Digital Domain : INTERIM REPORT 2020

September 18, 2020 at 05:15 am EDT

INTERIM REPORT 2020

The board of directors (the "Directors" and the "Board" respectively) of Digital Domain Holdings Limited (the "Company") announces the unaudited consolidated interim results of the Companyand its subsidiaries (the "Group") for the six months ended 30 June 2020 (the "Review Period") together with the comparative figures for the

corresponding periodin 2019 as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT - UNAUDITED

FOR THE SIX MONTHS ENDED 30 JUNE 2020

		Forthe six months ended30 June
		2020	2019
	Notes	HK$'000	HK$'000

Revenue	4	334,739	284,429
Cost of sales and services rendered		(307,848)	(227,832)
Gross profit		26,891	56,597
Other income and gains		90,218	73,237
Selling and distribution expenses		(2,549)	(10,238)
Administrative expenses and other net operating expenses		(242,089)	(245,659)
Finance costs	5	(14,985)	(42,117)
Fair value gains on investment properties		-	700
Gain on disposal of subsidiaries		-	99,293
Impairment loss on amounts due from associates		-	(93,289)
Share of losses of associates		(7,721)	(5,787)
Share of losses of joint ventures		-	(1)
Loss before taxation	6	(150,235)	(167,264)
Taxation	7	3,793	1,552
Loss for the period		(146,442)	(165,712)

Loss attributable to:
- Owners of the Company		(127,224)	(161,625)
- Non-controlling interest		(19,218)	(4,087)
		(146,442)	(165,712)

Loss per share:	8
Basic and diluted		HK cents (0.373)	HK cents (0.556)

DIGITAL DOMAIN HOLDINGS LIMITED	1
INTERIM REPORT 2020

CONDENSEDCONSOLIDATEDSTATEMENTOFCOMPREHENSIVE INCOME- UNAUDITED

FOR THE SIXMONTHS ENDED 30JUNE 2020

	Forthe six monthsended 30 June
	2020	2019
	HK$'000	HK$'000

Loss for the period	(146,442)	(165,712)
Othercomprehensive income
Items that may be reclassifiedsubsequently to profit or loss:
Currency translationdifferences	(5,615)	6,897
Share of other comprehensive incomeof associates	92	82
Share of othercomprehensive income of joint ventures	(4)	(1)
Net other comprehensive income that may
be reclassified subsequently to profit or loss	(5,527)	6,978

Item that will not be reclassified to profit or loss:
Changes in fair value of equity instrument at fair value through
other comprehensive income, net of tax	-	(57,382)
Net other comprehensive income that will not be
reclassified to profit or loss	-	(57,382)
Other comprehensive income for the period, net of tax	(5,527)	(50,404)
Total comprehensive income for the period	(151,969)	(216,116)

Total comprehensive income attributable to:
- Owners of the Company	(131,554)	(212,667)
- Non-controlling interest	(20,415)	(3,449)
	(151,969)	(216,116)

2	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

CONDENSED CONSOLIDATED STATEMENT OF FINANCIALPOSITION

AS AT30 JUNE 2020

		Unaudited	Audited
		30 June	31 December
	Notes	2020	2019
	HK$'000	HK$'000
Non-currentassets
Property, plant and equipment		79,997	72,002
Right-of-use assets		103,853	132,749
Intangible assets	9	1,304,989	1,346,042
Interests in associates		83,027	79,973
Interests in joint ventures		-	4
Financial asset measured at fair value through
other comprehensive income	10	-	-
Deposits	11	12,557	12,857
Deferred tax assets		2,431	176
		1,586,854	1,643,803
Current assets
Inventories		30,875	22,970
Trade receivables, other receivables and prepayments	11	214,078	169,674
Contract assets		3,795	13,170
Bank balances and cash		207,763	325,433
		456,511	531,247
Current liabilities
Trade payables, other payables and accruals	12	138,774	108,821
Lease liabilities		40,121	49,672
Contract liabilities		52,536	66,873
Borrowings		74,106	54,870
Contingent consideration payable		13,379	14,259
Tax payable		4,902	5,073
		323,818	299,568
Net current assets		132,693	231,679
Total assets less current liabilities		1,719,547	1,875,482
Non-current liabilities
Borrowings		234,817	219,515
Lease liabilities		93,414	114,977
Deferred tax liabilities		59,672	63,795
		387,903	398,287
Net assets		1,331,644	1,477,195

Capital and reserves
Share capital	13	340,737	340,737
Reserves		960,679	1,085,815
Equity attributable to owners of the Company		1,301,416	1,426,552
Non-controlling interest		30,228	50,643
Total equity		1,331,644	1,477,195

DIGITAL DOMAIN HOLDINGS LIMITED	3
INTERIM REPORT 2020

CONDENSEDCONSOLIDATEDSTATEMENTOFCHANGESIN EQUITY- UNAUDITED

FOR THE SIXMONTHS ENDED 30JUNE 2020

						Attributable to ownersof the Company
							Share	Exchange								Non-
	Share	Share		FVOCI	Contributed	options	fluctuation	Other	Accumulated				controlling	Total
	capital	premium	reserve		surplus	reserve	reserve	reserve		losses		Total		interest	equity
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
As at 1 January 2020	340,737	1,984,712	(196,213)	594,690	174,039	(903)	6,197	(1,476,707)	1,426,552		50,643	1,477,195
Recognition of equity-settled
share-basedpayment	-	-		-		-	6,418	-	-		-		6,418			-	6,418
Loss for theperiod	-	-		-		-	-	-	-	(127,224)	(127,224)		(19,218)	(146,442)
Currencytranslation differences	-	-		-		-	-	(4,418)	-		-		(4,418)		(1,197)	(5,615)
Share of othercomprehensive
income of associates	-	-		-		-	-	92	-		-		92			-	92
Share of othercomprehensive
income of joint ventures	-	-		-		-	-	(4)	-		-		(4)			-	(4)
Total comprehensive income
for the period	-	-		-		-	-	(4,330)	-	(127,224)	(131,554)		(20,415)	(151,969)
As at 30 June 2020	340,737	1,984,712	(196,213)	594,690	180,457	(5,233)	6,197	(1,603,931)	1,301,416		30,228	1,331,644


						Attributable to owners of the Company
				Buildings		Share	Deferred	Exchange							Non-
	Share	Share	FVOCI	revaluation	Contributed	options	shares	fluctuation	Other	Accumulated				controlling	Total
	capital	premium	reserve		reserve	surplus	reserve	reserve	reserve	reserve		losses	Total		interest	equity
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000		HK$'000	HK$'000
As at 31 December 2018	267,314	1,290,487	(30,237)		7,355	594,690	169,132	7,767	327	6,197	(1,081,558)	1,231,474	78,482	1,309,956
Initial application of HKFRS 16	-	-	-		-	-	-	-	-	-		(1,022)	(1,022)	(344)	(1,366)
As at 1 January 2019 (Restated)	267,314	1,290,487	(30,237)		7,355	594,690	169,132	7,767	327	6,197	(1,082,580)	1,230,452	78,138	1,308,590
Recognition of equity-settled
share-based payment	-	-	-		-	-	4,768	-	-	-		-	4,768		-	4,768
Issue of shares on placement,
net of expenses	53,237	500,319	-		-	-	-	-	-	-		-	553,556		-	553,556
Issue of shares on exercise
of share options, net of expenses	10	54	-		-	-	(34)	-	-	-		34	64		-	64
Release upon disposal of subsidiaries	-	-	-		(7,355)	-	-	-	-	-		7,355		-		-	-
Loss for the period	-	-	-		-	-	-	-	-	-	(161,625)	(161,625)	(4,087)	(165,712)
Currency translation differences	-	-	-		-	-	-	-	6,259	-		-	6,259	638	6,897
Share of other comprehensive income
of associates	-	-	-		-	-	-	-	82	-		-	82		-	82
Share of other comprehensive income
of joint ventures	-	-	-		-	-	-	-	(1)	-		-	(1)		-	(1)
Changes in fair value of equity
instrument at fair value through other
comprehensive income, net of tax	-	-	(57,382)		-	-	-	-	-	-		-	(57,382)		-	(57,382)

Total comprehensive income
for the period	-	-	(57,382)		-	-	-	-	6,340	-	(161,625)	(212,667)	(3,449)	(216,116)

As at 30 June 2019	320,561	1,790,860	(87,619)		-	594,690	173,866	7,767	6,667	6,197	(1,236,816)	1,576,173	74,689	1,650,862

4	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS-UNAUDITED

FOR THE SIX MONTHS ENDED 30 JUNE2020

	For the six months ended 30 June
	2020	2019
	HK$'000	HK$'000

Cash flows from operating activities
Loss before taxation	(150,235)	(167,264)
Adjustments for:
Depreciation of property, plant and equipment	15,108	22,712
Depreciation of right-of-use assets	25,306	16,545
Gain on disposal of intangible assets	-	(3,036)
Amortisation of intangible assets	52,792	49,871
Loss on disposal of property, plant and equipment	57	-
Gain on disposal of subsidiaries	-	(99,293)
Equity-settledshare-based payment expenses	6,418	4,768
Net exchange losses	3,521	2,272
Fair value gains on investment properties	-	(700)
Share of losses of associates	7,721	5,787
Share of losses of joint ventures	-	1
(Reversal of)/provision for impairment loss
on trade receivables and contract assets	(5,971)	1,233
Reversal of impairment loss on other receivables	(2,799)	-
Impairment loss on amounts due from associates	-	93,289
Change in fair value of contingent consideration payable	(887)	-
Interest income	(2,509)	(9,611)
Finance costs	14,985	42,117
Operating loss before working capital changes	(36,493)	(41,309)
Increase in trading merchandise goods	(7,905)	(1,463)
Increase in trade receivables, other receivables and prepayments	(33,972)	(129,795)
Decrease in contract assets	9,375	2,462
Increase/(decrease) in trade payables, other payables and accruals	28,578	(952)
(Decrease)/increase in contract liabilities	(14,337)	1,939
Cash used in operations	(54,754)	(169,118)
Income tax paid	(374)	(112)
Interest paid	(5,199)	(31,995)

Net cash used in operating activities	(60,327)	(201,225)

DIGITAL DOMAIN HOLDINGS LIMITED	5
INTERIM REPORT 2020

CONDENSEDCONSOLIDATEDSTATEMENTOFCASHFLOWS- UNAUDITED (continued)

FOR THE SIXMONTHS ENDED 30JUNE 2020

	For the six monthsended 30 June
	2020	2019
	HK$'000	HK$'000
Cash flows from investing activities
Interest received	831	9,521
Purchasesof property,plant andequipment	(25,378)	(3,542)
Proceeds from disposalof property, plantand equipment	17	-
Additions to intangible assets	(22,355)	(34,158)
Proceeds fromdisposal of intangible assets	-	4,046
Advance to associates	(10,683)	(48,401)
Decreasein bank depositswith more than three months
tomaturity whenplaced or pledged	15,582	-
Settlement of contingent consideration payable	-	(45,614)
Net cash inflow from disposal of subsidiaries	-	233,412
Net cash (used in)/generated from investing activities	(41,986)	115,264
Cash flows from financing activities
Proceeds from exercise of share options	-	64
Proceeds from issue of ordinary shares, net of issuing expenses	-	553,556
New borrowings	42,076	226,752
Repayment of borrowings	(5,338)	(468,044)
Repayment of principal portion of lease liabilities	(34,123)	(29,763)
Net cash generated from financing activities	2,615	282,565
Net (decrease)/increase in cash and cash equivalents	(99,698)	196,604
Effect of foreign exchange rate changes	(2,390)	(927)
Cash and cash equivalents at 1 January	309,851	75,926
Cash and cash equivalents at 30 June	207,763	271,603

Represented by:
Bank balances and cash	207,763	271,603

6	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIMFINANCIALSTATEMENTS

1. BASISOFPREPARATION AND ACCOUNTING POLICIES

The unaudited condensed consolidatedinterim financial statements for thesix months ended 30June 2020 have been

prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34 - "Interim Financial Reporting" issued by the

Hong Kong Institute of Certified Public Accountants ("HKICPA") andthe applicable disclosure requirements of Appendix 16 to the RulesGoverning the Listingof Securitieson The Stock Exchange of Hong Kong Limited.

The unauditedcondensed consolidated interim financial statements have beenprepared under the historical cost basis and exceptfor certain financialinstrumentswhich are measured atfair value.

Theseunaudited condensed consolidated interim financialstatements have been prepared with the same accounting policies adopted in the 2019 annual financial statements, except for those that relate to new standards or interpretations effectivefor the first time for periods beginning on or after 1 January 2020. The Group hasearlyadopted the Amendmentto HongKong Financial Reporting Standard 16 - Covid-19-Related Rent Concessions ("Amendment toHKFRS 16"). Details of any changes in accounting policies are set out in note 2. Except for the early adoption of Amendment to HKFRS 16, the adoption of the new and revised HKFRSs has no material effect on these unaudited condensed consolidated interim financial statements. The Group has not early adopted any other new and revised HKFRSs that has been issued but not yet effective in the current accounting period.

The preparation of these unaudited condensed consolidated interim financial statements in compliance with HKAS 34 requires the use of certain judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

These unaudited condensed consolidated interim financial statements are presented in Hong Kong Dollars ("HK$"), unless otherwise stated. These unaudited condensed consolidated interim financial statements contain unaudited condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2019 annual financial statements. These unaudited condensed consolidated interim financial statements and notes do not include all of the information required for a complete set of financial statements prepared in accordance with Hong Kong Financial Reporting Standards (the "HKFRSs") and should be read in conjunction with the 2019 consolidated financial statements.

2. CHANGES IN HKFRSs

The HKICPA has issued a number of new or amended HKFRSs that are first effective for the current accounting period of the Group:

Amendments to HKFRS 3	Definition of a Business
Amendments to HKAS 1 and HKAS 8	Definition of Material
Amendments to HKFRS 9, HKAS 39 and HKFRS 7	Interest Rate Benchmark Reform
Amendment to HKFRS 16	Covid-19-Related Rent Concessions1 (early adoption)

1The amendment is effective retrospectively for annual periods beginning on or after 1 June 2020 with earlier application permitted.

The Group has adopted all the new or revised HKFRSs that are relevant to its operations and effective for the current accounting period of the Group. The impact of the early adoption of Amendment to HKFRS 16 have been summarised below. The adoption of other new or amended HKFRSs that are effective from 1 January 2020 did not have any significant impact on the Group's accounting policy.

DIGITAL DOMAIN HOLDINGS LIMITED	7
INTERIM REPORT 2020

2. CHANGES INHKFRSs (continued) Amendment to HKFRS 16

This amendment provides a practical expedientfor lessees to elect not to apply leasemodification accounting for rent

concessions arising as a direct consequence of thecovid-19 pandemic. The practical expedient applies only to rent concessions occurring as adirect consequenceof the covid-19 pandemic and onlyif

(i)thechangein lease payments results in revised considerationfor the lease that is substantially the same as, or less than,the consideration for the lease immediately preceding thechange;

(ii) anyreduction in lease payments affects only payments originallydueon or before30June 2021;and

(iii) there is no substantivechange toother termsandconditionsof the lease.

During the period ended30 June2020,certainmonthlylease payments for the leases of the Group'sbuildings have been

reduced or waivedby thelessors asaresultof the covid-19 pandemic and there are no other changes to the termsof

the leases. The Group has early adopted the amendment on 1 January 2020 and elected not to apply lease modification

accountingforall rent concessionsgranted by the lessors as a result of the covid-19 pandemic during the period ended

30 June 2020. Accordingly, a reduction in the lease payments arising from the rent concessions of HK$428,000 has been

accountedfor asavariable lease payment by derecognising part of the lease liabilities and crediting to profit or loss for the periodended30June 2020.

USE OF JUDGEMENTS AND ESTIMATES
In preparing this unaudited condensed consolidated interim financial statements, the significant judgements made by the management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to 2019 annual financial statements.
REVENUE AND SEGMENT REPORTING Reportable segments
The Group determines its operating segments based on the reports reviewed by the chief operating decision-makers that are used to make strategic decisions and to assess the performance.
The segments are managed separately as each business offers different products and services and requires different business strategies. The following summary describes the operations in each of the Group's reportable segments:
- Media entertainment (visual effects production service, post production service, 360 degree digital capture technology application and sales of hardware and solution services)
- Property investment

Inter-segment transactions are priced with reference to prices charged to external parties for similar order. Central revenue and expenses are not allocated to the operating segments as they are not included in the measure of the segment's profit or loss that is used by the chief operating decision-makers for assessment of segment performance.

An analysis of the Group's revenue from its principal activities for the period is as follows:

			For the six months ended 30 June
			2020	2019
			HK$'000	HK$'000
		Revenue from contracts with customer within the scope of HKFRS 15:
		Provision of
		- visual effects production service	304,607	211,479
		- post production service	5,299	11,506
		- 360 degree digital capture technology application
		and sales of hardware and solution services	24,833	61,379
			334,739	284,364
		Revenue from other source
		Rental income	-	65
			334,739	284,429
8
DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

4.	REVENUEAND SEGMENT REPORTING (continued)
	Reportable segments (continued)
	(b)	Disaggregation of revenue from contracts with customers

			Media entertainment
			For the six months ended 30 June
			2020		2019
			HK$'000	HK$'000
		Segments
		Types of goods or services
		Provision of
		- visual effects production service	304,607		211,479
		- post production service	5,299		11,506
		- 360 degree digital capture technology application
		and sales of hardware and solution services	24,833		61,379
		Total	334,739		284,364

		Geographical markets
		The People's Republic of China (the "PRC")	26,046		91,897
		The United States of America ("USA")	88,485		86,927
		Canada	215,559		99,251
		United Kingdom	2,671		2,964
		Other countries/regions	1,978		3,325
		Total	334,739		284,364

		Timing of revenue recognition
		A point in time	24,840		59,990
		Over time	309,899		224,374
		Total	334,739		284,364

Analysis of the Group's revenue and results for the period and assets and liabilities by business segment are as follows:

	Media entertainment	Property investment	Consolidated
	For the six months	For the six months	For the six months
	ended 30 June	ended 30 June	ended 30 June
	2020	2019	2020	2019	2020	2019
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Reportable segment revenue
from external customers	334,739	284,364	-	65	334,739	284,429

Reportable segment loss	(130,820)	(110,014)	-	(230)	(130,820)	(110,244)


	As at	As at	As at	As at	As at	As at
	30 June	31 December	30 June	31 December	30 June	31 December
	2020	2019	2020	2019	2020	2019
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Reportable segment assets	1,805,229	1,778,058	-	-	1,805,229	1,778,058

Reportable segment liabilities	(592,427)	(586,028)	-	-	(592,427)	(586,028)
					9
				DIGITAL DOMAIN HOLDINGS LIMITED
					INTERIM REPORT 2020

4.	REVENUE AND SEGMENTREPORTING (continued)
	Reportable segments (continued)
	(d)	Reconciliationof reportable segment profitor loss, assetsand liabilities

			For the sixmonths ended 30 June
			2020	2019
			HK$'000	HK$'000
		Lossbefore taxation
		Reportable segment loss	(130,820)	(110,244)
		Reversal of/(provision for) impairmentloss
		on trade receivables and contract assets	5,971	(1,233)
		Reversalof impairment loss on other receivables	2,799	-
		Impairmentloss on amountsdue from associates	-	(93,289)
		Loss on disposalof unallocated property, plant and equipment	(74)	-
		Fair valuegains on investment properties	-	700
		Share of losses of associates	(7,721)	(5,787)
		Share of losses of joint ventures	-	(1)
		Auditor's remuneration	(882)	(428)
		Depreciation of unallocated property, plant and equipment,
		depreciation of unallocated right-of-use assets and
		amortisation of unallocated intangible assets	(26,511)	(21,187)
		Professional fees	(12,348)	(15,986)
		Finance costs	(14,985)	(42,117)
		Equity-settledshare-based payment expenses	(6,418)	(4,768)
		Unallocated lease expenses	(74)	(74)
		Unallocated other income and gains	80,845	72,726
		Gain on disposal of subsidiaries	-	99,293
		Other unallocated corporate expenses*	(40,017)	(44,869)
		Consolidated loss before taxation	(150,235)	(167,264)

The balance mainly represented unallocated corporate operating expenses that are not allocated to operating segments, including directors' remuneration, staff cost and other head office expenses.

10	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

4.	REVENUEAND SEGMENT REPORTING (continued)
	Reportable segments (continued)
	(d)	Reconciliation of reportable segment profit or loss, assets andliabilities (continued)

			As at
			30 June	31 December
			2020		2019
			HK$'000	HK$'000
		Assets
		Reportable segment assets	1,805,229		1,778,058
		Unallocated bank balances and cash	105,611		212,906
		Unallocated corporate assets	132,525		184,086
		Consolidated total assets	2,043,365		2,175,050


			As at
			30 June	31 December
			2020		2019
			HK$'000	HK$'000
		Liabilities
		Reportable segment liabilities	592,427		586,028
		Tax payable	4,902		5,073
		Deferred tax liabilities	59,672		63,795
		Unallocated borrowings	4,909		4,909
		Unallocated corporate liabilities	49,811		38,050
		Consolidated total liabilities	711,721		697,855

DIGITAL DOMAIN HOLDINGS LIMITED	11
INTERIM REPORT 2020

4.	REVENUE AND SEGMENTREPORTING (continued)
	Reportable segments (continued)
	(e)	Geographicinformation
		An analysis of the Group's revenue from external customers by geographiclocation is as follows:

			For the six months ended 30 June
			2020		2019
			HK$'000	HK$'000
		Hong Kong (placeof domicile)	-		65
		The PRC	26,046		91,897
		USA	88,485		86,927
		Canada	215,559		99,251
		UnitedKingdom	2,671		2,964
		Other countries/regions	1,978		3,325
			334,739		284,429

		The revenue information from above is based on location of customers.
	(f)	Trade receivables, contract assets and contract liabilities from contracts with customers

			As at
			30 June	31 December
			2020		2019
			HK$'000	HK$'000
		Trade receivables	37,697		46,678
		Contract assets	3,795		13,170
		Contract liabilities	52,536		66,873

The contract assets primarily relate to the Group's rights to consideration for work completed but not billed at the reporting date on revenue related to the provisions of visual effects production, post production service and solution services. The contract assets are transferred to receivables when the rights become unconditional. This usually occurs when the Group provides the invoice to the customer.

The contract liabilities are mainly related to the advance consideration received from customers.

The Group has applied the practical expedient to its sales contracts for media entertainment services and therefore the above information does not include information about revenue that the Group will be entitled to when it satisfies the remaining performance obligations under the contracts for media entertainment services that had an original expected duration of one year or less.

12	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

5.	FINANCECOSTS

		For the sixmonths ended 30 June
		2020	2019
		HK$'000	HK$'000
	Imputed interest on:
	Contingent consideration payable	158	1,817
	Lease liabilities	8,253	8,447
	Interest on:
	Bank and other loans	6,574	31,164
	Secured note	-	689
		14,985	42,117

6.	LOSS BEFORE TAXATION

		For the six months ended 30 June
		2020	2019
		HK$'000	HK$'000
	This is arrived at after crediting/charging:
	Crediting:
	Interest income	2,509	9,611
	Reversal of impairment loss on trade receivables and contract assets	5,971	-
	Reversal of impairment loss on other receivables	2,799	-
	Charging:
	Staff cost (including directors' remuneration)	351,828	268,742
	Depreciation of property, plant and equipment	15,108	22,712
	Depreciation of right-of-use assets	25,306	16,545
	Amortisation of intangible assets	52,792	49,871
	Impairment loss on trade receivables and contract assets	-	1,233
	Short-term lease expenses	215	367

DIGITAL DOMAIN HOLDINGS LIMITED	13
INTERIM REPORT 2020

7.	TAXATION
	Taxation creditedto theunaudited condensedconsolidated income statement represents:

		For the six months ended 30 June
		2020	2019
		HK$'000	HK$'000
	Current taxation - Hong Kong profitstax	-	-
	Current taxation - Overseastax
	- provision forthe period	458	1,758
	- over-provision in respect of prior years	(84)	-
	Deferred taxation	(4,167)	(3,310)
		(3,793)	(1,552)

HongKongprofitstaxis calculated at applicable tax rate on the estimated assessable profits for both periods. No provision

forHongKong profitstax has been made for both periods as the Group has estimated tax losses brought forward to offset against the estimated assessable profits. Taxation on overseas profits has been calculated on the estimated assessable profits for the period at the rates of taxation prevailing in the countries in which the Group operates.

8. LOSS PER SHARE

The calculation of the basic loss per share attributable to owners of the Company is based on the following data:

	For the six months ended 30 June
	2020	2019
	HK$'000	HK$'000
Loss for the period attributable to owners of the Company
for the purpose of basic loss per share	(127,224)	(161,625)


	For the six months ended 30 June
	2020	2019
	Number of	Number of
	shares	shares
Weighted average number of ordinary shares
for the purposes of basic loss per share	34,073,816,258	29,068,472,612

Diluted loss per share

Since the share options outstanding had an anti-dilutive effect on the basic loss per share, the exercise of outstanding share options were not assumed in the computation of diluted loss per share.

Except for the above, there is no other dilutive potential share during the current and prior periods. Therefore, the basic and diluted loss per share in the current and prior periods are equal.

14	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

9.	INTANGIBLEASSETS

								Licenses for
				Proprietary	Participation		Backlog	intellectual	Other
		Goodwill	Trademarks	software	rights	Patents	contracts	property rights	licenses	Total
		HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
	COST
	As at 1 January 2020	884,952	153,366	200,368	381,763	306,447	18,178	-	17,841	1,962,915
	Additions	-	-	16,280	-	279	-	2,075	3,721	22,355
	Exchangerealignment	235	(6,548)	(2,958)	-	(3,966)	-	-	(347)	(13,584)

	As at 30 June 2020	885,187	146,818	213,690	381,763	302,760	18,178	2,075	21,215	1,971,686

	ACCUMULATED AMORTISATION
	AND IMPAIRMENT LOSS
	As at 1 January 2020	74,419	-	103,129	344,706	73,264	16,663	-	4,692	616,873
	Amortisation for the period	-	-	5,465	21,657	19,533	1,515	519	4,103	52,792
	Exchange realignment	-	-	(1,104)	-	(1,750)	-	-	(114)	(2,968)

	As at 30 June 2020	74,419	-	107,490	366,363	91,047	18,178	519	8,681	666,697

	CARRYING AMOUNT
	As at 30 June 2020	810,768	146,818	106,200	15,400	211,713	-	1,556	12,534	1,304,989

	As at 31 December 2019	810,533	153,366	97,239	37,057	233,183	1,515	-	13,149	1,346,042

10. FINANCIAL ASSET MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

	As at
	30 June	31 December
	2020		2019
	HK$'000	HK$'000
Unlisted equity investment, at fair value	-		-

In 2018, the Group acquired the unlisted equity instrument at the consideration of US$25,000,000 (equivalent to approximately HK$196,213,000). Accumulated fair value adjustment (downside) of HK$196,213,000 has been recognised in other comprehensive income as at 30 June 2020 and 31 December 2019.

The above investment represents an unlisted equity instrument which is held for medium or long-term strategic purpose. The Group irrevocably designated the investment in equity instrument as at fair value through other comprehensive income on its initial recognition as the directors believed that this provided a more meaningful presentation for medium or long-term strategic investment, than reflecting changes in fair value immediately in profit or loss.

DIGITAL DOMAIN HOLDINGS LIMITED	15
INTERIM REPORT 2020

11.	TRADE RECEIVABLES, OTHER RECEIVABLESAND PREPAYMENTS
	The Groupnormally allowsan average creditperiod of 30 days (as at 31 December 2019: 30 days) to trade customers.
	The ageinganalysis of the Group'strade receivables, net ofallowance for impairment losses, based on invoice dates, is as
	follows:

		30 June	31 December
		2020	2019
		HK$'000	HK$'000
	Current portion
	Trade receivables by ageing
	0 to 30 days	17,855	26,347
	31to 60 days	3,303	2,415
	61 to 90days	1,622	5,428
	91 to 365 days	9,333	5,159
	Over365 days	5,584	7,329
	Totaltrade receivables	37,697	46,678
	Other receivables	60,565	66,003
	Deposits	5,148	5,307
	Prepayments	110,668	51,686
	Sub-total current portion	214,078	169,674
	Non-current portion
	Deposits	12,557	12,857
	Total trade receivables, other receivables and prepayments	226,635	182,531

12. TRADE PAYABLES, OTHER PAYABLES AND ACCRUALS

The ageing analysis of the Group's trade payables, based on invoice dates, is as follows:

	30 June	31 December
	2020	2019
	HK$'000	HK$'000
Trade payables by ageing
0 to 30 days	5,400	7,407
31 to 60 days	1,505	4,248
61 to 90 days	288	1,263
91 to 365 days	9,355	4,373
Over 365 days	4,555	10,057
Total trade payables	21,103	27,348
Other payables	49,226	25,347
Accruals	68,445	56,126
Total trade payables, other payables and accruals	138,774	108,821

16	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

13.	SHARECAPITAL

		Number of
		ordinary shares	Amount
			HK$'000
	Ordinary shares of HK$0.01 each
	Authorised:
	As at 31 December 2019 and 30 June 2020	75,000,000,000	750,000

	Issued and fully paid:
	As at 31 December 2019 and 30 June 2020	34,073,816,258	340,737

14. SHARE-BASED PAYMENT TRANSACTIONS

On 21 May 2020, 478,000,000 share options ("Options") were conditionally granted to employees of the Group, 292,200,000 Options have immediately vested on 21 May 2020, while 92,200,000 Options and 93,600,000 Options will be vested on 21 May 2021 and 21 May 2022 respectively. All Options are/shall be exercisable from their respective vesting dates until 20 May 2030. The exercise price of the Options is HK$0.046 per share, being the closing price as stated in the daily quotations sheet issued by the Stock Exchange on 21 May 2020.

During the six months ended 30 June 2020, no share options (six months ended 30 June 2019: nil) were forfeited and no

share options (six months ended 30 June 2019: 1,000,000) were exercised.

As at 30 June 2020, the weighted average exercise price of share options outstanding was HK$0.253 per share (as at 31 December 2019: HK$0.308 per share), and their average remaining contractual life is 6.23 years (as at 31 December 2019: 5.75 years).

The fair value of services received in return for the grant on the grant date is measured by reference to the fair value of share options granted. The fair value of the share options granted on 21 May 2020 is determined based on binomial option pricing model. The weighted average fair value of each option granted during the six months ended 30 June 2020 was HK$0.021. The key valuation parameters are as follows:

Share price at grant date	HK$0.046
Exercise price	HK$0.046
Expected volatility	50%
Life of the share options	10 years
Expected dividend yield	0%
Risk-free rate	0.58%
Forfeiture rate	5.5%
Suboptimal exercise behaviour multiple	2.5

Expected volatility is determined by considering the historical share price movement of the Company. Expected dividend yield is determined from the Company's historical payment of dividends. Risk-free rate is the average forecast rate obtained from Hong Kong Government Bonds. Forfeiture rate is determined from the Group's historical employee share options exit rate. Suboptimal exercise behaviour multiple is based on the Company's historical employee share options early exercise multiples.

The fair value of equity-settled share options is estimated through the use of option valuation models which require various inputs and assumptions. The value of options is subjective and may be uncertain as it is affected by assumptions applied and with regard to the limitation of the valuation model. Some of the inputs are based on estimates derived from historical information of the Group, such as suboptimal exercise behaviour. In this regard, using different input estimates could produce different option values, which would result in the recognition of a higher or lower expense.

There were no market vesting conditions associated with the share options granted.

In aggregate, the Group had recognised an equity-settledshare-based payment expenses of HK$6,418,000 (six months ended 30 June 2019: HK$4,768,000) during the six months ended 30 June 2020.

DIGITAL DOMAIN HOLDINGS LIMITED	17
INTERIM REPORT 2020

15.	RELATED PARTY TRANSACTIONS
	During the six months ended 30June 2020,the Grouphad the following material related partytransaction:

				For the six months ended 30 June
				2020		2019
	Related partyrelationship	Type of transaction	HK$'000	HK$'000

	Associate	Advertising and promotion expenses	-		1,090

16.	CAPITAL COMMITMENTS
	The Group did not have any significant capital commitment as at 30 June 2020 and 31 December 2019.
17.	SIGNIFICANTEVENTS AFTER THE ENDOF THE REPORTING PERIOD
	On 17 July 2020,the Group entered into a sale and purchase agreement with an independent purchaser in connection with
	the disposal of 22.29% equity interest in a group of subsidiaries of the Company of which principal activities are sales of
	hardwareand solution services (the "Disposal Group"). Further details were set out in the Company's announcement dated
	17 July2020. The transaction has been completed on 31 July 2020. Upon the completion of the transaction, the Company

lost control over the Disposal Group but retained significant influence over the Disposal Group. Accordingly, the Group will account for its retained interest in the Disposal Group as its interests in associates.

18	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

INTERIM DIVIDEND

The Directors have resolved not to declarethe payment of an interimdividend for the six months ended 30 June 2020 (2019: nil).

FINANCIAL AND BUSINESS REVIEW

During theReview Period,the Groupachieved a revenue of HK$334,739,000 (2019: HK$284,429,000), showing

anincreaseofapproximately 18% comparedto that of theprevious corresponding period. Thegross profit of the

Groupand amounted toHK$26,891,000 (2019:HK$56,597,000)during theReview Period, showing a decrease

of approximately 52%. As at 30 June 2020, the totalassetsoftheGroupamounted to HK$2,043,365,000 (as

at 31 December2019: HK$2,175,050,000). The loss attributabletotheowners oftheCompany fortheReview

Period was HK$127,224,000 (2019: HK$161,625,000), showing a decreaseof 21%.The loss for theReview Period was approximately HK$146,442,000 (2019: HK$165,712,000), showing a decrease of12%. The loss of total comprehensive income for the period has been reduced from HK$216,116,000 to HK$151,969,000,showing a decrease of 30%. The loss for the Review Period was mainly caused by:

the recognition of non-cash outflow expenses, including:
1. equity-settledshare-based payments for the share options granted between 2014 and 2020 to the value of HK$6,418,000 (2019: HK$4,768,000);
2. amortisation and depreciation expenses from 3Glasses Group of HK$26,135,000 (2019: HK$26,453,000);
3. amortisation expenses from the investment in TV drama series (grouped under "Participation Rights") of HK$21,657,000 (2019: HK$20,256,000); and
4. other amortisation and depreciation expenses (besides the two items mentioned above) to the value of HK$45,414,000 (2019: HK$42,419,000);

administrative and other project expenses, comprising mainly legal and professional fees (including those incurred in relation to the acquisitions, collaborations and business development in the Greater China region, business development in Montreal, Canada, and investor and public relations); and
operating losses from the media entertainment segment.

DIGITAL DOMAIN HOLDINGS LIMITED	19
INTERIM REPORT 2020

FINANCIALANDBUSINESSREVIEW(continued)

MEDIA ENTERTAINMENTSEGMENT

During the Review Period, this segment recorded a revenue ofapproximately HK$334,739,000 (2019:

HK$284,364,000). This segmentincurred a loss of approximately HK$130,820,000 (2019: HK$110,014,000). The loss

includedthe contentdevelopment and research and development costs incurred relating to virtual realitycontent and games, 360°and interactive virtual human functionality.

"The earnings before interests,tax, depreciation andamortization (EBITDA)" ofthe media entertainment segment for

the six months ended 30 June 2020was aloss of HK$64,125,000(2019:HK$44,792,000). EBITDA isnot a standard

measure under theHong Kong Financial ReportingStandards (HKFRS) but is also a widelyused financial indicator of

a company's operating performance. EBITDAshould not be considered in isolation or be construed as alternativesto

cash flows, net income or anyothermeasureof performance or as indicators of the Group's operating performance,

liquidity, profitability or cash flows generated by operating, investing or financing activities. EBITDA for the media

entertainmentsegmentiscalculated based on the loss of the segment for the period but does not account for taxes, interestexpenses, depreciation(of the segment's property, plant and equipment) and amortization charges (on the segment'sintangible assets).

Visual Effects Production and Post-Production Business

This segment provides visual effects ("VFX") production and post-production services which includes visualisation, previsualisation, postvisualisation, visual effects, computer graphics ("CG"), animation, motion capture, virtual production and design for major motion picture studios, networks, streaming services, advertisers, brands and games.

Digital Domain North America (USA and Canada):

The following list of recent awards and nominations offers recognition for Digital Domain's artists and technology:

TELLYS

For the Telly Awards, Director of Virtual Human Group, Mr. Darren HENDLER, Senior Director of Software R&D, Dr. Doug ROBLE, and their team won a silver craft award for "Digital Humans that Look Just Like Us."

Director Mr. Pierre MICHEL-ESTIVAL, Visual Effects Supervisor Mr. Matt DOUGAN, Producer Ms. Alexandra MICHAEL, and their team won a bronze craft award for the online commercial spot for "Tom Clancy's The Division 2."

20	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

FINANCIAL AND BUSINESS REVIEW (continued)

MEDIA ENTERTAINMENT SEGMENT (continued)

A. Visual Effects Production and Post-Production Business (continued)

Association of Independent Commercial Producers (AICP)

Visual Effects Supervisor Mr. Matt DOUGAN and his team were shortlisted for an AICP Post Award for the CGI category for their work on "Tom Clancy's TheDivision 2."

Lead Compositor Mr. JohnBRENNICKandthe team wereshortlisted for an AICP Post Award fortheCompositing and Visual Effects category for their work on P!NK's "WalkMe Home(OfficialMusic Video)."

Since1 January 2020, the artists of Digital Domain 3.0, Inc. ("DD3I", a subsidiary of theCompany)have provided VFXservices for work including:

"Morbius" - Visual Effects Supervisors Mr. Joel BEHRENS, Mr. Matthew BUTLER and their team worked on the highly anticipated film Sony Pictures film directed by Daniel Espinosa expected to release in March 2021.
"Free Guy" - Visual Effects Supervisor Mr. Nikos KALAITZIDIS and his team worked on Shawn Levy's action-comedy following a bank teller discovers that he's actually an NPC inside a brutal, open world video game. The film is expected to release in December 2020.
"Black Widow" - Visual Effects Supervisor Mr. Dave HODGINS and his team worked on Marvel Studios' film following Natasha Romanoff in her quests between the films "Captain America: Civil War" and "Avengers: Infinity War." The film is expected to release in November 2020.
"Chaos Walking" - Visual Effects Supervisor Mr. Mitch DRAIN and his team continue work on director Doug Liman's film about dystopian world where there are no women and all living creatures can hear each other's thoughts in a stream of images, words, and sounds called Noise. The film is expected to be released in 2021.
"Shang-Chiand the Legend of the Ten Rings" - Visual Effects Supervisor Mr. Hanzhi TANG and his team began work on the Marvel Studios' film expected to release in May 2021.
"Doctor Strange in the Multiverse of Madness" - Work will begin shortly on the next installation in the Doctor Strange series. The film is expected to release in March 2022.

DIGITAL DOMAIN HOLDINGS LIMITED	21
INTERIM REPORT 2020

FINANCIALANDBUSINESSREVIEW(continued)

MEDIA ENTERTAINMENTSEGMENT (continued)

A. VisualEffects Production and Post-ProductionBusiness(continued)

For episodic, Digital Domain's visual effects teamscompleted work on severalepisodes forhit television and streaming shows such as:

• CBS's "Twilight Zone" - Visual Effects SupervisorMr. Mitchell S.DRAIN leda team of artistsin creatingthe visual

effects for five episodes of Netflix'ssecond seasonof "TheTwilightZone." Digital Domain's artists produced a total of 140 shotsacross theseasonwhichincludedthecreationof a very complexcreature.

• "PerryMason" - Visual Effects Supervisor Mr. Mitchell S. DRAIN led artists based in Los Angeles to complete

nearly 140 shotsfor the HBOminiseries that included historically accurate environment work reconstructing 1930s LA surroundingthe"Angel'sFlight" railway.

• "WandaVision" - Visual Effects Supervisor Mr. Marion SPATES and his team continues work on the new Marvel Studiosepisodic due to deliver in October 2020.

"Carnival Row" season 2 - Visual Effects Supervisor Mr. Aladino DEBERT and his team continues work on the second season of Amazon Studios' fantasy series delivering in January 2021.
"Loki" - Visual Effects Supervisor Mr. Jean-Luc DINSDALE have begun work on the new Marvel Studios episodic delivering in February 2021.

Digital Domain's visualization studio provided previz services for features shows such as:

Marvel Studios' "Dr. Strange 2"
FOX's "The Orville"
Fox Studios' "Free Guy"
Sony Pictures' "Morbius"
Marvel Studios' yet-to-be-titled third "Spider-Man" installment
Legendary Entertainment's "Dune"

Additionally, Mr. Scott MEADOWS' team provided previz for the following commercials spots: "Cross X," a:40 game trailer, and a:60 trailer for the game known as "Game for Peace/PUBG."

The team also provided mocap services for an undisclosed Google project as well as an AAA video game for Supermassive Games set to release on Google Stadia.

22	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

FINANCIAL AND BUSINESS REVIEW (continued)

MEDIA ENTERTAINMENT SEGMENT (continued)

A. Visual Effects Production and Post-Production Business (continued)

For commercials, we provided VFX services for advertisements, special venue projects and games. Work completed in 2020 includes:

•Led byDirectorMr.Aladino DEBERT and Visual Effects Supervisor, Mr. Matt DOUGAN, Digital Domain partneredwith agencyAKQA,tocreate a:60gamecinematicwith additionalcutdowns for the game "Ghost of

Tsushima."

• For Tencent, Director Mr. Pierre MICHEL-ESTIVAL and the team partneredwithDigitalDomain Chinato direct and provide Mocap for a:60 CG trailer for "Game of Peace."

Digital Domain's Visual Effects Supervisor Mr. Piotr KARWAS partnered with 72andSunny for a 2D flame job for Pluto TV.
Visual Effects Supervisor Mr. Piotr KARWAS and the team worked on Magic Leap's watch video ad for HBO.
For Microsoft's Xbox, Visual Effects Supervisor Mr. Piotr KARWAS and the team are working on a two-minute game cinematic trailer for "Joanna Dark."
For Reynolds, Digital Domain teamed up with Havas Chicago to create three fifteen second spots that included live action shoot, design, editorial and finishing.
The team is also working on a:30 game trailer for Microsoft's "CrossfireX," utilizing the Unreal engine. The work also included building four digital heads to attach to in-game bodies.
Also for 72andSunny the team is working on 80+ versions of a live action spot for American celebrity skateboarder Tony Hawk, for which we are handling all finishing work (cleanup, beauty and online).

DIGITAL DOMAIN HOLDINGS LIMITED	23
INTERIM REPORT 2020

FINANCIALANDBUSINESSREVIEW(continued) MEDIA ENTERTAINMENTSEGMENT (continued)A. VisualEffects Production and Post-Production Business(continued)

Possible Indemnification

A wholly-owned subsidiary of the Company based in the United States (the "USSubsidiary") has used a combination

of physical equipment and intellectual property to record images ofhuman faces (the "Disputed IP"). The Disputed

IP is one of several different technologies available to capture elementsofa human face prior to visual effects

enhancements that create the final image.The US Subsidiary'suseofthe DisputedIP had beenundera 2013 license from anunaffiliatedcompany basedin thePRC(the"OriginalOwner").

In 2014, adisputeover theownership of theDisputedIP between the Original Owner and another company basedin

the UnitedStates (the "Claimant")resultedin the filing of a lawsuit (the "Lawsuit") in the United States District Court,

Northern District of California.Neitherthe Original Owner nor the Claimant is a member company of the Group.

Anothersubsidiary of theCompany agreed in 2015 to purchase the Disputed IP. The completion of the transfer of such Disputed IPis subjectto the favourable outcome of the Lawsuit. On 11 August 2017, the court issued a statement of decision which concluded that the Claimant owned the Disputed IP. The US Subsidiary had already used alternate technologies. An appeal of the statement of decision was subsequently filed. The appellate court issued a written decision on 31 July 2020 in which it concluded that Claimant owned the Disputed IP.

During 2017, the Claimant filed four separate lawsuits against certain clients of the US Subsidiary relating to the use of the Disputed IP in certain visual effects projects that the US Subsidiary had completed ("Other Lawsuits"). In its production services agreements for these projects, the US Subsidiary agreed to certain indemnification obligations with respect to claims brought against these clients arising from allegations that the technology it used was not properly licensed or acquired. As a result, these clients have requested that the US Subsidiary acknowledge its obligation to indemnify them for any losses suffered as a result of their involvement in the Other Lawsuits.

The US Subsidiary's clients filed a motion asking the court to summarily decide certain portions of the remaining claims in their favour. The court has allowed both parties in the Other Lawsuits to conduct further discovery and investigation into these remaining claims before hearing further arguments in favour of and against the motion.

The US Subsidiary has submitted the indemnity requests that it has received from these clients to one of its insurance companies that may provide insurance coverage for indemnity claims brought against it. The insurance company initially acknowledged its obligation to provide a defence to the US Subsidiary's clients, but subsequently communicated to the US Subsidiary that it was re-evaluating its coverage obligations under the insurance policy. The insurance company and the US Subsidiary are continuing their discussions with respect to whether, and to what extent the insurance company will pay the defence costs of the US Subsidiary's clients in the Other Lawsuits.

24	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

FINANCIAL AND BUSINESS REVIEW (continued)

MEDIA ENTERTAINMENT SEGMENT (continued)

A. Visual Effects Production and Post-Production Business (continued)

Digital Domain China:

Through the investmentin Lucrative SkillHoldings Limited ("Lucrative Skill")in April 2016 - theholding company of the

Post Production Office group ofcompanies (collectively rebrandedas "Digital Domain China (DDChina)"),the Group

made significant progressinestablishing a strong operating platform inChina with studios located in Beijing and Shanghai.

DD China provides VFX production and post-production services forcommercials, TV drama series, andfeature films

in China, including offline and online editing, compositing, colour grading,design, musicandaudio, CG and VFX production. It also provides production services for the making of commercials, VR/360° videosand feature films.

Visual effects and colour grading for feature films and TV drama series include "Dare To Grow Up", as well as upcoming "Ban Lang Chuan Shuo", "Leap" and "Summer Blur".

In 2020, DD China continued to provide post-production and production (e.g. shooting, editing, colour grading, music production etc.) services for various high-profile commercials profiling leading brands like OMO, L'Oréal Paris, BVLGARI, Biotherm, PizzaHut, DIOR, Dove, Hair Recipe, Feihe, FOREO, Fenqile.com, Chef Nic, fresh, HAVAL, DARLIE, HUAWEI, "Going Home", Carslan, BESTORE, LOCKDOWN NEIGHBOURS, Mercedes-Benz, Minute Maid, SHEN YU PICTURES, TAYRON X, Tmall - CHINA COOL, URBAN DECAY, VIVO, "VOGUE China", LittleOndine, MI, Youku - "We Are Young", FAW-Hongqi, SHISEIDO and The JB Conspiracy - "Guiding Lights".

Digital Domain India:

The Hyderabad facility continues to be an integral part of the Group's global strategy for its VFX services. The facility has proven to be a dependable delivery centre for internal shows and slowly building a similar reputation with external, domestic and international clients.

Digital Domain India provides services across platforms, i.e. features, television, web and over-the-top ("OTT"). Digital Domain India gives utmost importance to data security and also passed security audits of The Motion Picture Association of America, Inc. ("MPAA"), Walt Disney Studios Motion Pictures ("Disney") and Marvel Studios, LLC ("Marvel"). Digital Domain India is a certified secured facility to handle content for all "A" list Hollywood and other international shows.

In first half of 2020, Digital Domain India has managed to deliver quality work on schedule while dealing with the global COVID-19 challenges. The capacity expansion and the full CG production plans in partnership with IP developers continue to be in the pipe and slated take shape as the markets recover, thus improving its overall revenue targets in the next few years.

DIGITAL DOMAIN HOLDINGS LIMITED	25
INTERIM REPORT 2020

FINANCIALANDBUSINESSREVIEW(continued)

MEDIA ENTERTAINMENTSEGMENT (continued)

B. Virtual Reality/Augmented Reality ("AR"), New Media and Experiential

Thissegment includesbusinesses offering augmented, immersiveand virtual reality (collectivelyas "VR") technologyservices using 360° digitalcapture technologyand CG.

Digital Domain offers a variety of products and servicesin theemergingVR market. The Company has developed

a VR streaming platform and interactivetoolset to supportanend-to-endsolutionfromconcept to consumption of

immersive content. Digital Domain teams use proprietarycameras and softwarefor capturing360° video footage,

andtheir digital artists produceVR experiencesinrealtime and for video on demand (VOD). In addition tousing

its own appfor hosting VRcontent, DigitalDomain technical teams also create custom VR apps for brands andtelecommunicationentities.

Digital Domain'sVR/AR, newmedia and experiential team executed several livestream broadcasts, experiences and installations, includingfor thesein2020:

Digital Domain partnered with TIME for "The March", to produce an immersive historical recreation of the 1963 March on Washington for Jobs and Freedom in virtual reality, which includes Dr. Martin Luther King Jr.'s 'I Have a Dream' speech.
Digital Domain is working with a major theme park company on R&D for a future virtual human project.
The team also worked on an Undisclosed AAA game project, capturing 30 hours of performance capture leveraging our Masquerade facial capture process.

The global studio participated in several events, including:

Foundry Virtual Events Series: "Nuke TD Roundtable" Mr. Deke KINCAID participated in a Nuke TD Roundtable exploring what TDs and technical artists do and why it's a good career.
#AIShowBiz: Trailblazer - Mr. John CANNING, Executive Producer of New Media & Experiential, spoke on a panel on "Creating Digital Characters and Worlds in the New Normal."
Mr. John CANNING, Executive Producer of New Media & Experiential, participated in a panel for VES online discussing Real-Time Virtual Humans.
Virtual Digital Hollywood: Mr. John CANNING, Executive Producer of New Media & Experiential, participated as a moderator on Virtual Hollywood Production and Immersive Entertainment.
VRTO: Mr. John CANNING, joined Keran Malicki-Sanchez for a pixelside chat covering a wide range of concepts and production anecdotes centered around the art of capturing humans, monsters and historic figures in such a way that they are indistinguishable from the real thing.
Langara Centre for Entertainment Arts: Mr. Jan Philip CRAMER, Head of Animation, presented a Facial Animation master class to showcase techniques that result in the most realistic and best possible facial animation out of motion capture or keyframe animation.

26	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

FINANCIAL AND BUSINESS REVIEW (continued)

MEDIA ENTERTAINMENT SEGMENT (continued)

B. Virtual Reality/Augmented Reality ("AR"), NewMedia and Experiential(continued)

3Glasses Group

3Glasses Group is principally engagedin the research, development and sale of VR hardware,smart wearable

devices, VR software development kit and otherrelated products, under the brandname of "3Glasses". The

management teamof 3Glasses Group hasmore than 10years of experiences inVRtechnology development and is a

pioneer in providingVRsolutionsinthePRC.The major productof 3Glasses Group is the self-developedVRheadset,

which isahead-mounted display device that providesVRexperience for wearersand is widely used with computer

games, simulators and trainers. 3Glasses has launched China's first(theworld's second) VR headset (3GlassesD1)

andChina's first mixed reality headset (3Glasses Blubur S1, development versionfor Microsoft). 3Glasses Group has undertaken more than 200 successful VR projects serving a broad variety of industrysectorsincluding entertainment,education, tourism, exhibition and display, architecture, design, health care, film and television and security.

In 2019, 3Glasses released the world's first ultra-thin consumer VR glasses, X1, with only one-third of comparable product's weight and size in the market, levelled up current VR glasses' benchmark with a striking standard. In 2019, 3Glasses X1 was successfully directly connected to ZTE's Axon 10 Pro, which makes X1 the world's first mass-producedultra-thin VR glasses connected to 5G mobile phones. Also, in 2019, 3Glasses launched D4, an upgraded VR headset based on D series, which not only realises better visual experience in optics, but also optimises industrial design and wire rod for offline VR experience.

On 17 March 2020, 3Glasses and China Unicom jointly held a strategic cooperation conference online. In the press conference with the theme of "Same Frequency and Joint Resonance", both parties announced that in the course of China Unicom's integration of 5G+VR industry joint resonance solutions, 3Glasses became one of the initial partners of China Unicom's "terminal + application" and "online + offline" integration to implement cooperation agreements. In addition, "X1S", 3Glasses' brand new VR glasses under the "X" series made its debut at the press conference.

Being the first official certified partner of Qualcomm XR SIMPLEVIEW program, 3Glasses also has co-operated with other famous corporations such as BOE Technology Group Co., Ltd. for development of ultra-thin VR optical components to iterate VR industry. Furthermore, with the laying of 5G network by the telecommunication operators in the PRC, 3Glasses X1 and the new X1S, being a carrier of 5G application tethered to 5G smartphones, will serve as the consumer VR hardware for families and individual users to provide immersive and seamless VR experiences over 5G.

As at 30 June 2020, 3Glasses Group has applied for 404 VR independent core patents. As an innovative technology company, while maintaining its technological leading edge in the area of hardware products such as VR headset, 3Glasses also actively expands its solutions services (including VR hardware, VR games and content services and industry applications).

Contractual Arrangements - please refer to pages 17 to 21 of Annual Report 2019.

DIGITAL DOMAIN HOLDINGS LIMITED	27
INTERIM REPORT 2020

FINANCIALANDBUSINESSREVIEW(continued)

MEDIA ENTERTAINMENTSEGMENT (continued)

C. Virtual Human Business(North Americaand Greater China regions)

Forthe further enhancement ofthe virtual human technology and businessdevelopment, the Group continuestoseek opportunitiesfor financingand collaborationwith strategic partners and recruitment of appropriate global talent.

The Virtual HumanGroup (VHG) ofNorth America regionparticipatedin several events, including:

• Dr. Doug ROBLE was invitedtopresent atelepresencekeynote at Real-Time Conference which detailed how

he and our VHG successfully introduced theworldto DigiDoug, a photorealistic avatar whotook thestage in

real-timefor TED Conferencein 2019.This presentation also went into the details with where we are now with the technologyconcentrating onthe "real" in both real-time and photoreal.

• At NVIDIA's GTC,Dr. Doug ROBLE also presented "Photorealistic, Real-Time, Digital Humans: From Our TED

Talk toNow" whichdelved into how the team achieved their 2019 TED presentation solving real-time human problems and what they've been working on since; increasing the fidelity of the rendered character, creating the ability to easily have someone else drive a character, creating autonomous characters who can drive themselves and creating new ways to render the character for ultimate fidelity.

Additionally, Dr. Doug ROBLE gave an internal presentation for NVIDIA.
Mr. Darren HENDLER participated in SIGGRAPH's spotlight podcast on "Age Manipulation in VFX" which dove into the science, technology and technique behind age manipulation in VFX.
For Cannes XR, Mr. Darren HENDLER and Mr. John CANNING participated in a panel called "Welcome to the age (and magic) of Virtual Humans," which explored Virtual Humans and their revolution in cinema and Digital Domain's vision for real-life applications.

Besides Virtual Human Teresa Teng, the Group developed other virtual human characters with different business partners (e.g. famous singers/movie stars or corporations) in the Greater China region. Since 2018, the Group created its own Digital Domain's virtual human characters/IPs (e.g. Lydia, STAR). The Group also deployed resources towards research and development for enhancement of the interactive functions between virtual human characters and audience.

28	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

FINANCIAL AND BUSINESS REVIEW (continued)

MEDIA ENTERTAINMENT SEGMENT (continued)

D. Co-Production

Feature Film:

The film "Ender'sGame" was released in November 2013 in USA. The film continues to generate income from non-box

office channels bothwithin and outside the USA. "Ender'sGame"is based ona best-selling,award winning novel.

Itisan epic adventurestarring HarrisonFord, AsaButterfield, Hailee Steinfeld, Viola Davis, Abigail Breslin and

Ben Kingsley.ItisdistributedbySummitEntertainment in association with OddLot Entertainment and is a Chartoff

Productions/ Taleswapper/ OddLot Entertainment/ K/OPaper Products/ DD3I production. The profit sharingfrom

DD3I's participation rights in "Ender's Game" was recognised in "Otherrevenue andgains" in the Group'sconsolidated income statement.

TV Drama Series:

Digital Domain entered a collaboration with Talent Television and Film and Cenic Media to produce a TV Drama "Ten Years Late," which tells an inspiring workplace story set in multiple cities. Digital Domain will provide VFX and VR solutions for the drama, so that viewers can enjoy a high-quality immersive experience. At the same time, Digital Domain also invested in and provided the VFX works for "The Legends of Monkey King" from Cenic Media.

During the Review Period, HK$39,782,000 (2019: HK$57,795,000) from "The Legends of Monkey King" (2019: "Ten Years Late") was recognized as income arising from broadcasting movies and TV dramas and grouped under the "Other income and gains" in the Income Statement. There were amortization expenses from investment in TV drama series mentioned above (grouped under "Participation Rights") of HK$21,657,000 (2019: HK$20,256,000).

INTERESTS IN ASSOCIATES

Virtual Human Teresa Teng Business and 虛谷未來科技（北京）有限公司 (Beijing Xu Gu)

In order to speed up the business development of virtual human, the Group continues to seek opportunities for financing and collaboration with strategic partners. In January 2019, the Group invited strategic investors to invest into certain virtual human companies-projects in the Greater China region and these companies-projects have been reclassified as associates of the Company from 1 February 2019.

In 2014, Digital Domain Media (HK) Limited ("DDM"), an indirect wholly-owned subsidiary of the Company (become an associates of the Company from 1 February 2019), and TNT Production Limited ("TNT") entered into a cooperation framework agreement for the formation of a joint venture company to engage in the production and utilisation of 3D hologram technology of the music works of the deceased pop diva, Miss Teresa Teng ("Virtual Human Teresa Teng"). The joint venture company, DD & TT Company Limited ("DDTT"), was formed in 2015. DDTT's business focuses on the production of a series of Virtual Human Teresa Teng, targeting audiences in Chinese communities around the world. The latest 3D hologram technology can be widely applied in the entertainment business, including but not limited to concerts, albums, movies and advertisements.

In December 2019, Handan Merlot City Global Centre, Virtual Human Teresa Teng's exhibition and hologram show had completed the hologram theatre building and content rehearsal. We expected the show would be performed in late 2020 and last for a year.

DIGITAL DOMAIN HOLDINGS LIMITED	29
INTERIM REPORT 2020

INTERESTSINASSOCIATES(continued)

Digital Domain Space(VRTheatre)

InSeptember2017, Digital Domainannounced its collaboration with Poly Capital andHony Capital, toestablish數字王國空間（北京）傳媒科技有限公司 (Digital Domain Space). During2018, CITIC Press Group invested in Digital Domain

Space as a strategic investorand business partner.

Digital Domain Space's aimis to develop and execute an innovativeVR experiencewith VR theatres opened in China.

Highlighting the interactiveand entertaining nature of VRcontent, DigitalDomainSpace's VR theatres have already

been installedinside shopping malls in Beijing,Guangzhou, Hangzhou, Chongqing, Tianjin, Shenyang, Fushun and

Nanjing,and elsewhere.Compared to extantdomestic VRtechnologies,Digital DomainSpacepresents consumers

with elevated VR content and totalimmersioninVR experiences. Leveraging the influence and scale of its brand,

storelocations and consumer volume, Digital Domain Space offers enhanced product and advertising placement to

provide additional and diversifiedbusiness opportunities. The share of losses from this associate was amounted to approximatelyHK$6,106,000(2019: HK$5,787,000).

Inorder tomeettheincreasingly diversified needs of consumers in the cultural and tourism circle for content and experience, Digital Domain, Digital Domain Space and Ningxiang Cultural Tourism Investment Co., Ltd. jointly built the "Digital Domain • Oasis Mega Digital Theme Park" which officially commenced construction in December 2019 and held a groundbreaking ceremony in Tanhe Ancient City, Ningxiang City, Hunan Province. Based on the cutting-edge digital imaging technologies such as VR and holographic projection, the Group will build digital entertainment projects such as holographic theatre, monster prison, VR cinema and Cyber Block, with a usage area of up to 8,800 square meters.

EVENTS AFTER THE REPORTING PERIOD

Discloseable transaction in relation to the disposal of 22.29% of the issued share capital of Lead Turbo Limited

On 17 July 2020 (after the trading hours of the Stock Exchange), Digital Domain Network Technology Limited ("DD Network") and the purchaser entered into the disposal agreement, pursuant to which the purchaser conditionally agreed to acquire, and DD Network conditionally agreed to sell, the sale shares, representing 22.29% of the issued share capital of the Target (Lead Turbo Limited), at an aggregate consideration of HK$102,000,000. The disposal was completed on 31 July 2020.

As certain applicable percentage ratios calculated under Rule 14.07 of the Listing Rules in respect of the disposal exceeds 5% but less than 25%. Accordingly, the disposal constitutes a discloseable transaction of the Company pursuant to Rule 14.06 of the Listing Rules and is therefore subject to notification and announcement requirements under the Listing Rules. For details, please refer to the Company's announcement dated 17 July 2020.

CAPITAL

On 3 July 2019, the Company entered into a placing agreement with Ever Joy Securities Limited ("Placing Agent") in relation to the placing, on a best effort basis, of up to 2,000,000,000 placing shares at the placing price of HK$0.104 per placing share ("Placing"). The conditions of the Placing were fulfilled and completion of the Placing took place on 25 July 2019. The Placing Agent had placed an aggregate of 2,000,000,000 Placing shares to not less than six independent placees at the Placing price of HK$0.104 per Placing share. The Placing shares were allotted and issued pursuant to the general mandate of the Company. The 2,000,000,000 Placing shares in aggregate represent approximately 5.87% of the issued share capital of the Company as enlarged by the Placing (i.e. 34,061,111,340 shares).

30	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

CAPITAL (continued)

Shares (continued)

The gross proceeds and net proceeds from the Placing were approximately HK$208,000,000 and HK$205,730,000

respectively, and were intended to be applied towards media entertainment segment andasgeneral working capital of

theGroup. As at 31 December 2019, the remainingnet proceeds of approximatelyHK$138,360,000 wasnot utilised.

Thesaid unutilised net proceedsofapproximately HK$138,360,000 has been fully utilisedby theend of April 2020 on

media entertainment segment (approximately HK$90,469,000) and general working capitalfor theGroup, including

but notlimited tosalary, rentalexpensesand utilities(approximatelyHK$47,891,000). For details,please refer to the Company's announcements dated3July2019,18 July2019,25 July2019and 21 August2020.

As at 30 June 2020, the total number of the Company sharesof HK$0.01 each inissue(the"Shares") was 34,073,816,258shares.

Share Options

On 28 May 2014, a total of 980,060,000 share options were granted under the Company's share option scheme to the grantees. The share options entitle the grantees to subscribe for up to a total of 980,060,000 new shares at an exercise price of HK$0.098 per share. For details, please refer to the Company's announcements dated 28 May 2014 and 23 July 2014, and the circular dated 2 July 2014. During the Review Period, no share options were exercised, cancelled or have lapsed. 46,570,000 share options were exercised and 140,760,000 share options were cancelled or have lapsed since the grant-date (28 May 2014).

On 6 May 2015, a total of 78,000,000 share options were granted under the Company's share option scheme to the grantees. The share options entitle the grantees to subscribe for up to a total of 78,000,000 new shares at an exercise price of HK$1.32 per share. For details, please refer to the Company's announcement dated 6 May 2015. During the Review Period, no share options were exercised, cancelled or have lapsed. 10,000 share options were exercised and 3,000,000 share options were cancelled or have lapsed since the grant-date (6 May 2015).

On 29 January 2016, a total of 379,500,000 share options were granted under the Company's share option scheme to the grantees. The share options entitle the grantees to subscribe for up to a total of 379,500,000 new shares at an exercise price of HK$0.413 per share. For details, please refer to the Company's announcements dated 29 January 2016 and 7 June 2016, and the circular dated 30 April 2016. During the Review Period, no share options were exercised, cancelled or have lapsed. No share options were exercised and 25,666,665 share options were cancelled or have lapsed since the grant-date (29 January 2016).

On 22 June 2016, a total of 100,000,000 share options were granted under the Company's share option scheme to a grantee. The share options entitle the grantee to subscribe for up to a total of 100,000,000 new shares at an exercise price of HK$0.495 per share. For details, please refer to the Company's announcement dated 22 June 2016. During the Review Period and since the grant-date (22 June 2016), no share options were exercised, cancelled or have lapsed.

On 29 July 2016, a total of 50,000,000 share options were granted under the Company's share option scheme to the grantees. The share options entitle the grantees to subscribe for up to a total of 50,000,000 new shares at an exercise price of HK$0.566 per share. For details, please refer to the Company's announcement dated 29 July 2016. During the Review Period, no share options were exercised, cancelled or have lapsed. No share options were exercised and 13,199,986 share options were cancelled or have lapsed since the grant-date (29 July 2016).

DIGITAL DOMAIN HOLDINGS LIMITED	31
INTERIM REPORT 2020

CAPITAL (continued)

ShareOptions(continued)

On13 February2017, atotal of 300,000,000share optionsweregranted under the Company's share option scheme

to a grantee. The shareoptions entitle the grantee tosubscribe for up to a total of 300,000,000 new shares at an

exercise price of HK$0.469 pershare. For details, pleaserefer tothe Company's announcementsdated 13 February

2017and 1 June 2017, and the circular dated 27 April 2017. During theReview Period and since the grant-date(13 February 2017), no share options were exercised, cancelledorhave lapsed.

On24 April 2019, a total of130,000,000 share options were granted underthe Company's share option scheme to

the grantees. The shareoptions entitlethegranteestosubscribe for up to a total of 130,000,000 new sharesat an

exerciseprice of HK$0.130 per share. For details,please refer to the Company's announcement dated 24 April2019.

During the ReviewPeriodandsincethegrant-date (24 April 2019), no share options were exercised, cancelled or have lapsed.

On21May2020,atotal of 478,000,000 share options were granted under the Company's share option scheme to thegrantees.The share options entitle the grantees to subscribe for up to a total of 478,000,000 new shares at an exercise price of HK$0.046 per share. For details, please refer to the Company's announcement dated 21 May 2020. During the Review Period, no share options were exercised, cancelled or have lapsed.

LIQUIDITY, FINANCIAL RESOURCES, CHARGES ON GROUP ASSETS AND GEARING RATIO

The Group has diverse sources of financing, including internal funds generated from the Group's business operations, general banking facilities on a secured basis or an unsecured basis, non-bank loans on a secured or an unsecured basis and non-regular contributions (such as placement of shares, issuance of convertible notes or financing through shareholder loans) from shareholders and other potential investors. The Group continues to adopt conservative funding and treasury policies.

In 2020, the Company has banking facilities from a bank in Hong Kong amounted to US$13,000,000 (approximately HK$100,757,000). These banking facilities were credit limits for issuing standby letters of credit and the utilised portions (US$1,415,000, approximately HK$10,970,000) were secured by time deposits of the Group. The Group had working capital loans in amount of RMB9,500,000 (approximately HK$10,422,000) and each working capital loan was secured by a standby letter of credit issued by the bank in Hong Kong mentioned above. The Group had a banking facilities from a bank in Canada amounted to CAD$4,500,000 (approximately HK$25,691,000) secured by corporate guarantee provided by the subsidiaries, which utilized portion as CAD$1,559,000 (approximately HK$8,900,000). The Group also had working capital loans in amount of US$10,833,000 (approximately HK$83,964,000) and each working capital loan was secured by a time deposit of the Group. In addition, the Group has utilised a banking facility from a bank in Mainland of China amounted to RMB11,620,000 (approximately HK$12,747,000) secured by fixed deposit of the same bank.

In addition to the banking facilities mentioned above, an indirectly-owned subsidiary of the Group in the entertainment media segment, which was discontinued at the end of December 2010, obtained a banking facility amounting to HK$6,000,000 from a bank in Hong Kong in 2009 which consisted of a 5-year instalment loan ("Five Year Loan"). This facility was granted under the Special Loan Guarantee Scheme of the Government of the Hong Kong Special Administrative Region (the "Government"), pursuant to which the Government provided an 80% guarantee to the bank. A corporate guarantee was provided to the bank by an intermediate subsidiary of the Company which held the aforesaid indirectly-owned subsidiary. On 20 December 2010, the Company announced that it would not provide further financial assistance to the entertainment media segment. As a result, the operation of the aforesaid subsidiary has been discontinued since the end of December 2010. The Five Year Loan has been fully classified as a current liability.

32	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

LIQUIDITY,FINANCIAL RESOURCES, CHARGES ONGROUP ASSETSAND GEARING RATIO (continued)

As at 30 June 2020, the Group also hadlease liabilitiesof HK$133,535,000, whichwere determined at the present

value of the lease payments that arepayable at that date. Apart from lease payments relatedto office premises, the

Group had lease liabilitiesof HK$123,000, RMB549,000 (approximately HK$602,000), US$541,000 (approximately

HK$4,191,000) and CAD$549,000 (approximately HK$3,133,000) related to computer equipment, office equipment,

furniture and software (leased assets) secured by the lessor's chargeover the leased assets. Among these leased

assets, the terms of payments were 60 months, 33 months, 30monthsand 36 monthsrespectively. Payments were

ona fixed paymentbasis and theunderlyinginterestrates werefixed atrespective contractdates. No arrangements were entered intoforcontingentrental payments.

The Group had other loans of approximately HK$181,029,000 asat 30June2020. One indirect wholly-owned subsidiary has a loan in amount of US$3,500,000 (approximately HK$27,065,000) and HK$10,000,000, which is unsecured, interest-free and is not repayable within 13 months from 30 June 2020. One indirectwholly-owned subsidiaries also had a term loan facility of US$10,000,000 (approximately HK$77,500,000) and HK$80,000,000, with a guarantee provided by the Company. The subsidiary drew down the facility in 2015 and 2018. The outstanding balance of these loans as at 30 June 2020 was US$8,000,000 (approximately HK$62,004,000 and HK$50,000,000. These loans are unsecured, with a floating interest rate (prime rate quoted by a bank in Hong Kong) and is not repayable within 13 months from 30 June 2020. There is an other loan in amount of RMB20,000,000 (approximately HK$21,940,000), from a minority shareholder of the 3Glasses Group. During the period, the Group has borrowed other short-term loans of approximately HK$10,020,000 which were unsecured, interest bearing and repayable within 12 months. During the period, the Group participated in the payroll protection plan and obtained certain loans of US$897,000 (approximately HK$6,953,000).

The total cash and bank balance as at 30 June 2020 was approximately HK$207,763,000. As at 30 June 2020, the Group had banking facilities of approximately HK$247,278,000. Utilised portions of these bank facilities were set at a floating interest rate. Of these bank loans, loans amounting to approximately HK$90,916,000 are denominated in United States dollars, loans amounting to approximately HK$8,900,000 are denominated in Canadian dollars and loans amounting to approximately HK$23,169,000 are denominated in Renminbi. During the Review Period, all of the Group's bank loans were classified as either current liabilities or non-current liabilities according to the agreed scheduled repayment dates. According to the agreed scheduled repayment dates, the maturity profile of the Group's bank borrowings as at 30 June 2020 was spread over a period of three years, with approximately 33% repayable within one year and 67% repayable between two and three years.

The Group's current assets were approximately HK$456,511,000 while the current liabilities were approximately HK$323,818,000 as at 30 June 2020. As at 30 June 2020, the Group's current ratio was 1.4 (as at 31 December 2019: 1.8).

As at 30 June 2020, the Group's gearing ratio, representing the Group's financial liabilities (i.e., bank loans, other loans and lease liabilities) divided by the equity attributable to owners of the Company was 34% (as at 31 December 2019: 31%).

DIGITAL DOMAIN HOLDINGS LIMITED	33
INTERIM REPORT 2020

EXPOSURETOFLUCTUATION INEXCHANGERATESAND RELATEDHEDGES

The Group'srevenue, expenses,assetsand liabilitiesweremainly denominated in Hong Kong dollars ("HKD"), United States dollars ("USD"),Canadiandollars ("CAD"), Renminbi("RMB") and Indian Rupees ("INR"). The exchange rates

for the USD againstthe HKD remained relativelystableduring the Review Period. As some of the financial statements

for thebusiness operations in North America, Mainland of Chinaand India were reported in CAD, RMB and INR,

respectively, if the CAD or RMB or INR were to depreciate relative to theHKD, the reported earnings/expensesfor the Canadian portion, MainlandofChina portion orIndian portion woulddecrease.

At present,the Groupdoes not intendtoseek to hedgeits exposure to foreignexchangefluctuations involving RMB,

CADand/or INR. However, theGroupwill constantly review theeconomicsituation,the development of each business

segmentand theoverall foreign exchangeriskprofile,and will consider appropriate hedging measuresin futurewhennecessary.

CONTINGENT LIABILITIES

Saveas disclosedunder "Possible Indemnification" of Media Entertainment Segment above, as at 30 June 2020, the Groupdidnot have any material contingent liabilities.

EMPLOYEES OF THE GROUP AND REMUNERATION POLICY

As at 30 June 2020, the total headcount of the Group was 1,049. The Group believes that its employees play an important role in its success. Under the Group's remuneration policy, employee pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performance-related basis. Other benefits include discretionary bonuses, a share option scheme and retirement schemes.

PROSPECT

The global economy has been adversely affected by the outbreak of new coronavirus (COVID-19) and associated government epidemic prevention and control measures in early 2020 and we can see that 2020 will continue to be an extremely challenging year for a lot of businesses, including our media entertainment business. Given that the overall situation remains unstable and further impact may be reflected in the second half of 2020, so we are adopting a prudent approach in our business strategies (including cost control, business direction, production mix, etc.).

The Group continues to leverage its extensive experience in the VFX industry and proactively seeks new projects and business opportunities despite the highly competitive market environment in US and China. However, government measures and public response to the outbreak of COVID-19 worldwide has had an impact on, the business activities (VFX work for feature films, TV drama, commercials, etc.) in terms of extensions or delays in production schedules and new projects becoming available as the industry monitors the development of government directions and policies and their potential impact, while there were increased opportunities for providing VFX work for other type of products (e.g. online games). While we have noted more business opportunities in US and China following the gradual resumption of commercial work, it is more challenging to predict trends in different segment given that the development of the pandemic in different countries remain unstable. With the official opening of our new studio in Montreal, Quebec, Canada in February 2020, we enjoy additional production capacity with tax and other benefits provided by the Quebec provincial/Canadian federal governments. The Group will continue to evaluate the cost structure, function and operation performance of each studio in North America and Asia to enhance the effectiveness and efficiency of our working capacity while reducing production costs in the long run.

34	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

PROSPECT (continued)

The business activities (slowdown of expansion in Mainland ofChina and evenworld-wide,slowdownand/or

reduction of investments/projects by potential clients, etc.) of our VR business, especially those 360° digital capture/

livestreaming business (such as in sports,travel, concerts, social events with mass public) have also experienced

a slowdown due tothe COVID-19 pandemic relatedmeasures. Nevertheless, there are clientsor investors who still

haveconfidence in our VR business models/hardware productsand they are stilldiscussing the opportunities with

us. However, the impact forfinancial year 2020 remains to be seen given that overall situation remains in flux. At the

same time, webelieve that the introductionofa new business partner through the disposalof certainequityinterests

in 3Glasseswill provideanopportunity forustoevaluateouroverall strategy (investment direction, products mix, etc.) of our VRbusiness.

We will continue to explore new virtual human business opportunities (such as "virtual humanlive broadcasting with online shopping activities" in Mainland of China) and products with strategic investorsby developing new technologies which will enhance the interactivity between virtual humans and the audience in social-networking platform and entertainment business.

Similar to most advanced technology companies, we will continue to deploy substantial financial and human resources in continuing research and development in new technologies, and will seek to recruit and retain appropriate global talents to support the Group's future development. In line with our strategy to optimize our production capacity and costs, we will also explore appropriate strategically located properties for both operations and investment purposes. We will continue to seek opportunities for financing and collaboration with strategic partners/investors on Group level or business project/subsidiary level. We believe that continuing efforts in these directions will help us enhance our business ecosystems and other capabilities.

Looking ahead, we will continue to build on our strengths and strive to provide quality services and products to our valued clients, especially during this challenging year, while we work towards maximising benefits for our important stakeholders (strategic partners, shareholders, staff and management) in the coming years.

DIGITAL DOMAIN HOLDINGS LIMITED	35
INTERIM REPORT 2020

SHARE OPTIONSCHEME

The shareoption scheme of theCompany was adoptedon 27 April 2012 and amended on 3 April 2014 (the "Option Scheme"). Pursuant to theOption Scheme,the Directors are authorised to grant options ("Options") to any Directors,any employees and those persons of the Group who have contributed or willcontribute to the Group as incentive

schemesand rewards. Apart from theOption Scheme, the Company did not have any other share optionscheme.

The followingtable discloses movements in the Company'sOptions during the Review Period:

			Number of Options

				Cancelled/
	At	Granted	Exercised	lapsed	At			Exercise
Name and category	1 January	during the	during the	during the	30 June	Date	Exercise	price per
of participant	2020	Review Period	Review Period	Review Period	2020	of grant	period	Share
								(HK$)
Directors
Seah Ang	100,000,000	-	-	-	100,000,000	28/05/2014	28/05/2017	0.098
	(Notes 2 and 3)						to 27/05/2024
Wang Wei-Chung	1,666,667	-	-	-	1,666,667	29/01/2016	29/01/2016	0.413
	(Note 5)						to 28/01/2026
	1,666,667	-	-	-	1,666,667	29/01/2016	29/01/2017	0.413
	(Note 5)						to 28/01/2026
	1,666,666	-	-	-	1,666,666	29/01/2016	29/01/2018	0.413
	(Note 5)						to 28/01/2026
Employees of the Group
Zhou Jian	150,000,000	-	-	-	150,000,000	28/05/2014	28/05/2017	0.098
	(Notes 2 and 3)						to 27/05/2024
Fan Lei	150,000,000	-	-	-	150,000,000	28/05/2014	28/05/2017	0.098
	(Notes 2 and 3)						to 27/05/2024
Other employees,	344,730,000	-	-	-	344,730,000	28/05/2014	28/05/2017	0.098
in aggregate	(Note 2)						to 27/05/2024
	20,990,000	-	-	-	20,990,000	06/05/2015	06/05/2015	1.320
	(Note 4)						to 05/05/2025
	20,000,000	-	-	-	20,000,000	06/05/2015	06/05/2016	1.320
	(Note 4)						to 05/05/2025
	19,000,000	-	-	-	19,000,000	06/05/2015	06/05/2017	1.320
	(Note 4)						to 05/05/2025
	91,500,010	-	-	-	91,500,010	29/01/2016	29/01/2016	0.413
	(Note 5)						to 28/01/2026
	81,499,998	-	-	-	81,499,998	29/01/2016	29/01/2017	0.413
	(Note 5)						to 28/01/2026
	75,833,327	-	-	-	75,833,327	29/01/2016	29/01/2018	0.413
	(Note 5)						to 28/01/2026
	50,000,000	-	-	-	50,000,000	22/06/2016	22/06/2017	0.495
	(Note 7)						to 21/06/2026
	50,000,000	-	-	-	50,000,000	22/06/2016	22/06/2018	0.495
	(Note 7)						to 21/06/2026

36	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

SHARE OPTION SCHEME (continued)

			Number of Options

				Cancelled/
	At	Granted	Exercised	lapsed	At			Exercise
Name and category	1 January	during the	during the	during the	30 June	Date	Exercise	price per
of participant	2020	Review Period	Review Period	Review Period	2020	of grant	period	Share
								(HK$)
	16,666,692	-	-	-	16,666,692	29/07/2016	29/07/2016	0.566
	(Note 8)						to 28/07/2026
	11,699,998	-	-	-	11,699,998	29/07/2016	29/07/2017	0.566
	(Note 8)						to 28/07/2026
	8,433,324	-	-	-	8,433,324	29/07/2016	29/07/2018	0.566
	(Note 8)						to 28/07/2026
	109,999,999	-	-	-	109,999,999	24/04/2019	24/04/2019	0.130
	(Note 10)						to 23/04/2029
	6,666,667	-	-	-	6,666,667	24/04/2019	29/02/2020	0.130
	(Note 10)						to 23/04/2029
	3,333,333	-	-	-	3,333,333	24/04/2019	24/04/2020	0.130
	(Note 10)						to 23/04/2029
	6,666,667	-	-	-	6,666,667	24/04/2019	28/02/2021	0.130
	(Note 10)						to 23/04/2029
	3,333,334	-	-	-	3,333,334	24/04/2019	24/04/2021	0.130
	(Note 10)						to 23/04/2029
	-	292,200,000	-	-	292,200,000	21/05/2020	21/05/2020	0.046
		(Note 11)					to 20/05/2030
	-	92,200,000	-	-	92,200,000	21/05/2020	21/05/2021	0.046
		(Note 11)					to 20/05/2030
	-	93,600,000	-	-	93,600,000	21/05/2020	21/05/2022	0.046
		(Note 11)					to 20/05/2030
Others
Amit Chopra	48,000,000	-	-	-	48,000,000	28/05/2014	28/05/2017	0.098
	(Note 2)						to 27/05/2024
	5,000,000	-	-	-	5,000,000	06/05/2015	06/05/2015	1.320
	(Note 4)						to 05/05/2025
	5,000,000	-	-	-	5,000,000	06/05/2015	06/05/2016	1.320
	(Note 4)						to 05/05/2025
	5,000,000	-	-	-	5,000,000	06/05/2015	06/05/2017	1.320
	(Note 4)						to 05/05/2025
	33,333,334	-	-	-	33,333,334	29/01/2016	29/01/2016	0.413
	(Notes 5 and 6)						to 28/01/2026
	33,333,333	-	-	-	33,333,333	29/01/2016	29/01/2017	0.413
	(Notes 5 and 6)						to 28/01/2026
	33,333,333	-	-	-	33,333,333	29/01/2016	29/01/2018	0.413
	(Notes 5 and 6)						to 28/01/2026
Wei Ming	300,000,000	-	-	-	300,000,000	13/02/2017	13/02/2017	0.469
	(Note 9)						to 12/02/2027

Total	1,788,353,349	478,000,000	-	-	2,266,353,349

DIGITAL DOMAIN HOLDINGS LIMITED	37
INTERIM REPORT 2020

SHARE OPTIONSCHEME(continued)

Notes:

1. Options arevalid for10years fromthe date ofgrant.

2. Options grantedon28 May 2014are exercisable with effect from the 3rd anniversary of the dateof grant.The closing priceof the shares immediately beforethe dateon which such Optionswere granted was HK$0.099per share.

3. The Optionsconditionally granted to Mr.Zhou Jian, Mr. Fan LeiandMr. Seah Angon28 May 2014 (i.e. the date of grant) wereapproved by the Shareholdersat the specialgeneralmeetingof theCompanyheld on 23 July 2014.

4. Each of one third of the Options granted tothegrantees on 6 May 2015 are exercisable from the date of grant, the 1st

anniversaryofthedate of grant andthe 2nd anniversary of the date of grant respectively. The closing price of the shares immediately beforethedateon which such Options were granted was HK$1.390 per share.

5.Eachof one thirdof theOptions granted to the grantees on 29 January 2016 are exercisable from the date of grant, the 1st

anniversary ofthe date of grant and the 2nd anniversary of the date of grant respectively. The closing price of the shares immediately before the date on which such Options were granted was HK$0.400 per share.

The Options conditionally granted to Mr. Amit Chopra on 29 January 2016 (i.e. the date of grant) were approved by the Shareholders at the annual general meeting of the Company held on 7 June 2016.
50,000,000 Options granted on 22 June 2016 are exercisable from each of the 1st anniversary of the date of grant and the 2nd anniversary of the date of grant respectively. The closing price of the shares immediately before the date on which such Options were granted was HK$0.495 per share.
Each of one third of the Options granted to the grantees on 29 July 2016 are exercisable from the date of grant, the 1st anniversary of the date of grant and the 2nd anniversary of the date of grant respectively. The closing price of the shares immediately before the date on which such Options were granted was HK$0.550 per share.
The Options conditionally granted to Mr. Wei Ming on 13 February 2017 (i.e. the date of grant) were approved by the Shareholders at the annual general meeting of the Company held on 1 June 2017 and are exercisable from the date of grant. The closing price of the shares immediately before the date on which such Options were granted was HK$0.465 per share.
130,000,000 Options granted to the grantees on 24 April 2019, 109,999,999 Options, 3,333,333 Options and 3,333,334 Options of which are/shall be exercisable from the date of grant, the 1st anniversary of the date of grant and the 2nd anniversary of the date of grant respectively; 6,666,667 Options and 6,666,667 Options of which are/shall be exercisable from 29 February 2020 and 28 February 2021 respectively. The closing price of the shares immediately before the date on which such Options were granted was HK$0.128 per share.
478,000,000 Options granted to the grantees on 21 May 2020, 292,200,000 Options, 92,200,000 Options and 93,600,000 Options of which are/shall be exercisable from the date of grant, the 1st anniversary of the date of grant and the 2nd anniversary of the date of grant respectively. The closing price of the shares immediately before the date on which such Options were granted was HK$0.047 per share.

38	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

DIRECTORS' AND CHIEFEXECUTIVE'S INTERESTS

As at 30 June 2020, the interests and short positions of theDirectors and chief executive of the Company in the

Shares and underlying Shares (within the meaning of Part XV of the Securities and Futures Ordinance ("SFO")) (a) as

recorded in the register required to be kept under Section352 of the SFO;or (b) as otherwise notified to the Company

and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the

"Model Code")as set out in Appendix10 to the RulesGoverning the Listing of Securitieson theStock Exchange (the "Listing Rules") were as follows:

Interests andshortpositions in the Sharesand underlyingShares

					Approximate
			Number of	Total interests	percentageof
		Number of	underlying	(Long/short	the issued
Name of Director	Capacity	Shares held	Shares held	positions)	share capital
Seah Ang	Interest of controlled	2,008,531,324	100,000,000	2,108,531,324	6.19%
	corporation and			(Long position)
	beneficial owner
	(Notes 1 and 2)
	Interest of controlled	502,134,789	-	502,134,789	1.47%
	corporation			(Short position)
	(Note 1)
Wang Wei-Chung	Beneficial Owner	-	5,000,000	5,000,000	0.01%
	(Note 3)			(Long position)
Notes:

Global Domain Investments Limited was deemed to be interested in 2,008,531,324 Shares by holding 502,134,789 Shares and taking a deemed interest in 1,506,396,535 Shares under section 317 of the SFO. Mr. Seah Ang was deemed to be interested in the above Shares (long and short positions) by virtue of his 100% shareholding interest in Global Domain Investments Limited.
Mr. Seah Ang holds 100,000,000 Options granted under the Option Scheme, particulars of which are set out in the above section headed "Share Option Scheme".
Mr. Wang Wei-Chung holds 5,000,000 Options granted under the Option Scheme, particulars of which are set out in the above section headed "Share Option Scheme".

Save as disclosed above, as at 30 June 2020, none of the Directors and chief executive of the Company had any interests or short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code as set out in Appendix 10 to the Listing Rules.

DIGITAL DOMAIN HOLDINGS LIMITED	39
INTERIM REPORT 2020

SUBSTANTIALSHAREHOLDERS'ANDOTHERPERSONS' INTERESTS

As at 30June2020, so far asisknowntoanyDirector orchief executive of the Company, the followingpersons who had interestsor short positionsin the Sharesand underlying Shares asrecordedin the register required to be keptunder Section 336of theSFOwere as follows:

Interests and short positionsin the Shares and underlying Shares

					Approximate
			Number of	Total interests	percentage of
		Numberof	underlying	(Long/short	the issued
Name	Capacity	Sharesheld	Shares held	positions)	share capital
Global Domain	Beneficial owner and	2,008,531,324	-	2,008,531,324	5.89%
Investments Limited	deemed interest			(Long position)
	under section 317
	of the SFO
	(Note 1)
	Beneficial owner	502,134,789	-	502,134,789	1.47%
	(Note 1)			(Short position)
Seah Ang	Interest of controlled	2,008,531,324	100,000,000	2,108,531,324	6.19%
	corporation and			(Long position)
	beneficial owner
	(Notes 1 and 2)
	Interest of controlled	502,134,789	-	502,134,789	1.47%
	corporation			(Short position)
	(Note 1)
Redmount Ventures	Beneficial owner and	2,008,531,324	-	2,008,531,324	5.89%
Limited	deemed interest			(Long position)
	under section 317
	of the SFO
	(Note 3)
Wise Sun Holdings	Person having a	2,316,654,789	-	2,316,654,789	6.80%
Limited	security interest			(Long position)
	in shares and
	beneficial owner
	(Note 4)
Bright Ace Holdings	Interest of controlled	2,316,654,789	-	2,316,654,789	6.80%
Limited	corporation			(Long position)
	(Note 4)
Zhou Jian	Interest of controlled	2,381,878,527	150,000,000	2,531,878,527	7.43%
	corporation and			(Long position)
	beneficial owner
	(Notes 4, 5 and 6)

40	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

SUBSTANTIAL SHAREHOLDERS' AND OTHERPERSONS' INTERESTS (continued)

Interests and short positions in the Shares and underlying Shares (continued)

					Approximate
			Number of	Total interests	percentage of
		Number of	underlying	(Long/short	the issued
Name	Capacity	Shares held	Shares held	positions)	sharecapital
PolyCulture Group	Beneficial owner	5,323,600,000	-	5,323,600,000	15.62%
Corporation Limited				(Long position)
JadeLink Holdings	Beneficial owner	5,037,200,000	-	5,037,200,000	14.78%
Limited	(Note 7)			(Long position)
Tang Elaine Yilin	Interest of controlled	5,037,200,000	-	5,037,200,000	14.78%
	corporation			(Long position)
	(Note 7)
CITIC Limited	Interest of controlled	2,181,178,182	-	2,181,178,182	6.40%
	corporation			(Long position)
	(Note 8)
CITIC Group	Interest of controlled	2,181,178,182	-	2,181,178,182	6.40%
Corporation	corporation			(Long position)
	(Note 8)
Kingkey Enterprise	Beneficial owner	2,161,080,000	-	2,161,080,000	6.34%
Holdings Limited	(Note 9)			(Long position)
Chen Jiarong	Interest of controlled	2,166,550,000	-	2,166,550,000	6.36%
	corporation and			(Long position)
	beneficial owner
	(Note 9)
Chen Jiajun	Interest of controlled	2,161,080,000	-	2,161,080,000	6.34%
	corporation			(Long position)
	(Note 9)
Kabo Limited	Beneficial owner and	2,008,531,324	-	2,008,531,324	5.89%
	deemed interest			(Long position)
	under section 317
	of the SFO
	(Note 10)
	Beneficial owner	602,561,746	-	602,561,746	1.77%
	(Note 10)			(Short position)
Peter Chou	Interest of controlled	2,176,041,324	-	2,176,041,324	6.39%
	corporation			(Long position)
	(Notes 10 and 11)
	Interest of controlled	602,561,746	-	602,561,746	1.77%
	corporation			(Short position)
	(Note 10)
			DIGITAL DOMAIN HOLDINGS LIMITED	41
				INTERIM REPORT 2020

SUBSTANTIALSHAREHOLDERS'ANDOTHERPERSONS'INTERESTS (continued) Interestsandshortpositionsinthe Sharesand underlying Shares (continued) Notes:

1. Global DomainInvestmentsLimited was deemed tobe interested in2,008,531,324 Shares by holding 502,134,789 Shares

and taking a deemed interest in 1,506,396,535 Shares undersection 317 of theSFO.Mr. Seah Ang was deemed to be

interested in the aboveShares (long and short positions) by virtue of his 100% shareholdinginterest in Global Domain Investments Limited.

2. Mr. Seah Angholds100,000,000 OptionsgrantedundertheOption Scheme, particularsof which are set out in the above section headed"Share Option Scheme".

3. Redmount Ventures Limitedwasdeemed to be interested in 2,008,531,324 Shares by holding 502,134,789 Shares and havinga security interestin 1,506,396,535Shares under section 317 of the SFO.

4.WiseSun HoldingsLimited beneficially holds 534,083,465 Shares and was deemed to be interested in 502,134,789 Shares heldbyRedmount Ventures Limited, and by having a security interest in 1,280,436,535 Shares under section 317 of the SFO. Redmount Ventures Limited is wholly-owned by Wise Sun Holdings Limited and Wise Sun Holdings Limited is wholly-owned by Bright Ace Holdings Limited. Mr. Zhou Jian was deemed to be interested in the above Shares by virtue of his 100% shareholding interest in Bright Ace Holdings Limited.

Mr. Zhou Jian was deemed to be interested in 65,223,738 Shares held by Ultra Gain Development Limited, which is 100% controlled by Mr. Zhou Jian.
Mr. Zhou Jian holds 150,000,000 Options granted under the Option Scheme, particulars of which are set out in the above section headed "Share Option Scheme".
Jade Link Holdings Limited is wholly-owned by Tang Elaine Yilin. Tang Elaine Yilin was deemed to be interested in 5,037,200,000 Shares held by Jade Link Holdings Limited.
CITIC Group Corporation was deemed to be interested in 2,181,178,182 Shares held by Master Time Global Limited. Such Shares were owned by Master Time Global Limited which in turn is wholly owned by Dynasty One Investments Limited while Dynasty One Investments Limited is wholly owned by CITIC Limited. CITIC Limited is 32.53% and 25.60% controlled by CITIC Polaris Limited and CITIC Glory Limited respectively which are 100% controlled by CITIC Group Corporation.
Kingkey Enterprise Holdings Limited is 50% controlled by each of Mr. Chen Jiarong and Mr. Chen Jiajun. Mr. Chen Jiarong and Mr. Chen Jiajun were deemed to be interested in 2,161,080,000 Shares held by Kingkey Enterprise Holdings Limited. Mr. Chen Jiarong beneficially holds 5,470,000 Shares.
Kabo Limited was deemed to be interested in 2,008,531,324 Shares by holding 602,561,746 Shares and taking a deemed interest in 1,405,969,578 Shares under section 317 of the SFO.
Mr. Peter Chou was deemed to be interested in 167,510,000 Shares held by Honarn Inc., which is 100% controlled by Mr. Peter Chou.

Save as disclosed above, as at 30 June 2020, the Company had not been notified of any other interests or short positions in the Shares or underlying Shares as recorded in the register required to be kept under Section 336 of the SFO.

42	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

DISCLOSURE PURSUANT TO PARAGRAPH 13.21OF CHAPTER13 OF THE LISTINGRULES

There was a banking facility (the "Facility") with the principal amount of HK$6,000,000 provided bya bank in Hong

Kong to an indirectly-ownedsubsidiary of the Company (the "Subsidiary"), among the entertainment media segment

which was discontinued bythe end of December 2010, and imposedcertain specific performance obligations on

the Company, pursuantto which, the Company should not (i) hold less than 51% of the Subsidiary's equity interests

effectively and (ii) holdlessthan 100% of equity interests in an intermediate wholly-ownedsubsidiaryof the Company

which held theSubsidiary (the "IntermediateHoldingCompany"). The bankhad the righttodemand for repayment of

all outstandingamounts due bythe Subsidiary under the Facility, unless otherwise approved bythe bank, if there is

any breachoftheaforesaid conditions.Asat30June2020, theoutstanding loan principal of thisFacilityamounted to approximately HK$4,854,000 and the original last monthlyinstalmentrepaymentshould be in theyear 2014.

On 20 December 2010, the Company announced that it would not provide furtherfinancial assistanceto the entertainment media segment. As a result, the operation of the Subsidiary was discontinued bythe end of December 2010. The aforesaid bank took legal action against the Subsidiary and the Intermediate Holding Company in respect of the Facility. A provisional liquidator and two joint and several liquidators were appointed for the Subsidiary on 11 July 2012 and 23 July 2013, respectively. However, there was no corporate guarantee for the Facility issued by the Company and other subsidiaries of the Company in favour of the Subsidiary and the Intermediate Holding Company.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities during the Review Period.

CORPORATE GOVERNANCE

During the Review Period, the Company was in compliance with the code provisions set out in the Corporate Governance Code (the "CG Code") contained in Appendix 14 to the Listing Rules except for the following:

There is no separation of the roles of the chairman and the chief executive officer or chief executive during the period from 4 June 2020 to 30 June 2020. Mr. Seah Ang, the executive Director and chief executive officer of the Company, was appointed as the acting chairman of the Board following the resignation of Mr. Peter Chou as the chairman of the Board and the executive Director. The Board believed that at the time of vesting of the roles of chairman and chief executive officer in Mr. Seah Ang is beneficial to the operation and management of the Group due to his in-depth knowledge in the Group's operation and his extensive business network and connections. The Company was seeking the suitable candidate to fill the vacancy of the position of the chairman of the Board;
The non-executive Directors and independent non-executive Directors were not appointed for a specific term. However, they are subject to retirement and eligible for re-election at the general meeting pursuant to the Company's bye-laws and the CG Code. The service contracts of all the non-executive Directors and independent non-executive Directors have a termination notice requirement of one month; and
Due to other pre-arranged business commitments which must be attended to by Mr. Jiang Yingchun and Mr. Wang Wei-Chung, the non-executive Directors, they were not present at the annual general meeting of the Company held on 5 June 2020.

DIGITAL DOMAIN HOLDINGS LIMITED	43
INTERIM REPORT 2020

CHANGESINDIRECTOR'SINFORMATION

PursuanttoRule13.51B(1)ofthe Listing Rules, changesin the Director's informationare set out as follows:

(1) Mr. John Alexander Lagerling hasresigned as independentnon-executive Director with effect from 1 May 2020.

(2) Mr. Peter Chou has resigned as the chairman of the Boardand theexecutive Director, and ceased to be the chairman of the executivecommittee of the Company witheffect from4 June 2020.

(3) Mr. Seah Ang,the executiveDirector and chief executiveofficerof the Company, has been appointed as the

acting chairman of the Board andthechairmanoftheexecutive committeeofthe Company with effect from 4 June 2020.

(4) Dr. Elizabeth MonkDaley has beenappointed as independent non-executive Director with effect from 20 July 2020.

DIRECTORS'SECURITIES TRANSACTIONS

The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as its code of conduct regarding Directors' securities transactions.

Having made specific enquiry of all Directors, all Directors have confirmed that they had complied with the required standard set out in the Model Code throughout the Review Period.

REVIEW BY AUDIT COMMITTEE

The audit committee of the Company has reviewed the interim report of the Company for the Review Period.

By Order of the Board

Seah Ang

Executive Director and Chief Executive Officer

Hong Kong, 21 August 2020

44	DIGITAL DOMAIN HOLDINGS LIMITED
	INTERIM REPORT 2020

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Digital Domain Holdings Limited Announces Board Changes	22-03-30	CI
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	1st Jan change	Capi.
DIGITAL DOMAIN HOLDINGS LIMITED	+61.67%	494M
ENDEAVOR GROUP HOLDINGS, INC.	+11.21%	7.93B
MANGO EXCELLENT MEDIA CO., LTD.	-7.06%	6.05B
TOHO CO., LTD.	+11.64%	5.85B
MADISON SQUARE GARDEN SPORTS CORP.	-1.48%	4.28B
FL ENTERTAINMENT N.V.	+9.47%	4.17B
BEIJING ENLIGHT MEDIA CO., LTD.	+22.94%	4.03B
CHINA FILM CO., LTD.	-2.70%	3.07B
CHINA RUYI HOLDINGS LIMITED	-3.47%	2.5B
ZHEJIANG HUACE FILM & TV CO., LTD.	+21.64%	1.84B

Digital Domain Holdings Limited

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