Annual Report 2023

China Merchants China Direct Investments Limited Annual Report 2023 21 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) REVIEW OF INVESTMENTS (CONTINUED) In 2023, with strong support by the Qinghai provincial government, the number of tourists visiting the scenic destination of Qinghai Lake gradually increased. Moreover, as a result of extensive publicity and ongoing help from both the provincial and local governments, the volume of tourists visiting the area nearly reached the previous high level. Furthermore, the operating results of Qinghai Lake Tourism rebounded to positive territory as a result of higher volume, along with certain measures to reduce costs and enhance the efficiency of the company. At the same time, discussions are underway with certain state-owned enterprises and government platform companies regarding the possibility of a full acquisition of Qinghai Lake Tourism shares. The Investment Manager is closely monitoring these developments. Xi’an Jinpower Electrical Co., Ltd. (“Jinpower Electrical”) was established in Xi’an, Shaanxi in 2001 and is a high technology enterprise principally engaged in the research and development, and production, of intelligent online monitoring systems for transmission lines and substation equipment for the power grid. The stock of Jinpower Electrical was listed for trading on the New Third Board in January 2016. The Fund invested RMB20 million (equivalent to US$3.03 million) in January 2011 and held 2.89 million shares in Jinpower Electrical as of 31 December 2023, accounting for 4.825% of the issued share capital of Jinpower Electrical. As of the end of 2023, the carrying value of the Fund’s interest in Jinpower Electrical was US$0.35 million, representing a decrease of 38.60% from the value at the end of last year of US$0.57 million. On 18 August 2023, Jinpower Electrical announced that its unaudited net loss for the first half of 2023 was RMB5.76 million, compared to a net loss of RMB5.57 million for the same period last year. In recent years, there has been a decline in demand for traditional wire monitoring devices in the field of online monitoring for power grids. There is now a higher demand for cost-effective devices for online monitoring of the icing of poles and towers, imaging, micro-meteorology and other applications. As a result, a large number of low- priced equipment suppliers have emerged, intensifying market competition and applying pressure to profit margins of products. Moreover, the company operates in a highly concentrated market with declining demand in its core market, which poses a risk of decreasing market share. Due to a number of factors, such as a higher cost for listing on the New Third Board and the inability of the company to finance on the New Third Board, Jinpower Electrical decided to submit a delisting application to the regulatory authorities. On 24 January 2024, Jinpower Electrical announced that its delisting application had been approved by the regulatory authorities and its shares ceased to trade on the New Third Board, effective 25 January 2024.