The sentence

$$

observers say that they have lost much of their quality

$$

$$in the Direct Speech would be:

A

$-$

$$Observers say:

$$

$$They had lost much of their quality

$$

$.$

B

$-$

$$Observers say:

$$

They lose much of their quality.

$$

C

$-$

$$Observers say:

$$

They have lost much of their quality

$$

$.$

D

$-$

$$Observers say:

$$

We have lost much of our quality

$$

$.$

e

$-$

$$Observers say:

$$

They lost much of their quality

$$

$.$