Auto Italia : INTERIM REPORT 2020

CONTENTS

Corporate Information											2
Management Discussion and Analysis													4
Corporate Governance and Other Information											13
Report on Review of
Condensed Consolidated Financial Statements									22
Condensed Consolidated Statement of Profit or Loss							24
Condensed Consolidated Statement of Profit or Loss and
Other Comprehensive Income									25
Condensed Consolidated Statement of Financial Position						26
Condensed Consolidated Statement of Changes in Equity					28
Condensed Consolidated Statement of Cash Flows				29
Notes to the Condensed Consolidated Financial Statements			30

CORPORATE INFORMATION

DIRECTORS

Executive Directors

Mr. CHONG Tin Lung Benny (Executive Chairman and Chief Executive Officer) Mr. LAM Chi Yan

Mr. HUANG Zuie-Chin (appointed on 27 July 2020)

Mr. NG Siu Wai (appointed on 27 July 2020)

Independent Non-executive Directors

Dr. SANTOS Antonio Maria (resigned on 1 September 2020) Mr. KONG Kai Chuen Frankie

Mr. LEE Ben Tiong Leong

Mr. TO Chun Wai (appointed on 1 September 2020)

BOARD COMMITTEES

Audit Committee

Mr. KONG Kai Chuen Frankie (Chairman)

Dr. SANTOS Antonio Maria (resigned on 1 September 2020) Mr. LEE Ben Tiong Leong

Mr. TO Chun Wai (appointed on 1 September 2020)

Remuneration Committee

Dr. SANTOS Antonio Maria (Chairman) (resigned on 1 September 2020) Mr. TO Chun Wai (Chairman) (appointed on 1 September 2020)

Mr. CHONG Tin Lung Benny

Mr. KONG Kai Chuen Frankie Mr. LEE Ben Tiong Leong

Nomination Committee

Mr. CHONG Tin Lung Benny (Chairman)

Dr. SANTOS Antonio Maria (resigned on 1 September 2020) Mr. KONG Kai Chuen Frankie

Mr. LEE Ben Tiong Leong

Mr. TO Chun Wai (appointed on 1 September 2020)

Executive Directors' Committee

Mr. CHONG Tin Lung Benny (Chairman)

Mr. LAM Chi Yan

COMPANY SECRETARY

Ms. KWONG Yin Ping Yvonne

AUTHORISED REPRESENTATIVES

Mr. CHONG Tin Lung Benny

Ms. KWONG Yin Ping Yvonne

REGISTERED OFFICE

Victoria Place, 5th Floor 31 Victoria Street Hamilton HM 10 Bermuda

2 Auto Italia Holdings Limited

Corporate Information

PRINCIPAL OFFICE IN HONG KONG

Unit C, Ground Floor

2 Yuen Shun Circuit Siu Lek Yuen Shatin, Hong Kong

Tel: [phone] or (852) 2627 8931

Fax: [phone] or (852) 2469 9927

E-mail: [e-mail]

PRINCIPAL BANKERS

China CITIC Bank International Limited

Dah Sing Bank, Limited

ORIX Asia Limited

LEGAL ADVISORS

As to Hong Kong Law

Chiu & Partners

Howse Williams Bowers

As to Bermuda Law

Appleby

AUDITOR

Deloitte Touche Tohmatsu

Certified Public Accountants

Registered Public Interest Entity Auditor

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE IN BERMUDA

Ocorian Management (Bermuda) Limited Victoria Place, 5th Floor

31 Victoria Street

Hamilton HM 10 Bermuda

SHARE REGISTRAR AND TRANSFER OFFICE IN HONG KONG

Tricor Standard Limited

Level 54, Hopewell Centre

183 Queen's Road East

Hong Kong

STOCK CODE

The Stock Exchange of Hong Kong Limited: 720

WEBSITE ADDRESS

www.autoitalia.com.hk

Interim Report 2020

3

MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW

Car Division

Revenue

For the first half of 2020, the Car Division's revenue decreased by 58.2% to HK$55.8 million (2019: HK$133.5 million).

In Hong Kong, the threat of COVID-19 pandemic and the necessary anti-epidemic measures seriously disrupted a wide range of local economic activities. The overall revenue from Hong Kong recorded a drop of 53.8% to HK$53.5 million (2019: HK$115.9 million) primarily due to the decrease of new Maserati car sales. In Macau, the Group recorded a revenue of HK$1.7 million (2019: HK$1.4 million).

During the period, the Group has streamlined its Pre-Delivery Inspection ("PDI") services operation in mainland China and reduce its scope of business to a minimum due to the slowdown of economies of the People's Republic of China (the "PRC"). Hence, the revenue attributable to PDI services in mainland China decreased to HK$0.6 million (2019: HK$16.2 million).

Cost of Sales and Gross Profit

Gross profit margin increased by 17.8 percentage points to 44.1%. The increase is mainly due to the change of revenue proportion between car sales and after-sales services in this period. For the period ended 30 June 2020, the proportion of after-sales services revenue which contributed higher gross margin increased to 50.1% (2019: 33.4%) of the total revenue of Car Division.

Our gross profit decreased from HK$35.1 million to HK$24.6 million owing to the decrease in car unit sales of Maserati in Hong Kong operation as well as the change of business scope in Mainland China in 2020.

Other Income

For the six months ended 30 June 2020, other income amounted to HK$7.2 million (2019: HK$20.4 million). The decrease of HK$13.2 million was mainly caused by the drop of sale and marketing support from the supplier.

4 Auto Italia Holdings Limited

Management Discussion and Analysis

Other Gains and Losses

Other gains and losses amounted to a net gain of HK$0.1 million (2019: gain of HK$0.2 million) which mainly represented gain on disposal of property, plant and equipment of HK$0.2 million (2019: nil), net off with net foreign exchange loss of HK$0.1 million (2019: gain of HK$0.2 million).

Selling and Distribution Costs and Administrative Expenses

Selling and distribution costs and administrative expenses during the period aggregated to HK$33.0 million (2019: HK$55.1 million), which accounted for 59.1% (2019: 41.3%) of revenue. The net decrease of HK$22.1 million was mainly due to decrease in depreciation of right-of-use assets, marketing expenses and staff related cost resulting from our cost optimization and restructuring plan.

Finance Costs

Finance costs during the period were decreased to HK$0.8 million (2019: HK$2.4 million)

which included interest on lease liabilities of HK$0.7 million (2019: HK$1.3 million).

Financial Investments and Services and Property Investment Divisions

Operating Results

As at 30 June 2020, the loan receivables narrowed to HK$26.6 million from HK$70.1 million as at 31 December 2019. Hence, the revenue of Financial Investments and Services Division for the period ended 30 June 2020 decreased to HK$2.0 million (2019: HK$5.3 million), representing a decrease of HK$3.3 million. Segment loss increased by HK$3.8 million to HK$0.1 million (2019: profit HK$3.7 million).

Furthermore, the Property Investment division recorded a rental income of HK$1.0 million for leasing the property of the Group to a third party (2019: HK$0.9 million) and recorded a fair value loss of HK$0.5 million on the investment properties (2019: gain of HK$1.4 million). For the indirect investment in an office building in Glasgow, Scotland, the share of profit from such investment was HK$1.3 million (2019: HK$9.9 million). The decrease of HK$8.6 million was mainly owing to the drop of the share of the fair value gain of the property from HK$7.8 million in the first half of 2019 to nil in the reporting period.

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Management Discussion and Analysis

Life Science Investment

On 29 January 2020, the Group entered into a subscription agreement for subscription of 51,847,997 series A preferred shares of Chime Biologics Limited ("CBL") (the "Series

1. Preferred Shares") at a consideration of US$32 million (the "Subscription"). The Subscription was completed in February 2020 and CBL becomes an associate company of the Group. This investment in associate is measured at fair value through profit or loss in accordance with HKFRS 9 "Financial Instruments". At 30 June 2020, the aggregate carrying amount of this investment is HK$248 million. CBL is a provider of biologics contract development and manufacturing organisation (the "CDMO") services to biotech and pharmaceutical companies with industry-leading expertise. It offers fully integrated biologics CDMO platform: high quality comprehensive service capabilities with global qualifications. Its state-of-the-art advanced facility demonstrated solid large-scale manufacturing track record and expansion potential.

Loss Attributable to Shareholders

Loss attributable to shareholders of the Company for the six months ended 30 June 2020 was HK$8.1 million (2019: profit HK$11.2 million). It was primarily caused by the decrease in sales in Car Division, decrease in share of result of an associate and increase in finance costs.

Liquidity and Financial Resources

Cash Flow

During the period, the Group financed its operations and investments through cash generated from the Group's operations, as well as issuance of corporate bonds. We have made a net repayment of bank borrowings of HK$3.5 million and bonds of HK$41.6 million.

Cash and Cash Equivalents

As at 30 June 2020, the Group had cash and cash equivalents (including pledged bank deposits) of HK$92.4 million as compared with HK$148.0 million as at 31 December 2019, which were mainly denominated in Hong Kong dollars (as to 86%), Renminbi (as to 13%) and U.S. dollars (as to 1%).

6 Auto Italia Holdings Limited

Management Discussion and Analysis

Bank and Other Borrowings

As at 30 June 2020, the Group had bank and other borrowings totalling HK$131.8 million (31 December 2019: HK$5.3 million), of which HK$130.0 million was repayable more than one year. The Group debt to equity ratio for the six months ended 30 June 2020 increased to 29.7% from 1.2% for the year ended 31 December 2019 based on the total of current and non-current bank and other borrowings of HK$131.8 million (31 December 2019: HK$5.3 million) and total equity of HK$443.0 million (31 December 2019: HK$456.9 million). The increase is mainly caused by issuance of unsecured corporate bonds on 2 February 2020 amounted to HK$171.6 million. The unsecured corporate bonds have maturity of one and a half years and carry interest at 10% per annum. During the reporting period, the Group incurred bond interest expense of HK$7 million and repaid HK$41.6 million, the remaining bonds balance as at 30 June 2020 is HK$130.0 million.

Loan Receivables

During the period, the Group had engaged in Financial Investments and Services business, which included the provision of loan financing. As at 30 June 2020, the Group had outstanding loan lent to customers totalling HK$26.6 million (31 December 2019: HK$70.1 million), which carry on interest rate range from 8% to 10% per annum and were repayable within twelve months.

Foreign Exchange Exposure

The Group currently does not have a foreign currency hedging policy. However, the management of the Company monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

Pledge of Assets

As at 30 June 2020, certain of the Group's properties, bank deposits, inventories totaling HK$100.6 million (31 December 2019: HK$100.5 million) were pledged as securities for relevant bank loans and other bank facilities granted.

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Management Discussion and Analysis

CAPITAL EXPENDITURES, COMMITMENTS AND CONTINGENT LIABILITIES

As at 30 June 2020, the Group had HK$0.03 million capital commitment (31 December 2019: HK$0.67 million), all capital commitments as at 30 June 2020 and 31 December 2019 are authorized but not contracted for.

As at 30 June 2020, the Group had no material contingent liabilities.

EVENT AFTER THE REPORTING PERIOD

1. On 27 July 2020, the Group has appointed Mr. HUANG Zuie-Chin and Mr. NG Siu Wai as executive Directors to form a new life science division. On the same date, the Company has granted share options to certain eligible grantees for a total of 982,000,000 ordinary shares of HK$0.02 each of the Company under the share option scheme adopted by the Company on 28 May 2012. As the total number of shares to be issued upon exercise of the Conditionally Granted Options exceeds 1% of the shares in issue, pursuant to Rule 17.03(4) of the Listing Rules, the grant of the respective Conditionally Granted Options must be approved by shareholders of the Company at a special general meeting. Details of the Grant of Share Options are set out in the announcement of the Company dated 27 July 2020.
2. Reference is made to the Company's announcement dated 29 January 2020 concerning the CBL Subscription by Rainbow Surplus Investments Limited ("Rainbow Surplus"), a company incorporated in the British Virgin Islands and an indirect wholly-owned subsidiary of the Company, which has agreed to subscribe for certain Series A Preferred Shares pursuant to the CBL Subscription Agreement. For details, please see the announcement dated 29 January 2020. On 19 August 2020, the Company provided further information on the Subscription by Rainbow Surplus that the drag along right attaching to the Series A Preferred Shares enjoyed by Rainbow Surplus (the "Drag Along Right") constitutes an option. Pursuant to Rule 14.74(1) of the Listing Rules, as the exercise of the Drag Along Right is not at the discretion of the Company, the grant of Drag Along Right is subject to the approval by the shareholders of the Company at a special general meeting. For details of which are set out in the supplemental announcement of the Company dated 19 August 2020.

8 Auto Italia Holdings Limited

Management Discussion and Analysis

HUMAN RESOURCES AND CHARITY

As at 30 June 2020, the Group employed a total of 62 employees in Hong Kong and Macau. The Group believes that employees are all pivotal to our development and representing the most valuable asset for supporting our sustainable business growth.

During the period, COVID-19 pandemic became apparent since January 2020 and subsequently further developed to a worldwide pandemic. We implemented a variety of pandemic control measures to ensure our employees and customers can stay safe, such as sanitize regularly touchpoints at offices and common areas, mandatory wearing masks and maintain social distancing, allow work from homes and stagger lunch hours, etc..

As always, we not only provided competitive remuneration packages and benefits programs to our employees, but also provided reasonable and safe working environment, as well as supporting employee's continued education to uncover their hidden potential.

In this unprecedented challenge caused by the COVID-19 pandemic, the Group continues to make contributions to local communities through participating in charitable activities.

BUSINESS REVIEW

Maserati

The economic recession deepened in Hong Kong in the first half of 2020, as the threat of COVID-19 pandemic and the necessary anti-epidemic measures seriously disrupted a wide range of local economic activities. With the disease evolving into a pandemic in the second quarter of 2020, the economic fallout became even more severe. Retail sales in Hong Kong plunged 36.5% year-on-year for the first five months of 2020. The Maserati segment dropped about 40% in the first half of 2020 compared with the same period last year, despite major competitor's new model delivery in the first quarter of 2020.

The number of vehicles delivered to Maserati customers fell short of 70% of the prior-year figure in the first half of 2020 amid a sharp contraction in the overall market due to the outbreak of COVID-19 pandemic. Maserati's share of the segment decreased from 12% to 7% due to new model deliveries from the major competitors.

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Management Discussion and Analysis

Resources were more centralized with reduced operation expenses attributed by the closure of Kowloon Bay Showroom. Together with restructured team, the new moves enhanced overall work efficiency and cost effectiveness.

The increasing spread of the COVID-19 pandemic and resulting social distancing measures severely disrupted the marketing activities. Under the restrictions and quarantine measures, the team had adjusted the marketing tools to digital platforms and utilize online communications to engage with potential prospects. With organized and well-executed customer relation management guidelines from the brand, the overall customer satisfaction index sustained at 97%.

Following the new Ghibli Hybrid launched online in the second quarter 2020, the long anticipated new super car MC20 will be unveiled in September 2020, both two models will also be available for Hong Kong with delivery starting from 2021.

For Maserati aftersales service, the average throughput dropped 12% in the first half of 2020, comparing to 2019 full year. Overall sales from January to June 2020 recorded a 7.8% decline year on year. Here, too, the spread of the COVID-19 pandemic had a negative impact overall.

However with the success of devoted sales efforts, the average spending of each car increased by 18%. Operation workflow were refined resulting work efficiency of workshop improved from 5.92 days in 2019 to 2.89 days in the first half of 2020. Workshop productivity and efficiency increased over 26% and 30% respectively.

Sales of service package and extended warranty continued to be popular. A 47% growth is recorded for extended warranty while sales of service package remains a stable performance year on year.

Series of service campaigns during the COVID-19 pandemic were launched to provide added value services to our customers such as "Same day servicing with vehicle collection & delivery", "Car Interior Anti-bacteria Coating".

10 Auto Italia Holdings Limited

Management Discussion and Analysis

For our operation in Macau, the overall Maserati segment sales dropped 37% in the first half of 2020 year on year as a consequence of the debilitating market conditions arising from the COVID-19 pandemic. Market share of Maserati was 7.1%. On aftersales business, the Group strived to achieve 80% of target in the first three months in 2020. Yet, with the lockdown in the PRC, service income from cross-boundary vehicle was adversely affected, resulting in a 20% drop in the second quarter of 2020.

Pre-Delivery Inspection

As indicated in the Company's annual reports 2019 and 2018, because of the decrease in number of Maserati which underwent for PDI service in mainland China in 2019 and 2018, the revenue attributable to PDI service dropped in mainland China. The Group started discussion with Maserati for a new service agreement and explored new business model to cope with the new business situation.

In April 2020, a new service agreement was made by Maserati with the Group and a local partner ("Local Partner"). As different from the former service agreement, the Group ceased to be sole PDI service provider to Maserati under such new agreement. Having regard to the slowdown of the economies of the PRC and other parts of the world as a result of (among other causes) the COVID-19 pandemic and the trade conflicts between the US and the PRC, the Group plans to reduce its scope of business to a minimum, so that the Local Partner will take up most of the PDI services to further enhance the overall efficiency. For the six months ended 30 June 2020, the Group recorded HK$0.6 million as its revenue attributable to PDI services in mainland China.

Property Investment, Financial Investments and Services

During the period, the Group continued to engage in property investment business, financing business and financing related consultancy services.

The uncertainties of the Sino-US trade dispute, the ongoing political turbulence in Hong Kong and the threat of COVID-19 pandemic create economic uncertainty and challenges. The Group continue adopt a prudent and cautious approach when conducting our financing business, the six months ended 30 June 2020 loan portfolio narrowed to HK$26.6 million from HK$70.1 million as at 31 December 2019. Hence, our revenues from financial investments and services business decreased to HK$2 million (2019: HK$5.3 million).

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Management Discussion and Analysis

For the property investment business, the Group continued to earn a rental income of HK$1 million (2019: HK$0.9 million) from leasing the investment property. The Group's indirect investment in an office building in Glasgow, Scotland also allowed us to enjoy a stable income stream from the property's rental revenue. The share of profit from such investment for the period ended 30 June 2020 was HK$1.3 million (2019: HK$9.9 million). The decrease of HK$8.6 million was mainly owing to the drop of the share of the fair value gain of the property from HK$7.8 million in the first half of 2019 to nil in the reporting period.

Life Sciences Investment

During the reporting period, the Group participated in the Series A Preferred Shares subscription of CBL. The subscription was completed in February 2020 and CBL becomes an associate company of the Group. CBL is a provider of biologics CDMO services to biotech and pharmaceutical companies with industry-leading expertise. It offers fully integrated biologics CDMO platform: high quality comprehensive service capabilities with global qualifications. Its state-of-the-art advanced facility demonstrated solid large-scale manufacturing track record and expansion potential. Based on the investment in CBL, the Group will continue to explore other high-quality investment opportunities along the CDMO value chain.

On 27 July 2020, the Group has appointed Mr. HUANG Zuie-Chin and Mr. NG Siu Wai as executive Directors to form a new life science division. The new management members have a combined 40 plus years of experience in product development, commercialization, investment, fund raising for multiple life sciences companies.

OUTLOOK

Taking into consideration the current situation of Hong Kong, 2020 will continue to be a challenging year for the economy and affects the retail sector across all automotive brands. The Group expects a slow recovery but with new model and special edition Maserati to be launched soon. The Group will continue to explore different business opportunities include but not limited to life sciences and healthcare industry with the aim of bringing long-term enhancement of value to our shareholders.

12 Auto Italia Holdings Limited

CORPORATE GOVERNANCE AND OTHER INFORMATION

The board (the "Board") of directors (the "Directors") of Auto Italia Holdings Limited (the "Company") is pleased to announce the unaudited interim results of the Company and its subsidiaries (collectively, the "Group") for the six months ended 30 June 2020.

INTERIM DIVIDEND

The Board did not declare the payment of an interim dividend for the six months ended 30 June 2020 (2019: Nil).

DISCLOSURE OF INTERESTS

Directors' interests and chief executive's interests and short positions in Shares, underlying Shares and debentures

As at 30 June 2020, the interests and short positions of each Director and chief executive of the Company (the "Chief Executives") in any Shares (defined as below), underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong ("SFO")) as recorded in the register required to be kept under Section 352 of the SFO; or are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set out in Appendix 10 to the Rules Governing the Listing of Securities (the "Listing Rules") on The Stock Exchange of Hong Kong Limited (the "Stock Exchange"), to be notified to the Company and the Stock Exchange are as follows:

(a)(i)	none of the Directors held any beneficial interests and long positions in the
	ordinary shares of the Company (the "Shares"); and
(a)(ii)	none of the Directors held any short positions in the Shares; and

1. beneficial interests and short positions in underlying Shares of equity derivatives of the Company as at 30 June 2020 are disclosed in the section headed "Share Option Scheme" of this Report.

Save as disclosed in the section headed "Share Option Scheme" of this Report, as at 30 June 2020, none of the Directors or the Chief Executives or their respective associates had or was deemed to have any interests or short positions in any Shares, underlying Shares or debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO), which had been recorded in the register maintained by the Company pursuant to Section 352 of the SFO or which had otherwise been notified to the Company and the Stock Exchange pursuant to the Model Code.

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Corporate Governance and Other Information

Arrangement for Directors to acquire Shares or debentures

Save as disclosed in the section headed "Share Option Scheme" of this Report, at no time during the six months ended 30 June 2020 was the Company or any of its subsidiaries a party to any arrangements to enable the Directors and the Chief Executives (including their spouse and children under 18 years of age) to acquire benefits by means of the acquisition of Shares in or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

Substantial shareholders' interests and short positions in the Shares, underlying Shares and debentures

As at 30 June 2020, so far as is known to the Directors, the persons or corporations (other than the Directors or the Chief Executives) who had interests or short positions in the Shares and underlying Shares of the Company which were required to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept under Section 336 of the SFO were as follows:

Long positions in the Shares and underlying Shares
		Approximate %
		of the total
	Number of	number of
Name of shareholder(s)	Shares	issued Shares#
Gustavo International Limited	304,725,000(Note)	5.84%
Maini Investments Limited	304,725,000(Note)	5.84%
VMS Investment Group Limited ("VMSIG")	1,519,016,472(Note)	29.10%
Ms. MAK Siu Hang Viola	1,519,016,472(Note)	29.10%

• Based on the total number of issued Shares of 5,219,541,190 as at 30 June 2020.

Note: VMSIG and parties acting in concert with it are interested in an aggregate of 1,519,016,472 Shares, of which 1,214,291,472 Shares are held by VMSIG and 304,725,000 Shares are held by Gustavo International Limited (a company which is wholly-owned by Maini Investments Limited, which in turn is wholly-owned by VMSIG). VMSIG is wholly-owned by Ms. MAK Siu Hang Viola.

14 Auto Italia Holdings Limited

Corporate Governance and Other Information

Save as disclosed above, as at 30 June 2020, the Company had not been notified by any persons or corporations (other than the Directors or the Chief Executives) who had interests or short positions in the Shares or underlying Shares of the Company which were required to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept under Section 336 of the SFO.

SHARE OPTION SCHEME

Under the Share option scheme adopted by the Company on 28 May 2012 (the "Option Scheme"), options were granted to certain Directors, employees and other eligible participants of the Company entitling them to subscribe for Shares of HK$0.02 each in the capital of the Company.

Details of the movements in outstanding Share options, which have been granted under the Option Scheme, during the six months ended 30 June 2020 were as below:

							Cancelled/
				As at	Granted	Exercised	Lapsed	As at
Name or category of	Date of	Exercise	Exercisable	1 January	during the	during the	during the	30 June
participants	grant	price	period	2020	period	period	period	2020
		(HK$)
(a) Directors
Mr. CHONG Tin Lung Benny	16/10/2014	0.1840	16/10/2015 to	51,891,000	-	-	-	51,891,000
			15/10/2020(Note 2)
Mr. LAM Chi Yan	16/10/2014	0.1840	16/10/2015 to	18,700,000	-	-	-	18,700,000
			15/10/2020(Note 2)
	15/06/2017	0.0932	15/06/2018 to	18,700,000	-	-	-	18,700,000
			14/06/2023(Note 2)
Dr. SANTOS Antonio Maria	16/10/2014	0.1840	16/04/2015 to	1,500,000	-	-	(1,500,000)	-
			15/04/2020(Note 3)
Mr. KONG Kai Chuen Frankie	16/10/2014	0.1840	16/04/2015 to	1,500,000	-	-	(1,500,000)	-
			15/04/2020(Note 3)

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Corporate Governance and Other Information

							Cancelled/
				As at	Granted	Exercised	Lapsed	As at
Name or category of	Date of	Exercise	Exercisable	1 January	during the	during the	during the	30 June
participants	grant	price	period	2020	period	period	period	2020
		(HK$)
(b) Employees in aggregate	16/10/2014	0.1840	16/10/2015 to	4,671,200	-	-	-	4,671,200
			15/10/2020(Note 2)
	20/04/2015	0.3510	20/04/2016 to	260,000	-	-	-	260,000
			19/04/2021(Note 2)
	15/06/2017	0.0932	15/06/2018 to	18,700,000	-	-	-	18,700,000
			14/06/2023(Note 2)
(c) Other eligible participants 16/10/2014	0.1840	16/10/2015 to	40,000,000	-	-	-	40,000,000
			15/10/2020(Note 2)
	15/06/2017	0.0932	15/06/2018 to	60,000,000	-	-	-	60,000,000
			14/06/2023(Note 2)
Total				215,922,200	-	-	(3,000,000)	212,922,200

Notes:

1. The closing prices per Share immediately before 16 October 2014, 20 April 2015 and 15 June 2017 (the dates on which the Share options were granted) were HK$0.187, HK$0.335 and HK$0.093 respectively.
2. Share options granted under the Option Scheme on 16 October 2014, 20 April 2015 and 15 June 2017 shall vest in the grantees in accordance with the timetable below (for this purpose, the date or each such date on which the Share options are to vest being hereinafter referred to as a "Vesting Date"):

Vesting Date	Percentage of Share options to vest
First anniversary of the Date of Grant	40% of the total number of options granted
Second anniversary of the Date of Grant	30% of the total number of options granted
Third anniversary of the Date of Grant	30% of the total number of options granted

1. Share options granted under the Option Scheme on 16 October 2014 shall vest in the grantees in accordance with the date falling on the end of the sixth month from the date of grant.

16 Auto Italia Holdings Limited

Corporate Governance and Other Information

PURCHASE, SALE OR REDEMPTION OF SECURITIES

Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities during the six months ended 30 June 2020.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

Maintaining an effective corporate governance framework is one of the priorities of the Company. In the opinion of the Directors, the Company had complied with all the code provisions of the Corporate Governance Code (the "CG Code") and Corporate Governance Report as set out in Appendix 14 of the Listing Rules on the Stock Exchange throughout the six months ended 30 June 2020, except Code Provisions A.2.1 of the CG Code.

Provision A.2.1 of the CG Code stipulates that the roles of chairman and chief executive officer should be separate and should not be performed by the same individual.

Mr. CHONG Tin Lung Benny is the Executive Chairman and the Chief Executive Officer of the Company. Mr. Chong has extensive experience in corporate management and securities investments and is responsible for the overall corporate strategies, planning and business development of the Group. The Board considers that the vesting of two roles in the same person provides our Group with strong and consistent leadership and facilitates the implementation and execution of our Group's business strategy. The Company shall nevertheless review the structure from time to time in light of the prevailing circumstances.

COMPLIANCE WITH THE MODEL CODE

The Company has adopted the Model Code set out in Appendix 10 of the Listing Rules on the Stock Exchange as standard for dealings in securities of the Company by the Directors. Having made specific enquiry of all Directors by the Company, the Directors confirmed in writing that they have complied with the standards set out in the Model Code throughout the six months ended 30 June 2020.

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Corporate Governance and Other Information

CHANGES IN INFORMATION OF DIRECTORS

Pursuant to Rule 13.51B(1) of the Listing Rules, the changes in information of Directors subsequent to the date of the 2019 annual report of the Company are set out below:

Director	Details of Change
Mr. HUANG Zuie-Chin	Appointed as an executive director of the Company
	(the "Executive Director") with effect from 27 July
	2020
Mr. NG Siu Wai	Appointed as the Executive Director with effect from
	27 July 2020
Dr. SANTOS Antonio Maria	Resigned as an independent non-executive director
	of the Company (the "INED") and ceased as the
	chairman of the remuneration committee of the
	Company (the "Remuneration Committee") and
	member of each of audit committee of the Company
	(the "Audit Committee") and nomination committee
	of the Company (the "Nomination Committee") with
	effect from 1 September 2020
Mr. TO Chun Wai	Appointed as the INED, the chairman of Remuneration
	Committee and member of each of Audit Committee
	and Nomination Committee with effect from
	1 September 2020

Save as disclosed above, there is no other information required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules on the Stock Exchange.

18 Auto Italia Holdings Limited

Corporate Governance and Other Information

THE BOARD

The Directors who held office during the six months ended 30 June 2020 and up to the date of this Report are:

Executive Directors

Mr. CHONG Tin Lung Benny (Executive Chairman and Chief Executive Officer) Mr. LAM Chi Yan

Mr. HUANG Zuie-Chin (appointed on 27 July 2020)

Mr. NG Siu Wai (appointed on 27 July 2020)

INEDs

Dr. SANTOS Antonio Maria (resigned on 1 September 2020)

Mr. KONG Kai Chuen Frankie

Mr. LEE Ben Tiong Leong

Mr. TO Chun Wai (appointed on 1 September 2020)

BOARD COMMITTEES

Audit Committee

The members of the Audit Committee comprise Dr. SANTOS Antonio Maria, Mr. KONG Kai Chuen Frankie and Mr. LEE Ben Tiong Leong, all of whom are INEDs. Mr. KONG Kai Chuen Frankie is the chairman of the Audit Committee.

The principal duties of the Audit Committee include to review the financial reporting process, internal control and risk management systems of the Group and to provide advices and comments to the Board.

With effect from 1 September 2020, Mr. TO Chun Wai has been appointed as a member of the Audit Committee in place of Dr. SANTOS Antonio Maria.

Interim Report 2020

19

Corporate Governance and Other Information

Remuneration Committee

The members of the Remuneration Committee comprise Dr. SANTOS Antonio Maria, Mr. KONG Kai Chuen Frankie and Mr. LEE Ben Tiong Leong, all of whom are INEDs, and Mr. CHONG Tin Lung Benny, an executive Director. Dr. SANTOS Antonio Maria is the chairman of the Remuneration Committee.

The Remuneration Committee has the delegated responsibility to determine the remuneration packages of individual executive Directors and senior management and adopted a set of policy and guidelines to govern its administration in reviewing, considering and fixing the remuneration packages and benefits of Directors and senior management of the Group.

With effect from 1 September 2020, Mr. TO Chun Wai has been appointed as the chairman of the Remuneration Committee in place of Dr. SANTOS Antonio Maria.

Nomination Committee

The members of the Nomination Committee comprise Dr. SANTOS Antonio Maria, Mr. KONG Kai Chuen Frankie and Mr. LEE Ben Tiong Leong, all of whom are INEDs and Mr. CHONG Tin Lung Benny, an executive Director. Mr. CHONG Tin Lung Benny is the chairman of the Nomination Committee.

The Nomination Committee is primarily responsible for making recommendations to the Board on appointment of directors regarding the qualifications and competency of the candidates.

With effect from 1 September 2020, Mr. TO Chun Wai has been appointed as a member of the Nomination Committee in place of Dr. SANTOS Antonio Maria.

Executive Directors' Committee

The members of the executive Directors' committee of the Company (the "Executive Directors' Committee") comprise Mr. CHONG Tin Lung Benny and Mr. LAM Chi Yan, all of whom are executive Directors. Mr. CHONG Tin Lung Benny is the chairman of the Executive Directors' Committee.

20 Auto Italia Holdings Limited

Corporate Governance and Other Information

The Executive Directors' Committee is formed for the management of the Company's business. The Board delegated its power to the Executive Directors' Committee to carry on the business of the Company; to negotiate, enter into and sign on behalf of all contracts, tenders, agreements and distributorship; to negotiate with bankers for obtaining banking facilities, to enter into any guarantee, contract of indemnity; and to manage the Company's business activities and investments.

REVIEW OF INTERIM RESULTS

The interim results of the Group for the six months ended 30 June 2020 have not been audited but have been reviewed by Messrs. Deloitte Touche Tohmatsu, Certified Public Accountants, the Company's auditor. The Audit Committee has reviewed the unaudited condensed consolidated financial statements of the Group for the six months ended 30 June 2020.

By order of the Board

CHONG Tin Lung Benny

Executive Chairman and Chief Executive Officer

Hong Kong, 27 August 2020

Interim Report 2020

21

REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO THE BOARD OF DIRECTORS OF AUTO ITALIA HOLDINGS LIMITED

INTRODUCTION

We have reviewed the condensed consolidated financial statements of Auto Italia Holdings Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 24 to 50, which comprises the condensed consolidated statement of financial position as of 30 June 2020 and the related condensed consolidated statement of profit or loss, statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and certain explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 "Interim Financial Reporting" ("HKAS 34") issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with HKAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

22 Auto Italia Holdings Limited

Report on Review of Condensed Consolidated Financial Statements

SCOPE OF REVIEW

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of these condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS 34.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

27 August 2020

Interim Report 2020

23

CONDENSED CONSOLIDATED STATEMENT

OF PROFIT OR LOSS

For the six months ended 30 June 2020

		Six months ended 30 June
		2020	2019
	Notes	HK$'000	HK$'000
		(unaudited)	(unaudited)
Revenue from goods and services	3	55,773	133,518
Rental income		1,016	931
Interest income from loan receivables		2,005	5,261
Total revenue		58,794	139,710
Cost of sales and services		(31,197)	(98,381)
Gross profit		27,597	41,329
Other income	5	7,271	20,367
Other gains and losses	6	(769)	1,494
Reversal of impairment losses
under expected credit loss
("ECL") model, net		132	666
Selling and distribution costs		(21,577)	(37,841)
Administrative expenses		(15,837)	(21,703)
Finance costs	7	(7,818)	(2,414)
Share of result of an associate		1,338	9,928
(Loss) profit before taxation		(9,663)	11,826
Taxation	9	1,611	(588)
(Loss) profit for the period	8	(8,052)	11,238
(Loss) earnings per share
- Basic	10	(HK0.15 cents)	HK0.22 cents
- Diluted	10	(HK0.15 cents)	HK0.22 cents

24 Auto Italia Holdings Limited

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2020

	Six months ended 30 June
	2020	2019
	HK$'000	HK$'000
	(unaudited)	(unaudited)
(Loss) profit for the period	(8,052)	11,238
Other comprehensive expense
Item that may be subsequently reclassified
to profit or loss:
Exchange differences arising on translation
of foreign operations and the associate	(6,149)	(752)
Other comprehensive expense for the period	(6,149)	(752)
Total comprehensive (expense) income for
the period	(14,201)	10,486

Interim Report 2020

25

CONDENSED CONSOLIDATED STATEMENT

OF FINANCIAL POSITION

At 30 June 2020

		At	At
		30 June	31 December
		2020	2019
	Notes	HK$'000	HK$'000
		(unaudited)	(audited)
Non-current assets
Investment properties	12	56,000	56,500
Property, plant and equipment	13	10,037	12,135
Right-of-use assets		27,050	39,309
Goodwill		2,480	2,480
Investments in associates	14	307,576	81,484
Rental deposits		6,180	6,208
		409,323	198,116
Current assets
Inventories		93,409	112,602
Trade and other receivables	15	11,921	28,569
Loan receivables	16	26,599	70,055
Tax recoverable		167	-
Pledged bank deposits		44,021	44,019
Bank balances and cash		48,350	104,014
		224,467	359,259
Current liabilities
Trade and other payables	17	14,462	31,350
Contract liabilities		15,766	19,496
Tax payable		-	2,853
Bank and other borrowings	18	1,776	5,323
Lease liabilities		22,243	23,078
		54,247	82,100
Net current assets		170,220	277,159
Total assets less current liabilities		579,543	475,275

26 Auto Italia Holdings Limited

Condensed Consolidated Statement

of Financial Position

At 30 June 2020

		At	At
		30 June	31 December
		2020	2019
	Notes	HK$'000	HK$'000
		(unaudited)	(audited)
Capital and reserves
Share capital	19	104,391	104,391
Reserves		338,640	352,526
Total equity		443,031	456,917
Non-current liabilities
Bank and other borrowings	18	130,000	-
Deferred taxation		936	1,593
Lease liabilities		5,576	16,765
		136,512	18,358
		579,543	475,275

Approved by the Board of Directors on 27 August 2020 and are signed on its behalf by:

CHONG Tin Lung Benny	LAM Chi Yan
DIRECTOR	DIRECTOR

Interim Report 2020

27

CONDENSED CONSOLIDATED STATEMENT

OF CHANGES IN EQUITY

For the six months ended 30 June 2020

			Capital	Share
	Share	Share	redemption	option	Revaluation	Translation	Other	Accumulated
	capital	premium	reserve	reserve	reserve	reserve	reserve	losses	Total
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
At 1 January 2020 (audited)	104,391	249,345	2,151	17,200	19,246	(1,656)	166,431	(100,191)	456,917
Loss for the period	-	-	-	-	-	-	-	(8,052)	(8,052)
Other comprehensive
expense for the period	-	-	-	-	-	(6,149)	-	-	(6,149)
Total comprehensive expense
for the period	-	-	-	-	-	(6,149)	-	(8,052)	(14,201)
Recognition of equity settled
share-based payments	-	-	-	315	-	-	-	-	315
Transfer upon lapse of
share option	-	-	-	(233)	-	-	-	233	-
At 30 June 2020 (unaudited)	104,391	249,345	2,151	17,282	19,246	(7,805)	166,431	(108,010)	443,031
At 1 January 2019 (audited)	104,391	249,345	2,151	16,173	19,246	(3,588)	166,431	(76,155)	477,994
Profit for the period	-	-	-	-	-	-	-	11,238	11,238
Other comprehensive
expense for the period	-	-	-	-	-	(752)	-	-	(752)
Total comprehensive (expense)
income for the period	-	-	-	-	-	(752)	-	11,238	10,486
Recognition of equity settled
share-based payments	-	-	-	787	-	-	-	-	787
Transfer upon lapse of
share option	-	-	-	(155)	-	-	-	155	-
At 30 June 2019 (unaudited)	104,391	249,345	2,151	16,805	19,246	(4,340)	166,431	(64,762)	489,267

28 Auto Italia Holdings Limited

CONDENSED CONSOLIDATED STATEMENT

OF CASH FLOWS

For the six months ended 30 June 2020

	Six months ended 30 June
	2020	2019
	HK$'000	HK$'000
	(unaudited)	(unaudited)
OPERATING ACTIVITIES
Operating cash flows before movement in
working capital	12,007	25,735
Decrease in inventories	19,193	40,696
Decrease in loan receivables	43,611	19,270
Decrease in trade and other receivables	16,742	789
Decrease in trade and other payables	(22,200)	(22,552)
(Decrease) increase in contract liabilities	(3,730)	34
Other movements in operating activities	(2,050)	(287)
NET CASH FROM OPERATING ACTIVITIES	63,573	63,685
INVESTING ACTIVITIES
Dividends received from an associate	17,890	-
Proceeds from disposal of property, plant and
equipment	2,947	-
Interest received	190	140
Investment in an associate	(248,800)	-
Purchase of property, plant and equipment	(3,432)	(3,365)
NET CASH USED IN INVESTING ACTIVITIES	(231,205)	(3,225)
FINANCING ACTIVITIES
Bank and other borrowings raised	180,582	42,671
Repayment of bank and other borrowings	(54,129)	(101,207)
Payments for lease liabilities	(12,018)	(16,613)
Other financing cash flows	(2,506)	(2,414)
NET CASH FROM (USED IN)
FINANCING ACTIVITIES	111,929	(77,563)
NET DECREASE IN CASH AND
CASH EQUIVALENTS	(55,703)	(17,103)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE PERIOD	104,014	121,212
Effect of exchange rate changes	39	(139)
CASH AND CASH EQUIVALENTS AT END OF
THE PERIOD,
represented by bank balances and cash	48,350	103,970

Interim Report 2020

29

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2020

1. BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" ("HKAS 34") issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules").

1A. Significant events in the current interim period

The outbreak of Covid-19 and the subsequent quarantine measures as well as the travel restrictions imposed by many countries have had negative impacts to the global economy, business environment and directly and indirectly affect the operations of the Group. On the other hand, the Hong Kong government has announced some financial measures and supports for corporates to overcome the negative impact arising from the pandemic. As such, the financial positions and performance of the Group were affected in different aspects, including reduction in revenue and increase in government grants in respect of Covid-19-related subsidies as disclosed in the relevant notes.

30 Auto Italia Holdings Limited

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

2. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments which are measured at fair values.

Other than additional accounting policies resulting from application of amendments to Hong Kong Financial Reporting Standards ("HKFRSs") and application of certain accounting policies which became relevant to the Group, the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2020 are the same as those presented in the Group's annual financial statements for the year ended 31 December 2019.

Application of amendments to HKFRSs

In the current interim period, the Group has applied the Amendments to References to the Conceptual Framework in HKFRS Standards and the following amendments to HKFRSs issued by the HKICPA, for the first time, which are mandatorily effective for the annual period beginning on or after 1 January 2020 for the preparation of the Group's condensed consolidated financial statements:

Amendments to HKAS 1 and HKAS 8	Definition of Material
Amendments to HKFRS 3	Definition of a Business
Amendments to HKFRS 9, HKAS 39	Interest Rate Benchmark Reform
and HKFRS 7

Except as described below, the application of the amendments to HKFRSs in the current period has had no material impact on the Group's financial position and performance for the current and prior periods and/or on the disclosures set out in these condensed consolidated financial statements.

Interim Report 2020

31

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

2. PRINCIPAL ACCOUNTING POLICIES (Continued)

Application of amendments to HKFRSs (Continued)

Impact of application on Amendments to HKAS 1 and HKAS 8 "Definition of Material"

The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements taken as a whole.

The application of the amendments in the current period had no impact on the condensed consolidated financial statements. Changes in presentation and disclosures on the application of the amendments, if any, will be reflected on the consolidated financial statements for the year ending 31 December 2020.

32 Auto Italia Holdings Limited

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

2. PRINCIPAL ACCOUNTING POLICIES (Continued)

Accounting policies newly applied by the Group

In addition, the Group has applied the following accounting policies which became relevant to the Group in the current interim period.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate.

Government grants relate to income that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. Such grants are presented under "other income".

Financial assets at fair value through profit or loss ("FVTPL")

Financial assets that do not meet the criteria for being measured at amortised cost or fair value through other comprehensive income ("FVTOCI") or designated as FVTOCI are measured at FVTPL.

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial asset and is included in the "other gains and losses" line item.

Interim Report 2020

33

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

3. REVENUE FROM GOODS AND SERVICES

	Six months ended 30 June
	2020	2019
	HK$'000	HK$'000
Disaggregation of revenue
Trading of cars and related accessories	27,807	88,928
Provision of after sales and
pre-delivery inspection services	27,966	44,590
Total revenue from contracts with
customers/segment revenue - cars	55,773	133,518
Geographical markets
Hong Kong	53,477	115,906
Macau	1,664	1,409
The People's Republic of China
(excluding Hong Kong and Macau)	632	16,203
Total revenue from contracts with
customers/segment revenue - cars	55,773	133,518
Timing of revenue recognition
A point of time	27,807	88,928
Over time	27,966	44,590
Total revenue from contracts with
customers/segment revenue - cars	55,773	133,518

34 Auto Italia Holdings Limited

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

4. SEGMENT INFORMATION

During the six months ended 30 June 2020, the Group has three operating segments under HKFRS 8 "Operating Segments" are as follows:

1. Cars - Trading of cars and related accessories and provision of after sales and pre-delivery inspection services;
2. Financial investments and services - Provision for financing and corporate finance services; and
3. Property investment.

Segment profit represents the profit earned by each segment without allocation of share of result of an associate, interest income from bank deposits/bank balances, certain unallocated corporate expenses and finance costs. This is the measure reported to chief operating decision maker, being the executive directors of the Company, for the purpose of resource allocation and assessment of segment performance.

Interim Report 2020

35

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

4. SEGMENT INFORMATION (Continued)

Segment revenue and results

The following is an analysis of the Group's revenue and results by reportable segments:

Six months ended 30 June 2020 (unaudited)

		Financial
		investments	Property
	Cars	and services	investment	Consolidated
	HK$'000	HK$'000	HK$'000	HK$'000
SEGMENT REVENUE
Group revenue	55,773	2,005	1,016		58,794
SEGMENT RESULTS
Segment (loss) profit	(2,059)	(92)	457		(1,694)
					1,338
Share of result of an associate
Interest income					190
Unallocated corporate expenses					(2,428)
Finance costs					(7,069)
Loss before taxation					(9,663)

Six months ended 30 June 2019 (unaudited)

		Financial
		investments	Property
	Cars	and services	investment	Consolidated
	HK$'000	HK$'000	HK$'000	HK$'000
SEGMENT REVENUE
Group revenue	133,518	5,261	931		139,710
SEGMENT RESULTS
Segment (loss) profit	(888)	3,706	2,276		5,094
Share of result of an associate					9,928
Interest income					140
Unallocated corporate expenses					(2,188)
Finance costs					(1,148)
Profit before taxation					11,826

36 Auto Italia Holdings Limited

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

4. SEGMENT INFORMATION (Continued)

Segment assets and liabilities

The following is an analysis of the Group's assets and liabilities by reportable and operating segments:

At 30 June 2020 (unaudited)
			Financial
			investments	Property
		Cars	and services	investment	Consolidated
		HK$'000	HK$'000	HK$'000	HK$'000
Assets
Segment assets		150,183	27,054	56,100		233,337
						48,350
Bank balances and cash
Investments in associates						307,576
Pledged bank deposits						44,021
Tax recoverable						167
Unallocated corporate assets						339
Consolidated assets						633,790
Liabilities
Segment liabilities		51,161	314	726		52,201
						131,776
Bank and other borrowings
Deferred taxation						936
Unallocated corporate liabilities						5,846
Consolidated liabilities						190,759

Interim Report 2020

37

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

4. SEGMENT INFORMATION (Continued)

Segment assets and liabilities (Continued)

The following is an analysis of the Group's assets and liabilities by reportable and operating segments: (Continued)

At 31 December 2019 (audited)
		Financial
		investments	Property
	Cars	and services	investment	Consolidated
	HK$'000	HK$'000	HK$'000	HK$'000
Assets
Segment assets	197,876	72,950	56,595		327,421
Bank balances and cash					104,014
Investment in an associate					81,484
Pledged bank deposits					44,019
Unallocated corporate assets					437
Consolidated assets					557,375
Liabilities
Segment liabilities	86,870	379	692		87,941
Bank and other borrowings					5,323
Deferred taxation					1,593
Tax payable					2,853
Unallocated corporate liabilities					2,748
Consolidated liabilities					100,458

For the purpose of monitoring segment performance and allocating resource between segment:

• all assets are allocated to operating segment other than corporate assets, investments in associates, tax recoverable, bank balances and cash and pledged bank deposits;
• all liabilities are allocated to operating segment other than corporate liabilities, deferred taxation, tax payable, and bank and other borrowings.

38 Auto Italia Holdings Limited

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

5.	OTHER INCOME
		Six months ended 30 June
		2020	2019
		HK$'000	HK$'000
		(unaudited)	(unaudited)
	Commission income	2,286	2,931
	Handling fee	1,167	-
	Forfeited customers' deposits	1,052	-
	Bank interest income	190	140
	Government grant	787	-
	Subsidies income from suppliers	-	16,411
	Others	1,789	885
		7,271	20,367

During the current interim period, the Group recognised government grants of HK$787,000 in respect of Covid-19-related subsidies, of which HK$658,000 relates to Employment Support Scheme and HK$80,000 relates to Retail Sector Subsidy Scheme provided by the Hong Kong government, and HK$49,000 relates to Anti- epidemic Fund provided by the Macau government.

6.	OTHER GAINS AND LOSSES
		Six months ended 30 June
		2020	2019
		HK$'000	HK$'000
		(unaudited)	(unaudited)
	Gain on disposal of property, plant and
	equipment	169	-
	Net foreign exchange (loss) gain	(438)	94
	Fair value (loss) gain on investment
	properties	(500)	1,400
		(769)	1,494

Interim Report 2020

39

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

7.	FINANCE COSTS
		Six months ended 30 June
		2020	2019
		HK$'000	HK$'000
		(unaudited)	(unaudited)
	Interests on bank and other borrowings	110	1,148
	Interests on lease liabilities	749	1,266
	Interest on corporate bonds	6,959	-
		7,818	2,414

8. (LOSS) PROFIT FOR THE PERIOD

(Loss) profit for the period has been arrived at after charging:

	Six months ended 30 June
	2020	2019
	HK$'000	HK$'000
	(unaudited)	(unaudited)
Depreciation of property, plant and
equipment	2,749	5,635
Depreciation of right-of-use assets	12,252	17,399

9.	TAXATION
		Six months ended 30 June
		2020	2019
		HK$'000	HK$'000
		(unaudited)	(unaudited)
	Current tax (credit) charge:
	Hong Kong	(139)	325
	Other jurisdictions	(815)	263
		(954)	588
	Deferred tax:
	Current year	(657)	-
		(1,611)	588

40 Auto Italia Holdings Limited

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

10. (LOSS) EARNINGS PER SHARE

The calculation of the basic and diluted (loss) earnings per share attributable to owners of the Company is based on the following data:

	Six months ended 30 June
	2020	2019
	HK$'000	HK$'000
	(unaudited)	(unaudited)
(Loss) profit for the period for
the purpose of calculating basic and
diluted (loss) earnings per share	(8,052)	11,238

Number of shares

	Six months ended 30 June
	2020	2019
Weighted average number of ordinary
shares for the purpose of calculating
basic and diluted (loss) earnings
per share	5,219,541,190	5,219,541,190

For the six months ended 30 June 2020, the computation of diluted loss per share does not assume the exercise of the Company's share options because the assumed exercise of share options would result in decrease in loss per share.

The computation of diluted earnings per share for the six months ended 30 June 2019 does not assume the exercise of the Company's share options since the exercise prices of share options outstanding were higher than average market price of the shares for the six months ended 30 June 2019.

Interim Report 2020

41

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

11. DIVIDEND

No dividend was paid or declared during the six months ended 30 June 2020 and 2019 nor has any dividend been proposed since the end of the reporting period.

12. INVESTMENT PROPERTIES

	HK$'000
Fair value
At 1 January 2019	59,000
Fair value loss on investment properties	(2,500)
At 31 December 2019	56,500
Fair value loss on investment properties	(500)
At 30 June 2020	56,000

The investment properties comprised industrial buildings and carparks located in Hong Kong.

13. PROPERTY, PLANT AND EQUIPMENT

During the six months ended 30 June 2020, the Group spent HK$3,432,000 (2019: HK$3,365,000) on the acquisition of property, plant and equipment. The Group disposed of property, plant and equipment with carrying value of HK$2,778,000 and resulted in a gain of HK$169,000 (2019: nil).

42 Auto Italia Holdings Limited

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

14. INVESTMENTS IN ASSOCIATES

	At 30 June	At 31 December
	2020	2019
	HK$'000	HK$'000
	(unaudited)	(audited)
Investment in an associate accounted for
using equity method	59,570	81,484
Investment in an associate measured at
FVTPL	248,006	-
Total	307,576	81,484

On 29 January 2020, the Group entered into a subscription agreement for subscription of 51,847,997 series A preferred shares of Chime Biologics Limited ("CBL") at a consideration of US$32 million. The subscription was completed in February 2020. The Group has the right to appoint 1 out of 4 directors of the board of CBL and therefore the Group has the power to exercise significant influence over CBL and CBL becomes an associate of the Group. Details are set out in the Company's announcement dated 29 January 2020.

The investment in CBL is made in the form of preferred shares with preferential rights. They are subordinated to the other holders of ordinary shares in CBL. Such investment is therefore measured at FVTPL in accordance with HKFRS 9 "Financial Instruments". Details of fair value measurements are set out in note 23.

Interim Report 2020

43

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

15. TRADE AND OTHER RECEIVABLES

	At 30 June	At 31 December
	2020	2019
	HK$'000	HK$'000
	(unaudited)	(audited)
Trade receivables	5,999	15,225
Less: Allowance for ECL	(53)	(55)
	5,946	15,170
Utility and rental deposits	6,979	10,680
Interest receivables	355	2,795
Prepayments and other receivables	4,821	6,132
	18,101	34,777
Less: Amount due more than one year
shown under non-current assets	(6,180)	(6,208)
Amount shown under current assets	11,921	28,569

The Group allows its trade customers an average credit period of 90 days. The following is an aged analysis of trade receivables net of allowance for expected credit losses presented based on the invoice date at the end of the reporting period, which approximated the respective revenue recognition dates:

	At 30 June	At 31 December
	2020	2019
	HK$'000	HK$'000
	(unaudited)	(audited)
Within 30 days	3,132	5,223
31 - 60 days	1,219	1,986
61 - 90 days	85	1,527
91 days to 1 year	658	3,747
Over 1 year	852	2,687
	5,946	15,170

The Group has applied simplified approach on non-credit impaired trade receivables from contracts with customers to provide for ECL. In determining the recoverability of a trade receivable from contract with customers, the Group considers changes in the credit quality of the trade receivable from contract with customers from the date of credit initially granted up to the end of the reporting period, management's historical experience on the customers' settlement patterns and on-going business relationships with the Group.

44 Auto Italia Holdings Limited

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

16. LOAN RECEIVABLES

	At 30 June	At 31 December
	2020	2019
	HK$'000	HK$'000
	(unaudited)	(audited)
Fixed-rate loans	26,610	70,220
Less: Allowance for expected credit losses	(11)	(165)
	26,599	70,055

As at 30 June 2020, loan receivable amounted to HK$19,000,000 (31 December 2019: HK$19,000,000) with original maturity in July 2018, further extended to July 2020 (31 December 2019: July 2020), carrying interest rate of 8% per annum was secured by listed shares in Hong Kong with fair values of approximately HK $ 151,416,000 (31 December 2019: HK $ 180,296,000) . Subsequently, HK$5,000,000 of the loan has been partially repaid in July 2020, with the remaining loan balance of HK$14,000,000 further extended to July 2021, carrying interest rate of 10% per annum.

Loan receivable amounted to HK$7,610,000 (31 December 2019: HK$15,220,000) with original maturity in August 2018, further extended to August 2020 (31 December 2019: August 2020), carrying interest rate of 10% per annum was secured by second legal charge of a residential property located in Hong Kong with fair value of HK$20,138,000 (31 December 2019: HK$34,391,000). The fair value was determined based on direct comparison method making reference to comparable sales transactions as available in relevant markets.

Interim Report 2020

45

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

17. TRADE AND OTHER PAYABLES

	At 30 June	At 31 December
	2020	2019
	HK$'000	HK$'000
	(unaudited)	(audited)
Trade payables	463	6,867
Advance payments from customers	326	2,561
Accrued charges	3,583	15,027
Other payables	10,090	6,895
	14,462	31,350

The following is an aged analysis of trade creditors, presented based on invoice date, at the end of the reporting period:

	At 30 June	At 31 December
	2020	2019
	HK$'000	HK$'000
	(unaudited)	(audited)
Within 30 days	454	5,611
31 - 60 days	2	376
61 - 90 days	-	15
91 days to 1 year	7	101
Over 1 year	-	764
	463	6,867

46 Auto Italia Holdings Limited

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

18. BANK AND OTHER BORROWINGS

During the current interim period, the Group obtained several new bank loans from various banks and a financial institution amounting to HK$8,982,000 (for the six months ended 30 June 2019: HK$42,671,000) and repaid HK$12,529,000 (for the six months ended 30 June 2019: HK$101,207,000). The loans carry interest at variable market rates ranging from 2.17% to 4.75% per annum (31 December 2019: 4.25% to 5.53% per annum).

On 2 February 2020, the Group issued unsecured corporate bonds amounted to HK$171,600,000 in Hong Kong for the investment in an associate as set out in note 14. The unsecured corporate bonds have maturity of one and half years until August 2021 and carry interest at 10% per annum. During the six months ended

30 June 2020, the Group early repaid HK$41,600,000.

19. SHARE CAPITAL

	Number of shares	Share capital
		HK$'000
Ordinary shares of HK$0.02 each:
Authorised
At 1 January 2019, 30 June 2019,
1 January 2020 and 30 June 2020	17,500,000,000	350,000
Issued and fully paid
At 1 January 2019, 30 June 2019,
1 January 2020 and 30 June 2020	5,219,541,190	104,391

Interim Report 2020

47

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

20. RELATED PARTY TRANSACTIONS

The Group had entered the following significant transactions with its related parties:

	Six months ended 30 June
	2020	2019
	HK$'000	HK$'000
	(unaudited)	(unaudited)
Key management personnel
compensation (Note)	3,583	4,096

Note: The remuneration of key management personnel during the period was determined by the directors having regard to the performance of individuals and market trends.

21. CAPITAL COMMITMENTS

	As at	As at
	30 June	31 December
	2020	2019
	HK$'000	HK$'000
	(unaudited)	(audited)
Capital expenditure authorised for but
not contracted and provided in the
condensed consolidated financial
statements in respect of purchase of
property, plant and equipment	30	670

48 Auto Italia Holdings Limited

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

22. SHARE-BASED PAYMENTS

A share option scheme (the "Option Scheme") was adopted pursuant to a resolution passed by the shareholders of the Company on 28 May 2012. The purpose of the Option Scheme is to provide incentives or rewards to the participants for their contribution to the Group and enable the Group to recruit and retain high calibre employees and attract human resources that are valuable to the Group and any companies in which the Group holds any equity interest. The Option Scheme will expire on the 10th anniversary of the date of adoption.

The table below discloses movement of the Company's share options:

	Number of
	share options
Outstanding as at 1 January 2019, 30 June 2019 and
1 January 2020	215,922,200
Lapsed during the period	(3,000,000)
Outstanding as at 30 June 2020	212,922,200

During the six months ended 30 June 2020, the Group recognised the total expense of HK$315,000 (six months ended 30 June 2019: HK$787,000) in administrative expenses in relation to share options granted by the Company.

Interim Report 2020

49

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

23. FINANCIAL INSTRUMENTS

Fair value measurement

As at 30 June 2020, the investment in preferred shares of HK$248,006,000 as detailed in note 14 is measured at fair value at the end of the reporting period at Level 2 fair value hierarchy. No further disclosures on valuation techniques and key inputs are provided as the fair value is referencing to recent transaction price.

The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the condensed consolidated financial statements approximate their fair values.

Financial risk management objectives and policies

The Group currently does not have a foreign currency hedging policy. However, the management of the Company monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

24. EVENT AFTER THE REPORTING PERIOD

On 27 July 2020, the Company has granted share options to certain eligible grantees for a total of 982,000,000 ordinary shares of HK$0.02 each of the Company under the share option scheme adopted by the Company on 28 May 2012. As the total number of shares to be issued upon exercise of the Conditionally Granted Options (as defined in the announcement of the Company dated 27 July 2020) exceeds 1% of the shares in issue, pursuant to Rule 17.03(4) of the Listing Rules, the grant of the respective Conditionally Granted Options must be approved by shareholders of the Company at a special general meeting. Details of the grant of share options are set out in the announcement of the Company dated 27 July 2020.

50 Auto Italia Holdings Limited