Annual Report 2024

20 China Merchants China Direct Investments Limited Annual Report 2024 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) REVIEW OF INVESTMENTS (CONTINUED) Qinghai Provincial Qinghai Lake Tourism Group Co., Ltd. (“Qinghai Lake Tourism”) was established in Xining, Qinghai in 2008. It is a tourism operator with a focus on Qinghai Lake, a national 5A-class scenic spot, and is principally engaged in product development, business operations and provision of services related to tourism in Qinghai Lake and the surrounding regions. The Fund agreed to advance cash of RMB200 million in total to Qinghai Lake Tourism for a period of 3 years, with the right to convert the loan into an equity interest in Qinghai Lake Tourism during the term of the loan, subject to the fulfillment of certain precedent conditions. In August and September 2017, the Fund disbursed RMB50 million (equivalent to US$7.50 million) and RMB150 million (equivalent to US$22.93 million), respectively, amounting to RMB200 million (equivalent to US$30.43 million) in aggregate. Pursuant to a supplemental agreement to the convertible loan agreement entered into between the Fund and Qinghai Lake Tourism dated 9 May 2019, the Fund had received aggregate loan repayments of RMB200 million from Qinghai Lake Tourism before the end of 2020, representing a full recovery of the loan made by the Fund. The Fund entered into a letter of confirmation with Qinghai Lake Tourism with respect to an extension of interest payments on 22 January 2021, pursuant to which Qinghai Lake Tourism might postpone the payment of interest due for the loan of RMB200 million to 30 June 2022. In addition, if Qinghai Lake Tourism underwent a shareholding restructuring during the period, the Fund reserved the right to convert an amount up to RMB200 million into shareholding under the above supplemental agreement, at its sole discretion. Given that the coronavirus pandemic has affected the normal development of Qinghai Lake Tourism for an extended period of time, the Fund is considering a further extension of interest payments by Qinghai Lake Tourism. The Fund is still in discussion with Qinghai Lake Tourism about the specific terms of the extension, which will be formalised by a new letter of confirmation. As of the end of 2024, the carrying value of the Fund’s debt in Qinghai Lake Tourism was US$5.30 million, representing a decrease of 0.93% from the value at the end of last year of US$5.35 million. In 2024, the number of tourists visiting the scenic destination of Qinghai Lake continued to grow, with strong support by the Qinghai provincial government. In addition, the majority shareholder of Qinghai Lake Tourism has changed from a government platform enterprise to one with a state-owned background. The Fund will keep in close contact with the new management of Qinghai Lake Tourism and will closely monitor its future development plans.