WITH INNOVATIVE MINDSET

>240,000 staff members

collaboration with 14 strategic investors (Tencent, Baidu, JD.com, Alibaba, Suning…)

>1,000 members in “5G Application Innovation Alliance” Human to human, human to thing, thing to thing connections

3 gigabit-networks: 5Gn, Wifi6, Fibre-to-the-home

EMPOWER INNOVATIVE CONNECTIVITY

5Gn-intelligent network • Super fast speed: >1Gbps • Massive connectivity: 1 million connected devices per km2 by one 5G base station • Ultra low latency highly reliable: milli-second

The world’s first and largest 5G co-build co-share network (>380,000 5G base stations) effectively sharpens the edges & return with win-win Industrial Smart Internet home

Smart city AI Autonomous driving Big Data IoT

Smart healthcare

loV

Smart education

Edge computing

BRING INNOVATIVE COMPELLING EXPERIENCE

>70 million 5G package subscribers >250 5G lighthouse customers

Cloud Smart computing culture & tourism 5G TO ADD VALUE FOR CUSTOMERS & SHAREHOLDERS to innovate and share a good smart living to empower business clients to grow and thrive to leverage unrivalled edges to increase revenue and profit 88 Independent Auditor's Report 93 Consolidated Statement of Income 94 Consolidated Statement of Comprehensive Income 95 Consolidated Statement of Financial Position 98 Consolidated Statement of Changes in Equity Company Profile Financial Overview 99 Consolidated Statement of Cash Flows 8 102 Notes to the Consolidated Financial Statements 2 186 Financial Summary 188 Corporate Information

Directors and Senior Management 3 Shareholding Structure 24

Recognition and Awards 4Performance Highlights t t 36 Major Events C Corporate Governance Report 6 38 Forward-looking statements on en s Certain statements contained in this report may be viewed as “forward-looking statements” within the meaning of Report of the Directors Section 27A of the U.S. Securities Act of 1933 (as amended) and Section 21E of the U.S. Securities Exchange Act of 1934 62 (as amended). Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial Chairman's Statement condition or results of operations of the Company to be Human Resources Development materially different from any future performance, financial 8 condition or results of operations implied by such forward- looking statements. In addition, we do not intend to update 80 these forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the Company's most recent Annual Report on Social Responsibility Form 20-F and other filings with the U.S. Securities and Business Overview Exchange Commission. 4 82 ompany of about 270 million, fixed-line broadband subscribers of about 86 interest of 27.8% of the shares in the Company through A Share million, and fixed-line local access subscribers of about 47 million. Company’s shareholding in China Unicom (BVI) Limited. The remaining PROFILE 20.1% of the shares in the Company were beneficially owned by public C As at 31 December 2020, the ultimate parent company of the Company, shareholders. China Unicom (Hong Kong) Limited (the “Company”) was incorporated The Company is committed to being a creator of smart living trusted by China United Network Communications Group Company Limited had in Hong Kong in February 2000 and was listed on the New York Stock customers, connecting the world to innovate and share a good smart # an effective interest of 52.1% of the shares in the Company through Based on the Executive Order 13959 issued on 12 November 2020 by Exchange (“NYSE”)# and The Stock Exchange of Hong Kong Limited living, improving the quality of products and services continuously to the former President of the United States and the guidance by the US China United Network Communications Limited (“A Share Company”), Department of Treasury’s Office of Foreign Assets Control, NYSE staff on 21 June 2000 and 22 June 2000 respectively. On 1 June 2001, the fulfill customer needs. Future products and services will be developed China Unicom (BVI) Limited and China Unicom Group Corporation (BVI) determined to commence proceedings to delist the Company’s ADSs and Company was included as a constituent stock of the Hang Seng Index. in a “smart” way. Internet of Things, cloud computing, Big Data and suspended trading in the Company’s ADSs from 11 January 2021. In order Limited; the strategic investors, employee restrictive incentive shares The Company merged with China Netcom Group Corporation (Hong other technologies will be used for the smart processing on data to protect the interests of the Company and its shareholders, on 20 January and the public shareholders of A Share Company had an effective 2021, the Company filed with the NYSE a written request for a review of the Kong) Limited on 15 October 2008. and information. The Company’s telecommunication network covers determination by a Committee of the Board of Directors of the NYSE. Please China and connects to the world. It operates a wide range of services, refer to the Company’s announcement dated 21 January 2021 for details. The Company was one of the “Fortune Global 500” companies for including mobile broadband, fixed-line broadband, mobile voice, consecutive years, and ranked 290th in “Fortune Global 500” for the fixed-line voice, ICT, data communications and other related value- year 2020. It was also voted as “Asia’s No.1 Most Honored Telecom added services. As at the end of 2020, the Company had mobile billing Company” for the fifth consecutive year by Institutional Investor. subscribers of about 306 million, of which 4G and 5G subscribers hareholding CHINA UNITED NETWORK STRUCTURE COMMUNICATIONS GROUP S * ** COMPANY LIMITED Strategic investors , employee restrictive incentive shares and other public shareholders 63.2%

CHINA UNITED NETWORK 17.9% 36.8% COMMUNICATIONS LIMITED (Issued shares: approximately 31.0 billion shares) 100% 82.1%

China Unicom (BVI) Limited Public Shareholders

53.5% 20.1%

China Unicom Group Corporation *** CHINA UNICOM (HONG KONG) LIMITED 26.4% (Issued shares: approximately 30.6 billion shares) (BVI) Limited * In 2017, approximately 10.9 billion shares of China United Network Communications Limited were acquired by the strategic investors introduced by the mixed- ownership reform through non public share issuance and transfer of existing shares. These shares were no longer restricted from sale in November 2020.

** Pursuant to the initial grant of restrictive share incentive scheme, China United Network Communications Limited granted approximately 800 million restricted shares to the core employees, of which, approximately 300 million shares were unlocked in April 2020.

*** Excluded the interest regarding the pre-emptive right owned by China Unicom Group Corporation (BVI) Limited in 225,722,791 shares of the Company.

As at 31 December 2020

2 CHINA UNICOM (HONG KONG) LIMITED ANNUAL REPORT 2020 3 2019 Change YoY 4.6% 2020 4.3% 290.51 –0.2% 303.84 264.39 94.36 –1.6pp 275.81 10.3% KEY FINANCIAL DATA 94.14 35.7% 11.33 10.3% 34.1% –0.8% Operating Revenue (RMB billions) 12.49 0.370 26.4 Of which: Service Revenue (RMB billions) 0.408 1 (RMB billions) EBITDA 26.2 As % of Service Revenue 2 (RMB billions) Net Profit Basic EPS (RMB)3 (RMB billions)

Free Cash Flow EBITDA represents profit for the year before finance costs, interest income, share of net profit of Note 1: associates, share of net profit of joint ventures, other income-net, income tax expenses, depreciation and amortisation. As the telecommunications business is a capital intensive industry, capital expenditure and finance costs may have a significant impact on the net profit of the companies with similar operating results. Therefore, the Company believes that EBITDA may be helpful in analysing the operating results of a telecommunications service operator like the Company. However, it is a non-GAAP financial measure which does not have a standardised meaning and therefore may not be comparable to similar measures presented by other companies.

Net profit represented profit attributable to equity shareholders of the Company. Note 2: Excluded the impact of adoption of IFRS/HKFRS 16 on free cash flow in 2019 and 2020 (i.e. free cash flow = Note 3: operating cash flow — CAPEX — capital element of lease rentals paid.)

HIGHLIGHTS Calculated the cumulative free cash flow generated since 2017. Note 4: erformanceFree cash flow > RMB100 Bil over the past years Service revenue mix further optimised Sustained profit growth

INDUSTRY INTERNET REVENUE CUMULATIVE AS PERCENTAGE OF FREE CASH FLOW3,4 NET PROFIT2 SERVICEP REVENUE (RMB BIL) (RMB BIL)

2018 2019 2020 2017 2018 2019 2020 2018 2019 2020 8.7% 12.4% 15.5% 42.9 90.4 116.8 143.0 10.20 11.33 12.49

4 CHINA UNICOM (HONG KONG) LIMITED ANNUAL REPORT 2020 5 DecemberChina Unicom fully completed 2020 the 100% high-quality migration of cBSS, becoming the first operator in the industry to realise the centralised JanuaryChina Unicom achieved full2020 coverage of 3G/4G/5G carrying of all services and all users nationwide networks in Huoshenshan Hospital in a 36-hour uninterrupted construction to support pandemic prevention and control

February 2020 China Unicom provided 5G+ thermal imaging human body temperature screening solutions across the country to firmly SeptemberChina Unicom launched its new2020 corporate brand image in an build the first line of defense for pandemic prevention and all-round way and advocated “Innovation walks with control Intelligence”

EVENTS

April 2020 China Unicom officially released its first MEC (Multi-access Edge M Computing) large-scale edge cloud commercial network ajor China Unicom, China Mobile and China Telecom jointly released JuneChina Unicom 2020 built the first in-pit 5G commercial network in the 5G Messaging White Paper, expounding the core concept of 5G country, enabling 5G+ smart mining solutions to enter a new stage Messaging and specifying related business functions and of large-scale promotion technical requirements

MayChina Unicom 2020 and its partners established an education joint venture “iCloud Wisdom”

China Unicom Guangxi Branch launched operational reform by socialised cooperation

China Unicom announced entering the “Three-Gigabit” era and provided customers with the ultimate experience of a new generation of high-speed Internet access in all scenarios

6 CHINA UNICOM (HONG KONG) LIMITED ANNUAL REPORT 2020 7 Chairman’s Statement

WANG XIAOCHU Chairman and Chief Executive Officer

Dear Shareholders,

In 2020, in the face of the challenges from the complicated internal and external environment, the Company actively supported the pandemic prevention and control, firmly implemented the strategy of focus, innovation and cooperation, and accelerated the comprehensive digital transformation. It endeavored to optimise the ecology of the industry, and achieved remarkable results in the network “co-build and co-share”, achieving growing momentum in operation and development. It further unleashed the power of the mixed-ownership reform and continued to make solid strides on high- quality development.

8 CHINA UNICOM (HONG KONG) LIMITED The Company attached great importance to shareholders’ returns. With due regard to the Company’s profitability, debt and cash flow level and capital requirements for future development, etc., the Board of Directors recommended the payment of a final dividend of RMB0.164 per share, as compared to a dividend of RMB0.148 per share for 2019. Going forward, the Company will continue to strive Our value-oriented operation delivered to enhance its profitability and shareholders’ returns. fruitful results, as the growth momentum of mobile business further emerged. The BUSINESS DEVELOPMENT mobile service revenue and the billing During the year, the pandemic repeatedly brought challenges to the subscriber ARPU grew sequentially for Company’s operations. However, the prevention of pandemic had three consecutive quarters. In 2020, the accelerated the development of the digital economy. The Company Company’s mobile service revenue seized the opportunities of development, turned adversity into rebounded and reached RMB156.7 billion. Statement opportunities, achieving effective pandemic prevention and control The mobile billing subscribers ARPU with orderly production and operation. The Company actively drove reached RMB42.1, up by 4.1% year-on- OVERALL RESULTS rational and disciplined competition in the market to promote year. Mobile handset data traffic volume In 2020, the Company registered service healthy development of the industry. It restored growth in grew by 16.5% year-on-year, while the revenue of RMB275.8 billion, representing fundamental businesses and continuously enhanced the revenue monthly average DOU per handset an increase of 4.3% year-on-year, generation capability in innovative businesses. The customer subscriber reached approximately 9.7 GB. outperforming the industry average of perception and service levels continued to improve, achieving initial Selling and marketing expenses further 3.6% while the speed of development success in high-quality development of the Company. decreased, achieving steady pace in quality continued to lead the industry. The improvement transformation and the Persistent in value-oriented operation to further improve Company’s profitability was steadily continuous improvement of profitability. the development quality of mobile business improved while quality and efficiency were The Company actively participated in creating positive industry remarkably enhanced. Profit before income dynamics, advocating rational competition and sustainable tax amounted to RMB16.0 billion and profit development, and shifting focus from subscriber scale development attributable to equity shareholders of the to subscriber quality and value enhancement. The Company Company amounted to RMB12.5 billion, continued its effort in building a digital operating system of representing a year-on-year increase of marketing and servicing while strengthening Big Data 10.3%. EBITDA1 amounted to RMB94.1 empowerment to drive smart and targeted scenario marketing. By billion. accelerating the offer of innovative products for consumer market

The Company deeply implemented the new and focusing on medical and hygiene, infotainment, sports and development philosophy and adhered to healthcare and other key areas, the Company provided customers win-win cooperation. It fully implemented with rich and diversified terminal experience. The Company “co-build and co-share” of 5G network, provided customers with simplified self-service to improve its further improving the cost efficiency. service support system. By optimising resource allocation, “cross- During the year, with effective control of region integrated services” was launched to meet the mobility the investment pace, the capital needs of customers, enabling customer satisfaction to continuously expenditure amounted to RMB67.6 billion. improve. Free cash flow2 remained strong, reaching RMB37.9 billion. The Company’s financial position was further strengthened and solidified.

ANNUAL REPORT 2020 9 CHAIRMAN’S STATEMENT

Seizing the window of opportunity to achieve scale integrated operations, achieving steady breakthrough in 5G business growth in the fixed-line broadband 2020 was the first year for scale development of 5G. The Company services. In Northern China, the Company seized the opportunities and carried through value-oriented highlighted its broadband quality and operation and service experience excellence to promote the scale service leadership to maintain its business development of 5G business. In consumer market, the Company scale. In Southern China, the Company deployed Big Data analytics for customer segmentation with precise continued to step up cooperation, strategy. It promoted online and offline integrated and multi- activated broadband port resources and dimensional scenario target marketing for 5G business. The improved its operating system. Focusing on Company deeply advanced industry cooperation and created a 5G home market, the Company strengthened pan-smart terminal ecosystem integrating “terminal + content + value-oriented operation for home users application”, empowering the consumer Internet market through bundling of smart home products, development. The Company actively prepared commercial trial of video and privileges. With Big Data 5G Messaging and developed lightweight portal to improve product analytics, precision marketing and competitiveness by adhering to industry collaboration and co-built retention management were powered up eco-system. In the government and enterprise market, focusing on and the Company was able to carry out areas such as industrial Internet, smart city, medical healthcare and target marketing in key areas, continuously others, the Company successfully built a number of 5G lighthouse improving operational efficiency. projects, garnering over 250 high-quality lighthouse customers, and In 2020, the Company’s fixed-line achieved 5G commercialisation in 2B (To Business) setting. The broadband access revenue amounted to Company officially released three 5G private network products and RMB42.6 billion, representing an increase built a centralised 5G private network/MEC self-service platform, of 2.4% year-on-year. Fixed-line broadband elevating 5G innovative products and applications to a new level. In subscribers registered a net addition of addition, leveraging the first-mover advantages in 5G and industry 2.62 million, reaching a total of 86.10 verticals, the Company led in establishing a 5G fund of funds to million subscribers. The penetration rate of accelerate the formation of proprietary core competency system. the integrated service among fixed-line With more than 1,000 members in 5G Application Innovation broadband subscribers reached 64%, Alliance, the Company made phased progress in the industry eco- representing a year-on-year increase of 5 system construction. percentage points. During the year, the Company’s 5G package subscribers reached 70.83 million, and the penetration rate of 5G package subscribers Steadily enhancing proprietary reached 23%, which was above industry average of 20%. As 5G capabilities to consolidate the network coverage further improves, applications featured by VR/AR foundation for innovative business games and high-definition 4K/8K video continue to enrich and the development The Company firmly seized the terminal penetration continues to increase, the Company will strive development opportunities of digital to promote the continuous rapid grow of 5G subscribers and industrialisation and industrial digitisation. effectively drive the sustainable and healthy development of mobile It actively supported the pandemic business. prevention and control as well as the Adopting customised strategy based on the geographical resumption of work, production and features to maintain steady growth of broadband schooling, with its innovative cloud service business models and digital pandemic prevention During the year, leveraging the differentiated advantages of effort being widely recognised. Focusing on broadband quality and content, the Company firmly grasped the key areas such as smart city, digital valuable opportunities of rising demand in remote office, online government and industrial Internet, the education among others during the pandemic and strengthened Company promoted the integrated

10 CHINA UNICOM (HONG KONG) LIMITED marketing model of “cloud + smart NETWORK CONSTRUCTION continued to improve, achieving networks + smart applications” to Comprehensive promotion of “co-build and co-share” of remarkable results in high-quality network thoroughly develop application products in 5G network continuously improved return development. key industries. Based on cloud network The Company executed the new development philosophy, MIXED-OWNERSHIP capabilities, the Company built a “6+N+1” implemented the new infrastructure requirements and built the REFORM innovative business capability system and world’s first and largest “co-build and co-share” 5G network with Achievements and benefits of mixed- proudly released new WO Cloud 6.0, which China Telecom, with the total scale of 5G base stations of 380,000, ownership reform further emerged integrated the capabilities of cloud, Big achieving the coverage scale basically equivalent to that of the and consolidated Data, IoT, artificial intelligence, security and leading operator for the first time in history. The “co-build and co- The Company continued to explore new blockchain. The initial establishment of WO share” initiative resulted in a cumulative saving of network governance based on mixed-ownership Cloud PaaS had been applied in scale in key investment of over RMB76.0 billion for both parties. It also reform and its own resources and edges. It areas such as smart city and digital significantly reduced network operating costs and greatly accelerated the promotion of government, showing that the research and shortened the network deployment cycle. At present, the Company comprehensive digital transformation, development, promotion and operation realised the world’s first scale commercialisation of Stand-alone introduced the superior resources capabilities of the Company’s proprietary network and achieved 100% Network Function Virtualisation (NFV) advantages of strategic investors and products steadily improved. The Company in 5G core network. During the year, the Company achieved a scale partners in the course of its development, strengthened acquisition of leading and top breakthrough in 4G networks “co-build and co-share” with China consolidating the foundation for mixed- talents such as CTOs and architects on Telecom by adding 170,000 “co-build and co-share” 4G base ownership reform and transformation. market-oriented basis, enhancing its stations and saved a total of RMB9.0 billion for both parties in During the year, the cooperation of the proprietary research and development network investment. The Company actively promoted the co-build Company with the eco-system progressed capabilities continuously. of optical cables and the co-share of fiber core and cloud steadily. The joint ventures such as infrastructure, significantly improving the network utilisation and During the year, the Company’s revenue Yunlizhihui, Yunjingwenlv, Yundi, Yundun efficiency. from industry Internet business increased and Smart Steps continued to promote by 30.0% year-on-year to RMB42.7 billion, Precise investment enhanced quality, return and product research and development and as a percentage of the overall service differentiated network edges iteration upgrade to boost market revenue increased to 15.5%. Among which, The Company insisted on focused, precise and value-oriented expansion, significantly increasing the revenue from ICT business grew 33.4% deployment with iterative investment flexibility, which significantly Company’s product capabilities and market year-on-year to RMB13.4 billion; revenue improved network quality and enhanced network service support shares in areas such as smart city, tourism, from IDC and cloud computing reached capabilities. In mobile network, the Company adhered to the Focus industrial Internet, network security and RMB23.4 billion with a year-on-year Strategy and “co-build and co-share”. It strived to achieve 4/5G demographic Big Data. The Company also increase of 26.1%; revenue from the network integration and unified voice carrying by IMS. In fixed-line actively deployed new tracks by Internet of Things (IoT) and Big Data broadband, the Company continued to maintain its leading position establishing several strategic cooperation services reached RMB4.2 billion and in coverage, speed, user experience and services in Northern China, centers and joint laboratories with Baidu, RMB1.7 billion respectively, representing a while focusing on tackling shortcomings and improving capabilities Alibaba and JD to explore 5G application year-on-year growth of 39.0% and 39.8% in Southern China. The Company also continued to improve the scenarios with artificial intelligence, edge respectively. Driven by the sound growth of premium network for government and enterprises customers, computing and network slicing, etc., innovative business and fixed-line deepened the cloud infrastructure and data centers layout, creating differentiated competitive broadband business, the Company’s fixed- enhancing network competitiveness. The Company stepped up advantages brought by resources edges of line service revenue reached RMB116.9 efforts in digital transformation and innovation of network and strategic investors of mixed-ownership billion, up by 10.6% year-on-year. In the continued to promote the evolution of network cloudification, reform. future, the Company will speed up further optimising the infrastructure of cloud and network addressing the shortcomings of key core integration. Aligning with the trend of network evolution, the capabilities, promote proprietary Company systematically promoted the operation system reform of technological innovation and continue to network function, continuously improving the efficiency and carry out in-depth cooperation to achieve effectiveness of network operations. During the year, the win-win with partners. Company’s mobile network NPS and fixed-line broadband NPS

ANNUAL REPORT 2020 11 CHAIRMAN’S STATEMENT

Improved quality and expanded scope in operational The Company continued to excel its reform had opened a new chapter in comprehensive corporate governance mechanism, digital transformation enhance execution and strengthen risk The Company synergistically advanced reform and comprehensive management and internal control, in a bid digital transformation. The reform of the operating systems of six to providing solid support for the professional functions was fully implemented with workflow sustainable and healthy development of redesigned and rationalised, empowering digital and innovative the Company. In 2020, the Company operation. During the year, the number of management attained a number of accolades, including departments was optimised continuously in the headquarters. The being awarded “Asia’s Best Corporate structure of provincial branches was further streamlined and Governance Company” by FinanceAsia and flattened with increasing features of matrix. The Company voted “Asia’s No. 1 Most Honored Telecom accelerated the construction of the “five major middle platforms” Company” by Institutional Investor for the and historically completed 100% migration to the centralised fifth consecutive year and ranked 286th in Business Support System (cBSS), further expanding its leadership “The Forbes Global 2000”. brought by the centralised IT system. The Company’s supply chain The former US President issued an system pioneered in digital transformation among central State- executive order 13959 (the “Executive owned enterprises, and achieved Internet-based transactions of Order”) on 12 November 2020, and over 80%, remarkably growing operational efficiency and subsequently the US Department of development efficacy. The scope of market-oriented reform of sub- Treasury’s Office of Foreign Assets Control ordinate companies was further expanded and the transformation issued the guidance. The Executive Order of operating mechanisms accelerated, continuously releasing the and the guidance prohibit any transaction intrinsic energy and vitality of the Company. by any US person in publicly traded SOCIAL RESPONSIBILITY AND CORPORATE securities (including, among others, GOVERNANCE derivatives thereof) of certain Chinese The Company actively leveraged information communication to companies, including the Company. The drive and facilitate the value chain as well as the economic and New York Stock Exchange (“NYSE”) staff social development. It also set a positive example in fulfilling determined that, based on the Executive economic, environmental and social responsibilities. During the Order and the guidance, it commenced the year, facing the sudden pandemic, the Company vigorously process to delist the Company’s American delivered communication assurance and smooth network traffic. Depositary Shares (the “ADSs”) and Leveraging the advantages of new digital technology, the Company suspended trading in the Company’s ADSs supported precise pandemic prevention and control and orderly from 11 January 2021. Since its listing on resumption of work, production and schooling. Unicom Big Data The Stock Exchange of Hong Kong Limited Co., Ltd. was awarded the honorary title of “National Advanced and the NYSE in 2000, the Company has Group in Fighting Against COVID-19”. Capitalising on its network complied strictly with the laws and and technological advantages, the Company supported targeted regulations, market rules as well as poverty alleviation and accelerated the infrastructure construction regulatory requirements of its listing such as broadband and 4/5G network, striving to narrow the digital venues, and has been operating in divide in poverty-stricken areas. In addition, the Company adhered accordance with laws and regulations. The to the harmonious symbiosis of human and nature, vigorously Company was disappointed by the promoted green and low-carbon technology, strengthened Executive Order and NYSE decisions, which electromagnetic radiation management and build a green supply led to a negative impact on the trading chain so as to guard the safety boundary of the natural ecological prices of its ordinary shares and ADSs and environment. harmed the interests of the Company and its shareholders. In order to protect the interests of the Company and its

12 CHINA UNICOM (HONG KONG) LIMITED shareholders, on 20 January 2021, the innovation, ignite organisational vibrancy and continuously Note 1: EBITDA represents profit for the Company filed with the NYSE a written promote development transformation and upgrade. It will year before finance costs, interest request for a review of the determination comprehensively improve quality of growth and operational income, share of net profit of by a Committee of the Board of Directors of efficiency, in order to create greater value for shareholders, associates, share of net profit of the NYSE. Please refer to the Company’s customers and society. joint ventures, other income-net, announcement dated 21 January 2021 for income tax expenses, depreciation details. The Company will continue to pay Lastly, on behalf of the Board of Directors, I would like to express and amortisation. As the close attention to the development of our sincere gratitude to all shareholders, customers and fellows telecommunications business is a related matters and also seek professional across society for their support and to all employees for their capital intensive industry, capital advice and reserve all rights to protect continuous dedication and contribution along the way! expenditure and finance costs may lawful rights of the Company. have a significant impact on the net profit of the companies with OUTLOOK similar operating results. Currently, with the rapid development of Therefore, the Company believes information technology, we are entering a that EBITDA may be helpful in rapidly changing information era. It is analysing the operating results of a foreseeable that in the near future, telecommunications service ubiquitous connections and rapid operator like the Company. transformation arising from However, it is a non-GAAP financial intelligentisation and digitisation will measure which does not have a profoundly impact the form of social and standardised meaning and economic operations. The digital therefore may not be comparable Wang Xiaochu industrialisation and industrial digitisation to similar measures presented by Chairman and Chief Executive Officer will give birth to a huge emerging market. other companies. At the same time, the risks resulting from Hong Kong, 11 March 2021 the rapid changes in domestic and overseas Note 2: Free cash flow represents macroeconomic environment, the operating cash flow less capital emergence of new industry competitive expenditure. However, it is a non- dynamic and the transformation of new GAAP financial measure which and old growth drivers will bring new does not have a standardised challenges to the corporate development in meaning and therefore may not be the future. comparable to similar measures presented by other companies. In 2021, facing the complicated changes in the internal and external environment, the Company will firmly grasp the key opportunities for the scale development of 5G, continue to deeply implement the strategy of focus, innovation and cooperation, accelerate the comprehensive digital transformation and focus on shaping the “Five-high” new development edges with high-quality service, high-quality development, highly effective governance, high-tech engine and high-vitality operation. The Company will also adhere to win-win cooperation, actively drive

ANNUAL REPORT 2020 13 MOBILE SERVICE Centered on 5Gn, the Company also stepped up 5G collaborated”, achieving the scale In 2020, China Unicom deepened its promotion and brand communication and strengthened development strategy of WO Cloud. strategy of “Focus, Innovation and selling points of products with “Three-Gigabit”, promoting The Company also built its proprietary Cooperation”. Led by 5G to drive service upgrade with innovative communications. As at the core competence of new WO Cloud, mobile service growth, China Unicom end of 2020, the number of mobile billing subscribers focusing on resources, networks, persisted in the strategy to “promote reached 306 million with a gradual increase in 5G market platforms, products and ecology, 5G package nationwide, with focus on share and the mobile billing subscribers ARPU stood at optimising the layout of its cloud 5G terminal penetration and network RMB42.1. Mobile handset data traffic volume grew by resource pool across the network and access rate in key cities”, while 16.5% year-on-year. well positioning the brand of WO seeking for user upgrade from Cloud. In 2020, cloud computing existing customers and expanding the FIXED-LINE BROADBAND revenue reached RMB3.84 billion, us in ess scale in new user market. The In 2020, by adhering to the comprehensive coordination of representing a year-on-year growth of Company strived to maintain the “network + business + operation + service + information” in 62.7%. OVERVIEW the development of fixed-line service, led by “Three- competitiveness of its tariff and products and enhanced flexibility on Gigabit” and combined with 5G hotspots based on business In Big Data, the Company formed a tariff and contract design at provincial needs, China Unicom established a market-driven product matrix including data level, aiming to drive 5G customers mechanism with network, business and service interaction, application services, data technology with contracts and bundled services thereby comprehensively improved broadband access services, AI and blockchain, focusing while promoting full coverage of 5G capabilities and the ability on resource management, on the key industries such as packages on all existing customers. achieving the coordinated development of broadband sale government affairs, finance, cultural B The Company also reinforced 5G core and marketing and network deployment. The Company and tourism and transportation. It Facing the complex internal and external environment, applications to create differentiation. also accelerated the construction of gigabit networks and developed proprietary products such COVID-19, and other challenges in 2020, China Unicom China Unicom carried out scale formulated “Gigabit Broadband Development Plan”, as government big data platform, adhered to its Focus Strategy, actively promoted promotion in Omni-channel by pushing forward the deployment and transformation of digital + intelligence + industry + comprehensive digital transformation, and remained implementing “‘6+X’+1+1” initiative, gigabit communities focusing high-value regions. finance platform, smart travel-cultural committed to the differentiated operation. The Company which centered on 5G differentiated Meanwhile, relying on the unconditional acceptance of tourism big data platform and smart strengthened integrated operation led by 5G services to scenarios online and enabled 5G to broadband application, the Company built a digital factory AI application platform. The enhance user acquisition capability, thereby actively actively drive traffic. The Company operation system of “two networks and one middle Company released “Unicom Chain”, pushing forward on high-quality and sustainable growth. also conducted 5G experience and platform” for home users, thereby optimised resource an unified blockchain products and closed-door terminal sales events on allocation and promoted highly-efficient governance. In capabilities platform. “Unicom Chain” physical channels. On enterprise and 2020, fixed-line broadband access revenue reached was connected to the new national government customer front, the RMB42.56 billion, representing a year-on-year growth of blockchain infrastructure “Xinghuo Company actively built 5G benchmark 2.4%. During the year, the number of broadband Space”. The Company fulfilled the role demonstration. The Company subscribers increased by 2.617 million to 86.095 million as a SOE to support the pandemic CHEN ZHONGYUE accelerated concerted development and the broadband access ARPU was RMB41.5. FTTH prevention and control and assisted in Executive Director and President among terminal, network and subscribers penetration reached 86%. the resumption of work, production business, building the interactive and schooling. Our Unicom Big Data drive between service and terminal. INDUSTRY INTERNET Co. Ltd. was named “National The innovative installment credit In cloud computing, the Company focused on cloud Advanced Group in Fighting Against services on terminals also boosted the leadership while integrating research and development COVID-19”. In 2020, Big Data revenue business development. In addition, resources and riding on the organic growth of the reached RMB1.72 billion, the Company was able to implement innovative business as core driving forces. The Company representing a year-on-year growth of refined customer segmentation and created new WO Cloud base, new PaaS, and new cloud 39.8% and achieving a market share offer fit and suitable products based management product capabilities to build its differentiated of 59.4%, ranked first among telecom on precise Big Data analytics and deep edges of being “cloud-network integrated, secure and operators. insight from various scenarios. reliable, private and customised and multi-cloud

14 CHINA UNICOM (HONG KONG) LIMITED ANNUAL REPORT 2020 15 BUSINESS OVERVIEW

In Internet of Things (IoT), the Company optimised the IoT business system with the drive by 5G, 4G as main force and precise development of NB and achieved the number of connections reaching approximately 240 million. Based on the concept of “network softwarisation, software hardwarisation and hardware as a chip”, the Company strengthened proprietary capability building. The number of connections carried by the Yanfei Zhilian CMP platform exceeded 80 million and the Yanfei Gewu DMP platform had begun its commercial use. In 2020, IoT revenue reached RMB4.22 billion, representing a year- on-year growth of 39.0%. smooth operation of communication network systems in The Company continued to optimise

In IT services, the Company grasped the government, provided a number of digital services such its international network deployment. the development opportunities of as 5G-based live broadcast and remote meetings for As at the end of 2020, the “New infrastructure”, public important national conferences and successfully completed international submarine cable governance and industrial with high quality of more than 260 assurance tasks in three resource capacity, international digitalisation, focusing on customers major categories. China Unicom System Integration Internet outbound capacity and such as government units, public Company Limited ranked 21st in “100 Most Competitive homebound bandwidth reached service units and large industrial Software & IT Service Company” in China. In 2020, IT 52.6T, 4.12T and 3.30T, respectively. enterprises, and key areas such as services revenue reached RMB13.36 billion, representing a The Company’s international roaming smart city, digital government, Big year-on-year growth of 33.4%. services covered 627 operators in 259 countries and regions. data + IT + Innovation, ITO and 5G NETWORK CAPABILITIES innovation, further promoting digital In 2020, the Company deepened the implementation of its MARKETING transformation empowerment. The strategy of focus, innovation, and cooperation, actively Branding Company also created a “platform + promoted the digital transformation of network and the In 2020, the Company carried out application” product system covering reform of network operating mechanism. The Company high-quality development and acted digital infrastructure, cloud-network achieved strategic results in the high-quality collaborative out its brand planning by affirming integration, digital platforms, digital development in the industry and network “co-build and co- the brand positioning of a warmth applications, and digital solutions by share”, and continued to strengthen in network service smart living along with the slogan aggregating its proprietary innovation support capabilities to facilitate the Company’s high- “Innovation walks with Intelligence”, and core capabilities. The Company’s quality development. which fully renovated the internal and qualification level further improved external branding of China Unicom and it is the only one among the three As at the end of 2020, the number of the Company’s 4G and enhanced the brand value of operators which obtained the first- base stations reached 1.503 million with 4G population China Unicom. In promoting 5G, the level qualification for electrification coverage reaching 94% and administrative village coverage Company gave full play to the leading and intelligentisation. The Company reaching 86%. In the fixed-line network, the Company role of 5G, continued the effort to also newly added 7 IT industry continued to expand network coverage in new regions and communicate the brand philosophy qualifications including CS4, ITSS stepped up the network upgrade in areas with PON+LAN. and build and accumulate the 5Gn (Level I) and others. During the The total number of broadband access ports reached 225 brand visual assets. While the pandemic, the Company assured the million, of which FTTH ports accounted for 88%. Company focused on key businesses

16 CHINA UNICOM (HONG KONG) LIMITED and scenarios on publicity campaigns, improvements and two controls” and carried out value- Score (NPS) measuring the reputation it also rode promotions on trends, oriented operation for all customers. The Company also of mobile and broadband services hotspots, events and key festivals. innovated the platform-based product portfolio and built improved by 5.5 points and 7.6 The Company took the lead in an ecosystem for channels by giving full play to the points, respectively. As at the end of launching “Three-Gigabit” products, advantages of the business and IT collaboration, consumer December, valid complaint rate focusing on the home network service market and government and enterprise market published by Ministry of Industry and demand, and carried out promotion collaboration, sought development in segment markets by Information Technology (MIIT) featuring product benefits and customer slicing and precise policy implementation. At the decreased by 35.2% year-on-year. catering regional differences. In the same time, the Company strived to improve six key PRECISE PANDEMIC youth market, the Company operational capabilities namely, “brand, customers, CONTROL rejuvenated WO Pi brand, deepened products, channels, terminals and services” to achieve the Since the beginning of 2020, facing WO Pi’s brand proposition, “Do what I improvement of marketing efficiency and facilitating the the outbreak of COVID-19, the like”, and conveyed the connotation high-quality development of the consumer market. Company has been proactively of diversified vitality. By continuously Marketing Channels undertaking social responsibility, optimising the promotion content and In 2020, the Company actively implemented assuring the effective communication diversifying communication means, comprehensive digital transformation strategy, leveraged services delivery and making use of the Company received good overall the efficient support of middle platforms, strengthened new technologies such as big data, AI brand development momentum and Omni-channel collaboration and focused on the and 5G to support a precise pandemic improved in reputation and brand implementation of “‘6+X’+1+1” project. The Company also control and resumption of work, awareness. Meanwhile, by virtue of accelerated the online to offline integration, building a production and schooling. The the sponsorship of the Winter digital OMO channel operation system which integrate new outbreak posed short-term challenges Olympics, consumers’ perception of and existing customer management, service and to the Company, including customer the brand further improved. marketing. In addition, the Company stepped up channel acquisition, business development, Marketing strategies innovation and transformation, vigorously developed network deployment and risk of bad In 2020, the Company continued to online, light touch-point micro-ecology, live broadcast and debt. However, it also accelerated push forward comprehensive digital other new touchpoints, new marketing models and demand by economy and society for transformation and carried out segment markets, thus customer acquisition capability had transformation on digitisation, “1+3+3” work deployment. Focusing continuously improved on digital channels. Through fully cyberisation and intelligence, thereby on the development of the four major promoting “100%” satisfaction and actively building a high- creating new opportunities to the markets and adhering to the core traffic APP portal ecosystem, as well as boosting the multi- Company. Striving to turn adversity strategy of “1+4+X” and leading by dimensional smart push capability, the service capability of into opportunities, the Company “Three-Gigabit” products, the digital channels was gradually enhanced. Riding on the accelerated the transformation of Company focused on four middle platforms serving consumer market and the high- Internet-oriented operation, provided fundamental products and realised traffic APP portal, the Company achieved online and offline innovative communications service scale development of smart home resource sharing, the online powered up offline and built offerings, strengthened O2O products. The Company promoted the an unified delivery tools which pushed forward network integrated operation and actively full coverage of 5G packages for all and business collaboration, continuously accelerating the promoted new informatisation customers and strengthened 5G core digitalisation of channels. applications, thereby providing applications to create differentiation. customers with accessible, Customer Care Segmenting customers based on convenient and highly efficient smart In 2020, the Company dedicated in promoting service customer value distribution and living services. assurance during the pandemic and accelerated digital spending pattern, the Company transformation, achieving continuous improvement in refined customer lists and accurately customer experience and service quality. As at the end of matched customers with appropriate the fourth quarter, end-to-end real-time customer tariffs, products and touchpoints. The experience score improved by 1.52 points. Net Promoter Company solidly promoted the “two

ANNUAL REPORT 2020 17 inancialOVERVIEW

OVERVIEW REVENUE F In 2020, the Company continuously deepened the In 2020, the Company’s revenue was implementation of “Focus Strategy”, total revenue was RMB303.84 billion, up by 4.6% year- RMB303.84 billion in 2020, up by 4.6% year-on-year. on-year, of which, service revenue Service revenue reached RMB275.81 billion, up by 4.3% was RMB275.81 billion, up by 4.3% year-on-year. Net profit1 was RMB12.49 billion, up by year-on-year due to continuous RMB1.16 billion year-on-year. optimisation of the revenue mix.

In 2020, the Company’s net cash flow from operating The table below sets forth the activities was RMB105.55 billion. Capital expenditure was composition of service revenue, and RMB67.65 billion. Liabilities-to-assets ratio was 43.6% as at the percentage contribution of each 31 December 2020. service to total service revenue for the years of 2020 and 2019:

18 CHINA UNICOM (HONG KONG) LIMITED SERVICE REVENUE (RMB BIL) 275.81

EBITDA2 (RMB BIL) 94.14

NON-VOICE SERVICE REVENUE (RMB BIL) 240.32

2020 2019 As a As a percentage percentage Total of service Total of service

(RMB in billions) amount revenue amount revenue

Service revenue 275.81 100.00% 264.39 100.00% Include: Voice service 35.49 12.87% 39.48 14.93%

Non-voice service 240.32 87.13% 224.91 85.07%

Voice Service In 2020, service revenue from the voice service was RMB35.49 billion, down by 10.1% year-on-year.

Non-Voice Service In 2020, service revenue from the non-voice service was RMB240.32 billion, up by 6.9% year-on-year.

ANNUAL REPORT 2020 19 FINANCIAL OVERVIEW

COSTS AND EXPENSES In 2020, total costs and expenses amounted to RMB287.81 billion, up by 4.1% year-on-year.

The table below sets forth the items of the costs and expenses and their respective percentage of the revenue for the years of 2020 and 2019:

2020 2019 As a As a Total percentage Total percentage

(RMB in billions) amount of revenue amount of revenue

Total costs and expenses 287.81 94.73% 276.35 95.12% Operating costs 292.72 96.34% 279.25 96.12% Include: Interconnection charges 10.57 3.48% 11.51 3.96% Depreciation and amortisation 83.02 27.32% 83.08 28.60% Network, operation and support expenses 46.29 15.23% 43.24 14.88% Employee benefit expenses 55.74 18.35% 50.52 17.39% Costs of telecommunications products sold 26.86 8.84% 26.41 9.09% Selling and marketing expenses 30.46 10.03% 33.54 11.55% General, administrative and other operating expenses 39.78 13.09% 30.95 10.65% Finance costs, net of interest income 0.38 0.13% 0.85 0.29% Share of net profit of associates –1.59 –0.52% –1.36 –0.47% Share of net profit of joint ventures –0.79 –0.26% –0.65 –0.22%

Other income-net –2.91 –0.96% –1.74 –0.60%

20 CHINA UNICOM (HONG KONG) LIMITED Interconnection charges Selling and marketing expenses The Company was affected by the decline in voice service, The Company promoted the interconnection charges were RMB10.57 billion in transformation on digitisation and 2020, down by 8.2% year-on-year and, as a percentage of strengthened O2O integrated revenue, decreased from 3.96% in 2019 to 3.48% in 2020. operation, selling and marketing expenses were RMB30.46 billion in Depreciation and amortisation 2020, down by 9.2% year-on-year Depreciation and amortisation charges were RMB83.02 and, as a percentage of revenue, billion in 2020, down by 0.1% year-on-year and, as a decreased from 11.55% in 2019 to percentage of revenue, decreased from 28.60% in 2019 to 10.03% in 2020. 27.32% in 2020. General, administrative and other Network, operation and support expenses operating expenses Network, operation and support expenses were RMB46.29 General, administrative and other billion in 2020, up by 7.1% year-on-year and, as a operating expenses were RMB39.78 percentage of revenue, increased from 14.88% in 2019 to billion in 2020, up by 28.6% year-on- 15.23% in 2020 mainly due to increase in the tower usage year, mainly due to the rapid growth fee, energy consumption cost and rental expenses of of ICT services leading to increased premises and equipment. related service costs and increased investment in technical support for Employee benefit expenses innovative businesses. As a result of the improved operating results and increased the introduction of talent pipeline in the meantime, Finance costs, net of interest income employee benefit expenses were to RMB55.74 billion in Finance costs, net of interest income 2020, up by 10.3% year-on-year and, as a percentage of was RMB0.38 billion in 2020, revenue, increased from 17.39% in 2019 to 18.35% in decreased by RMB0.47 billion year- 2020. on-year mainly due to fall in interest- bearing debts. Cost of telecommunications products sold Costs of telecommunications products sold were RMB26.86 Other income-net billion and revenue from sales of telecommunications Other income-net was RMB2.91 products were RMB28.02 billion in 2020. Gross profits on billion in 2020, increased by RMB1.18 sales of telecommunications products was RMB1.16 billion. billion year-on-year.

ANNUAL REPORT 2020 21 FINANCIAL OVERVIEW

EARNINGS EBITDA2 Profit before income tax In 2020, the Company’s EBITDA was In 2020, the Company benefited from continuous RMB94.14 billion, down by 0.2% year- enhancement in growth quality and profitability, profit on-year. EBITDA as a percentage of before income tax was RMB16.03 billion, up by 13.1% year- service revenue was 34.1%, down by on-year. 1.6 percentage points year-on-year.

Income tax CAPITAL EXPENDITURE AND In 2020, the Company’s income tax was RMB3.45 billion CASH FLOW and the effective tax rate was 21.5%. In 2020, capital expenditure of the Company totaled RMB67.65 billion, Profit for the year which mainly consisted of In 2020, the Company’s net profit1 was RMB12.49 billion, investments in mobile network, increased by RMB1.16 billion year-on-year. Basic earnings broadband and data, and per share was RMB0.408, up by 10.3% year-on-year. infrastructure and transmission network etc. In 2020, the Company’s net cash flow from operating activities was RMB105.55 billion. Free cash flow3 was RMB37.90 billion after the deduction of the capital expenditure. TO ELEVATE SHAREHOLDER VALUE THROUGH QUALITY & EFFICIENCY ENHANCEMENT

• Strengthen cash flow management and promote transformation of resources allocation & utilisation to enhance productivity of all essential factors

• Accelerate operating model transformation, to foster pan-marketing coordinated operation & high quality development

• Deepen network & business integration with precise investment to enhance the edges of cloud-network integration

22 CHINA UNICOM (HONG KONG) LIMITED The table below sets forth the major items of the capital expenditure in 2020:

2020

RMB (in billions) Total amount As percentage

Total 67.65 100.00% Include: Mobile network 38.17 56.42% Broadband and data 10.15 15.01% Infrastructure and transmission network 11.04 16.32%

Others 8.29 12.25%

BALANCE SHEET The Company’s total assets changed from RMB562.50 billion as at 31 December 2019 to RMB580.62 billion as at 31 December 2020. Total liabilities changed from RMB241.74 billion as at 31 December 2019 to RMB253.10 billion as at 31 December 2020. The liabilities-to-assets ratio changed from 43.0% as at 31 December 2019 to 43.6% as at 31 December 2020. The debt-to-capitalisation ratio decreased from 15.2% as at 31 December 2019 to 12.2% as at 31 December 2020. The net debt-to-capitalisation ratio was 6.0% as at 31 December 2020.

Note 1: Net profit represented profit attribute to equity shareholders of the Company.

Note 2: EBITDA represents profit for the year before finance costs, interest income, shares of net profit of associates, share of net profit of joint ventures, other income-net, income tax expenses, depreciation and amortisation. As the telecommunications business is a capital intensive industry, capital expenditure and finance costs may have a significant impact on the net profit of the companies with similar operating results. Therefore, the Company believes that EBITDA may be helpful in analysing the operating results of a telecommunications service operator like the Company. However, it is a non-GAAP financial measure which does not have a standardised meaning and therefore may not be comparable to similar measures presented by other companies.

Note 3: Free cash flow represents operating cash flow less capital expenditure. However, it is a non-GAAP financial measure which does not have a standardised meaning and therefore may not be comparable to similar measures presented by other companies.

• Strengthen centralised IT operation & data governance to boost overall IT efficiency

• Continue to promote value management leveraging innovative revitalisation of operating assets & enhancement of talent performance

ANNUAL REPORT 2020 23 DirectorsAND SENIOR MANAGEMENT

WANG XIAOCHU Chairman and Chief Executive Officer

Aged 62, was appointed in September 2015 as an Executive Director, Chairman and Chief Executive Officer of the Company. Mr. Wang, a professor level senior engineer, graduated from Beijing Institute of Posts and Telecommunications in 1989 and received a doctorate degree in business administration from the Hong Kong Polytechnic University in 2005. Mr. Wang served as Deputy Director General and Director General of the Hangzhou Telecommunications Bureau in Zhejiang province, Director General of the Tianjin Posts and Telecommunications Administration, Chairman and Chief Executive Officer of China Mobile (Hong Kong) Limited, Vice President of China Mobile Communications Corporation, an Executive Director, Chairman and Chief Executive Officer of China Telecom Corporation Limited, Chairman and President of China Telecommunications Corporation, Chairman and a Non-Executive Director of China Communications Services Corporation Limited and a Director of Telefónica S.A.. In addition, Mr. Wang also serves as the Chairman of China United Network Communications Group Company Limited (“Unicom Group”), China United Network Communications Limited (“A Share Company”) and China United Network Communications Corporation Limited (“CUCL”), respectively. Mr. Wang has extensive experience in management and telecommunications industry.

24 CHINA UNICOM (HONG KONG) LIMITED AND SENIOR MANAGEMENT

CHEN ZHONGYUE Executive Director and President

Aged 49, was appointed in February 2021 as an Executive Director and President of the Company. Mr. Chen, a senior engineer, graduated from Shanghai Posts and Telecommunications College in 1990 and received a master degree in economics from Zhejiang University in 1998. Mr. Chen served as Deputy General Manager of China Telecom Zhejiang branch, Managing Director of the Public Customers Department of China Telecom, General Manager of China Telecom Shanxi branch, Vice President of China Telecommunications Corporation, Executive Director and Executive Vice President of China Telecom Corporation Limited. Mr. Chen also serves as a Director and General Manager of Unicom Group, a Director and President of A Share Company as well as a Director and President of CUCL. Mr. Chen has extensive experience in management and the telecommunications industry.

ANNUAL REPORT 2020 25 DIRECTORS AND SENIOR MANAGEMENT

LI FUSHEN Executive Director

Aged 58, was appointed in March 2011 as an Executive Director of the Company. Mr. Li graduated from the Jilin Engineering Institute in 1988 and received a master’s degree in management from the Australian National University in 2004. Mr. Li served as Deputy General Manager of the former Jilin Provincial Telecommunications Company and Jilin Communications Company, General Manager of the Finance Department and the Chief Accountant of China Network Communications Group Corporation, Chief Financial Officer, Executive Director and Joint Company Secretary of China Netcom Group Corporation (Hong Kong) Limited, Vice General Manager and Chief Accountant of Unicom Group and Senior Vice President and Chief Financial Officer of the Company. In addition, Mr. Li also serves as a Non-Executive Director and the Deputy Chairman of the Board of PCCW Limited (listed on the Hong Kong Stock Exchange with an American Depositary Receipts trading on OTC Markets Group Inc.), a Non-Executive Director of HKT Limited (HKT Trust and HKT Limited are listed on the Hong Kong Stock Exchange) and HKT Management Limited (the trustee manager of the HKT Trust), a Director of Unicom Group, a Director of A Share Company, as well as a Director of CUCL. Mr. Li has worked in the telecommunications industry for a long period of time and has extensive management experience.

26 CHINA UNICOM (HONG KONG) LIMITED MAI YANZHOU Senior Vice President

Aged 52, was appointed in February 2018 as a Senior Vice President of the Company. Mr. Mai, a professor level senior engineer, graduated from Zhengzhou University in 1991 and received a master’s degree in Electronics and Information Engineering from Beijing University of Posts and Telecommunications in 2002. Mr. Mai served as Deputy General Manager of Guangdong Branch of China Network Communications Group Corporation, Deputy General Manager of Guangdong Branch, General Manager of Fujian Branch, as well as General Manager of Liaoning Branch of China Unicom. Mr. Mai served as a Delegate to the 12th National People’s Congress. Mr. Mai also serves as a Non-Executive Director of PCCW Limited (listed on the Hong Kong Stock Exchange with an American Depositary Receipts trading on OTC Markets Group Inc.), a Non-Executive Director of China Tower Corporation Limited (listed on the Hong Kong Stock Exchange), a Non-Executive Director of China Communications Services Corporation Limited (listed on the Hong Kong Stock Exchange), Vice General Manager of Unicom Group, Senior Vice President of A Share Company as well as Director and Senior Vice President of CUCL. Mr. Mai has extensive experience in management and telecommunications industry.

ANNUAL REPORT 2020 27 DIRECTORS AND SENIOR MANAGEMENT

LIANG BAOJUN Senior Vice President

Aged 51, was appointed in February 2018 as a Senior Vice President of the Company. Mr. Liang, a professor level senior engineer, graduated from Changchun Institute of Posts and Telecommunications in 1991, received a master’s degree in Engineering from Beijing University of Posts and Telecommunications in 1998 and an executive master’s degree of Business Administration from Tsinghua University in 2006. Mr. Liang served as Deputy General Manager of Beijing Branch of China Telecom Corporation Limited, as well as General Manager of Henan Branch of China Telecommunications Corporation, General Manager of Corporate Informatisation Department, General Manager of Government and Enterprise Customers Department of China Telecommunications Corporation. Mr. Liang also serves as Vice General Manager of Unicom Group, Senior Vice President of A Share Company, Director and Senior Vice President of CUCL, as well as Director of certain member of the Group. Mr. Liang has extensive experience in management and telecommunications industry.

28 CHINA UNICOM (HONG KONG) LIMITED ZHU KEBING Executive Director & Chief Financial Officer

Aged 46, was appointed in August 2018 as Executive Director and Chief Financial Officer of the Company. Mr. Zhu is a Senior Accountant, graduated from Northeastern University in 1997 and received a Professional Accountancy master’s degree from Chinese University of Hong Kong in 2011. Mr. Zhu previously worked as Deputy Head of the Financial Department, General Manager, Budgeting Controller and Asset Management Controller of the Operation and Financial Department of Baosteel Group Co., Ltd., the Chief Financial Officer, Board Secretary and Supervisor of Baoshan Iron and Steel Co., Ltd., a General Manager of the Industry Finance Development Center of China Baowu Steel Group Corporation Limited, a Director of Shanghai Baosight Software Co., Ltd., General Manager of Hwabao Investment Co., Ltd., a Non-Executive director of China Pacific Insurance (Group) Co., Ltd., Director of Sailing Capital International Investment Fund (Shanghai), Director of Sailing Capital Management Co., Ltd., Director of Siyuanhe Equity Investment Management Co., Ltd. and the Vice President of PE Association of Shanghai etc. Meanwhile, he also serves as a Non-Executive Director of PCCW Limited (listed on the Hong Kong Stock Exchange with an American Depositary Receipts trading on OTC Markets Group Inc.), a Non-Executive Director of HKT Limited (HKT Trust and HKT Limited are listed on the Hong Kong Stock Exchange) and HKT Management Limited (the trustee-manager of the HKT Trust), the Chief Accountant of Unicom Group, the Chief Financial Officer and Board Secretary of A Share Company, the Director and the Chief Financial Officer of CUCL, as well as the Directors of certain members of the Group. Mr. Zhu has extensive experience in board secretary, corporate finance and investment management.

ANNUAL REPORT 2020 29 DIRECTORS AND SENIOR MANAGEMENT

FAN YUNJUN Executive Director and Senior Vice President

Aged 48, was appointed in February 2020 as an Executive Director of the Company. Mr. Fan was appointed in January 2019 as a Senior Vice President of the Company. Mr. Fan, a senior engineer, received a doctorate degree of Engineering in Signal and Information Processing from Beijing University of Posts and Telecommunications in 1998. Mr. Fan served as a Director and Vice General Manager of China Mobile Group Beijing Company Limited, the Chairman and Chief Executive Officer of CMPak Limited, the Chairman of China Mobile Hong Kong Company Limited, the Chairman and Chief Executive Officer of China Mobile International Limited, the Chairman and General Manager of China Mobile Group Beijing Company Limited. Mr. Fan also serves as a Vice General Manager and General Counsel of Unicom Group, a Senior Vice President and General Counsel of A Share Company as well as a Director and Senior Vice President of CUCL. Mr. Fan has extensive experience in management and telecommunications industry.

30 CHINA UNICOM (HONG KONG) LIMITED HE BIAO Senior Vice President

Aged 49, was appointed in June 2020 as a Senior Vice President of the Company. Mr. He graduated from Xiangtan University in 1993 and received a doctorate degree of Business Administration in 2016. Mr. He served as Deputy General Manager and General Manager of Guangdong Branch of China Unicom as well as Chairman of China Unicom (Guangdong) Industrial Internet Co., Ltd.. Mr. He also serves as a Vice General Manager of Unicom Group, a Senior Vice President of A Share Company as well as a Director and Senior Vice President of CUCL. Mr. He has extensive experience in management and telecommunications industry.

ANNUAL REPORT 2020 31 DIRECTORS AND SENIOR MANAGEMENT

CHEUNG WING LAM LINUS Independent Non-Executive Director

Aged 72, was appointed in May 2004 as an Independent Non-Executive Director of the Company. Mr. Cheung is an Independent Non-Executive Director of HKR International Limited (listed on the Hong Kong Stock Exchange). Mr. Cheung was a member of the University of Hong Kong Council, Chairman of the Council of Centennial College, a member of the Board of Governors of Centennial College, Chairman of the University of Hong Kong School of Professional and Continuing Education, Chairman of Asia Television Limited, Deputy Chairman of PCCW Limited, an Independent Non-Executive Director of Taikang Life Insurance Company Limited and Sotheby’s, as well as President of the Chartered Institute of Marketing (Hong Kong Region). Prior to the merger of Pacific Century Cyberworks Limited and Hong Kong Telecom Limited, Mr. Cheung was the Chief Executive of Hong Kong Telecom Limited and an Executive Director of Cable & Wireless plc in the United Kingdom. Mr. Cheung worked at Cathay Pacific Airways for 23 years, leaving as Deputy Managing Director. He was appointed an Official Justice of the Peace in 1990 and a Non- official Justice of the Peace in 1992. Mr. Cheung received a bachelor’s degree in social sciences and a diploma in management studies from the University of Hong Kong. He is also an Honorary Fellow of the University of Hong Kong and of The Chartered Institute of Marketing in the United Kingdom.

32 CHINA UNICOM (HONG KONG) LIMITED WONG WAI MING Independent Non-Executive Director

Aged 63, was appointed in January 2006 as an Independent Non-Executive Director of the Company. Mr. Wong is Executive Vice President and Chief Financial Officer of Lenovo Group Limited (listed on the Hong Kong Stock Exchange). Mr. Wong was previously an investment banker with over 15 years of experience in investment banking business in Greater China and was a member of the Listing Committee of The Stock Exchange of Hong Kong Limited. Mr. Wong is a chartered accountant and holds a bachelor’s degree (with Honors) in management science from the Victoria University of Manchester in the United Kingdom.

ANNUAL REPORT 2020 33 DIRECTORS AND SENIOR MANAGEMENT

CHUNG SHUI MING TIMPSON Independent Non-Executive Director

Aged 69, was appointed in October 2008 as an Independent Non-Executive Director of the Company. Mr. Chung is a member of the National Committee of the 13th Chinese People’s Political Consultative Conference. He is also the Pro-Chancellor of the City University of Hong Kong. Besides, Mr. Chung is an Independent Non-Executive Director of Glorious Sun Enterprises Limited, The Miramar Hotel and Investment Company, Limited, China Overseas Grand Oceans Group Limited, China Everbright Limited, China Railway Group Limited, Orient Overseas (International) Limited and Postal Savings Bank of China Co., Limited (all listed on the Hong Kong Stock Exchange). From October 2004 to October 2008, Mr. Chung served as an Independent Non-Executive Director of China Netcom Group Corporation (Hong Kong) Limited. Formerly, he was the Chairman of China Business of Jardine Fleming Holdings Limited and the Deputy Chief Executive Officer of BOC International Limited. He was also the Director-General of Democratic Alliance for the Betterment and Progress of Hong Kong, the Chairman of the Advisory Committee on Arts Development, the Chairman of the Council of the City University of Hong Kong, the Chairman of the Hong Kong Housing Society, a member of the Executive Council of the Hong Kong Special Administrative Region, the Vice Chairman of the Land Fund Advisory Committee of Hong Kong Special Administrative Region Government, a member of the Managing Board of the Kowloon-Canton Railway Corporation, a member of the Hong Kong Housing Authority, a member of the Disaster Relief Fund Advisory Committee, an Independent Non-Executive Director of Henderson Land Development Company Limited, Nine Dragons Paper (Holdings) Limited, China Construction Bank Corporation and Jinmao Hotel and Jinmao (China) Hotel Investments and Management Limited, an Independent Director of China Everbright Bank Company Limited and China State Construction Eng. Corp. Ltd. and an Outside Director of China Mobile Communications Corporation. Mr. Chung holds a bachelor of science degree from the University of Hong Kong and a master’s degree in business administration from the Chinese University of Hong Kong. Mr. Chung also received an honorary doctoral degree in Social Science from the City University of Hong Kong in 2010. Mr. Chung is a fellow member of the Hong Kong Institute of Certified Public Accountants.

34 CHINA UNICOM (HONG KONG) LIMITED LAW FAN CHIU FUN FANNY Independent Non-Executive Director

Aged 68, was appointed in November 2012 as an Independent Non-Executive Director of the Company. Mrs. Law is currently a Member of the Executive Council of the Government of the Hong Kong Special Administrative Region (“HKSAR”), a Director of the Fan Family Trust Fund and the Honorary Principal of Ningbo Huizhen Academy. Besides, Mrs. Law is an Independent Non-Executive Director of CLP Holdings Limited, Nameson Holdings Limited, Minmetals Land Limited and China Taiping Insurance Holdings Company Limited (all listed on the Hong Kong Stock Exchange), as well as External Director of China Resources (Holdings) Co., Limited. Mrs. Law served as a Deputy of HKSAR to the National People’s Congress of the People’s Republic of China, Chairman of the Board of Directors of Hong Kong Science and Technology Parks Corporation and an Independent Non-Executive Director of DTXS Silk Road Investment Holdings Company Limited. Prior to her retirement from the civil service in 2007, Mrs. Law was the Commissioner of the Hong Kong Independent Commission Against Corruption. During her 30 years as an Administrative Officer, Mrs. Law has worked in many fields, including medical and health, economic services, housing, land and planning, home affairs, social welfare, civil service, transport and education. Mrs. Law graduated from the University of Hong Kong with an Honours degree in Science, and in 2009 was named an outstanding alumnus of the Science Faculty of the University of Hong Kong. She received a Master degree in Public Administration from Harvard University and was named a Littauer Fellow of Harvard University. She also holds a Master degree in Education from the Chinese University of Hong Kong and is a Fellow of The Hong Kong Institute of Directors.

ANNUAL REPORT 2020 35 R t ecogniAND ionAWARDS

For more information, please visit the Company’s website at www.chinaunicom.com.hk

36 CHINA UNICOM (HONG KONG) LIMITED ANNUAL REPORT 2020 37 Corporate

GREPORTovernance

38 CHINA UNICOM (HONG KONG) LIMITED to confirm its compliance with related financial reporting, by Corporate Governance Asia. The information disclosure, corporate internal control Company was voted as “Best Overall requirements and other regulatory requirements. The Board Investor Relations (Large Cap)”, “Best is responsible for performing overall corporate governance in Communications Sector” and “Best duties. The Company has adopted a Corporate Governance in Hong Kong” at “IR Magazine Awards Practice which sets out the key terms of reference of — Greater China 2020”. The Company the Board on corporate governance functions, including, was accredited with “Gold Award — amongst others, developing and reviewing the Corporate Excellence in Environmental, Social, Governance Policy and corporate governance practices and Governance” in “The Asset ESG of the Company; reviewing and monitoring the training Corporate Awards 2020”. and continuous professional development of Directors and senior management; reviewing and monitoring the The Corporate Governance Code (the The Board is committed to high Company’s policies and practices on compliance with legal “Code”) as set out in Appendix 14 standards of corporate governance and regulatory requirements; developing, reviewing and of the Rules Governing the Listing of and recognises that good governance overnance monitoring the code of conduct and compliance manual Securities on The Stock Exchange of is vital for the long-term success applicable to employees and Directors; and reviewing the Hong Kong Limited (the “Listing Rules”) and sustainability of the Company’s Company’s compliance with the Code. provides for code provisions (the business. As a company incorporated “Code Provisions”) and recommended in Hong Kong, the Company adopts In 2020, the Company’s continuous efforts in corporate best practices with respect to (i) the Companies Ordinance (Chapter governance gained wide recognition from the capital Directors, (ii) remuneration of 622 of the Laws of Hong Kong), the markets and the Company was accredited with a number Directors and senior management and Securities and Futures Ordinance of of awards. The Company was voted as “Asia’s No.1 Most evaluation of the Board of Directors Hong Kong and other related laws and Honored Telecom Company” for five years in a row in (the “Board”), (iii) accountability and regulations as the basic guidelines for “2020 All-Asia Executive Team” ranking organised by the audit, (iv) delegation by the Board, (v) the Company’s corporate governance. authoritative financial magazine, Institutional Investor. communication with shareholders and As a company dual-listed in Hong Meanwhile, the Company was also honored with “Asia’s Best (vi) company secretary. Other than Kong and the United States, the CEO (Telecoms)”, “Asia’s Best CFO (Telecoms)”, “Asia’s Best the disclosures made in the section current articles of association are in ESG (Telecom)” and “Asia’s Best IR Team”. The Company headed “Board of Directors” below, compliance with the Rules Governing was voted by professional investors as “Best Corporate the Company confirms that for the year the Listing of Securities on The Stock Governance in Asia” and “Best Managed Company in ended 31 December 2020, it complied Exchange of Hong Kong Limited China” in “Asia’s Best Managed Companies Poll 2020” by with all the Code Provisions. and the regulatory requirements FinanceAsia. The Company was award “Most Outstanding for non-U.S. companies listed in the Company in Asia - Telecommunication Services Sector” and United States. These rules serve as “Overall Most Outstanding Company in Hong Kong” in the guidance for the Company to improve “Asia’s Outstanding Companies Poll 2020” organised by the foundation of its corporate Asiamoney. The Company was awarded “Asia’s Best CSR” governance, and the Company strives to comply with the relevant requirements of international and local corporate governance best practices. The Company has regularly published statements relating to its internal control in accordance with the U.S. Sarbanes-Oxley Act and the regulatory requirements of the United States Securities and Exchange Commission and the New York Stock Exchange

ANNUAL REPORT 2020 39 CORPORATE GOVERNANCE REPORT

BOARD OF DIRECTORS To serve the best interests of the Company and its shareholders, the Board is responsible for reviewing and approving major corporate matters, including, amongst others, business strategies and budgets, major investments, capital market operations, as well as mergers and acquisitions. The Board is also responsible for monitoring risk management and internal control, reviewing environmental, social and governance strategies, reviewing and approving the announcements periodically published by the Company regarding its business results and operating activities.

In order to achieve a sustainable and balanced development, the Company views Board diversity as a key element for supporting its strategic goals and maintaining sustainable development. The Board membership maintains wide representation. Members of the Board consist of outstanding individuals from different professions. Currently, the Board comprises nine Directors, including five executive Directors and four independent non-executive Directors. Particulars of the Directors are set out on pages 24 to 35 of this annual report. The Company believes that the Board currently comprises experts from diversified professions such as telecommunications, technology, banking, finance, investment and management, and is diversified in terms of gender, age, duration of service, educational background, professional experience, etc., which contributes to the enhanced management standard and more regulated operation of corporate governance of the Company, and results in a more comprehensive and balanced Board structure and decision-making process.

The below sets out the analysis of the current composition of the Board:

DESIGNATION Executive Independent 5 Directors 4 Non-Executive Directors

GENDER

8 male 1 female

AGE GROUP

3 45-54 3 55-64 3 >65

DURATION OF SERVICE (YEARS)

3 <5 3 6-10 3 >10

40 CHINA UNICOM (HONG KONG) LIMITED The roles and responsibilities of the All independent non-executive Directors of the Company Every newly appointed Director is Chairman and the Chief Executive possess good knowledge and experience in different provided with a comprehensive, Officer of the Company were areas. They have been making positive contributions to formal and tailored induction performed by the same individual for the development of the Company’s strategies and policies on appointment, including but the year ended 31 December 2020. through independent, constructive and informed advices. not limited to the “Guidelines on The Company considers that, as all They have maintained close contact with the management Directors’ Duties” published by the major decisions are made by the Board and actively express constructive opinions on matters Hong Kong Companies Registry and relevant Board Committees after relating to the shareholders and the capital market at board and the “Guidelines for Directors” discussion, through supervision by meetings. These views and opinions facilitate the Board in published by the Hong Kong Institute the Board and the independent non- making their decisions in the shareholders’ best interests. of Directors. Directors have fiduciary executive Directors together with All independent non-executive Directors, except for their responsibilities to the company. They effective internal control mechanism, equity interests and remuneration disclosed in this annual must not exercise their powers for the Company has achieved a balance of report, do not have any business with or financial interests improper purposes. They must not use power and authority. In addition, the in the Company, its holding company or subsidiaries, and the company’s opportunities to serve same individual performing the roles of have confirmed their independence to the Company. The their own interests. Their personal the Chairman and the Chief Executive functions of non-executive Directors include, amongst other interests are not allowed to conflict Officer can enhance the Company’s things, attending board meetings, exercising independent with the company’s interests, and they efficiency in decision-making and judgements at meetings, playing a leading role in resolving must not abuse the company’s assets. execution, effectively capturing any potential conflicts of interest, serving on committees by The Director would subsequently business opportunities. invitation and carefully examining whether the performance receive all briefing and professional of the Company has reached the planned corporate targets development necessary to ensure and objectives, and monitoring and reporting on matters that he/she has proper understanding relating to the performance of the Company. With respect of the Company’s operations and to the nomination and appointment of new directors and businesses, full understanding of senior management members, the Nomination Committee his/her responsibilities under the would, after considering the Company’s need for new statutes, the common law, the Listing directors and/or senior management members, identify a Rules, applicable legal and regulatory wide range of candidates from within the Company and the requirements, and the Company’s human resources market and make recommendations to the business and corporate governance Board. The Nomination Committee will consider candidates policies. Furthermore, formal letters on merit against objective criteria and with due regard to of appointment setting out the key the benefits of diversity on the Board. After having obtained terms and conditions of the Directors’ the consent from candidates in relation to the relevant appointment will be duly prepared. nomination and based on the Company’s actual needs, the Board would convene a meeting, attendees of which include non-executive Directors, to consider the qualifications of the candidates. The Directors of the Company (including non- executive Directors) are not appointed for a specific term but are subject to retirement by rotation at general meetings pursuant to the Company’s articles of association and at least once every three years.

ANNUAL REPORT 2020 41 CORPORATE GOVERNANCE REPORT

Directors’ training is an ongoing process. The Company regularly invites various professionals to provide trainings on the latest changes and development of the legal and regulatory requirements as well as the market and/or industrial environment to Directors. In 2020, the Directors as at 31 December 2020 have participated in various training and continuous professional development activities and the summary of which is as follows:

Types of training

Executive Director Wang Xiaochu (Chairman) A, B Li Fushen A, B Zhu Kebing A, B Fan Yunjun A, B

Independent Non-Executive Director Cheung Wing Lam Linus A, B Wong Wai Ming A, B Chung Shui Ming Timpson A, B

Law Fan Chiu Fun Fanny A, B

A: attending relevant seminars and/or conferences and/or forums; delivering speeches at relevant seminars and/or conferences and/or forums

B: reading or writing relevant newspapers, journals and articles relating to general economy, general business, telecommunications, corporate governance or directors’ duties

The remuneration package for executive Directors includes salary and performance-linked annual bonuses. The remuneration of executive Directors is determined by reference to their respective duties and responsibilities in the Company, their respective experience, prevailing market conditions and applicable regulatory requirements while the award of the performance-linked annual bonuses is tied to the attainment of key performance indicators or targets set by the Company. The remuneration of non-executive Directors is determined by reference to prevailing market conditions and their respective responsibilities and workload from serving as non-executive Directors and members of the board committees of the Company. The Company also adopted share option scheme for the purpose of providing long term incentives to eligible participants, including Directors (details of such share option scheme are set out in the paragraph headed “Share Option Scheme of the Company” on pages 64 to 65 of this annual report). The remuneration for each Director and the remuneration of senior management by band are disclosed on pages 135 to 136 of this annual report. In addition to the remuneration, the Company has arranged appropriate insurance coverage in respect of legal action against the Directors.

42 CHINA UNICOM (HONG KONG) LIMITED The Board has provided clear The Company Secretary, being an employee of the Company, information regarding those matters guidelines for delegation of powers has day-to-day knowledge of the Company’s affairs and is provided in advance and in a timely and responsibilities to management. reports to the Chairman of the Board. He keeps close manner, and all Directors have the However, certain important matters contact with all Directors and ensures that the operation right to inspect documents and must be decided only by the Board, of the Board and all board committees is in compliance information in relation to matters including, but not limited to, long- with the procedures as set forth in the Company’s articles to be decided by the Board. The term objectives and strategies, annual of association and the charters of the board committees. Directors have frequently visited budget, initial announcements on Additionally, the Company Secretary is responsible for various branches in Mainland China quarterly, interim and final results, compiling and regularly submitting draft minutes of board to gain better understanding of dividends, major investments, equity- meetings and committee meetings to the Directors and the Company’s daily operations. In related capital market operations, committee members for their comment, and final versions addition, the Company has arranged mergers and acquisitions, major of minutes for their records, within a reasonable time after relevant trainings for the Directors connected transactions and annual the relevant meetings. Each Director may obtain advice from (which include training sessions internal control evaluation. The and the services of the Company Secretary to ensure that conducted by professional advisers, arrangements on delegation of powers board procedures, and all applicable rules and regulations, such as lawyers and accountants, from and responsibilities to management are followed. Physical board meetings will be held for time to time) in order to broaden are reviewed by the Board periodically the selection, appointment or dismissal of the Company their knowledge in the relevant areas to ensure that they remain appropriate Secretary. To ensure the possession of up-to-date knowledge and to improve their understanding to the needs of the Company. and market information to perform his duties, the Company of the Company’s business, legal and Secretary attended sufficient professional training in 2020. regulatory requirements and the latest The Board convenes meetings regularly operational technologies. The Board and all Directors have adequate The Directors may, upon request, obtain independent also conducts annual evaluation of opportunity to be present at the professional advice at the expense of the Company. In its performance. Such efforts have meetings and to include matters for addition, if any substantial shareholder of the Company or improved the corporate governance of discussion in the meeting agenda. any Directors has significant conflicts of interest in a matter the Company. Notices of regular board meetings are to be resolved, the Board will convene a board meeting delivered to the Directors at least 14 in respect of such matter and those Directors who have In 2020, the Board held four board days in advance of the meetings. The conflicts of interest must abstain from voting and will not be meetings and passed two written Company delivers, on a best endeavor counted in the quorum of the meeting. resolutions for, amongst other things, basis, all documents for regular discussion and approval of important board meetings to the Directors at All Directors are required to devote sufficient time and matters such as the 2019 annual least one week prior to the meetings attention to the affairs of the Company. A culture of results, the 2019 Form 20-F, the 2020 (and ensures that all documents are openness and debate are promoted in the Board and annual budget, the 2020 interim delivered to the Directors no less the Directors are encouraged to express their views and results, the first and the first three than three days prior to the regular concerns. The Company provides monthly operating update quarters results for 2020, corporate meetings as required by the Code to the Directors, so as to ensure the Directors are familiar social responsibility report, reports Provisions). with the Company’s latest operations. In addition, through on risk management and internal regular board meetings and reports from management, control as well as the appointment the Directors are able to clearly understand the operations, of executive Director and senior vice business strategy and latest development of the Company president. and the industry. Besides formal board meetings, the Chairman also meets annually with independent non- executive Directors, without the presence of other Directors, which further promotes the exchange of diversified views and opinions. In order to ensure that all Directors have appropriate knowledge of the matters discussed at the meetings, adequate, accurate, clear, complete and reliable

ANNUAL REPORT 2020 43 CORPORATE GOVERNANCE REPORT

Set forth below is an overview of the attendance during the year of 2020 by the Board members at various meetings:

Meetings Attended/Held Audit Remuneration Nomination Board Committee Committee Committee Shareholders Meeting Meeting Meeting Meeting Meeting

Executive Directors Wang Xiaochu (Chairman) 4/4 N/A N/A 1/1 1/1 Li Guohua1 N/A N/A N/A N/A N/A Li Fushen 4/4 N/A N/A N/A 1/1 Shao Guanglu2 N/A N/A N/A N/A N/A Zhu Kebing 4/4 N/A N/A N/A 1/1 Fan Yunjun3 4/4 N/A N/A N/A 1/1

Non-Executive Director Cesareo Alierta Izuel4 0/2 N/A N/A N/A N/A

Independent Non-Executive Directors Cheung Wing Lam Linus 4/4 4/4 1/1 N/A 1/1 Wong Wai Ming 4/4 4/4 1/1 N/A 1/1 Chung Shui Ming Timpson 4/4 4/4 1/1 1/1 1/1 Law Fan Chiu Fun Fanny 4/4 4/4 N/A 1/1 1/1

Note 1: On 11 March 2020, Mr. Li Guohua has resigned as executive Director of the Company.

Note 2: On 16 January 2020, Mr. Shao Guanglu has resigned as executive Director of the Company.

Note 3: On 17 February 2020, Mr. Fan Yujun was appointed as executive Director of the Company.

Note 4: On 25 May 2020, Mr. Cesareo Alierta Izuel has retired as non-executive Director of the Company.

Note 5: Non-executive Director did not attend the meetings of the Board due to other business commitments or being overseas.

In 2020, the Board performed their fiduciary duties and devoted sufficient time and attention to the affairs of the Company. The Board works effectively and performs its responsibilities efficiently with all key and appropriate issues being discussed and approved in a timely manner.

44 CHINA UNICOM (HONG KONG) LIMITED The Company has adopted the “Model which is available on the websites of the Company and with the management as well as Code for Securities Transactions by The Stock Exchange of Hong Kong Limited (the “Hong reviewing the reports on the risk Directors of Listed Issuers”, as set out Kong Stock Exchange”). From time to time as required by management and internal control in Appendix 10 to the Listing Rules (the the Listing Rules, the Board also establishes independent procedures of the Company. The Audit “Model Code”) to govern securities board committee for the purpose of advising and providing Committee also has the authority to transactions by directors. Further to voting recommendations to independent shareholders set up a reporting system to receive the specific enquiries made by the on connected transactions and transactions subject to and handle cases of complaints or Company to the Directors, all Directors independent shareholders’ approval entered into by the complaints made on an anonymous have confirmed their compliance with Company and/or its subsidiaries. The committees are basis regarding the Company’s the Model Code for the year ended 31 provided with sufficient resources, including, amongst accounting, internal control and December 2020. others, obtaining independent professional advice at audit matters. Any complaints on the the expense of the Company, to perform its duties. The aforementioned subject matters can The Directors acknowledge their committees report their decisions or recommendations to be submitted by post (No. 21 Financial responsibilities for preparing the the Board after meetings. Street, Xicheng District, Beijing, financial statements for the year 100033, China) or by phone (86-(010) ended 31 December 2020, which give Audit Committee 88091674). The Audit Committee is a true and fair view of the financial Composition responsible to and regularly reports its position of the Company as at the Currently the Audit Committee comprised Mr. Wong work to the Board. statement of financial position date Wai Ming, Mr. Cheung Wing Lam Linus, Mr. Chung Shui and financial performance and cash Ming Timpson and Mrs. Law Fan Chiu Fun Fanny, all being Work Completed in 2020 flows of the Company for the year independent non-executive Directors of the Company. The Audit Committee meets at least ended the statement of financial The Chairman of the Audit Committee is Mr. Wong Wai four times each year, and assists the position date, are properly prepared Ming. All members of the Audit Committee have satisfied Board in its review of the financial on the going concern basis in the “independence” requirements in relation to an Audit statements to ensure effective risk accordance with relevant statutory Committee member under applicable laws, regulations and management and internal control as requirements and applicable financial rules. The Chairman of the Audit Committee is an accountant well as efficient audit. reporting standards. A statement of with expertise and experience in accounting and financial the independent auditors about their management. Another member of the Audit Committee is The Audit Committee held four reporting responsibilities related to the also an accountant with extensive accounting professional meetings in 2020 for, amongst other financial statements is set out in the experience. things, discussion and approval of the independent auditor’s report on pages 2019 annual results, the 2019 Form 88 to 92 of this annual report. Major Responsibilities 20-F, the 2020 interim results, and The primary responsibilities of the Audit Committee include: the first and the first three quarters COMMITTEES UNDER THE as the key representative body, overseeing the Company’s results for 2020. In addition, the Audit BOARD relationship with the independent auditor, considering Committee approved in the meetings The Company has established three and approving the appointment, resignation and removal the report on risk management, the committees of the Board under of the independent auditor; pre-approval of services and report on internal audit and internal the Board, the Audit Committee, fees to be provided by the independent auditor based on control, the report on continuing the Remuneration Committee and the established pre-approval framework; supervising the connected transaction, the re- the Nomination Committee. Each independent auditor and determining the potential impact appointment, the audit fees and the committee has a written charter, of non-audit services on such auditor’s independence; audit plans of the independent auditor reviewing quarterly and interim financial information as well as well as the non-audit services as annual financial statements; coordinating and discussing provided by the independent auditor in with the independent auditor with respect to any issues 2020. identified and recommendations made during the audits; reviewing correspondences from the independent auditor to the management and responses of the management; discussing the risk management and internal control system

ANNUAL REPORT 2020 45 CORPORATE GOVERNANCE REPORT

The Audit Committee has performed its duties effectively, with contractual terms; and ensuring and enabled the Board to better monitor the financial that no Director or any of his/her condition of the Company, supervise the risk management associates is involved in deciding his/ and internal control of the Company, ensure the integrity her own remuneration. and reliability of the financial statements of the Company, prevent significant errors in the financial statements Work Completed in 2020 and ensure the Company’s compliance with the relevant The Remuneration Committee meets requirements of the Listing Rules, the U.S. federal securities at least once a year. The Remuneration laws and the New York Stock Exchange listing standards with Committee held one meeting in respect to audit committee. 2020 for, amongst other things, discussion and approval of proposal for Remuneration Committee appraisal and remuneration of senior Composition management. Currently the Remuneration Committee comprised Mr. Cheung Wing Lam Linus, Mr. Wong Wai Ming and Mr. The Remuneration Committee has Chung Shui Ming Timpson, all being independent non- performed its duties effectively on executive Directors of the Company. The Chairman of the reviewing and approving the proposal Remuneration Committee is Mr. Cheung Wing Lam Linus. of appraisal of senior management, as well as making recommendations Major Responsibilities to the Board with regards to the The primary responsibilities of the Remuneration remuneration packages for senior Committee include: making recommendations to the management. Board on the policies and structure for all Directors’ and senior management’s remuneration and on the Nomination Committee establishment of a formal and transparent procedure Composition for developing remuneration policy; reviewing and Currently the Nomination Committee approving the management’s remuneration proposals comprised Mr. Chung Shui Ming with reference to the corporate goals and objectives set by Timpson, Mr. Wang Xiaochu and Mrs. the Board; making recommendations to the Board on the Law Fan Chiu Fun Fanny. Except for Mr. remuneration packages of individual executive Directors Wang Xiaochu, who is the Chairman and senior management (including benefits in kind, and CEO of the Company, Mr. Chung pension right and compensation payments, including any Shui Ming Timpson and Mrs. Law Fan compensation payable for loss or termination of their office Chiu Fun Fanny are independent non- or appointment); making recommendations to the Board executive Directors of the Company. on the remuneration of non-executive Directors; consulting The Chairman of the Nomination the Chairman about the remuneration proposals for other Committee is Mr. Chung Shui Ming executive Directors; considering salaries paid by comparable Timpson. companies, time commitment and responsibilities and employment conditions elsewhere in the Group; considering Major Responsibilities any concrete plan proposed by the management of the The primary responsibilities of the Company for the grant of option which has not been granted, Nomination Committee include: and any plan to amend any existing option scheme of the reviewing the structure, size and Company; reviewing and approving compensation payable composition (including the skills, to executive Directors and senior management for any loss knowledge and experience) of or termination of office or appointment to ensure that it is the Board at least annually and consistent with contractual terms; reviewing and approving making recommendations on any compensation arrangements relating to dismissal or removal proposed changes to the Board to of Directors for misconduct to ensure that they are consistent complement the corporate strategy

46 CHINA UNICOM (HONG KONG) LIMITED of the Company; identifying individuals suitably qualified The Company has also adopted a to become Board members and making recommendations policy concerning diversity of board to the Board; formulating, reviewing and implementing members. The Company recognises the board diversity policy; assessing the independence and embraces the benefits of having of independent non-executive Directors; making a diverse Board, and notes increasing recommendations to the Board on the appointment or diversity at Board level as an essential re-appointment of Directors and succession planning for element in maintaining a competitive Directors; providing advice to the Board on candidates of the advantage. All Board appointments senior management nominated by the CEO and on changes are made on merit, in the context of to the senior management of the Company. the skills and experience the Board as a whole requires to be effective. Work Completed in 2020 In reviewing Board composition, the The Nomination Committee meets at least once a year. Nomination Committee will consider The Nomination Committee held one meeting and passed their professional knowledge, skills, two written resolutions in 2020 for, amongst other things, experience and the balance of diversity reviewing the structure, size and composition of the Board, of perspectives which are appropriate assessment of the independence of independent non- to the Company’s business model and executive Directors, making recommendations to the Board specific needs. In identifying suitable on the proposed re-election of Directors, the appointment of candidates for appointment to the executive Director and senior vice president. Board, the Nomination Committee will with due regard to the benefits The Company has adopted nomination policy. With respect of diversity on the Board and base to the nomination and appointment of new directors and on a range of diversity perspectives senior management members, the Nomination Committee including but not limited to gender, would, after considering the Company’s need for new age, cultural and educational directors and/or senior management members, identify a background, professional experience, wide range of candidates from within the Company and the skills, knowledge and duration of human resources market and make recommendations to the service. The ultimate decision will be Board. The Nomination Committee will consider candidates based on merit and contribution that on merit against objective criteria and with due regard to the selected candidates will bring to the benefits of diversity on the Board. After having obtained the Board. the consent from candidates in relation to the relevant nomination and based on the Company’s actual needs, the In addition, pursuant to the Company’s Board would convene a meeting, attendees of which include articles of association, shareholder non-executive Directors, to consider the qualifications of the may propose other person for election candidates. The Directors of the Company (including non- as a director at general meeting. executive Directors) are not appointed for a specific term The proposal will be considered and but are subject to retirement by rotation at general meetings approved in the general meeting. pursuant to the Company’s articles of association and at least With regard to the procedure for once every three years. shareholder to propose a person for election as a director, please visit the Company’s website at https://www. chinaunicom.com.hk/en/about/cg_ report.php.

ANNUAL REPORT 2020 47 CORPORATE GOVERNANCE REPORT

INDEPENDENT AUDITOR KPMG is the independent auditor of the Company. Apart from audit services, it also provides other assurance and non-audit services. The other assurance and non-audit services provided by the independent auditors did not contravene the requirements of the U.S. Sarbanes-Oxley Act and therefore enabling them to maintain the independence. The remuneration paid/payable to the independent auditor for provision of services in 2020 is as follows:

2020 Items Note (in RMB thousands)

Audit services (i) 76,440 Other assurance services (ii) 681

Non-audit services (iii) 136

Notes: (i) Audit services in 2020 mainly included audit work in connection with the audit of the Company’s consolidated financial statements and internal control over financial reporting, pursuant to Section 404 of the U.S. Sarbanes-Oxley Act of 2002.

(ii) Other assurance services included other assurance and related services that can be reasonably provided by the independent auditor. In 2020, the provisions of other assurance and related services mainly included performing the limited procedures on the XBRL-tagged data related to Form 20-F for the year ended 31 December 2020.

(iii) Non-audit services included other services that can be reasonably provided by the independent auditor. In 2020, the provisions of non-audit services mainly included tax compliance services.

RISK MANAGEMENT AND INTERNAL CONTROL The Board is responsible for evaluating and determining the nature and extent of the risks it is willing to take in achieving the Company’s strategic objectives, and ensuring that the Company establishes and maintains appropriate and effective risk management and internal control systems, promotes the sustainable and healthy development of the Company, and enhances the Company’s operation management level and risk prevention ability. The Board should oversee management in the design, implementation and monitoring of the risk management and internal control systems, and management should provide a confirmation to the Board on the effectiveness of these systems. The Board acknowledges that it is its responsibility for the risk management and internal control systems and reviewing their effectiveness.

48 CHINA UNICOM (HONG KONG) LIMITED Risk management and internal control systems have been designed to monitor and facilitate the accomplishment of the Company’s business objectives, safeguard the Company’s assets against loss and misappropriation, ensure maintenance of proper accounting records for the provision of reliable financial information, ensure the Company’s compliance with applicable laws, rules and regulations. Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

Organisation systems The Company set up a group-wide risk management and internal control systems consisting of the Board, the Internal Control and Risk Management Committee, the Integrated Management Department and each relevant professional functional departments.

THE BOARD AUDIT COMMITTEE Highest decision making body Supervision body

INTERNAL CONTROL AND COMMITTEES IN FINANCIAL RISK RISK MANAGEMENT RELATED PROFESSIONAL COMMITTEE COMMITTEE The cross departmental body The cross departmental body in Highest coordination and of risk management in financial risk management deliberation body at company professional fields management level

INVESTMENT DECISION COMMITTEE The cross departmental body in risk management of investment decision INTERNAL CONTROL AND RISK MANAGEMENT OFFICE Daily working departments WORKING STEERING GROUP OF INTERNET AND CYBERSECURITY The cross departmental body in risk management of internet and cybersecurity PROFESSIONAL INTERNAL AUDIT FUNCTIONAL DEPARTMENT INDEPENDENT DEPARTMENTS Integrated risk EXTERNAL AUDITOR Professional internal control management and internal control ...... External Independent management and department and supervision and The cross departmental bodies in risk Internal Control evaluation body execution departments evaluation department management

Branches and INTERNAL CONTROL AND Subsidiaries COMMITTEES IN RELATED RISK MANAGEMENT PROFESSIONAL COMMITTEE With reference to the needs of CUCL and the Coordination and deliberation body at Company, the cross departmental bodies of risk company management level management in professional fields have been established INTERNAL CONTROL AND RISK MANAGEMENT OFFICE Daily working departments

PROFESSIONAL FUNCTIONAL INTERNAL AUDIT DEPARTMENTS DEPARTMENT Professional internal control management Integrated risk management and internal control department and and execution departments supervision and evaluation department

ANNUAL REPORT 2020 49 CORPORATE GOVERNANCE REPORT

The Company has an internal audit department with 3. Control Activities: Deploys 612 staff members, with officers stationed at various appropriate policies and control provincial branches. The internal audit department reports procedures over the Company’s directly to the Audit Committee at least twice annually business activities, identifies and is independent of the Company’s daily operation key control procedures and and accounting functions. The internal audit department policies of significant control responsible for overall risk evaluation, special risk evaluation activities through evaluation and internal control self-testing etc. It has also formulated targeted risk prevention and control measures, conducted 4. Information and risk follow-up inspections and has enhanced the risk Communication: Identifies awareness of the employees, all of which have played an relevant information and active role in the Company’s effective support and safeguard communication methods, of its operation management and business development. establishes information and Furthermore, with an emphasis on the effectiveness of communication mechanisms to internal control with respect to the efficiency of operations, aggregate and delivers relevant accuracy of financial information, and compliance with rules information and regulations, the internal audit department conducts, amongst others, internal control assessment and internal 5. Monitoring Activities: audit on economic accountability. In addition, the internal Establishes the internal control audit department also contributes to strengthening the monitoring mechanism, operation and management, improving internal control implements the monitoring systems, mitigating operational risks and increasing the procedures and adopted the economic efficiency of the Company. before, during and extensive monitoring principles, Using the risk evaluation as fundamental with the adoption and carries on the proper of Internal Control Integrated Framework issued by the monitoring to the internal Committee of Sponsoring Organisations of the Treadway control Commission (the “COSO”), the Company established internal control systems based on the following five fundamental Risk evaluation and management components: The Company has established and gradually improved its comprehensive 1. Control Environment: Establishes the control closed-loop risk management system environment which fulfill COSO requirements to for the purpose of “integrating provide the appropriate operating environment for management of day-to-day general the effective implementation of internal control risks and spontaneous critical risks”, achieved the closed-loop management 2. Risk Evaluation: Establishes the Policy on Risk by risk evaluation, early warning Evaluation Management and evaluation mechanism, and follow-up inspections to ensure evaluates the risks to the achievement of its the effectiveness of operation objectives across the Company and identifies to the management. The Company evaluated new risk due to the changes the adequacy and appropriateness on risk and control measures according to the new business model, management requirement, change of system, adjustment of duties and findings from internal and external inspections.

50 CHINA UNICOM (HONG KONG) LIMITED 2020 Risk evaluation result standardisation organisations and The followings were the major significant risks which the conducted in-depth research and Company might encounter and its countermeasures in 2020: testing on new technologies and new businesses, so as to continuously Continuous market competition Risk improve its technological innovation From the perspective of the current industry environment, capabilities and reasonably plan and the traditional communication business market is construct networks. The Company becoming increasingly saturated, and the domestic has also insisted on promoting the telecommunications industry has serious homogeneity in co-build and co-share of 5G network, networks, products and services, and lack of differentiation. continued to build a technologically Market competition in the industry will continue in the long leading 5G premium network with run. The Company will deeply carry out the strategy of Focus, “wide coverage, fast speed, and Innovation and Cooperation, promote in-depth the high- good experience”, and increased the quality development and thoroughly implement the new application new technologies and development concept based on its own endowment, so as to promotion of new services, so as to achieve differentiated breakthroughs in advantageous areas. maintain its competitive strength. At the same time, the Company will insist on competition and cooperation, maintain orderly and healthy competition, Interest rates and exchange rates risk continue to promote industry collaboration and value The Company holds assets and enhancement, to gradually form a win-win ecosystem and liabilities denominated in foreign support the healthy and sustainable development of the currencies. Changes in the RMB industry. exchange rate may have a certain impact on the Company’s profits, and Risk from the changes of regulatory policies in the industry the rise in interest rates may increase The Chinese government will continue to promote the the Company’s interest payments on policies such as the opening of telecommunications industry interest-bearing debts. The Company to foreign and private capital, “Speed Upgrade and Tariff will continue to monitor the changes Reduction” and adjustments to interconnection settlement in the exchange rate and interest rate in domestic telecommunication services. These regulatory markets, and reduce the exchange rate policies will bring new development opportunities to the and interest rate risks by reasonable Company while also bringing challenges. The Company adjustments to the debt structure and will pay close attention to changes in regulatory policies strengthening fund management. and respond to the relevant impacts of regulatory policy adjustments in a timely manner. Foreign oversea risk The New York Stock Exchange (“NYSE”) Technology upgrade risk staff determined that, based on Currently, global telecom operators are accelerating the the Executive Order 13959 and the network upgrades and advancing the application of 5G guidance, it commenced the process technology, and the new information and communication to delist the Company’s American technologies are accelerating upgrades and iterations. Depositary Shares (the “ADSs”) and Based on its extensive experience in mobile network suspended trading in the Company’s construction and operation, the Company has actively ADSs from 11 January 2021., On 20 participated in the work of world’s mainstream international January 2021, the Company filed with the NYSE a written request for a

ANNUAL REPORT 2020 51 CORPORATE GOVERNANCE REPORT

review of the determination by a Committee of the Board Our Internal Audit Department has of Directors of the NYSE. The Company will continue to pay continued to organise our branches close attention to the development of related matters and and subsidiaries to conduct annual also seek professional advice and reserve all rights to protect internal control self-assessment lawful rights of the Company. based on the actual conditions of each unit and improve the quality The scope of the 2020 overall risk evaluation covered the of such self-assessment tasks, so as whole Group, which included headquarter, 31 provincial to gradually develop a quantitative companies and its cities-level branch offices and subsidiaries. internal assessment regime governed Through both the quantitative and qualitative analysis, by uniform standards. Through the Company fully considered the changes in operating the effective rectification of issues environment, business and policies, identified the potential identified during the audit, assessment risk to the Company’s operation, and planned for the risk of the internal control system and according to the quantitative result. After reporting to its implementation, improvements each professional departments and the management, the made to the system and process significant risks and the risk level of the year were finally optimisation, a long-term mechanism determined. The annual risk management instructions from for closed-loop management in the management were implemented according to the Policy internal control has been put in on Risk Management and the Company’s risk management place. According to the internal requirement. This included the formulation of relevant control self-assessment reports risk management strategies, solution and corresponding from the branches and subsidiaries, departments carried out interim follow-up inspection self-assessment reports from each works. The negative impacts arising from the risks and risk professional department, current year events were controlled as planned and were within an exceptional issues in internal control acceptable range. There were no significant control failings or discovered during internal audit and weaknesses that have been identified during the year. the Company annual risk management report, the Group’s Internal Control Monitoring and Optimisation and Risk Management Office at its To ensure the effectiveness of risk management and internal headquarter formed the Company’s control designs, the Company carried out risk evaluation internal control self-assessment timely and compared the risk points, formulated or enhanced report, which acted as supporting corresponding internal control measures according to the document for the management to change in business and management. At the same time, issue a statement of the effectiveness the internal control manual will be updated timely through of internal control. Based on different the assessment and review on applications on internal disclosure requirements on Company’s control workflow modification submitted by professional internal control assessment report departments, risk evaluation reports and exceptional from different listing regulatory body, issues from internal control assessment etc., so as to the Company prepared internal control provide the effective support for the development of the assessment report respectively. sustainable growth of the Company. Internal Control and Risk External auditor issued and disclosed Management Office conducted inspections on effectiveness independence opinions on financial on risk management and internal control implementation in statement as at 31 December on that regular or irregular time interval, improved and enhanced year and effectiveness on internal risk management and internal control designs continuously. control over financial reporting.

52 CHINA UNICOM (HONG KONG) LIMITED As a telecommunications operator, the Company is subject efforts through enhanced sharing of to the regulations, eg, the Cybersecurity Law of the People’s relevant knowledge internally and Republic of China, designed to protect critical information externally. The Company is required to infrastructure. Personal privacy, information security, and perform a security assessment when data protection are increasingly significant issues in China transferring personal information and other jurisdictions in which the Company operate. For and important data overseas if such example, Cybersecurity Law of the People’s Republic of China personal information and important which sets forth the general framework regulating network data are collected from the operation products, equipment and services, as well as the operation in China. and maintenance of information networks, the protection of personal data, and the supervision and administration Annual review of cybersecurity in China. Information Security Technology The Board oversees the Company’s - Personal Information Security Specification published risk management and internal control in 2018 set forth detailed guidelines on the collection, systems on an ongoing basis and the utilisation and retention of personal information and privacy Board conducted an annual review protection, and Identification Methods for Illegal Collection of the risk management and internal and Use of Personal Information by Apps published in control systems of the Company and 2019, stipulating standards for determining illegal acts of its subsidiaries for the financial year collecting and using personal information through mobile ended 31 December 2020, which applications. The Cyber Security Review Measures published covered all material controls including in 2020 require that the procurement of network products financial, operational and compliance and services that affect or may affect national security controls. After receiving the reports should conduct a network security review. The Company from the Internal Audit Department, also devotes significant resources to network security, data as well as the confirmation from security and other security measures to protect its systems the management to the Board on and data and in response to the evolving cybersecurity the effectiveness of these systems, laws and regulations. The Company also employs risk the Board is of the view that the management and internal control systems. including, among Company’s risk management and other things, (i)continuously strengthening data security internal control systems is effective capabilities, such as improving data encryption, protection and adequate. The review also ensure, of critical information infrastructure and security of supply with respect to the Company’s chain of the information technology products and services; accounting, internal audit and financial (ii)establishing data protection compliance policies and reporting function, the adequacy of guidelines, including training on crisis management and resources, staff qualifications and compliance of cybersecurity laws and regulations; (iii)self- experience, and training programs and examining potential risks and weakness of data system budget. and updating private policy; (iv)enhancing the real-time monitoring and alarm reporting system and implementing an emergency action plan to allow the Company to act responsively and minimise losses in the event of an emergency; and (v)continuously improving compliance

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REQUIREMENTS UNDER SECTION 404 OF THE Information Disclosure Controls and U.S. SARBANES-OXLEY ACT Procedural Standards Compliance with the requirements under Section 404 of the In order to further enhance the U.S. Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) Company’s system of information has been an area of emphasis for the Company. The relevant disclosure, and to ensure the sections of the Sarbanes-Oxley Act require the management truthfulness, accuracy, completeness of non-U.S. issuers with equity securities listed on U.S. stock and timeliness of its public disclosures exchanges to issue reports and make representations as to (including inside information), internal control over financial reporting. the Company has adopted and implemented the Information The relevant internal control report needs to stress Disclosure Control Policy. In an the management’s responsibility for establishing and effort to standardise the principles maintaining adequate and effective internal control over for information disclosures, the financial reporting. Management is required to assess the Company established the Information effectiveness of the Company’s internal control over financial Disclosure Review Committee under reporting as at year end. Under Section 404 of the Sarbanes- the management and formulated Oxley Act, the Company’s management is required to the procedures in connection with conduct an assessment of the effectiveness of the Company’s the compilation and reporting of the internal control over financial reporting as at 31 December Company’s financial and operational 2020. Management is currently in the process of finalising statistics and other information, as the management’s report on internal control over financial well as the procedures in connection reporting, which will be included in the Company’s annual with the preparation and review report on Form 20-F for the year ended 31 December 2020 of the periodic reports. Moreover, to be filed with the United States Securities and Exchange the Company established detailed Commission by 30 April 2021. implementation rules with respect to the contents and requirements of financial data verification, in particular, the upward undertakings by the individual responsible officers at the major departments.

54 CHINA UNICOM (HONG KONG) LIMITED POLICY ON PAYMENT OF DIVIDEND Upon the announcement of The objective of the dividend policy is to achieve a long- interim and annual results or major term, sustainable and steadily increasing dividend, with a transactions, the Company will view to maximising the shareholders’ value. The declaration generally hold analyst briefings, press and payment of future dividends will depend upon, among conferences, and global conference other things, financial condition, business prospects, future calls with investors. During such earnings, cash flow, liquidity level and cost of capital. The conferences, the management of the Company believes such policy will provide the shareholders Company would interact directly with with a stable return in the long term along with the growth analysts, fund managers, investors of the Company. Pursuant to the Companies Ordinance and journalists to provide them (Chapter 622 of the Laws of Hong Kong) and the Company’s with relevant information and data articles of association, the Company may only pay dividends of the Company. The Company’s out of profits available for distribution. management would accurately and thoroughly respond to questions raised Taking into consideration the Company’s profitability, debt by analysts, fund managers, investors and cash flow level, capital requirements for its future and journalists. Archived webcast development etc., the Board recommended the payment of of the investor presentation is also a final dividend of RMB0.164 per share for the year ended 31 available on the Company’s website December 2020. Going forward, the Company will continue to ensure wide dissemination of to strive for enhancing its profitability and shareholders’ information and data. return. The Company’s investor relations CORPORATE TRANSPARENCY AND INVESTOR department is responsible for RELATIONS providing information and services In addition to publishing annual reports and interim requested by investors, maintaining reports, the Company discloses major unaudited financial timely communications with investors information (including revenue, operating expenses, and fund managers, including EBITDA, net profit) and other key performance indicators responding to investors’ inquiries on a quarterly basis and announces operational statistics and meeting with company-visit on a monthly basis in order to enhance the Company’s investors, as well as gathering market transparency and improve investors’ understanding of information and passing views from the business operations of the Company. In addition, the shareholders to the Directors and Company submits annual reports and regular reports to the management to ensure such views United States Securities and Exchange Commission pursuant are properly communicated. The to the requirements under the U.S. federal securities laws. Company also arranges from time to time road shows and actively attends investor conferences arranged by investment banks, through which the Company’s management meets and communicates with investors to provide them with opportunities to understand more accurately the Company’s latest development and performance in various aspects, including business operations and management.

ANNUAL REPORT 2020 55 CORPORATE GOVERNANCE REPORT

In 2020, the Company participated in the following investor conferences:

Date Conferences

January 2020 Morgan Stanley China New Economy Summit March 2020 Morgan Stanley Virtual Access Summit 2020 April 2020 Bernstein 6th Annual China Telecommunications Symposium May 2020 Nomura Virtual Greater China TMT Corporate Day 2020 May 2020 Citi Pan-Asia Regional Investor Conference 2020 May 2020 Goldman Sachs TechNet Conference Asia Pacific 2020 June 2020 BofA 2020 Innovative China Virtual Conference August 2020 Citi Hong Kong China TMT Corporate Day August 2020 Nomura China Investor Forum 2020 September 2020 Morgan Stanley Virtual Asia TMT Conference September 2020 UBS China TMI Virtual Conference 2020 September 2020 27th Annual CITIC CLSA Investors’ Forum September 2020 Jefferies Asia Forum September 2020 Morgan Stanley Virtual Asia Pacific Conference November 2020 Goldman Sachs China Conference 2020 November 2020 11th Credit Suisse China Investment Conference November 2020 Citi China Investor Conference 2020 November 2020 BofA 2020 China Conference November 2020 CICC Investment Forum 2020 November 2020 JPMorgan Global TMT Conference 2020 November 2020 Morgan Stanley Virtual Asia Pacific Summit November 2020 Morgan Stanley Virtual European Technology, Media & Telecoms Conference November 2020 Nomura Virtual 5G/Tech Corporate Day 2020 December 2020 Daiwa Investment Conference Hong Kong 2020

December 2020 The 16th BOCI Investors Conference

56 CHINA UNICOM (HONG KONG) LIMITED In addition, through announcements, press releases and China 2020”. It was also voted as the Company website (www.chinaunicom.com.hk), the “Asia’s Best IR Team (Telecoms)” in Company disseminates the latest information regarding any “2020 All-Asia Executive Team” ranking significant business development in a timely and accurate organised by Institutional Investor. manner. In the perspective of investor relations, the Company’s website not only serves as an important channel SHAREHOLDERS’ RIGHTS for the Company to disseminate press releases and corporate Annual General Meeting information to investors and the capital market, but also The Board endeavors to maintain an plays a significant role in the Company’s valuation and our on-going dialogue with shareholders, compliance with regulatory requirements for information and in particular, to communicate disclosure. In 2020, the Company updated the content with shareholders through annual of its website on an ongoing basis to further enhance the general meetings. Notices of functions of website and level of transparency in information annual general meeting are sent disclosure, striving for achieving international best practices. to shareholders at least 20 clear Our website was honored with the Grand Awards by various business days before the meeting. international institutions, including “iNova Awards” and The Directors and representatives “Astrid Awards” this year. of the Board committees usually attend the meetings and treasure Furthermore, the Company has adopted a Shareholders’ the opportunities to communicate Communication Policy to ensure that the shareholders of with shareholders at such meetings. the Company are provided with readily, equal and timely At general meetings, the chairman access to balanced and understandable information about of the meeting proposes individual the Company, to enable shareholders to exercise their rights resolutions in respect of each in an informed manner, and to enhance the shareholders’ substantially separate matter. All and the investment community’s communication with the matters at the Company’s general Company. meetings are resolved by poll and the relevant procedures are explained The Company’s effort in investor relations is well recognised at the meeting. The Company also by the capital market, and accredited with a number of appoints external scrutineers to ensure awards. The Company was voted as “Best Overall Investor that all votes are counted and recorded Relations (Large Cap)”, “Best in Communications Sector” appropriately, and publishes the poll and “Best in Hong Kong” at “IR Magazine Awards — Greater results in a timely manner.

ANNUAL REPORT 2020 57 CORPORATE GOVERNANCE REPORT

The last annual general meeting of the Company was held on Putting Forward Resolutions at 25 May 2020, at which the following resolutions were passed Annual General Meetings and percentage of votes cast in favor of the resolutions are Pursuant to Section 615 of the set out as follows: Companies Ordinance (Chapter 622 of the Laws of Hong Kong), the following • to receive and consider the financial statements and persons may put forward a resolution the Reports of the Directors and of the Independent at the next annual general meeting Auditor for the year ended 31 December 2019 (over of the Company: (a) any number of 99%) shareholders, together holding not less than 2.5% of the total voting rights of • to declare a final dividend for the year ended 31 all shareholders which have, as at the December 2019 (over 99%) date of the requisition, a right to vote at the next annual general meeting, or • to re-elect Mr. Li Fushen, Mr. Fan Yunjun and Mrs. (b) not less than 50 shareholders who Law Fan Chiu Fun Fanny as Directors, and to authorise have a right to vote on the resolution the Board to fix remuneration of the Directors (over at the annual general meeting to which 99%) the requests relate.

• to re-appoint auditor and authorise the Board to fix The resolution must be one which may their remuneration for the year ending 31 December be properly moved and is intended to 2020 (over 99%) be moved at the next annual general meeting. The requisition must be • to grant a general mandate for share buy-back (over signed by the requisitionists and 99%) deposited at the registered office of the Company at least six weeks or • to grant a general mandate to issue new shares (over if later, the time at which notice is 89%) given of the annual general meeting before the annual general meeting, • to extend the general mandate to issue new shares the Company has a duty to give (over 89%) notice of such proposed resolution to all shareholders who are entitled The next annual general meeting will be held on 13 May to receive notice of the next annual 2021. Please refer to the circular, which sets out the details, general meeting. that has been sent together with this Annual Report.

58 CHINA UNICOM (HONG KONG) LIMITED In addition, requisitionists may require the Company to any of them representing more than circulate to shareholders entitled to receive notice of the half of their total voting rights, may annual general meeting a statement of not more than themselves convene a meeting to be 1,000 words with respect to the resolution to be proposed. held within three months of such date. However, the Company is not required to circulate any statement if the court is satisfied that this right is being Meetings convened by the abused to secure needless publicity for defamatory matters. requisitionists must be convened In such event, the requisitionists may be ordered to pay for in the same manner, as nearly as the Company’s expenses for application to the court. possible, as meetings to be convened by Directors of the Company. Any If the requisition signed by the requisitionists does not reasonable expenses incurred by the require the Company to give shareholders notice of a requisitionists will be reimbursed by resolution, such requisition may be deposited at the the Company due to the failure of the registered office of the Company not less than one week Directors duly to convene a meeting. before the next annual general meeting. Putting Forward Resolutions at Convening Extraordinary General Meetings Extraordinary General Meetings Pursuant to Section 566 of the Companies Ordinance, Shareholders may not put forward shareholder(s) holding not less than 5% of the total voting resolutions to be considered at rights of all shareholders having a right to vote at general any general meetings other than meetings of the Company as at the date of deposit of the annual general meetings. However, requisition, may request the Directors of the Company to shareholders may request an convene an extraordinary general meeting. The requisition extraordinary general meeting to must state the objects of the meeting and must be signed by consider any such resolution as the requisitionists and deposited at the registered office of described in “Convening Extraordinary the Company. General Meetings” above.

If the Directors do not, within 21 days from the date of deposit of the requisition, proceed duly to convene a meeting to be held not more than 28 days after the notice of the meeting, shareholder(s) requisitioning the meeting, or

ANNUAL REPORT 2020 59 CORPORATE GOVERNANCE REPORT

Any queries relating to shareholders’ rights on putting In accordance with the requirements forward resolutions at general meetings and convening of Section 303A.11 of the New York extraordinary general meetings should be directed to the Stock Exchange Listed Company Company Secretary of the Company. Requisitions should be Manual, the Company has posted on its deposited at the Company’s registered office and marked for website (www.chinaunicom.com.hk) a the attention of the Company Secretary. summary of the significant differences between corporate governance SUMMARY OF SIGNIFICANT DIFFERENCES practices of the Company and those BETWEEN THE CORPORATE GOVERNANCE required to be followed by U.S. PRACTICES OF THE COMPANY AND THE companies under the listing standards CORPORATE GOVERNANCE PRACTICES of the New York Stock Exchange. REQUIRED TO BE FOLLOWED BY U.S. COMPANIES UNDER THE LISTING STANDARDS CONTINUOUS EVOLUTION OF OF THE NEW YORK STOCK EXCHANGE CORPORATE GOVERNANCE As a company listed on both the Hong Kong Stock Exchange The Company continuously and the New York Stock Exchange, the Company is subject analyses the corporate governance to applicable Hong Kong laws and regulations, including development of international the Listing Rules and the Companies Ordinance, as well as advanced enterprises and the applicable U.S. federal securities laws, including the U.S. investors’ desires, review and enhance Securities Exchange Act of 1934, as amended, and the corporate governance procedures and Sarbanes-Oxley Act. In addition, the Company is subject practices from time to time so as to to the listing standards of the New York Stock Exchange meet our shareholders’ expectations, to the extent applicable to non-U.S. issuers. As a non-U.S. commits to high standards of issuer, the Company is not required to comply with all of the corporate governance and recognises corporate governance listing standards of the New York Stock that good governance is vital for the Exchange. long-term success and sustainability of the Company’s business.

CHINA UNICOM’S ANNUAL REPORTS ATTAINED INTERNATIONAL TOP ACCOLADES FOR YEARS

60 CHINA UNICOM (HONG KONG) LIMITED ENQUIRY ON THE COMPANY Shareholders may raise any enquiry on the Company at any time through the following channels:

China Unicom (Hong Kong) Limited

Address: 75th Floor, The Center, 99 Queen’s Road Central, Hong Kong

Tel : (852) 2126 2018 Fax : (852) 2126 2016 Website : www.chinaunicom.com.hk Email : [email protected]

These contact details are also available in the “Contact Us” section on the Company’s website (www.chinaunicom.com.hk) designated to enable shareholders to send enquiries to the Company on a timely and effective manner.

https://www.chinaunicom.com.hk

ANNUAL REPORT 2020 61 R OF THEeport DIRECTORS

The board of directors (the “Board”) of China Unicom the forthcoming Annual General Meeting, the 2020 Final (Hong Kong) Limited (the “Company”) is pleased to Dividend is expected to be paid in Hong Kong dollars on present its report together with the audited financial or about 16 June 2021 to those members registered in statements of the Company and its subsidiaries (the the Company’s register of members as at 24 May 2021 “Group”) for the year ended 31 December 2020. (the “Dividend Record Date”).

PRINCIPAL ACTIVITIES FINANCIAL INFORMATION The principal activity of the Company is investment Please refer to the Financial Summary on pages 186 to holding. The principal activities of Company’s 187 for the summary of the operating results, assets and subsidiaries are the provision of cellular and fixed-line liabilities of the Group for the five years ended 31 voice and related value-added services, broadband and December 2020. other Internet-related services, information communications technology services, and business and Please refer to the financial statements on pages 93 to data communications services in the PRC. 185 for the operating results of the Group for the year ended 31 December 2020 and the respective financial RESULTS AND APPROPRIATION positions of the Group and the Company as at that date. The results of the Group for the year ended 31 December 2020 are set out on pages 93 to 94 of this BUSINESS REVIEW annual report. The business review of the Group for the year ended 31 December 2020 is set out in the sections headed Taking into consideration the Company’s profitability, “Chairman’s Statement” on pages 8 to 13, “Business debt and cash flow level, capital requirements for its Overview” on pages 14 to 17, “Financial Overview” on future development etc., the Board has resolved to pages 18 to 23, “Financial Statements” on pages 93 to recommend at the forthcoming shareholders’ general 185, “Human Resources Development” on pages 80 to meeting that the payment of a final dividend of 81, “Social Responsibility” on pages 82 to 87, “Corporate RMB0.164 per ordinary share (“2020 Final Dividend”), Governance Report” on pages 38 to 61 and “Report of totaling approximately RMB5,018 million for the year the Directors” on pages 62 to 79 respectively of this ended 31 December 2020. Going forward, the Company annual report. All references herein to other sections or will continue to strive for enhancing its profitability and reports in this annual report form part of this Report of shareholders’ returns. If approved by Shareholders at the Directors.

62 CHINA UNICOM (HONG KONG) LIMITED LOANS CHARGE ON ASSETS Please refer to Notes 33, 39 and 45.3 to the As at 31 December 2020, no property, plant and consolidated financial statements for details of the equipment was pledged to banks as loan security (31 borrowings of the Group. December 2019: Nil).

PROMISSORY NOTES SHARE CAPITAL Please refer to Note 34 to the consolidated financial Please refer to Note 30 to the consolidated financial statements for details of the promissory notes of the statements for details of the share capital. Group. RESERVES CORPORATE BONDS Please refer to page 98 and page 167 of this annual Please refer to Note 35 to the consolidated financial report for the movements in the reserves of the Group statements for details of the corporate bonds of the and the Company during the year ended 31 December Group. 2020 respectively. As at 31 December 2020, the distributable reserve of the Company amounted to COMMERCIAL PAPERS approximately RMB13,679 million (2019: approximately Please refer to Note 40 to the consolidated financial RMB14,560 million). statements for details of the commercial papers of the Group. SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CAPITALISED INTEREST Please refer to Notes 18, 19 and 20 to the consolidated Please refer to Note 15 to the consolidated financial financial statements for details of the Company’s statements for details of the interest capitalised by the subsidiaries, the Group’s associates and joint ventures. Group for the year. CHANGES IN SHAREHOLDERS’ EQUITY EQUITY-LINKED AGREEMENTS Please refer to page 98 of this annual report for the Other than the share option scheme as disclosed in this Consolidated Statement of Changes in Equity and page Report of Directors, as at 31 December 2020, no equity- 167 for the Statement of Changes in Equity. linked agreements were entered into by the Group during the year or subsisted. EMPLOYEE BENEFIT EXPENSES Please refer to Note 8 to the consolidated financial PROPERTY, PLANT AND EQUIPMENT statements for details of the employee benefit expenses Please refer to Note 15 to the consolidated financial provided to employees of the Group. statements for movements in the property, plant and equipment of the Group for the year.

ANNUAL REPORT 2020 63 REPORT OF THE DIRECTORS

PRE-EMPTIVE RIGHTS Scheme, no further share option can be granted under There are no provisions for pre-emptive rights in the the 2014 Share Option Scheme, but the provisions of articles of association of the Company requiring the the 2014 Share Option Scheme will remain in full force Company to offer new shares to the existing and effect to the extent necessary to give effect to the shareholders in proportion to their shareholdings. exercise of any share options granted prior thereto or otherwise as may be required in accordance with the MAJOR CUSTOMERS AND SUPPLIERS provisions of the 2014 Share Option Scheme. Under the The Group’s sales to its five largest customers for the 2014 Share Option Scheme: year ended 31 December 2020 did not exceed 30% of the Group’s total turnover for the year. (1) share options may be granted to employees including all Directors; The Group’s purchases from its largest supplier for the year ended 31 December 2020 represented (2) any grant of share options to a Connected Person approximately 17.2% of the Group’s total purchases for (as defined in the Listing Rules) of the Company the year. The total purchases attributable to the five must be approved by the independent non- largest suppliers of the Group for the year ended 31 executive Directors of the Company (excluding December 2020 accounted for approximately 42% of any independent non- executive Director of the the total purchases of the Group for the year. Company in the case such Director is a grantee of the options) and all grants to connected persons None of the Directors nor their respective close shall be subject to compliance with the associates (as defined in the Rules Governing the Listing requirements of the Listing Rules, including of Securities on The Stock Exchange of Hong Kong where necessary the prior approval of the Limited (the “Listing Rules”)) nor any shareholder of the shareholders; Company (which to the knowledge of the Directors owns more than 5% of the Company’s share capital) had (3) the maximum aggregate number of shares in any interests in the five largest suppliers of the Group respect of which share options may be granted for the year ended 31 December 2020. shall be calculated in accordance with the following formula: SHARE OPTION SCHEME OF THE COMPANY Pursuant to a resolution passed at the annual general N = A – B – C meeting held on 16 April 2014, the Company adopted a new share option scheme (the “2014 Share Option where: Scheme”). The purpose of the 2014 Share Option Scheme was to recognise the contribution that certain “N” is the maximum aggregate number of individuals have made to the Company, to attract and shares in respect of which share options retain the best available personnel and to promote the may be granted pursuant to the 2014 success of the Company. The 2014 Share Option Scheme Share Option Scheme; is valid and effective for a period of 10 years commencing on 22 April 2014 and will expire on 22 April 2024. Following the expiry of the 2014 Share Option

64 CHINA UNICOM (HONG KONG) LIMITED “A” is the maximum aggregate number of (5) the subscription price shall not be less than the shares in respect of which shares options higher of: may be granted pursuant to the 2014 Share Option Scheme and any other share (a) the closing price of the shares on the Hong option schemes of the Company, being Kong Stock Exchange on the offer date in 10% of the aggregate of the number of respect of the share options; and shares in issue as at the date of adoption of the 2014 Share Option Scheme; (b) the average closing price of the shares on the Hong Kong Stock Exchange for the five “B” is the maximum aggregate number of trading days immediately preceding the shares underlying the share options offer date; already granted pursuant to the 2014 Share Option Scheme; and (6) the total number of shares in the Company issued and to be issued upon exercise of the share “C” is the maximum aggregate number of options granted to a participant of the 2014 shares underlying the options already Share Option Scheme (including both exercised granted pursuant to any other share and outstanding share options) in any 12-month option schemes of the Company. period must not exceed 1% of the issued share capital of the Company; and Shares in respect of share options which have lapsed in accordance with the terms of the 2014 (7) the consideration payable for each grant is Share Option Scheme and any other share option HKD1.00. schemes of the Company will not be counted for the purpose of determining the maximum No share options had been granted since adoption of aggregate number of shares in respect of which the 2014 Share Option Scheme. options may be granted pursuant to the 2014 Share Option Scheme; As at 31 December 2020, 1,777,437,107 options were available for issue under the 2014 Share Option Scheme, (4) the option period commences on any day after representing approximately 5.81% of issued share the date on which such share option is offered, capital of the Company as at the date of this annual but may not exceed 10 years from the offer date; report.

DIRECTORS’, CHIEF EXECUTIVES’ AND EMPLOYEES’ INTERESTS UNDER THE SHARE OPTION SCHEME OF THE COMPANY For the year ended 31 December 2020 and as at 31 December 2020, none of the Directors of the Company or chief executives or employees of the Company had any interests under any share option scheme of the Company.

ANNUAL REPORT 2020 65 REPORT OF THE DIRECTORS

DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES As at 31 December 2020, the interests and short positions of Directors and chief executives of the Company in any shares, underlying shares and debentures of the Company or any of its associated corporations (as defined in Part XV of the Hong Kong Securities and Futures Ordinance (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 of Hong Kong Limited pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 of the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (the “Listing Rules”), were as follows:

Ordinary Percentage of Name of Director Capacity Shares Held Issued Shares

Chung Shui Ming Timpson Beneficial owner (Personal) 6,000 0.00%

Save as disclosed in the foregoing, as at 31 December 2020, none of the Directors or chief executives of the Company had any interests or short positions in any shares, underlying shares, or debentures of the Company or any of its associated corporations (as defined in Part XV of the SFO) as recorded in the register required to be kept pursuant to Section 352 of the SFO or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code.

Furthermore, save as disclosed in the foregoing, during the year ended 31 December 2020, none of the Directors or chief executives (including their spouses and children under the age of 18) of the Company had any interests in or was granted any right to subscribe in any shares, underlying shares, or debentures of the Company or any of its associated corporations, or had exercised any such rights.

66 CHINA UNICOM (HONG KONG) LIMITED MATERIAL INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS IN SHARES AND UNDERLYING SHARES OF THE COMPANY As at 31 December 2020, the following persons (other than disclosed under the section headed “Directors’ and Chief Executives’ Interests and Short Positions in Shares, Underlying Shares and Debentures”) had the following interests and short positions in the shares or underlying shares of the Company as recorded in the register required to be kept pursuant to Section 336 of Part XV of the SFO:

Ordinary Shares Held Percentage of Name of Shareholders Directly Indirectly Issued Shares

(i) China United Network Communications Group Company Limited (“Unicom Group”)1,2 — 24,683,896,309 80.67% (ii) China United Network Communications Limited (“Unicom A Share Company”)1 — 16,376,043,282 53.52% (iii) China Unicom (BVI) Limited (“Unicom BVI”)1 16,376,043,282 — 53.52% (iv) China Unicom Group Corporation 2,3 (BVI) Limited (“Unicom Group BVI”) 8,082,130,236 225,722,791 27.15%

Notes: (1) Unicom Group and Unicom A Share Company directly or indirectly control one-third or more of the voting rights in the shareholders’ meetings of Unicom BVI, and in accordance with the SFO, the interests of Unicom BVI are deemed to be, and have therefore been included in, the respective interests of Unicom Group and Unicom A Share Company.

(2) Unicom Group BVI is a wholly-owned subsidiary of Unicom Group. In accordance with the SFO, the interests of Unicom Group BVI are deemed to be, and have therefore been included in, the interests of Unicom Group.

(3) Unicom Group BVI holds 8,082,130,236 shares (representing 26.41% of the total issued shares) of the Company directly. In addition, Unicom Group BVI is also interested in 225,722,791 shares (representing 0.74% of the total issued shares) of the Company under the SFO, in which Unicom Group BVI had a pre-emptive right.

Apart from the foregoing, as at 31 December 2020, no person had any interest or short position in the shares or underlying shares in the Company as recorded in the register required to be kept under Section 336 of the SFO.

Please also refer to Note 30 to the consolidated financial statements for details of the share capital of the Company.

REPURCHASE, SALE OR REDEMPTION OF LISTED SHARES OF THE COMPANY For the year ended 31 December 2020, neither the Company nor any of its subsidiaries had repurchased, sold or redeemed any of the Company’s listed shares.

ANNUAL REPORT 2020 67 REPORT OF THE DIRECTORS

COMPOSITION OF THE BOARD DIRECTORS’ INTEREST IN CONTRACTS The following is the list of Directors during the year and Save for the service agreements between the Company up to date of this report. and the executive Directors, as at 31 December 2020, the Directors did not have any material interest, Executive Directors: whether directly or indirectly, in any significant Wang Xiaochu (Chairman and Chief Executive Officer) contracts entered into by the Company. Chen Zhongyue (appointed on 19 February 2021) Li Guohua (resigned on 11 March 2020) None of the Directors for re-election at the forthcoming Li Fushen annual general meeting has an unexpired service Shao Guanglu (resigned on 16 January 2020) agreement which is not terminable by the Company Zhu Kebing within one year without payment of compensation Fan Yunjun (appointed on 17 February 2020) (other than statutory compensation).

Non-Executive Director: DIRECTORS’ INTEREST IN COMPETING Cesareo Alierta Izuel (retired on 25 May 2020) BUSINESSES Unicom Group and the A Share Company are engaged in Independent Non-Executive Directors: telecommunications business and other related Cheung Wing Lam Linus businesses in China that are similar to and/or compete Wong Wai Ming with those of the Company. Executive directors of the Chung Shui Ming Timpson Company also hold executive positions with Unicom Law Fan Chiu Fun Fanny Group and the A Share Company. Please refer to the section headed “Directors and Senior Management” on Pursuant to the articles of association, Mr. Chen pages 24 to 35 of this annual report for further details. Zhongyue, Mr. Zhu Kebing, Mr. Wong Wai Ming and Mr. Chung Shui Ming Timpson will retire at the forthcoming Mr. Li Fushen, an executive Director of the Company, annual general meeting of the Company and, being serves as a non-executive director and the deputy eligible, offer themselves for re-election. chairman of the board of directors of PCCW Limited. Mr. Li Fushen also serves as a non-executive director of HKT Please refer to Note 8 to the consolidated financial Limited and HKT Management Limited (the trustee- statements for details of the emoluments of the manager of the HKT Trust). Mr. Zhu Kebing, an executive Directors. Director and Chief Financial Officer of the Company, serves as a non-executive director of PCCW Limited, HKT INDEPENDENCE OF INDEPENDENT NON- Limited and HKT Management Limited. Mr. Shao EXECUTIVE DIRECTORS Guanglu (resigned from his position as an executive The Company has received from each of its independent Director and Senior Vice President of the Company with non-executive Directors the annual confirmation of his effect from 16 January 2020) was served as a non- independence pursuant to Rule 3.13 of the Listing Rules executive director of PCCW Limited. and the Company considers that all independent non- executive Directors are currently independent.

68 CHINA UNICOM (HONG KONG) LIMITED Mr. Cesareo Alierta Izuel (retired from his position as a EMPLOYEE AND REMUNERATION POLICY Non-executive Director of the Company with effect from As at 31 December 2020, the Group had approximately 25 May 2020) is an Executive Chairman of Telefónica 241,245 employees, 603 employees and 273 employees Foundation, which is an affiliate of Telefónica, S.A.. in Mainland China, Hong Kong and other countries, respectively. Furthermore, the Group had Each of PCCW Limited, HKT Limited, HKT Management approximately 12,581 temporary staff in Mainland Limited and Telefónica S.A. is engaged in the China. For the year ended 31 December 2020, employee telecommunications business and other related benefit expenses were approximately RMB55.740 billion businesses that may compete with those of the (for the year ended 31 December 2019: RMB50.516 Company. billion). The Group endeavors to maintain its employees’ remuneration in line with the market trend Apart from the above, there are no competing interests and to remain competitive. Employees’ remuneration is of directors which are disclosable under Rule 8.10(2)(b) determined in accordance with the Group’s of the Listing Rules at any time during the year of 2020 remuneration and bonus policies based on their up to and including the date of this annual report. performance. The Group also provides comprehensive benefit packages and career development opportunities DIRECTORS OF SUBSIDIARIES for its employees, including retirement benefits, housing The names of all directors who have served on the benefits and internal and external training programmes, boards of the subsidiaries of the Company during the which are tailored in accordance with individual needs. year ended 31 December 2020 and up to the date of this report of directors are available on the Company’s The Company has adopted share option schemes, under website (http://www.chinaunicom.com.hk). which the Company may grant share options to eligible employees for subscribing for the Company’s shares. PERMITTED INDEMNITY Pursuant to the Company’s articles of association, USE OF PROCEEDS FROM ISSUE OF NEW subject to the applicable laws and regulations, every SHARES Director shall be indemnified out of the assets of the As part of the mixed ownership reform plan, on 22 Company against all costs, charges, expenses, losses and August 2017, the Company and Unicom BVI entered into liabilities which he/she may sustain or incur in the a share subscription agreement. The completion of execution of his/her office or otherwise in relation allotment and issuance of the subscription shares took thereto. The Company has taken out insurance against place on 28 November 2017. 6,651,043,262 new the liability and costs associated with defending any ordinary shares of the Company have been issued for a proceedings which may be brought against directors of cash consideration of HKD13.24 per share to Unicom BVI the Group. and the gross proceeds amounted to HKD88,059.81 million (equivalent to approximately RMB74,953.87 million) and the net issue price amounted to HKD13.24 each. The closing price was HKD12.04 per share as quoted on the Hong Kong Stock Exchange as at the date of the share subscription agreement. Details of such issue have been disclosed in the circular dated 28 August 2017.

ANNUAL REPORT 2020 69 REPORT OF THE DIRECTORS

As disclosed in the circular in relation to the subscription of new shares by Unicom BVI issued by the Company on 28 August 2017, the use of proceed was intended to be utilised for the following purposes:

(a) approximately HKD46,777.96 million (equivalent to approximately RMB39,816 million) for upgrading the 4G network capabilities of the Company, which involves the upgrading of the transmission capacity of existing nationwide 4G network, construction of new 4G stations, improving the interoperation with 5G network and construction of transmission network in connection with the interoperation;

(b) approximately HKD23,011.85 million (equivalent to approximately RMB19,587 million) for technology validation and enablement and launch of trial programs in relation to the 5G network, which involve research, development and validation of 5G network related technologies, construction of 5G trial stations and establishment of basic 5G network capability;

(c) approximately HKD2,728.01 million (equivalent to approximately RMB2,322 million) for developing innovative businesses, which involves the establishment of specialised teams and business platforms to back up the development of cloud computing, big data, the Internet of Things, industrial Internet, payment finance, video and other businesses; and

(d) approximately HKD15,538.98 million (equivalent to approximately RMB13,226 million) for the repayment of the outstanding principal amount of loans obtained from the banks.

The proceeds have been utilised for the following purposes:

(Unit: RMB, million)

Actual amounts utilised for the Amounts not yet Intended amounts Amounts not yet period of Actual amounts utilised as at to be utilised as set utilised as at 1 January to utilised up to 31 December Intended use of proceeds out in the circular 31 December 2019 31 December 2020 31 December 2020 2020 (Note)

Upgrading the 4G network capabilities 39,816 — — 39,816 —

Technology validation and enablement and launch of trial programs in relation to the 5G network 19,587 16,950 16,950 19,587 —

Developing innovative businesses 2,322 672 297 1,947 375

Repayment of the principal amount of loans 13,226 — — 13,226 —

Note: The Company plans to change the use of the remaining proceeds of RMB375 million from “Developing innovative businesses” to “Technology validation and enablement and launch of trial programs in relation to the 5G network” in the coming year. The above optimization adjustment was made based on various factors, such as the changes in the market environment of the industry, the use of proceeds in the investment projects, the actual operating conditions of the Company and the priority of the development of investment projects funded by the proceeds, in order to better satisfy the needs for future development of the Company.

70 CHINA UNICOM (HONG KONG) LIMITED CONNECTED TRANSACTION- ACQUISITION CONTINUING CONNECTED TRANSACTIONS OF 51% EQUITY INTEREST IN FAW On 21 October 2019, CUCL, a wholly-owned subsidiary COMMUNICATION SCIENCE AND of the Company, and Unicom Group entered into a TECHNOLOGY FROM UNICOM GROUP comprehensive services agreement (the “2020-2022 On 6 November 2020, China United Network Comprehensive Services Agreement”) to renew certain Communications Corporation Limited (“CUCL”), a continuing connected transactions including (i) wholly-owned subsidiary of the Company, entered into telecommunications resources leasing; (ii) property the FAW Communication Science and Technology leasing; (iii) value-added telecommunications services; Acquisition Agreement with Unicom Group, pursuant to (iv) materials procurement services; (v) engineering which CUCL agreed to acquire 51% equity interest in design and construction services; (vi) ancillary Communication Science and Technology Co., Ltd. of telecommunications services; (vii) comprehensive Changchun FAW (“FAW Communication Science and support services; (viii) shared services; and (ix) financial Technology”) from Unicom Group, for a purchase price services, including deposit services, lending and other of RMB131,227,590 (approximately HK$150,732,357). credit services, and other financial services. Pursuant to the 2020-2022 Comprehensive Services Agreement, Unicom Group is the ultimate parent company of the CUCL and Unicom Group shall provide certain services Company. Accordingly, Unicom Group is a connected and facilities to each other and the receiving party shall person of the Company and the transaction under the pay the corresponding service fees in a timely manner. FAW Communication Science and Technology The 2020-2022 Comprehensive Services Agreement is Acquisition Agreement constitutes a connected valid for a term of three years starting from 1 January transaction of the Company under Chapter 14A of the 2020 and expiring on 31 December 2022. Listing Rules. Unicom Group is the ultimate controlling shareholder of The purchase price was determined after arm’s length the Company and is therefore a connected person of the negotiations between CUCL and Unicom Group, are on Company under the Listing Rules. normal commercial terms, and with reference to various factors including, but not limited to, the financial and Details of the continuing connected transactions under operating performance, development prospect of FAW the 2020-2022 Comprehensive Services Agreement are Communication Science and Technology, the appraised as follows: value of total shareholders’ equity of FAW Communication Science and Technology as at 31 (1) Telecommunications Resources Leasing December 2019 of approximately RMB260 million Unicom Group agrees to lease to CUCL: (approximately HK$300 million) as set out in the valuation report prepared by an independent appraisal (a) certain international telecommunications company. The acquisition of the 51% equity interest in resources (including international FAW Communication Science and Technology will telecommunications channel gateways, strengthen the cooperation between the Group and international telecommunications service China FAW Group Co., Ltd., creating strong alliance so as gateways, international submarine cable to complement each other’s advantages, and leverage capacity, international land cables and synergistic benefits, which in turn could help promote international satellite facilities); and the development and improve competitiveness and operation efficiency of FAW Communication Science (b) certain other telecommunications and Technology, thus further drive the growth of facilities required by CUCL for its revenue and profit of the Group in future. operations.

ANNUAL REPORT 2020 71 REPORT OF THE DIRECTORS

The rental charges for the leasing of CUCL or Unicom Group (including their international telecommunications respective branch companies and subsidiaries). resources and other telecommunications facilities are based on the annual The rental charges for the leasing of each other depreciation charges of such resources properties and ancillary facilities are based on and telecommunications facilities market rates. Where there is no market rate or it provided that such charges would not be is not possible to determine the market rate, the higher than market rates. CUCL shall be rate shall be negotiated and agreed between the responsible for the on-going maintenance two parties. Market rates refer to the rates at of such international telecommunications which the same or similar type of products or resources. CUCL and Unicom Group shall services are provided by Independent Third determine and agree which party is to Parties in the ordinary course of business and provide maintenance service to the under normal commercial terms. Negotiated telecommunications facilities referred to rates refer to the rates based on the reasonable in (b). Unless otherwise agreed by CUCL costs plus the amount of the relevant taxes and and Unicom Group, such maintenance reasonable profit margin. When determining the service charges would be borne by CUCL. pricing standard or reasonable profit margin, to If Unicom Group is responsible for the extent practicable, management of the maintaining any telecommunications Company shall take into account the rates of at facilities referred to in (b), CUCL shall pay least two similar and comparable transactions to Unicom Group the relevant entered with or carried out by Independent Third maintenance service charges which shall Parties in the corresponding period of reference. be determined with reference to market The rental charges are payable quarterly in rate, or where there is no market rate, arrears. shall be agreed between the parties and determined on a cost-plus basis. When For the year ended 31 December 2020, the rental determining the pricing standard or charges paid by CUCL to Unicom Group reasonable profit margin, to the extent amounted to approximately RMB999 million, and practicable, management of the Company the rental charges paid by Unicom Group to shall take into account the rates of at least CUCL was negligible. two similar and comparable transactions entered with or carried out by (3) Value-added Telecommunications Services Independent Third Parties or relevant Unicom Group (or its subsidiaries) agrees to industry profit margins in the provide the customers of CUCL with various corresponding period of reference. CUCL types of value-added telecommunications and Unicom Group agree to settle the net services. rental charges and service charges due to Unicom Group on a quarterly basis. CUCL shall settle the revenue generated from the value-added telecommunications services with For the year ended 31 December 2020, the branches of Unicom Group (or its the total charges paid by CUCL to Unicom subsidiaries) on the condition that such Group amounted to approximately settlement will be based on the average revenue RMB283 million. for independent value-added telecommunications content providers who (2) Property Leasing provide value-added telecommunications CUCL and Unicom Group agree to lease to each content to CUCL in the same region. The revenue other properties and ancillary facilities owned by shall be settled on a monthly basis.

72 CHINA UNICOM (HONG KONG) LIMITED For the year ended 31 December 2020, the total relevant taxes and reasonable profit margin. revenue allocated to Unicom Group in relation to When determining the pricing standard or value-added telecommunications services reasonable profit margin, to the extent amounted to approximately RMB188 million. practicable, management of the Company shall take into account the rates of at least two similar (4) Materials Procurement Services and comparable transactions entered into with Unicom Group agrees to provide comprehensive Independent Third Parties in the corresponding procurement services for imported and domestic period or the relevant industry profit margin for telecommunications materials and other reference. The service charges due to Unicom domestic non- telecommunications materials to Group will be settled on a monthly basis. CUCL. Unicom Group also agrees to provide services on management of tenders, verification For the year ended 31 December 2020 the total of technical specifications, installation, consulting charges paid by CUCL to Unicom Group and agency services. In addition, Unicom Group amounted to approximately RMB47 million. will sell cable, modem and other materials operated by itself to CUCL and will also provide (5) Engineering Design and Construction Services storage and logistics services in relation to the Unicom Group agrees to provide engineering above materials procurement. design, construction and supervision services and IT services to CUCL. Engineering design services Charges for the provision of materials include planning and design, engineering procurement services are calculated at the rate inspection, telecommunications electronic of: engineering, telecommunications equipment engineering and corporate telecommunications (a) up to 3% of the contract value of those engineering. Construction services include procurement contracts in the case of services relating to telecommunications domestic materials procurement; and equipment, telecommunications routing, power supplies, telecommunications conduit, and (b) up to 1% of the contract value of those technical support systems. IT services include procurement contracts in the case of services relating to office automation, software imported materials procurement. testing, network upgrading, research and development of new business, and development The charges for the provision of materials of support systems. operated by Unicom Group, and the pricing and/ or charging standard of various materials The charges for the provision of engineering procurement services, and storage and logistics design and construction services are based on services commission relevant to the direct market rates. Market rates refer to the rates at material procurement are based on the market which the same or similar type of products or rates. Where there is no market rate or it is not services are provided by Independent Third possible to determine the market rate, the rate Parties in the ordinary course of business and will be negotiated and agreed between the two under normal commercial terms. When parties. Market rates refer to the rates at which determining the pricing standard, to the extent the same or similar type of assets or services is practicable, management of the Company shall provided by Independent Third Parties in the take into account the rates of at least two similar ordinary course of business and under normal and comparable transactions entered with or commercial terms. Negotiated rates refer to the carried out by Independent Third Parties in the rates based on the reasonable costs incurred in corresponding period of reference. In the event providing the services plus the amount of the the recipient will determine the specific provider

ANNUAL REPORT 2020 73 REPORT OF THE DIRECTORS

of engineering design and construction services profit margin for reference. The service charges through tender, the provider will be no less will be settled between CUCL and Unicom Group qualified and equipped than the Independent as and when the relevant services are provided. Third Parties, and will participate in the tender procedure in a similar manner as the For the year ended 31 December 2020, the total Independent Third Parties. Under such services charges paid by CUCL to Unicom Group circumstances, the pricing will be determined by amounted to approximately RMB2,735 million. the final rate according to the tender procedure. (7) Comprehensive Support Services The service charges will be settled between CUCL Unicom Group and CUCL agree to provide and Unicom Group as and when the relevant comprehensive support services to each other, services are provided. including dining services, facilities leasing services (excluding those facilities which are provided For the year ended 31 December 2020, the total under the Telecommunications Resources charges paid by CUCL to Unicom Group Leasing above), vehicle services, health and amounted to approximately RMB2,034 million. medical services, labour services, security services, hotel and conference services, (6) Ancillary Telecommunications Services gardening services, decoration and renovation Unicom Group agrees to provide to CUCL ancillary services, sales services, construction agency, telecommunications services, including certain equipment maintenance services, market telecommunications pre-sale, on-sale and after- development, technical support services, sale services such as assembling and repairing of research and development services, sanitary certain client telecommunications equipment, services, parking services, staff trainings, storage sales agency services, printing and invoice services, advertising services, marketing, delivery services, maintenance of telephone property management services, information and booths, customers’ acquisitions and servicing and communications technology services (including other customers’ services. construction and installation services, system integration services, software development, The charges payable for the provision of ancillary product sales and agent services, operation and telecommunications services are determined by maintenance services, and consultation the market rates between the two parties. services). Where there is no market rate or it is not possible to determine the market rates, the rate The service charges are determined by the will be negotiated and agreed between the two market rates between the two parties. Where parties. Market rates refer to the rates at which there is no market rate or it is not possible to the same or similar type of assets or services are determine the market rate, the rate will be provided by Independent Third Parties under negotiated and agreed between the two parties. normal commercial terms. Negotiated rates refer Market rates refer to the rates at which the same to the rates based on the reasonable costs plus or similar type of assets or services are provided the amount of the relevant taxes and reasonable by Independent Third Parties under normal profit margin. When determining the pricing commercial terms. Negotiated rates refer to the standard or reasonable profit margin, to the rates based on the reasonable costs plus the extent practicable, management of the Company amount of the relevant taxes and reasonable shall take into account the rates of at least two profit margin. When determining the pricing similar and comparable transactions entered into standard or reasonable profit margin, to the with Independent Third Parties in the extent practicable, management of the Company corresponding period or the relevant industry shall take into account the rates of at least two

74 CHINA UNICOM (HONG KONG) LIMITED similar and comparable transactions entered into provided to each other, as adjusted in with Independent Third Parties in the accordance with their respective total assets corresponding period or the relevant industry value on an annual basis. profit margin for reference. The service charges will be settled between CUCL and Unicom Group For the year ended 31 December 2020, the total as and when the relevant services are provided. services charges paid by CUCL to Unicom Group amounted to approximately RMB77 million, and For the year ended 31 December 2020, the total the services charges paid by Unicom Group to services charges paid by CUCL to Unicom Group CUCL was negligible. amounted to approximately RMB979 million, and the total services charges paid by Unicom Group (9) Financial Services to CUCL amounted to approximately RMB229 CUCL or its subsidiaries agrees to provide million. financial services to Unicom Group, including deposit services, lending and other credit (8) Shared Services services, and other financial services. Other Unicom Group and CUCL agree to provide shared financial services include settlement services, services to each other, including, but not limited acceptance of bills, entrusted loans, credit to, the following: (a) CUCL will provide verification, financial and financing consultation, headquarter human resources services to consultation, agency business, approved Unicom Group; (b) Unicom Group and CUCL will insurance agent services, and other businesses provide business support centre services to each approved by China Banking Regulatory other; (c) CUCL will provide hosting services Commission. related to the services referred to in (a) and (b) above to Unicom Group; and (d) Unicom Group The key pricing policies are follows: will provide premises to CUCL and other shared services requested by its headquarters. In (a) Deposit Services relation to the services referred to in (b) above, The interest rate for Unicom Group’s CUCL will provide support services, such as billing deposit with CUCL or its subsidiaries will and settlement services provided by the business be no more than the maximum interest support centre and operational statistics reports. rate promulgated by the People’s Bank of Unicom Group will provide support services, China for the same type of deposit, the including telephone card production, interest rate for the same type of deposit development and related services, maintenance offered to other clients and the applicable and technical support and management services interest rate offered by the general in relation to the telecommunications card commercial banks in PRC for the same operational system. type of deposit.

Unicom Group and CUCL share the costs related (b) Lending and other credit services to the shared services proportionately in The lending interest rate will follow the accordance with their respective total assets interest rate standard promulgated by the value, except that the total assets value of the People’s Bank of China, and will be no less overseas subsidiaries and the listed company of than the minimum interest rate offered Unicom Group will be excluded from the total by CUCL and its subsidiaries to other asset value of Unicom Group. The shared costs clients for the same type of loan, and the proportion will be agreed between Unicom applicable interest rate offered to Unicom Group and CUCL in accordance with the total Group by the general commercial banks in assets value set out in the financial statements PRC for the same type of loan. For the

ANNUAL REPORT 2020 75 REPORT OF THE DIRECTORS

year ended 31 December 2020, the The legal department is responsible for the review of the maximum daily lending and other credit agreement for connected transactions. The finance services balance (including accrued department takes the lead in the daily management and interests) amounted to approximately supervision of connected transactions, including liaising RMB10,644 million. with the relevant business departments for account reconciliation with connected parties, monitoring the (c) Other financial services implementation of connected transactions together The fees to be charged by CUCL or its with business departments on a routine basis and subsidiaries for the provision of the performing supervisory examination. The finance financial services to Unicom Group will department regularly reports the status of the comply with the relevant prescribed rates implementation of connected transactions to the Audit for such services as determined by the Committee. The audit department includes review on People’s Bank of China or the China connected transactions into the scope of annual internal Banking Regulatory Commission. Where control assessment and reports the results to the no relevant prescribed rate is applicable, management. the fee will be determined with reference to market rates of similar financial Furthermore, the aforesaid continuing connected services charges and agreed between the transactions have been reviewed by independent non- parties. executive directors of the Company. The independent non-executive directors confirmed that the aforesaid The service charges will be settled continuing connected transactions were entered into (a) between CUCL or its subsidiaries and in the ordinary and usual course of business of the Unicom Group as and when the relevant Group; (b) either on normal commercial terms or better services are provided. or, if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on For the financial year ended 31 December 2020, the terms no less favourable to the Group than terms above continuing connected transactions have not available to or from independent third parties; and (c) in exceeded their respective caps. accordance with the relevant agreements governing them on terms that are fair and reasonable and in the The Company has formulated and strictly implemented interests of the shareholders of the Company as a various systems including the Administrative Measures whole. of Connected Transactions of China Unicom to ensure that connected transactions are properly entered into in The Company’s independent auditor was engaged to accordance with pricing mechanisms and the terms of report on the Group’s continuing connected the transactions are fair and reasonable and are in the transactions in accordance with Hong Kong Standard on interests of the Company and the Shareholders as a Assurance Engagements 3000 “Assurance Engagements whole. Other Than Audits or Reviews of Historical Financial Information” and with reference to Practice Note 740 The staff from the relevant business departments and “Auditor’s Letter on Continuing Connected Transactions the connected persons of the Company will negotiate under the Hong Kong Listing Rules” issued by the Hong the pricing terms of the continuing connected Kong Institute of Certified Public Accountants. The transactions. These pricing terms will be determined in independent auditor has issued an unqualified letter accordance with the pricing policy principles set out in containing his findings and conclusions in respect of the the 2020-2022 comprehensive services agreement, continuing connected transactions disclosed by the which should be fair and reasonable and subject to the Group in pages 71 to 76 of this annual report in review of the finance department. accordance with paragraph 14A.56 of the Listing Rules. The independent auditors’ letter has confirmed that

76 CHINA UNICOM (HONG KONG) LIMITED nothing has come to their attention that cause them to The New York Stock Exchange (“NYSE”) staff determined believe that the continuing connected transactions: that, based on the Executive Order and the guidance, it commenced the process to delist the Company’s (A) have not been approved by the Board; American Depositary Shares (the “ADSs”) and suspended trading in the Company’s ADSs from 11 (B) were not, in all material respects, in accordance January 2021. Since its listing on The Stock Exchange of with the pricing policies of the Group as stated in Hong Kong Limited and the NYSE in 2000, the Company this annual report; has complied strictly with the laws and regulations, market rules as well as regulatory requirements of its (C) were not entered into, in all material respects, in listing venues, and has been operating in accordance accordance with the relevant agreements with laws and regulations. The Company was governing the continuing connected disappointed by the Executive Order and NYSE transactions; and decisions, which led to a negative impact on the trading prices of its ordinary shares and ADSs and harmed the (D) have exceeded their respective annual caps for interests of the Company and its shareholders. In order the financial year ended 31 December 2020 set to protect the interests of the Company and its out in the previous announcements of the shareholders, on 20 January 2021, the Company filed Company. with the NYSE a written request for a review of the determination by a Committee of the Board of Directors A copy of the independent auditor’s letter has been of the NYSE. Please refer to the Company’s provided by the Company to the Hong Kong Stock announcement dated 21 January 2021 for details. The Exchange. Company will continue to pay close attention to the development of related matters and also seek The Company confirms that it has complied with the professional advice and reserve all rights to protect requirements of Chapter 14A of the Listing Rules in lawful rights of the Company. relation to all connected transactions and continuing connected transactions to which any Group member MATERIAL LEGAL PROCEEDINGS was a party during 2020. Please refer to Note 45 to the As a company incorporated in Hong Kong and dual-listed consolidated financial statements for a summary of the in Hong Kong and the United States, the Company related party transactions entered into by the members adopts the Companies Ordinance of Hong Kong, the of the Group for the year ended 31 December 2020. Securities and Futures Ordinance of Hong Kong, Rules Governing the Listing of Securities on The Stock CORPORATE GOVERNANCE REPORT Exchange of Hong Kong Limited, the regulatory Report on the Company’s corporate governance is set requirements for non-US companies listed in the United out in “Corporate Governance Report” on pages 38 to States, the Company’s Articles of Association and other 61. related laws and regulations as the basic guidelines for the Company’s corporate governance. NYSE COMMENCED PROCEEDINGS TO DELIST THE ADSs The principal activities of Company’s subsidiaries are the The former US President issued an executive order provision of cellular and fixed-line voice and related 13959 (the “Executive Order”) on 12 November 2020, value-added services, broadband and other Internet- and subsequently the US Department of Treasury’s related services, information communications Office of Foreign Assets Control issued the guidance. technology services, and business and data The Executive Order and the guidance prohibit any communications services in the PRC. The Company is transaction by any US person in publicly traded required to comply with the Telecommunications Regulations of the People’s Republic of China, securities (including, among others, derivatives thereof) Administrative Regulations on Telecommunications of certain Chinese companies, including the Company.

ANNUAL REPORT 2020 77 REPORT OF THE DIRECTORS

Companies with Foreign Investments, Cybersecurity Law of the People’s Republic of China and other related laws and regulations. At the same time, oversea subsidiaries of the Company are also required to comply with the related laws and regulations where their business operations are located.

For the year ended 31 December 2020, the Company had not been involved in any material litigation, arbitration or administrative proceedings. So far as the Company is aware of, no such litigation, arbitration or administrative proceedings were pending or threatened as at 31 December 2020.

PUBLIC FLOAT Based on publicly available information and so far as Directors are aware, the Company has maintained the specified amount of public float as required by the Hong Kong Stock Exchange during the year ended 31 December 2020 and as at the date of this annual report.

DONATIONS For the year ended 31 December 2020, the Group made charitable and other donations in an aggregate amount of approximately RMB6.37 million.

CLOSURE OF REGISTER OF MEMBERS For the purpose of ascertaining the shareholders’ rights to attend and vote at the Annual General Meeting (and any adjournment thereof) on 13 May 2021, and entitlement to the 2020 Final Dividend, the register of members of the Company will be closed. Details of such closures are set out below:

(1) For ascertaining the shareholders’ rights to attend and vote at the Annual General Meeting: Latest time to lodge transfer documents for registration 4:30 p.m. of 5 May 2021 Closure of register of members From 6 May 2021 to 13 May 2021 Record date 6 May 2021

(2) For ascertaining the shareholders’ entitlement to the 2020 Final Dividend: Latest time to lodge transfer documents for registration 4:30 p.m. of 21 May 2021 Closure of register of members 24 May 2021 Dividend Record date 24 May 2021

During the above closure periods, no transfer of shares will be registered. To be eligible to attend and vote at the Annual General Meeting, and to qualify for the 2020 Final Dividend, all transfers, accompanied by the relevant certificates, must be lodged with the Company’s Share Registrar, Hong Kong Registrars Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, by no later than the aforementioned latest times.

WITHHOLDING AND PAYMENT OF ENTERPRISE INCOME TAX FOR NON-RESIDENT ENTERPRISES IN RESPECT OF 2020 FINAL DIVIDEND Pursuant to (i) the “Notice Regarding Matters on Determination of Tax Residence Status of Chinese- controlled Offshore Incorporated Enterprises under Rules of Effective Management” (the “Notice”) issued by the State Administration of Taxation of the People’s Republic of China (the “SAT”); (ii) the “Enterprise Income Tax Law of the People’s Republic of China” (the “Enterprise Income Tax Law”) and the “Detailed Rules for the Implementation of the Enterprise Income Tax Law of the People’s Republic of China” (the “Implementation Rules”); and (iii) information obtained from the SAT, the Company is required to withhold and pay enterprise income tax when it pays the 2020 Final Dividend to its non-resident enterprise shareholders. The enterprise income tax is 10% on the amount of dividend paid to non-resident enterprise shareholders (the “Enterprise Income Tax”), and the withholding and payment obligation lies with the Company.

78 CHINA UNICOM (HONG KONG) LIMITED As a result of the foregoing, in respect of any If anyone would like to change the identity of the shareholders whose names appear on the Company’s holders in the register of members, please enquire register of members on the Dividend Record Date and about the relevant procedures with the nominees or who are not individuals (including HKSCC Nominees trustees. The Company will withhold for payment of the Limited, other custodians, corporate nominees and Enterprise Income Tax for its non-resident enterprise trustees such as securities companies and banks, and shareholders strictly in accordance with the relevant other entities or organisations), the Company will laws and requirements of the relevant government distribute the 2020 Final Dividend payable to them after agencies and adhere strictly to the information set out in deducting the amount of Enterprise Income Tax payable the Company’s register of members on the Dividend on such dividend. Investors who invest in the shares in Record Date. The Company assumes no liability the Company listed on the Main Board of The Stock whatsoever in respect of and will not process any Exchange of Hong Kong Limited through the Shanghai claims, arising from any delay in, or inaccurate Stock Exchange or Shenzhen-Hong Kong Stock Exchange determination of, the status of the shareholders, or any (the Shanghai-Hong Kong Stock Connect or Shenzhen- disputes over the mechanism of withholding. Hong Kong Stock Connect investors) are investors who hold shares through HKSCC Nominees Limited, and in INDEPENDENT AUDITOR accordance with the above requirements, the Company The Hong Kong financial reporting and U.S. financial will pay to HKSCC Nominees Limited the amount of the reporting for the year ended 31 December 2020 have 2020 Final Dividend after deducting the amount of been audited by KPMG and KPMG Huazhen LLP, Enterprise Income Tax payable on such dividend. respectively, which will retire as auditors of the Group upon expiration of their current term of office at the In respect of any shareholders whose names appear on close of 2021 annual general meeting of the Company. the Company’s register of members on the Dividend The Board, as recommended by the audit committee of Record Date and who are individual shareholders, there the Company, has resolved to propose to the will be no deduction of Enterprise Income Tax from the shareholders of the Company at the AGM to approve dividend that such shareholder is entitled to. the appointment of Deloitte Touche Tohmatsu and Deloitte Touche Tohmatsu Certified Public Accountants Shareholders who are not individual shareholders listed LLP as the auditors of the Group for Hong Kong financial on the Company’s register of members and who (i) are reporting and U.S. financial reporting purposes, resident enterprises of the People’s Republic of China respectively, for the year ending 31 December 2021. (the “PRC”) (as defined in the Enterprise Income Tax Law), or (ii) are enterprises deemed to be resident enterprises of the PRC in accordance with the Notice, and who, in each case, do not desire to have the Company withhold Enterprise Income Tax from their 2020 Final Dividend, should lodge with the Company’s Share Registrar, Hong Kong Registrars Limited, at Shops By Order of the Board 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Wang Xiaochu Road East, Wan Chai, Hong Kong, at or before 4:30 p.m. Chairman and Chief Executive Officer of 21 May 2021, and present the documents from such shareholder’s governing tax authority in the PRC Hong Kong, 11 March 2021 confirming that the Company is not required to withhold and pay Enterprise Income Tax in respect of the dividend that such shareholder is entitled to.

ANNUAL REPORT 2020 79 uman RESOURCES DEVELOPMENT

HAdhering to the team collaboration Supply-side reforms in human resources continued to The Company adopted performance- approach, China Unicom continuously improve efficiency and rationalise structure. The Company based compensation as the principal optimises its system and mechanism, uncovered the master map of manpower deployment, mechanism with a diversified allowing employees and teams who thereby making the Group’s overall human resource remuneration structure. The highly contributing to customer needs allocation more transparent, and improving efficiency Company improved the employee and enhancing corporate value to comprehensively on the organizational structure, compensation distribution and share higher returns, thus achieving professional structure, rank and position and other performance evaluation mechanism the mutual growth of the Company dimensions. China Unicom’s employee productivity to achieve the aligned growth of and the employees. In 2020, continuously increased. The Company continued to employee benefits and the return and underpinned by the goals of optimise its employee structure integrating the sub- efficiency of the Company. The promoting “staff in and out”, “post up division of performing unit reform, which redeployed Company optimised its value-based and down” and “compensation up about 6,000 employees at all levels to frontline positions at internal remuneration distribution and down”, China Unicom paid sub-divided units directly contributing to value creation. mechanism, further widening the gap continuous efforts to deepen the China Unicom also strengthened the effort to recruit in remuneration and stimulating the human resources system reform, talents in enhancing the digital transformation of the vibrancy of micro-entities. The providing human resources support Company and the number of high school graduates Company launched an integrated for the Company’s comprehensive recruited increased by 6% year-on-year. incentive reporting system, which is digital transformation and achieving able to deliver customised annual sustainable high-quality development.

80 CHINA UNICOM (HONG KONG) LIMITED ANALYSIS OF STAFF COMPOSITION

Administrative & Postgraduate or Support above 6.73% Others Secondary school 8.32% 3.17% or below Management 12.53% 11.66%

By Education Personnel By Background Profession College Marketing 19.11% 27.95%

Bachelor degree Technical 60.04% 50.49%

For further details of Human Resources Development, please refer to the relevant sections of the Company’s detailed Corporate Social Responsibility Report 2020 to be published in June 2021. Please visit the Company’s website at www.chinaunicom.com.hk.

remuneration report to the Company further strengthened the young manager Company conducted innovation employees, further enhancing development, as well as the communication between the capability certification in IT and employees’ sense of achievement. A headquarters and the frontlines, and actively pushed government and enterprise services, long-term incentive system was also forward the implementation of the director accountability and a total of 25,000 employees had established to effectively attract, system. While promoting the withdrawn rate of managers passed the examination in 2020. retain, and appropriately compensate of no less than 1.5% per annum, the Company stepped up talents. effort to withdraw managers, further stimulating their Focusing on the demand for digital vitality. transformation, the Company Focusing on the top-level design, the reshaped its staff education and Company conducted comprehensive The Company strengthened on professional talent pipeline training system to enhance the analysis on the leadership team development. A four-tier professional grade structure training on transformation structure and the overall planning and namely, practice leaders, experts, core members and new empowerment. To further strengthen coordination with due regard to the talents, comprising of 18,000 members from 14 and cultivate the digital capability of needs of the Company in the course professional fields including IT, operating and employees, annual key training plans of development. China Unicom maintenance, research and development, government and for management personnel and enhanced the capability on digital enterprise, marketing, etc. was developed. The Company professional talents were formulated, transformation, strengthened the deepened the implementation of “418” talent while continuously carrying out supervision of managers and development initiative in the innovative areas and stepped professional improvement and motivating managers at all levels to up on talents recruitment. In 2020, 3 top talents were transformation training for all groups. take new responsibilities and deliver recruited at the headquarters, and nearly 30 top talents new initiatives in the new era. The were recruited at the branch and subsidiary levels. The

ANNUAL REPORT 2020 81 China Unicom is always committed to prevention and business operations to ensure smooth Company deeply reformed systems integrating its own development with network communication, sound service and effective and mechanisms and accelerated the broader social responsibility to support. It fully leveraged its new digital technology edges establishment of new mechanism that achieve the harmony and alignment to support precise epidemic prevention and the stimulates the vitality of micro of corporate interests and social resumption of work, production and schooling, thereby entities to better adapt production goals. In 2020, under the guidance of contributing to the winning of the battle against COVID-19 functions to productivity changes. At the new development philosophies of and fully fulfilling its role as a key pillar of a great nation. the same time, the Company innovation, coordination, green, practiced green development openness and sharing, the Company DIGITALLY STRENGTHENED THE philosophies by building green continued to practically implement FOUNDATION OF CYBER SUPERPOWER TO networks and promoting the green national strategic plans such as Cyber ENHANCE VALUE transformation of production and Superpower, Digital China and the The Company adheres to people-oriented values and operation, leading to significant “Belt and Road Initiative”, etc. and fundamental principles. It accelerated the construction of improvement in operational strived to promote comprehensive high-speed, mobile, secure and ubiquitous new efficiency. digital transformation, fully infrastructure, improved network quality and operational ocial supporting the transformation and efficiency through digitisation, accelerated network DIGITALLY IGNITED THE S upgrade of the economy and society. construction in remote areas and insisted on network ENGINE OF RESPONSIBILITY TECHNOLOGICAL In the face of the sudden COVID-19, information security, continuously solidifying the INNOVATION TO the Company quickly responded with foundation of a digital economy and striving to develop our STRENGTHEN GROWTH respect to epidemic prevention and country into a Cyber Superpower and Digital China. MOMENTUM communication assurance. It As the main force in building a emphasised on both epidemic DIGITALLY IMPROVED PEOPLE’S LIVING QUALITY TO SEEK GROWTH technology superpower, the Company Shouldering Cyber Superpower missions, the Company committed to proprietary leveraged high-quality information and communication development and improvement of infrastructure to continuously enrich the substance of technology. It seized the new communication products and services. It vigorously opportunities for technological improved network quality and customer experience and innovation brought by the digital committed itself to improving the nation’s overall economy, enhanced its own information technology development. It provided innovation capabilities, and nurtured customers with satisfying and high-quality communication a flourishing and synergetic services, letting more consumers share the benefits of innovation ecosystem. It accelerated technological advancement and enjoy better service the transformation of technological experience and perception. innovation achievements into actual production, and enriched and DIGITALLY IMPROVED GOVERNANCE expanded new innovative technology EFFICIENCY TO FOCUS ON FUNDAMENTALS products, assisting the government in As a “pioneer” in the mixed-ownership reform of central efficient social governance and state-owned enterprises, China Unicom undertook serving the digital transformation of comprehensive digital transformation. Guided by the numerous industries. market-oriented allocation of factors of production, the

82 CHINA UNICOM (HONG KONG) LIMITED ANNUAL REPORT 2020 83 SOCIAL RESPONSIBILITY

DIGITALLY PROMOTED TALENT DIGITALLY BUILT A TRANSFORMATION AND DEVELOPMENT TO MUTUALLY BENEFICIAL REINFORCE PASSION AND WIN-WIN ECOSYSTEM The Company attaches great importance to staff TO EXPAND COOPERATION development and believes that a company thrives with Under the new landscape of talents. Serving both corporate and staff development accelerated digital transformation purposes, the Company restructured its staff mix through across the world, the Company digital transformation and focused on cultivating a group of continuously strengthened professionals with true technological innovation expertise cooperation with fellow operators, and ability to lead in industry competition. Meanwhile, the strategic investors, Internet SOCIAL RESPONSIBILITY MANAGEMENT Company effectively protected the legitimate interests of companies and supply chain partners, its staff, and encouraged them to actively participate in etc. to promote coordinated industry • Implementing social responsibility strategies corporate management, letting them share the fruits of development and network “co-build reform and development and grow together with the co-share”. It drove the optimisation • Improving social responsibility organizations Company. and upgrade of the supply chain and nurtured a flourishing digital • Establishing social responsibility systems innovation ecosystem to jointly • Assessing social responsibility capabilities promote the improvement of people’s living quality and the • Selecting social responsibility participation construction of an intelligent society.

CHINA UNICOM’S SOCIAL RESPONSIBILITY STRATEGY SYSTEM Innovate on application services to support digital economy

Build premium network to support cyber superpower development

Support industry development through open and win-win cooperation Create and Practise green development and promote energy conservation in society Share with society to promote social harmony Enhance Value Care about staff growth and enhance sense of reward

CUSTOMERS SHAREHOLDERS GOVERNMENT COMMUNITY EMPLOYEES PARTNERS PEERS

The Company will publish its detailed Corporate Social Responsibility Report 2020 in June 2021. For more details, please visit the Company’s website at https://www.chinaunicom.com.hk.

84 CHINA UNICOM (HONG KONG) LIMITED ANNUAL REPORT 2020 85 SOCIAL RESPONSIBILITY

86 CHINA UNICOM (HONG KONG) LIMITED ANNUAL REPORT 2020 87 table column width 65pt 88 (incorporated in Hong Kong with limited liability) limited with Kong Hong in (incorporated and informingouropinionthereon,wedonotprovideaseparateonthesematters. statements ofthe current period. These matters were addressed inthe context ofour auditofthe consolidated financial statements asawhole, Key auditmattersare those mattersthat, inourprofessional judgement, were ofmostsignificanceinouraudittheconsolidatedfinancial Key auditmatters appropriate toprovideabasisforouropinion. our other ethical responsibilities inaccordance with the Code. We believe thatthe auditevidence we have obtained issufficient and CHINA UNICOM (HONG KONG) LIMITED the in are furtherdescribed standards those under responsibilities by theHKICPA.Our issued (“HKSAs”) Auditing on Kong Standards Hong accordance with in audit our We conducted Basis foropinion in compliancewiththeHongKongCompaniesOrdinance. have beenproperlyprepared (“HKICPA”) and Accountants Public Certified of Kong Institute by theHong issued (“HKFRSs”) Standards Reporting Hong KongFinancial and Board (“IASB”) Standards Accounting by theInternational issued (“IFRSs”) Reporting Standards Financial International December 2020 and ofitsconsolidated financialperformance anditsconsolidated cashflowsfor the year then ended inaccordance with oftheGroupas at 31 atrueandfairview of theconsolidatedfinancialposition statementsgive financial In ouropinion,theconsolidated significant accountingpolicies. consolidated statement ofcash flows for the year then ended andnotes tothe consolidated financial statements, including asummary of statement ofincome, the consolidated statement ofcomprehensive income, the consolidated statement ofchanges inequity and the as at31December 2020, the consolidated position financial statement of comprise theconsolidated pages 93to185, which on set out Group”) We have audited the consolidated financialstatements ofChinaUnicom (Hong Kong) Limited (“the Company”) anditssubsidiaries (“the Opinion TO THEMEMBERSOFCHINAUNICOM(HONGKONG)LIMITED are of the Group inaccordance with the independent HKICPA’s AUDITOR’S REPORT INDEPENDENT Auditor’s responsibilities for the audit of the consolidated financial statements financial consolidated the of audit the for responsibilities Auditor’s

Code of Ethics for Professional Accountants Professional for Ethics of Code (“the Code”) and we (“theCode”) have fulfilled section of our report. We our of section table column width 65pt 89 ANNUAL REPORT 2020 ANNUAL design, implementation and operating effectiveness of design, implementation and operating effectiveness of IT general the over controls internal key management’s including operate, systems business in which the environment access to program controls, program change controls, program controls; development controls and computer operation design, implementation and operating effectiveness of completeness internal IT controls over the key management’s end-to-end and the and bill generation of rating and accuracy reconciliation controls from the rating and billing to the systems accounting system; comparing the details with the corresponding accounts receivable details and cash receipts; a sample basis; from customerswith of the use electronic audit tools using data the and reconciling systems support business the from extracted results to the Group’s financial records; determined by the Group for services and handsets offered in mobile by comparison handset bundled with the sales packages, sells Group the when handset or service of the prices observable that service or handset separately in similar circumstances and to similar customers; revenue allocation between the servicesand handsets offered in the comparing by packages sales bundled handset mobile and basis and recalculating allocation Group’s the with settings generated system with the allocation results the comparing results; specific risk-based sample basis, and comparing details of these journals underlyingentries with relevant documentation, which included service contracts and progress reports. How the matter was addressed in our audit How the matter was addressed Our audit procedures to the recognition assess of included revenue the following: • assessing, with the assistance of our internal IT specialists, the • assessing, with the assistance of our internal IT specialists, the • selecting bills issued to customers, on a sample basis, and • reconciling the Group’s revenue to the cash collection records on • recalculating the balances of accounts receivable and advances • prices selling standalone the basis, sample on a assessing, • assessing, on a sample basis, the settings in the IT system for • on a accounts, to revenue posted entries journals evaluating The Key Audit Matter provision from the of voice is primarily generated revenue The Group’s data and internet services, data and mobile broadband usage, lines transmission services, value-added other services, application usage and associated services and sales of telecommunications products. financial consolidated in the recorded of revenue accuracy The of billing systems the because risk industry inherent is an statements telecommunications companies are complex and process large volumes year, the sold during products of different a combination with of data through a number of different systems. Significant judgement can be required in management determining the of different and timing of recognition measurement appropriate sales bundled obligations within contracts containing performance which packages, may include and services telecommunication products Group’s in the required settings are and complex such as handsets, appropriate the achieve to (“IT”) systems technology information allocation of transaction prices. because audit matter as a key recognition revenue identified We and Group of the indicators performance key of the one is revenue judgement management and systems IT complex involves it because could be that revenue risk to an inherent rise both of which give period in the incorrector couldrecorded be subject to manipulation to meet targets or expectations. Revenue recognition Refer to note 6 to the consolidated financial statements on page 133 and the accounting policies on page 118 to 119. table column width 65pt 90 Refer to note 15 to the consolidated financial statements on pages 144 to 145 and the accounting policies on pages 109 to 110. to 109 pages on policies accounting the and 145 to 144 pages on statements financial consolidated the to 15 note to Refer CHINA UNICOM (HONG KONG) LIMITED report thatfact.Wehavenothingto reportinthisregard. If, based onthe workwe have performed, weconclude thatthere isamaterial misstatement ofthisother information, we arerequired to audit orotherwiseappearstobematerially misstated. the in statements orourknowledgeobtained financial the consolidated with materially inconsistent is whether theotherinformation consider so, doing in and, information other the read to is responsibility our statements, financial consolidated the of audit our with connection In conclusion thereon. Our opinionon the consolidated financial statements does notcover the other information andwe do notexpress any form ofassurance other thantheconsolidatedfinancialstatementsandourauditor’sreport thereon. report, annual the in included information the all comprises information other The information. other the for areresponsible directors The Information otherthantheconsolidatedfinancialstatementsandauditor’s reportthereon statements. financial consolidated tothe significance its of because and involved judgement management of level high the of matterbecause key audit as a equipment and property, plant the carryingvalueof We identified the estimation ofeconomic useful lives andresidual values • determining the date on which construction-in-progress is • determiningwhichcostsmeetthecriteriaforcapitalisation; • include: These the carrying profiles. value ofPP&E, the related depreciation and There are anumber ofareas where management judgement impacts December 2020wasapproximatelyRMB364,187million. improvements The carrying to network value ofPP&E quality. as at 31 connection with the expansion ofitsnetwork coverage and expenditure in level of capital to incurasignificant The Groupcontinues The KeyAuditMatter Carrying valueofproperty,plantandequipment(“PP&E”) AUDITOR’S REPORT INDEPENDENT assigned toproperty,plantandequipment. commences; transferred toproperty, plantandequipment anddepreciation

evaluatingmanagement’s estimationofusefuleconomic • transferring construction-in-progress the dateof challenging • assessing, onasample basis, costs capitalised during the year • assessing the design, implementation andoperating • the following: PP&E included assess thecarryingvalueof procedures to Our audit How thematterwasaddressedinouraudit telecommunications industry. wider the in adopted practices and business of the knowledge our considering by values residual and lives progress reports,onasamplebasis; project reports and/or to PP&E theinspection by examining construction-in-progress; on asample basis, the calculation ofinterest capitalised in recalculating the interest capitalisation rate andassessing, agreements, ratestoloan interest comparing included met which the relevant capitalised criteria for capitalisation; costs the whether assessing and invoices, and agreements purchase included which documentation, underlying relevant the with capitalised costs the comparing by useful economiclivesandresidualvalues; of estimation the over controls keyinternal the including equipment, and plant property, of accuracy and existence over thecompleteness, controls key internal effectiveness of

table column width 65pt 91 ANNUAL REPORT 2020 ANNUAL perform audit procedures responsive to those risks, and obtain audit to those risks, responsive audit procedures that is sufficient perform evidence and appropriate to provide a basis for as fraud our opinion. resulting from fraud is higher than for one resulting from error, a material misstatement of not detecting The risk control. may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal internal control. circumstances but not for the purpose of expressing an opinion on the effectiveness of the Group’s by the directors. as to continue ability Group’s doubt on the cast significant that may conditions or to events related exists uncertainty a material whether a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our future auditor’s events or conditions report. However, may cause the Group to cease to continue as a going concern. Responsibilities of the directors for the consolidated financial statements Responsibilities of the directors IFRSs with in accordance view and fair a true that give statements financial consolidated of the preparation the for responsible are directors The issued by the IASB and HKFRSs issued by the HKICPA and the Hong Kong Companies Ordinance and for such internal control as the directors determine is to necessary enable the preparation of consolidated financial from material misstatement, whether due statements that free are to fraud or error. In preparing the consolidated financial are responsible statements, the directors to continue as a going concern, for assessing the Group’s ability disclosing, using to going concern and going concern basis as applicable,the related accounting of intend unless matters the directors either to but to do so. cease operations, or have no realistic alternative liquidate the Group or to in discharging their responsibilities for overseeing the Group’s financial reporting process. The directors are assisted by the Audit Committee financial statements Auditor’s responsibilities for the audit of the consolidated Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material and to issue an auditor’s that includes report due to fraud or error, our opinion. whether misstatement, This is made solely to you, as a report and for no other purpose. We do not assume responsibility Companies Ordinance, in accordance with section 405 of the Hong Kong body, the contents of this report. towards or accept liability to any other person for Reasonable is a high assurance level of assurance but that an audit is not a guarantee conducted in accordance with HKSAs will a always detect in the or individually if, material considered and are error or fraud from can arise Misstatements it exists. when misstatement material could they expected to influence reasonably be decisions the economic aggregate, on of users taken the basis consolidated of these financial statements. professional exercise judgement and maintain ofwe an audit part professional As in accordance with HKSAs, scepticism throughout the audit. We also: • and design error, or fraud to due whether statements, financial consolidated of the misstatement of material risks the and assess Identify • appropriate in the that are audit procedures control relevant to the audit in order to design of internal Obtain an understanding • appropriateness of accounting Evaluate the policies disclosures reasonableness of accounting and related made used and the estimates • obtained, evidence audit on the based basis of accounting and, going concern of the use directors’ of the appropriateness on the Conclude table column width 65pt 92 Certified Public Accountants Public Certified CHINA UNICOM (HONG KONG) LIMITED 11 March2021 Central, HongKong 10 ChaterRoad 8th Floor,Prince’sBuilding KPMG The engagementpartnerontheauditresultinginthisindependentauditor’sreportisChanKimTak. the publicinterestbenefitsofsuchcommunication. be expected reasonably to outweigh ourreport so would because theadverse in be consequences ofdoing communicated not matter should report unless law or regulation precludes public disclosure aboutthe matter or when, inextremely rare circumstances, we determine that a auditor’s our mattersin these Wedescribe matters. keyaudit the aretherefore and period current the of statements financial consolidated the of audit the in mostsignificance matters thatwereof those wedetermine Committee, Audit the with matterscommunicated the From applicable, actionstakentoeliminatethreatsorsafeguardsapplied. bethoughttobearonourindependenceand,where andothermattersthatmayreasonably relationships themall with communicate Committee withastatement We provide theAudit that we with relevant also have ethical requirements complied and regarding independence findings, includinganysignificantdeficienciesininternalcontrolthatweidentifyduringouraudit. We communicate withthe Audit Committee regarding, audit among other matters,and significant scope andtimingofthe audit the planned the Group to oftheactivitieswithin entities or appropriateauditevidence business information regarding sufficient the Obtain financial • Evaluate the overall presentation, structure andcontent ofthe consolidated financial statements, including the disclosures, and whether • AUDITOR’S REPORT INDEPENDENT group audit.Weremainsolelyresponsibleforourauditopinion. and performance statements. We of the for thedirection,supervision are financial responsible on theconsolidated express an opinion the consolidatedfinancialstatementsrepresentunderlyingtransactionsandeventsinamannerthatachievesfairpresentation.

table column width 65pt 93

42 646 0.37 0.37 2019 1,272 1,359 1,735 (2,123) (2,795) 14,167 11,372 11,330 (26,412) (64,480) (50,516) (43,236) (11,513) (83,080) 290,515

ANNUAL REPORT 2020 ANNUAL 84 787 0.41 0.41 2020 1,366 1,588 2,911 (1,747) (3,450) 16,027 12,577 12,493 (70,237) (26,862) (55,740) (46,286) (83,017) (10,574) 303,838 Year ended 31 December OF INCOME OF

9 8 7 6 10 11 12 14 14 13 Note

(All amounts in Renminbi (“RMB”) millions, except per share data) per share except in Renminbi (“RMB”) millions, (All amounts CONSOLIDATED STATEMENT CONSOLIDATED net — Equity shareholders of the Company Non-controlling interests during the year: Interest income Other operating expenses Finance costs Share of net profit of associates Share of net profit of joint ventures Other income Costs of telecommunications products sold Employee benefit expenses

Depreciation and amortisation support expenses Network, operation and Profit before income tax Profit for the year Profit attributable to: Earnings per share for profit attributable to equity shareholders of the Company Basic earnings per share (RMB) Diluted earnings per share (RMB) Details of dividends attributable to equity shareholders of the Company for the years ended 31 December 2020 and 2019 are set out in Note 32. The notes on pages 102 to 185 are an integral part of these consolidated financial statements. Revenue Interconnection charges Income tax expenses table column width 65pt 94 The notesonpages102to185areanintegralpartoftheseconsolidated financialstatements. Total comprehensiveincomeattributableto: Total comprehensiveincomefortheyear Other comprehensiveincomefortheyear,netoftax Item thatmaybereclassifiedsubsequentlytostatementofincome: Items thatwillnotbereclassifiedtostatementofincome: Other comprehensiveincome Profit fortheyear CHINA UNICOM (HONG KONG) LIMITED (All amountsinRMBmillions) OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT Currency translationdifferences Non-controlling interests Equity shareholdersoftheCompany Changes infairvalueoffinancialassetsmeasuredatFVOCI,nettax(recycling) Others Changes infairvalueoffinancialassetsmeasuredatFVOCI,nettax(non-recycling) Tax effectonchangesinfairvalueoffinancialassetsmeasuredatFVOCI(non-recycling) Changes infairvalueoffinancialassetsmeasuredatFVOCI(non-recycling)

Year ended31December 10,787 10,871 12,577 (1,706) (1,483) (1,478) (1,482) 2020 (257) (223) 84 34 (5) 4

10,829 10,871 11,372 2019 (501) (582) (581) (583) 81 42 81 — (1) 2 table column width 65pt 95

240 202 595 2019 2,359 1,308 2,771 7,688 3,448 3,716 4,771 1,226 4,923 3,891 83,595 43,073 17,233 12,456 36,445 34,945 13,808 478,904 562,499 367,401

ANNUAL REPORT 2020 ANNUAL 823 195 745 103 2020 1,951 2,771 3,665 5,656 3,672 3,493 16,287 37,960 15,882 10,570 38,802 24,189 11,989 23,085 14,591 As at 31 December 471,980 108,636 580,616 364,187 (All amounts in RMB millions) (All amounts

26 21 27 15 16 17 28 45 19 45 23 24 29 20 13 21 22 23 25 Note

OF FINANCIAL POSITION FINANCIAL OF CONSOLIDATED STATEMENT CONSOLIDATED Inventories and consumables Contract assets Accounts receivable Property, plant and equipment Right-of-use assets Goodwill Prepayments and other current assets Amounts due from ultimate holding company Interest in associates Amounts due from related parties Amounts due from domestic carriers Financial assets measured at fair value Short-term bank deposits and restricted deposits Cash and cash equivalents Interest in joint ventures Deferred income tax assets Contract assets Contract costs Financial assets measured at fair value Other assets

Current assets Total assets ASSETS Non-current assets table column width 65pt 96 Non-current liabilities LIABILITIES Total equity Non-controlling interests Equity attributabletoequityshareholdersoftheCompany EQUITY CHINA UNICOM (HONG KONG) LIMITED (All amountsinRMBmillions) OF FINANCIAL POSITION CONSOLIDATED STATEMENT Other obligations Amounts duetorelatedparties Deferred revenue Deferred incometaxliabilities Lease liabilities Corporate bonds Promissory notes Long-term bankloans Retained profits Reserves Share capital — — Others Proposedfinaldividend

Note 38 45 37 13 36 35 34 33 32 31 30

254,056 327,520 326,587 (18,821) As at31December 16,458 86,334 31,068 3,042 5,927 1,999 2,482 5,018 2020 998 933 98 64

254,056 320,755 320,047 (18,803) 21,535 80,265 36,554 3,042 4,851 2,998 2,869 4,529 2019 174 998 708 87 table column width 65pt 97 — 920 330 437 2019 2,604 5,564 8,995 4,039 1,534 1,779 7,851 2,174 40,648 10,790 205,190 241,744 562,499 357,309 117,525 (121,595)

ANNUAL REPORT 2020 ANNUAL — 359 740 418 2020 2,529 7,000 1,000 5,482 2,805 1,640 9,183 2,291 42,641 11,503 As at 31 December 222,028 253,096 580,616 358,588 134,437 (113,392)

38 21 39 40 33 35 36 41 45 45 Note

Zhu Kebing Director Current portion of other obligations Contract liabilities Advances from customers Short-term bank loans Commercial papers bank loans Current portion of long-term bonds Current portion of corporate Lease liabilities Accounts payable and accrued liabilities Bills payable Taxes payable Amounts due to ultimate holding company Amounts due to related parties Amounts due to domestic carriers Dividend payable

Wang Xiaochu Total liabilities Total equity and liabilities Net current liabilities Total assets less current liabilities The notes on pages 102 to 185 are an integral part of these consolidated financial statements. of the Board by: Approved and authorised for issue by the Board of Directors on 11 March 2021 and signed on behalf Current liabilities Director table column width 65pt 98 Others Capital contribution relating toshare-based payment relating contribution Capital to 2019 relating Dividends Appropriation tootherreserves Appropriation Appropriation tostatutoryreserves Appropriation Total comprehensive income fortheyearcomprehensive income Total The notesonpages102to185areanintegralpartoftheseconsolidatedfinancialstatements. Share of an associate’sShare of otherreserves Balance at1January 2020 Balance at31December 2019 Balance at31December 2020 CHINA UNICOM (HONG KONG) LIMITED (All amountsinRMBmillions) Capital contribution from non-controlling interests fromnon-controlling contribution Capital Balance at1January2019 Total comprehensive income fortheyearcomprehensive income Total Share of an associate’sShare of otherreserves Capital contribution relating toshare-based relating payment contribution Capital to2018 relating Dividends tootherreserves Appropriation tostatutoryreserves Appropriation OF CHANGES IN EQUITY CONSOLIDATED STATEMENT borne byAShare Company borne byAShare Company

Note 44 32 44 32

5,5 9 796 015(172 474300778320,755 708 320,047 84,794 (41,722) 30,185 (7,956) 690 254,056 5,5 7 735 892(222 903328834313,212 364 312,848 79,053 (42,272) 28,912 (7,375) 474 254,056 5,5 9 796 015(172 474300778320,755 708 320,047 84,794 (41,722) 30,185 (7,956) 690 254,056 5,5 5 944 141(168 132365793327,520 933 326,587 91,352 (41,668) 31,431 (9,434) 850 254,056 capital Share — — — — — — — — — — — — — —

General risk reserve 160 216 — — — — — — — — — — — — Attributable to equity shareholders ofthe Company

revaluation Investment reserve (1,478) (581) — — — — — — — — — — — —

Statu reserves 1,246 1,273 to — — — — — — — — — — — — ry (37)

reserves Other 28 24310,787 12,493 (228) (307) 375 206 571 (56) 01,3 10,829 11,330 80 — — — — — —

Retained rft Total profits 459 (4,529) (4,529) (1,246) 410 (4,100) (4,100) (1,273) (160) (216) — — — — — — (37)

(307) 375 0 0 508 302 206 571 5)141 (56) — — — —

controlling neet Total equity interests Non- 410,871 84 210,871 42 — — — — — — — — — —

(37)

(4,529) (4,100) (307) 375 571 85 — — — — table column width 65pt 99

— — — — — 82 34 (15) 531 205 (423) (304) (137) 2019 1,512 1,551 (4,355) (2,521) 94,952 93,678 11,134 (56,187) (59,053) (11,434)

ANNUAL REPORT 2020 ANNUAL 19 210 546 (117) 2020 1,647 4,268 1,309 9,050 (4,675) (5,751) (9,050) (1,354) (1,832) (1,349) (6,900) 19,511 13,704 (42,650) (92,018) (53,981) (16,500) 107,428 105,551 (All amounts in RMB millions) (All amounts Year ended 31 December

OF CASH FLOWS CASH OF CONSOLIDATED STATEMENT CONSOLIDATED Acquisition of debt securities measured at FVOCI (recycling) Acquisition of debt securities measured at FVOCI Proceeds from disposal of property, plant and equipment and other assets Proceeds from disposal of property, plant and equipment at FVPL Proceeds from disposal of financial assets measured Purchase of other assets Acquisition of financial assets measured at FVPL at FVOCI (recycling) Proceeds from disposal of debt securities measured amortised cost Acquisition of other financial assets measured at Net cash outflow from investing activities Cash generated from operations Interest received Income tax paid Net cash inflow from operating activities right-of-use assets Purchase of property, plant and equipment and Interest paid Proceeds from disposal of other financial assets measured at amortised cost Proceeds from disposal of other financial assets at FVOCI (non-recycling) Dividend received from financial assets measured Acquisition of interest in associates Acquisition of interest in joint ventures venture Proceeds from disposal of associates and a joint Repayment of loans from related parties to Finance Company (Increase)/Decrease in short-term bank deposits and restricted deposits (Increase)/Decrease in short-term bank deposits Lending by Unicom Group Finance Company Limited (“Finance Company”) to a related party Dividends received from associates

Cash flows from operating activities Cash flows from operating Cash flows from investing activities table column width 65pt 100 The notesonpages102to185areanintegralpartoftheseconsolidated financialstatements. Analysis ofthebalancescashandequivalents: Cash andcashequivalents,endofyear Net (decrease)/increaseincashandequivalents Cash flowsfromfinancingactivities CHINA UNICOM (HONG KONG) LIMITED (All amountsinRMBmillions) OF CASH FLOWS CONSOLIDATED STATEMENT Bank balances Cash balances Effect ofchangesinforeignexchangerate Cash andcashequivalents,beginningofyear Net cashoutflowfromfinancingactivities Increase instatutoryreservedepositsplacedbyFinanceCompany Net depositswithFinanceCompanybyrelatedparties Dividends paidtoequityshareholdersoftheCompany Proceeds frompromissorynotes Proceeds fromcommercialpapers Proceeds fromshort-termbankloans Capital contributionsfromnon-controllinginterests Payment ofissuingexpenseforcommercialpapers Capital elementofleaserentalspaid Repayment ofcorporatebonds Repayment ofrelatedpartyloans Loans fromarelatedparty Proceeds fromcorporatebonds Repayment ofcommercialpapers Repayment oflong-termbankloans Repayment ofshort-termbankloans

Note 29 32

Year ended31December (11,677) (25,210) (11,696) (10,000) 23,084 23,085 34,945 23,085 (1,140) (5,447) (7,564) 8,000 2,740 2020 (183) (395) 283 (50) 66 — — — — (7) 1

(29,765) (17,000) (11,123) (38,290) 34,944 34,945 30,060 28,784 34,945 (4,100) 8,995 4,860 2,000 2019 (351) (418) 508 236 992 (48) 25 50 — — 1 table column width 65pt 101 2 (7) — 30 (16) (24) (96) 216 322 623 364 745 321 571 (796) (205) (646) (122) (335) 2019 1,164 2,386 1,991 2,179 3,663 (2,002) (1,876) (1,272) (1,359) (5,928) (2,188) 94,952 14,167 83,080

ANNUAL REPORT 2020 ANNUAL (5) 29 59 (11) (36) (87) 117 375 (198) (217) (154) (174) (787) (233) (210) 2020 1,076 1,076 1,993 8,210 1,271 1,564 1,125 2,365 5,584 (4,178) (1,694) (1,366) (1,588) (1,371) (4,151) 16,027 83,017 107,428 Year ended 31 December

Increase in amounts due to domestic carriers Increase in amounts due to related parties Increase in deferred revenue (Decrease)/Increase in amounts due to ultimate holding company Increase in advances from customers Increase/(Decrease) in contract liabilities Decrease in other obligations Increase in accounts payable and accrued liabilities Increase in taxes payable (Increase)/Decrease in amounts due from related parties (Increase)/Decrease in amounts due from domestic carriers Increase in prepayments and other current assets Increase in amounts due from ultimate holding company Increase in other assets Fair value gains on financial assets measured at FVPL Fair value gains on financial assets measured at Depreciation and amortisation Interest income Finance costs FVPL Gains on disposal of financial assets measured at at FVOCI (recycling) Investment income from debt securities measured Share of net profit of associates Share of net profit of joint ventures granted to the Group’s employees Expenses for restricted shares of A Share Company Decrease/(Increase) in contract assets Increase in contract costs Decrease/(Increase) in inventories and consumables (Increase)/Decrease in restricted deposits Loss on disposal of property, plant and equipment Credit loss allowance and write-down of inventories (non-recycling) Dividend from financial assets measured at FVOCI Increase in accounts receivable

Cash generated from operations Profit before income tax Adjustments for: Changes in working capital: (a) operating activities is as follows: before income tax to cash generated from The reconciliation of profit table column width 65pt 102 CHINA UNICOM (HONG KONG) LIMITED Statementof compliance 2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. ORGANISATION AND PRINCIPAL ACTIVITIES 1. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED have beenconsistentlyappliedtoalltheyearspresented,unlessotherwisestated. These policies statements below. are set out financial these consolidated of the preparation in applied policies accounting The principal company, respectively. holding ultimate and company holding the immediately as Group”) the PRC,hereinafterreferred “Unicom as in to enterprise established state-owned (a Limited Company Group Network United Communications China and BVI Unicom consider the Company directors of The shares listedontheShanghaiStockExchange9October2002. 31 December the PRCon in 2001, (hereinafter stock companyincorporateditsA referred Limited with a joint to as“AShare Company”), Limited (“Unicom Group BVI”).The majority ofequity interests inUnicom BVIisowned by ChinaUnited Network Communications The substantialshareholders ofthe Companyare ChinaUnicom (BVI)Limited(“UnicomBVI”)andChinaUnicom GroupCorporation(BVI) Depositary Shares(“ADS”)oftheCompanywerelistedonNewYorkStockExchange21June2000. American the 2000and 22June on (“SEHK”) Limited Kong Hong of Exchange Stock The on werelisted Company the of shares The address oftheCompany’sregisteredofficeis75thFloor,TheCenter,99Queen’sRoadCentral,HongKong. The are hereinafter referred to asthe“Group”. subsidiaries its and the PRC.TheCompany in products telecommunications of sales and services associated and usage lines transmission services, value-added other services, application internet and data services, data mobile and voice usage,broadband of are the provision subsidiaries the Company’s of activities The principal investment holding. is Company ofthe activity principal The 2000. on8February (the“PRC”) ofChina Republic thePeople’s Kong”), (“Hong Region Administrative theHongKongSpecial companyin liability asalimited (the“Company”)wasincorporated (HongKong)Limited Unicom China requirements oftheHongKongCompaniesOrdinance. the applicable disclosure provisions ofthe Rules Governing the Listing ofSecurities onthe SEHK (“Listing Rules”) and the as as well HKFRSs with comply statements also The financial IFRSs. with (“HKICPA”), are consistent Accountants Public Certified of theHongKongInstitute by issued andInterpretations (“HKASs”) Standards HongKongAccounting Standards, Reporting Hong KongFinancial individual which collectiveterm all applicable (“HKFRSs”), includes Reporting Standards Hong Kong Financial by theIASB. issued Interpretations and (“IASs”) Standards Accounting International Standards, Reporting Financial International individual applicable all term collective includes which (“IASB”), Board Standards Accounting by theInternational issued (“IFRSs”) The financial statements have been prepared inaccordance with allapplicable International Financial Reporting Standards

table column width 65pt 103 ANNUAL REPORT 2020 ANNUAL (Continued) approximately RMB348.4 billion was unutilised as at 31 December 2020; and good credit history. for the leasehold land performed by independent valuers for the purpose of reporting to relevant PRC government PRC government for the purpose of reporting to relevant valuers by independent for the leasehold land performed taxation; authorities, and adjustment for corresponding deferred billion RMB113.4 approximately by assets current exceeded Group of the liabilities current 2020, December 31 at As of the into account conditions and taking economic current the billion). Considering RMB121.6 approximately (2019: the considered has comprehensively management future, foreseeable in the expenditure capital expected Group’s Group’s available sources of funds as follows: • The Group’s continuous net cash inflows from operating activities; • billion Approximately RMB352.4 of revolving banking quota bonds, facilities of corporate of which and registered • Other available sources of financing from domestic banks and other financial institutions in view of the Group’s and perspectives and long-term medium short, funds from to raise ability it has the Group believes the In addition, maintain reasonable financing costs through appropriate financing portfolio. its funds to meet has sufficient Group opinion that the is of the of Directors Board the considerations, above on the Based working capital commitments, expected capital expenditure and debt obligations. As a result, the consolidated financial concern basis. statements of the Group for the year ended 31 December 2020 have been prepared on a going • recognition of goodwill associated with the acquisition of certain subsidiaries prior to 2005; and • recognition of the dilution gain or loss of interest in equity-accounted investee. The consolidated financial the historical been prepared under statements have cost convention, the following except that assets set out below: are stated at their fair value • at fair value Financial assets measured The consolidated financial prepared by the PRC subsidiaries statements for PRC statutory reporting purposes are based on the which PRC, (“MOF”) of the of Finance Ministry the by issued (“CAS”) Enterprises Business for Standards Accounting Chinese Group’s the between differences certain are There provisions. transitional certain 2007 with 1 January from effective became IFRS/HKFRS financial and statements financial PRC The principal statements. adjustments made to the PRC financial statements to conform to IFRSs/HKFRSs include the following: • reversal of the revaluation surplus or deficit and related amortisation charges arising from the revaluation of prepayments (a) Going Concern Assumption 2.2 Basis of preparation 2. 2. POLICIES ACCOUNTING SIGNIFICANT OF SUMMARY table column width 65pt 104 CHINA UNICOM (HONG KONG) LIMITED NewAccountingStandardsandAmendments (c) CriticalAccountingEstimatesandJudgment (b) Basisofpreparation(Continued) 2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Concessions” onleasemodifications. Rent 16, “Covid-19-related under theamendmentstoIFRS/HKFRS take the practiceexpedientavailable not advantageof does In particular,theGroup yet not effective period. thatis for thecurrent orinterpretation accounting new standard any applied statements. TheGrouphasnot financial prior periodshavebeenconsolidated prepared this or presented in for thecurrent or position financial the Group’sresultsand how a materialeffect on the amendmentshavehad None of AmendmentstoIFRS/HKFRS16,“Covid-19-RelatedRentConcessions” • AmendmentstoIAS/HKAS1and8,“DefinitionofMaterial” • AmendmentstoIFRS/HKFRS9,IAS/HKAS39and7,“InterestRateBenchmarkReform” • AmendmentstoIFRS/HKFRS3,“Definitionofabusiness” • financial statements: the current accountingperiod ofthe Group. Ofthese, the following amendments are relevant tothe Group’s consolidated effective are first IASs/HKASs thatfor and IFRSs/HKFRSs amendments to a numberof HKICPA have issued IASB and The statements andmajorsourcesofestimationuncertaintyarediscussedinNote4. Judgments made by management inthe application ofIFRSs/HKFRSs that have significant effect onthe financial revision andfutureperiodsiftheaffectsbothcurrentperiods. ofthe theperiod orin thatperiod, affectsonly therevision if revised is theestimate which in period the in recognised The estimates and underlying assumptionsare reviewed on an ongoing basis. Revisions to accounting estimates are may differfromtheseestimates. that are carrying not readilyapparentfromother sources. Actualresults judgments about values ofassets and liabilities factors thatare believed tobe reasonable under the circumstances, the results ofwhichform the basis of making the income andexpenses. The estimates andassociated assumptionsare based onhistorical experience andvarious other of assets, reported liabilities, amounts and of policies that affecttheapplication assumptions judgments, estimates and requires management to make IFRSs/HKFRSs with conformity statements in financial the consolidated The preparationof (Continued)

table column width 65pt 105 or after Effective for beginning on beginning on 1 January, 2021 1 January, 2022 1 January, 2022 1 January, 2022 1 January, 2023 accounting periods ANNUAL REPORT 2020 ANNUAL

2020 – Phase 2” (Continued) — HKFRS 16, “Interest Rate Benchmark Reform December 2020. The IASB and has HKICPA issued a number of amendments to IFRSs/HKFRSs and IASs/HKASs which are not yet effective 2020 and ended which 31 December for the year not have been adopted in these consolidated financial statements. Of financial statements: are relevant to the Group’s consolidated these, the following developments Amendments to IFRS/HKFRS 9, IAS/HKAS 39, IFRS/HKFRS 7, IFRS/HKFRS 4 and IFRS/Amendments to IFRS/HKFRS 9, IAS/HKAS 39, IFRS/HKFRS Conceptual Framework” Amendments to IFRS/HKFRS 3, “Reference to the Equipment: Proceeds before Intended Use”Amendments to IAS/HKAS 16, “Property, Plant and of Fulfilling a Contract” Amendments to IAS/HKAS 37, “Onerous Contracts-Cost 2018 Annual Improvements to IFRS/HKFRS Standards 1 January, 2022 Amendments to IAS/HKAS 1, “Classification of Liabilities as Current or Non-current” Amendments to IAS/HKAS 1, “Classification of Liabilities relevant adopt the and will and interpretations, standards to amendments of such impact the is assessing Group The So far it has concluded that the as required. period in the subsequent amendments to standards and interpretations impact on the consolidated financial statements. adoption of them is unlikely to have a significant Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When are considered. assessing whether the Group has power, only substantive rights (held by the Group and other parties) An investment in a subsidiary is consolidated into the consolidated financial the date that control from commences statements until that control the date ceases. Intra-group balances, transactions and cash flows and any unrealised profits arising from intra- from resulting losses Unrealised financial statements. consolidated the in preparing in full eliminated are transactions group intra-group transactions eliminated as unrealised of no are is in way gains evidence the same but only that there to the extent impairment. under and businesses combination of entities business account for to of accounting method purchase the adopted Group The of accounting purchase method the at the date of the acquisition, common control in 2005. Under force before the cost of an the at assumed or incurred and liabilities issued instruments equity given, assets of the value fair the at measured was acquisition and contingent and liabilities acquired assets acquisition. Identifiable to the attributable plus costs directly of exchange, date non- of any extent of the irrespective date, acquisition at the values fair at their initially measured were assumed liabilities assets net identifiable of the share Group’s of the value fair the cost of acquisition over of the excess The interest. controlling acquired as goodwill. was recorded If the cost of acquisition was less than the fair value of of the Group’s share the identifiable income. net assets of the subsidiary acquired, the difference was recognised directly in the statement of 2.2 Basis of preparation (Continued) (d) yet effective for the year ended 31 new standards and interpretations issued but not Possible impact of amendments, 2. 2. POLICIES ACCOUNTING SIGNIFICANT OF SUMMARY 2.3 and non-controlling interests Subsidiaries table column width 65pt 106 . Associates,jointventuresandarrangement 2.4 Subsidiariesandnon-controllinginterests(Continued) 2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. CHINA UNICOM (HONG KONG) LIMITED (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED and haverightstothenetassetsofarrangement. venture A is anarrangement joint agree whereby other partiescontractually the Groupand of thearrangement, to share control including participationinthefinancialandoperatingpolicydecisions. An associate isan entity inwhich the Group has significant influence, but not control or joint control, over its management, 2.13), unlesstheinvestmentisclassifiedasheldforsale(orincludedina disposalgroupthatisclassifiedasheldforsale). (see isstatedatcostlessimpairmentlossesNote a subsidiary an investmentin position, In theCompany’sstatement of financial 2.12) or,whenappropriate,thecostoninitialrecognitionofaninvestmentinassociateorjointventure(seeNote2.4). asset (see Note of afinancial recognition is regarded amount this asthefairvalueoninitial is recognisedatfairvalueand lost is Any at thedatewhencontrol interest thatformer retained in or loss. subsidiary profit being recognisedin resulting gainorloss When the Group loses control ofasubsidiary, itisaccounted for asadisposalofthe entire interest inthatsubsidiary, with a the changeinrelativeinterests,butnoadjustmentsaremadetogoodwillandgainorlossisrecognised. reflect to equity consolidated interests within non-controlling and controlling of the amounts are made to whereby adjustments are for asequitytransactions, of controlaccounted a loss result in not that do a subsidiary theGroup’sinterestsin Changes in depending onthenatureofliability. holders are presented asfinancialliabilities inthe consolidatedstatement offinancialpositioninaccordance withNote 2.20 towards these obligations other contractual interests and of non-controlling from holders Loans the Company. of shareholders the totalprofit or lossandtotalcomprehensive income for the year between non-controlling interests andthe equity of statement the statement face of comprehensive of incomeandthe of theincomeasanallocation consolidated consolidated the resultsofGroupare interests in presented on Non-controlling shareholders ofthe Company. to theequity attributable equity, separatelyfromequity within position financial statement of the consolidated interests are presented in Non-controlling controlling interests’proportionateshareofthesubsidiary’snetidentifiableassets. non- atthe or value atfair either interests non-controlling any measure to elect can Group the combination, business each For liability. of afinancial respect in of thoseintereststhatmeets the definition obligation Group asawholehavingcontractual respect ofwhich the Group hasnotagreed any additionalterms with the holders ofthose interests which would result inthe in and Company, the to indirectly or directly attributable not asubsidiary in equity the represent interests Non-controlling method, whichisconsistentwithHKFRSs. values predecessor the using control common under businesses and entities of combinations business for account to policy (“AG 5”)issued bythe HKICPA in2005.Upon the adoptionofIFRSsbythe Groupin2008, the Group adopted the accounting 5 “Mergercombinations” for commoncontrol merger Guideline accordance withtheAccounting using accounting in accounting under commoncontrolofthe Group after of entityandbusiness 2005 was combination accounted for Under HKFRSs, business (Continued)

table column width 65pt 107 ANNUAL REPORT 2020 ANNUAL (Continued) An investment in an associate or a joint venture is accounted for in the consolidated financial statements under the equity equity the under statements financial consolidated in the for is accounted venture a joint or in an associate investment An method, unless it is classified held as for sale (or included in a disposal group that is classified as held for sale). Under the equity fair acquisition-date of the share Group’s of the excess any for adjusted cost, at recorded is initially investment the method, includes investment The cost of the (if any). investment the cost of the assets over net identifiable investee’s values of the purchase price, other costs directly attributable to the acquisition of the investment, and any direct investment into the associate the investment is adjusted for the post acquisition or joint part of the Group’s equity investment. Thereafter, that forms venture change in the Group’s share of the investee’s netand assets any impairment loss relating to the investment. The Group’s share of the post-acquisition post-tax results of the investees and any impairment recognised in are lossesthe consolidated for the year comprehensive other investees’ of the post-acquisition post-tax items of the share Group’s the whereas of income, statement in the consolidated statement of comprehensive income. income is recognised as other comprehensive income When the Group’s share of its interest in losses exceeds the associate or the joint the Group’s interest is reduced to nil venture, and recognition extent that the Group has incurred legal of further losses is discontinued except to the or constructive of the amount carrying is the interest Group’s the purpose, this For investee. of the on behalf payments made or obligations with the Group’s long-term interests that in investment under the equity method together substance form part of the Group’s where to such other long-term interests ECL model applying the (after joint venture or the in the associate investment net applicable). Unrealised profits and losses resulting from transactions between the Group and its associates and joint venture are eliminated to unrealised the extent of the Group’s interest inexcept where losses the investee, provide evidence of an impairment of the immediately in profit or loss. asset transferred, in which case they are recognised remeasured. is not interest retained versa, vice or venture joint in a an investment becomes associate an in investment an If for under the equity method. Instead, the investment continues to be accounted In all when cases, the Group other to have significant ceases influence an over associate or joint control a joint over it is venture, loss with a resulting gain or being recognised in profit loss. or in that investee, accounted for as a disposal interest entire of the Any interest retained in that former investee at the date when significant influence or joint control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset. joint parties have control. more Joint contractually agreed of which two or is the control is an arrangement joint A arrangement sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. 5G network of the and maintenance operation construction, with the associated and rewards risks the share To better infrastructure, the Group entered into a framework agreement with China Telecom Corporation Limited (“China Telecom”) to with “Cooperation In accordance build, infrastructure (the Agreement”). network maintain one nationwideaccess and share 5G 5G of and maintenance construction the for responsible is China Telecom and Group of the each Agreement, Cooperation the network infrastructure in designated their respective regions, and bear the associated construction, maintenance and operating planning, network including overall decisions and key mechanism a joint operation established have costs. Both parties and maintenance on construction standard and a unified acceptance and completion commencement project construction services across all regions are subject to mutual agreement by both parties. has and vehicle, separate a through structured is not that operation joint a as arrangement the for accounted has Group The the arrangement. recognised its share of assets, liabilities, revenues and expenses in accordance with the terms of 2.4 and joint arrangement (Continued) Associates, joint ventures 2. 2. POLICIES ACCOUNTING SIGNIFICANT OF SUMMARY table column width 65pt 108 CHINA UNICOM (HONG KONG) LIMITED (c) Group Transactionsandbalances companies (b) Functionalandpresentationcurrency (a) Foreigncurrencytranslation 2.6 Segmentreporting 2.5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED regularly, hasbeenidentifiedastheExecutiveDirectorsofCompanythatmakesstrategicdecisions. resources and assessingperformance for allocating of theoperatingsegments The CODM,whoisresponsibleMaker (“CODM”). Operating Decision- to theChief reporting provided the internal Operating segments with are a mannerconsistent reported in or lossondisposal. When aforeign operation issold, such exchange differences are recognised inthe statement ofincome aspart ofthe gain investments, are taken toshareholders’equity. such as hedgesof other currency designated instruments and borrowings of and operations, foreign in ofthenetinvestment fromthetranslation arising exchangedifferences consolidation, On Allresultingexchange as aseparate of differences are other comprehensive incomeand component recognised in • averageis this rates(unless ataverageexchange aretranslated ofincome statement foreach expenses and Income • rateatthe closing atthe aretranslated presented position financial of statement each for liabilities Assetsand • currency asfollows: the presentation currency into are currencyfrom thepresentation translated different have afunctional economy) that The results andfinancialpositionofallthe Group entities (none ofwhichhasthe currency of ahyperinflationary denominated inforeigncurrenciesarerecognisedthestatementofincome. liabilities exchangeratesofmonetaryassetsand atyear-end translation fromthe and transactions ofsuch settlement of the transactions or valuation where items are re-measured. Foreign exchange gains andlosses resulting from the at thedates the exchangeratesprevailing currency using the functional are translatedinto currency Foreign transactions are presentedinRMB,whichistheCompany’sfunctionalandpresentationcurrency. statements operate(“thefunctionalcurrency”).Theconsolidatedfinancial theentities inwhich economic environment statements of eachtheGroup’sentitiesare the measured the currency in financial using Items of theprimary included equity intootherreserve. case incomeandexpensesaretranslatedatthedatesoftransactions); which dates, in effect the transaction of thecumulative of therates on prevailing a reasonableapproximation not statement offinancialpositiondate; (Continued)

table column width 65pt 109 5% 5% 5% – – – 3 3 3 ANNUAL REPORT 2020 ANNUAL

10 years 10 years 30 years – – – 5 5 10 Depreciable life Residual rate

(Continued) Telecommunications equipment Office furniture, fixtures, motor vehicles and other equipment lease periods. Leasehold improvements are depreciated over the shorter of their estimated useful lives and the The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date. is amount carrying asset’s if the amount recoverable its to immediately down is written amount carrying asset’s An greater than its estimated recoverable amount (Note 2.13). Buildings Construction-in-progress Construction-in-progress (“CIP”) buildings, represents plant and equipment under construction and pending installation, and is stated at cost less accumulated impairment losses. Costs include construction and acquisition costs, and interest arising charges from borrowings used to finance the assets during the construction period. No provision depreciation for being asset the When use. intended its for ready and completed are assets the as time such until on CIP made is category of assets. for use, the CIP is transferred to the appropriate constructed becomes available accumulated and depreciation accumulated less cost at stated are Group the by held equipment and plant Property, expected useful lives. impairment losses, and are depreciated over their Property, plant and equipment comprise buildings, telecommunications equipment, leasehold improvements, office furniture, fixtures, motor vehicles and other equipment. The cost of an asset, except for those acquired in exchange for a non-monetary comprises its assets, asset or purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. plant If an item of property, and equipmentplant is acquired in for anotherand item of property, exchange equipment, the cost of such an plantitem of property, and equipment is measured at fair value unless (i) the exchange transactions measurable. up is reliably given asset the nor received asset the of neither value fair (ii) the or substance commercial lacks its cost is measured at the carrying amount of the asset given up. If the acquired item is not measured at fair value, Subsequent costs are included in theasset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable incurred at the time the costs that are future economic benefits associated with the item will flow to the part is derecognised. All amount of the replaced reliably. The carrying can be measured item cost of the Group, and the other repairs and maintenance are charged to the statement of income during the financial period in which they are incurred. Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their costs less their residual values over their estimated useful lives, as follows: (b) Property, plant and equipment Depreciation (c) Construction-in-progress (a) 2.7 Property, plant and equipment 2. 2. POLICIES ACCOUNTING SIGNIFICANT OF SUMMARY table column width 65pt 110 CHINA UNICOM (HONG KONG) LIMITED Contractcosts 2.9 2.8Goodwill Gainorlossondisposalofproperty,plantequipment (d) Property,plantandequipment(Continued) 2.7 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED The accountingpolicyforrevenuerecognitionissetoutinNote2.25. when therevenue the assetrelates or loss contract costsischarged is recognised. to which to profit of capitalised Amortisation that relatedirectlytoprovidingthosegoodsorserviceshavenotyet beenrecognisedasexpenses. anycosts (ii) thattheGroupexpectstoreceive inexchangeforthegoodsorservicestowhichassetrelates,less consideration recognised to the extent that the carrying amount ofthe contract cost asset exceeds the net of(i)remaining amount of are losses Impairment losses. impairment and amortisation accumulated less atcost arestated costs contract Capitalised capitalised asinventory,property,plantandequipmentorintangibleassets, areexpensedasincurred. costs thatare incurred only because the Group entered intothe contract. Other costs of fulfilling acontract, which are not may include direct labour, direct materials, allocationsofcosts, coststhat are explicitly chargeable to the customer and other expected to be recovered. Costs that relate directly to an existing contract or to a specifically identifiable anticipated contract anticipated contract; generate or enhance resources that will be used to provide goods or services inthe future; and are Costs tofulfilacontract are capitalised ifthe costsrelate directly toanexisting contract or toaspecifically identifiable obtaining acontractareexpensedwhenincurred. case thecostsare Other costsof expensed whenincurred. which of theasset, in recognition year initial or lessfromthedateof one is period be recovered, the expectedamortisation are expectedto the costs unless if incurred when contract arecapitalised a not haveIncremental costs ofobtaining incurred if thee.g.anincrementalsalescommission. contract hadnotbeen obtained would it a customer that a contractwith obtain to incurs the Group that costs a contractare those of obtaining Incremental costs assets. (seeNote2.7)orintangible andequipment (seeNote2.15),property,plant asinventory arenotcapitalised customer which Contract costsare either the incremental costsofobtainingacontractwithcustomer or the coststofulfilacontractwith which thegoodwillarose. in combination business from thesynergiesof benefit are expectedto that units cash-generating of or groups generating units Goodwill is allocated to cash-generating units for the purpose ofimpairment testing. The allocation ismade to those cash- includes thecarryingamountofgoodwillrelatingtoentitysold. ofanentity onthedisposal Gainorloss arenotreversed. ongoodwill Impairmentlosses losses. impairment accumulated carried atcostless and for impairment tested atleastannually is Goodwill acquisition. at thedateof subsidiaries the acquired of assets the netidentifiable share of the Group’s value of over thefair acquisition an of the cost represents theexcessof Goodwill carrying amounts,andarerecognisedinthestatementofincome. the the netsalesproceedswith are determined bycomparing or equipment property, of plant disposal on or losses Gains (Continued)

table column width 65pt 111 ANNUAL REPORT 2020 ANNUAL (Continued) specific software. These costs are amortised over their estimated useful lives on a straight-line basis. specific software. These costs are amortised over service period. Other assets mainly represent (i) computer software; (ii) prepaid usage fees for transmission lines and electricity cables. Other assets mainly represent (i) computer software; (i) Acquired computer software licences are capitalisedon the basis of the costs incurred to acquire and bring to use the (ii) Long-term prepaid usage fees for transmission lines and electricity cables amortised using are a straight-line method over A contract asset is recognised when the Group recognises revenue (see Note 2.25) before being unconditionally Note (see revenue asset is recognised when the Group recognises contractA entitled to the credit loss (“ECL”) assessed for expected out in assets are the contract. Contract consideration set in terms under the payment has consideration to the right the when to receivables reclassified 2.14 and are out in Note set policy with the accordance Note 2.16). become unconditional (see A contract liability is when the customer pays non-refundable recognised consideration before the Group recognises the related (see Note 2.25). A contract liability recognised if would also be revenue Group has an unconditional the receive right to non- refundable consideration before the Group In recognises the related revenue. such a corresponding cases, receivable would also be recognised (see Note 2.16). the transaction The Group provides subscriber points price of providing program, telecommunications reward and the services subscriber points reward is allocated based on their standalone price. The allocated portion of transaction price for the subscriber points reward is recorded as contract liabilitywhen the rewards are granted and recognised as revenue when the points are redeemed or expired. For a single contract with either a net contract asset or a net contract liability the customer, is For multiple presented. contracts, contracts are not presented on a net basis. contract assets and contract liabilities of unrelated When the contract includes a significant financing the contract balancecomponent, includes under the effective accrued interest interest method (see Note 2.25). 2.11 Other assets 2.10 Contract assets and contract liabilities 2. 2. POLICIES ACCOUNTING SIGNIFICANT OF SUMMARY table column width 65pt 112 CHINA UNICOM (HONG KONG) LIMITED Financialassetsmeasuredatfairvalue Financialassetsmeasuredatamortisedcost Financialassets 2.12 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED or FVOCI,arerecognisedinprofit lossasotherincomeinaccordancewiththepolicysetoutnote2.27. asatFVPL classified whether of irrespective securities, equity in investment an from Dividends loss. or profit through recycled not the fairvaluereserve accumulated in It is the amount istransferred At (non-recycling) to retainedprofits. the timeofdisposal, accumulated inother comprehensive income remains inthe fairvalue reserve (non-recycling) until theinvestment isdisposed of. made, theamount is election an from theissuer’sperspective.Where such equity of the investmentmeets the definition made if Such irrevocable elections are made onaninstrument-by-instrument basisatthe time ofinitialrecognition, butmay only be fair value are changes inothercomprehensiveincome. recognised in such thatsubsequent (non-recycling) investment atFVOCI of theinvestmentGroupmakes recognition an irrevocable election todesignatethe initial and on for tradingpurposes held not investment is the equity unless (“FVPL”) loss and profit as fairvaluethrough classified securities is equity An investmentin comprehensive incomeisrecycledfromequitytoprofitorloss. interest method) andforeign exchange gainsandlosses. When the investment is derecognised, the amountaccumulated inother the effective using interest income(calculated ECLs, of or loss profit in other comprehensiveincome,except for therecognition in arerecognised value fair in Changes sale. and flows cash contractual of collection the both by achieved is objective whose model a business within held the investmentis interest and and principal payments of solely the investmentcomprise of flows cash the contractual (recycling), if (“FVOCI”) other comprehensiveincome through as fairvalue Debt investmentsare classified amortised cost.Financialassetsunderthiscategoryaredebtandequityinvestmentscarriedatfairvalue. at measured be to conditions meetthe not do they if category this under assets areclassified financial other and Investments method anddisclosedasinterestincome. interest effective the using ofincome statement the in recognised is income Interest ofincome. statement the in recognised Gains andlosses arising from disposal, being the differences between the net sales proceeds andthe carrying values, are for impairment. effective lessprovision category interest method this arecostusing assets undercarriedatamortised Financial carriers andcertainotherassetsareclassifiedunderthiscategory. current assets, amountsdue from ultimate holding company, amountsdue from related parties, amountsdue from domestic Cash andcashequivalents, short-term bankdeposits andrestricted deposits,accountsreceivable, prepayments andother principal of payments aresolely that flows cash to dates specified on rise assetsgive financial termsofthe contractual The • for cash flows contractual order tocollect assets in to hold whose objective is model a business within Theassetsareheld • Financial assetsareclassifiedunderthiscategoryiftheysatisfybothofthefollowingconditions: managing itsfinancialinstrumentsandthecontractualcashflowcharacteristicsofinstrument. model for the entity’s business on depends the classification and recognition is madeatinitial at fairvalue.Thedetermination The Group classifies its financial assets into two measurement categories: those measured at amortised cost and those measured for thecreditriskassociatedwithprincipalamountoutstandingduringaparticularperiodoftime. for thetimevalueofmoney and with interest being theconsideration outstanding, amount interest and on theprincipal managing liquidityandgeneratingincomeonthefinancialassets,butnotforpurposeofrealisingfairvaluegains; (Continued)

table column width 65pt 113 ANNUAL REPORT 2020 ANNUAL (Continued) deposits, accounts receivable, prepayments and other current assets, amounts due from ultimate holding company, company, holding ultimate from due amounts assets, current and other prepayments receivable, accounts deposits, from domestic carriers and certain other assets); amounts due from related parties, amounts due and after the reporting date; and items to which the ECL model applies. financial assets measured at amortised cost (including cash and equivalents, cash short-term bank deposits and restricted 2.10); from contracts with 15”) (see Note customers” (“IFRS/HKFRS IFRS/HKFRS 15, “Revenue contract assets as defined in debt securities measured at FVOCI (recycling). months possible within to result from twelve the default events expected lossesthat are are twelve-month ECLs: these to result from all lifetime losses expected ECLs: possiblethese are that are lives of the expected the default over events The Group recognises a loss allowance for ECLs on the following items: The Group recognises a loss allowance for ECLs on — — — Financial including fair value, at measured assets financial at FVPL and financial measured at FVOCI assets (non- assets measured recycling), are not subject to the ECL assessment. ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all expected cash shortfalls the cash flows (i.e. between due to the Group the difference in accordance with the contract and the cash flows that the Group expects to receive). The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. In measuring ECLs, the Group takes into account reasonable and supportable information that is available without undue cost or conditions. effort. This includes information about past events, current conditions and forecasts of future economic ECLs are measured on either of the following bases: — — Assets that have an indefinite useful life or are not yet available for use are not subject to amortisation and are tested for for tested are and to amortisation not subject are use for available not yet are or life useful an indefinite that have Assets in changes or events whenever impairment for reviewed are Assets of financial position date. statement at each impairment by for the amount loss is recognised An impairment recoverable. the carrying amount may not be circumstances indicate that which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of (i) an asset’s fair value less costs to sell and (ii) in value at the lowest levels for grouped use. For the purposes assets are of assessing impairment, losses impairment that goodwill than other Assets units). (cash-generating flows cash identifiable separately are there which at each reporting date. are reviewed for possible reversal of the impairment were previously recognised 2.14 Credit losses from financial instruments and contract assets Measurement of ECLs 2.13 Impairment of non-financial assets 2. 2. POLICIES ACCOUNTING SIGNIFICANT OF SUMMARY table column width 65pt 114 CHINA UNICOM (HONG KONG) LIMITED Significantincreasesincreditrisk MeasurementofECLs(Continued) Creditlossesfromfinancialinstrumentsandcontractassets(Continued) 2.14 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED account. allowance aloss through amount carrying their to adjustment acorresponding with instruments financial all for loss or gain recognises animpairment The Group or loss. profit in or loss gain recognised asanimpairment is amount the ECL Any changein ECLs are remeasured ateach reporting date toreflect changes inthe financial instrument’s credit risk since initialrecognition. are groupedbasedonsharedcreditriskcharacteristics,suchaspastdue statusandcreditriskratings. instruments the financial basis, a collective performed on When theassessmentis basis. or acollective basis individual either an Depending onthe nature ofthe financialinstruments, the assessment ofasignificant increase incredit risk isperformed on — — — — initial recognition: since increased significantly whether credit riskhas when assessing account taken into is information the following In particular, including historicalexperienceandforward-lookinginformationthatisavailablewithoutunduecostoreffort. initial recognition. The Group considers bothquantitative andqualitative information thatisreasonable andsupportable, of date atthe assessed that with date reporting atthe assessed instrument financial the on occurring default of risk the compares In assessing whether the credit risk ofafinancial instrument hasincreased significantly since initial recognition, the Group at anamountequaltolifetimeECLs. is measured case allowance which theloss recognition, in instrument sinceinitial increase creditriskofthefinancial in significant there unless equal totwelve has beena ECLs allowance instruments,theGrouprecognises months a loss other financial For all reporting date. at the factors thatarethecurrentto thedebtorsandanassessment andforecast of both specific general economic conditions experience, for credit loss adjusted the Group’shistorical matrix basedon a provision assets are estimated using these financial on ECLs ECLs. lifetime to equal amount measured atan contract assetsarealways receivable and accounts for allowances Loss existingorforecast market, changes inthe technological, adverse economic orlegalenvironmentthathave a significant anactualorexpectedsignificantdeteriorationintheoperatingresultsofdebtor;and anactualorexpectedsignificantdeteriorationinafinancialinstrument’sexternalinternalcreditrating(ifavailable); failuretomakepaymentsofprincipalorinterestontheircontractuallyduedates; effect onthedebtor’sabilitytomeetitsobligationGroup. (Continued)

table column width 65pt 115 ANNUAL REPORT 2020 ANNUAL (Continued) or issuer. the disappearance of an active market for a security because of financial difficulties of the difficulties of the debtor; significant financial a breach of contract, such as a default or delinquency in interest or principal payments; it becoming probable that the borrower will enter into bankruptcy or other financial reorganisation; debtor; on the effect an adverse that have environment legal or economic market, technological, in the changes significant — amount The gross carrying of a financial asset or contract asset is written off (either partially or in full) is that there to the extent no This realistic prospect of is recovery. generally the case when the Group determines that the debtor does not have assets or cash flows to repay the amounts subject to the write-off. sources of income that could generate sufficient Subsequent of an asset that was previously recoveries of written off impairment are recognised as a reversal in profit loss or in the period in which the recovery occurs. of cost and net lower at the stated are and accessories, cards SIM/USIM handsets, comprise primarily which Inventories, in incurred costs and other of purchase all costs and comprises method first-in-first-out on the Cost is based value. realisable bringing the inventories to their present location and condition. realisableNet value for all the inventories is determined on the basis of anticipated sales proceeds less estimated costs necessary to make the sale. to charged and are networks telecommunications Group’s the in maintaining used and supplies consist of materials Consumables for obsolescence. the statement of income when brought into use. Consumables are stated at cost less any provision is recognised A receivable when the Group has an unconditional consideration. right to receive consideration A right to receive is unconditional if onlypayment of that consideration passage of time is required before the has been recognised is due. If revenue before the Grouphas an unconditional right to receive consideration, the amount is presented as a contract (see Note asset 2.10). losses (see Note 2.14). Receivables are stated at amortised cost using the effective interest method less allowance for credit At each reporting date, the Group assesses whether a financial financial a A is credit-impaired. is credit-impaired when whether asset asset Group assesses the reporting date, each At one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. events: asset is credit-impaired includes the following observable Evidence that a financial — — — — Write-off policy Write-off 2.15 Inventories and consumables 2.16 Accounts receivable 2.14 contract assets (Continued) Credit losses from financial instruments and financial assets Credit-impaired 2. 2. POLICIES ACCOUNTING SIGNIFICANT OF SUMMARY table column width 65pt 116 CHINA UNICOM (HONG KONG) LIMITED Employeebenefits 2.22 (a) Retirement benefits Sharecapital 2.21 2.20Borrowings Governmentgrants 2.19 Cashandcashequivalents 2.18 Short-termbankdepositsandrestricted 2.17 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED and nogainorlossshallberecognisedinthestatementofincome. the Company of shareholders to equity attributable from equity deducted tax) is incremental costs(netof directly attributable any including paid, Where (treasury shares), any groupcompanypurchasestheCompany’sequitysharecapitalconsideration from theproceeds. net oftax, equity asadeduction, in are shown new sharesoroptions of to theissuance Incremental costsdirectlyattributable Ordinary sharesareclassifiedasequity. least twelvemonthsafterthestatementoffinancialpositiondate. Borrowings are classified ascurrent liabilities unless the Group hasanunconditional right todefer settlement ofthe liability for at statement ofincomeovertheperiodborrowingsusingeffectiveinterestmethod. amortised cost, any difference between the proceeds (net oftransaction costs) and the redemption value isrecognised inthe Borrowings are recognised initiallyatfairvalue, net oftransaction costsincurred. Borrowingsare subsequently stated at effectively recognisedinprofitorlossovertheusefullifeofassetasotherincome. incurred. Grants thatcompensate the Group for the costofanasset are recognised asdeferred revenue consequently are the expenses are which the same in in on asystematic period or lossbasis expenses incurred are profit in recognised asincome will be received andthattheGroupwillcomply with the conditionsattachingtothem.Grantsthatcompensate the Groupfor they assurance that reasonable when there is initially position financial Government the statementof grants are recognised in with originalmaturitiesofthreemonthsorless. investments liquid other short-term with banksandhighly at call held hand, deposits cash in cash equivalentsinclude Cash and Company. Restricted deposits mainly included statutory reserve deposits with the People’s Bank ofChina (“PBOC”) placed by Finance to oneyear. three months from morethan ranging maturities original with fixed-term deposits invested in are cash deposits Short-term bank recognised asanassettotheextent thatareductioninthefuturepaymentsisavailable. basis. The contributions are recognised asemployee benefit expenses when they are due. Prepaid contributions are orvoluntary onamandatory, contractual plans insurance pension administered orprivately topublicly contributions The Group participates indefined contribution pension schemes. For defined contribution plans, the Group pays (Continued)

table column width 65pt 117 ANNUAL REPORT 2020 ANNUAL (Continued) The Group’s contributions to basic and supplementary medical insurances are expensed as incurred. The Group has no once the contributions have been paid. further payment obligations it is in which year of income in the statement One-off cash housing to the charged subsidies are paid employees to PRC can be reasonably estimated. of such subsidies is probable and the amounts determined that the payment are special monetary housing benefits and other housing benefits housing fund, contributions to the The Group’s payment obligations once the contributions have been paid. expensed as incurred. The Group has no further also Group of the subsidiaries social insurance, contribution defined governmental in local In addition to participating provide other post retirement supplementary benefits to their employees, including supplementary pension allowance, supplementary post retirement These insurance. medical and supplementary expenses of medical reimbursement in non- is included obligation benefit defined of the value present The plan. benefit defined as accounted are benefits current other obligations and salary and welfare payables (current portion). The liability is remeasured every three to profit in which is recognised other comprehensive income, is not allowed months to reverse and the remeasurement and loss in subsequent period. December 2020, the As at 31 amount of the liability was RMB75 million RMB70 (2019: million). share-based compensation an equity-settled, The Group operates received plan. services value of the employee The fair options for the grant of the share is recognised as an expense. The total amount to be expensed over the in exchange vesting period to is the fair value of the share options determined by reference granted at the grant date excluding the impact of any non-market vesting conditions (for example, revenue and profit targets) and is not subsequently non-market vestingremeasured. However, conditions are considered in determining the number of options that are share of number of the its estimates revises Group the of financial position date, statement each At to vest. expected options that are expected to vest. The Group recognises the impact of the revision of original estimates, if any, in the to equity. statement of income of the period in which the revision occurs, with a corresponding adjustment The equity amount is recognised in until share-based compensation the employee either the option reserve is exercised (when it is included in the amount recognised in share capital for the shares issued) or the option expires (when it is released directly to retained profits). fair The contribution. as a capital is treated Group of the employees to the Company A-Share by granted shares Restricted value of the core employee services received in exchange for the grant of the restricted shares is recognised as an by is determined expensed total amount to be The to equity. credit with a corresponding period, vesting the over expense price. reference to the fair value of the granted shares measured as of the grant date less the subscription At the end of expected its reporting period, the Group each shares that are estimates of revises the number of restricted to be vested. The impact of the revision of the original estimates, if any, is recognised in profit or loss, with a corresponding adjustment to equity. (c) Housing benefits Housing (c) benefits Supplementary (d) (e) Share-based compensation costs (f) Incentive Scheme Restricted A-Share (b) Medical insurance Medical (b) 2.22 Employee benefits (Continued) 2. 2. POLICIES ACCOUNTING SIGNIFICANT OF SUMMARY table column width 65pt 118 CHINA UNICOM (HONG KONG) LIMITED Revenuerecognition 2.25 2.24Provisions Accountspayable 2.23 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Data and internet application service revenue, which mainly represent revenue from the provision ofdatastorage and • Revenue from the provision ofbroadband and mobile data services are recognised when the services are provided to • Voiceusageandmonthlyfeesarerecognisedwhentheservices arerendered; • Further detailsoftheGroup’srevenuerecognitionpoliciesareasfollows: consideration foranyeffectsofasignificantfinancingcomponentifthe period offinancingistwelvemonthsorless. effective interest method. The Group takes advantage ofthe practical expedient inIFRS/HKFRS 15 anddoes notadjustthe underthe expenseaccretedonthecontractliability theinterest underthat contractincludes revenuerecognised the Group, benefit to financing a significant provides which component effective a financing Where interest method. the contractcontains the accrued separatelyunder is interestincome the customer,and with transaction a separatefinancing be reflectedin would twelve months, revenue ismeasured atthe present value ofthe amountreceivable, discounted usingthe discountrate that benefit tothecustomer for more than financing provides asignificant which component Where a financing the contractcontains Revenue excludesvalueaddedtaxorothersalestaxesandisafterdeductionofanytradediscounts. consideration to which the Group isexpected to be entitled, excluding those amounts collected onbehalf ofthird parties. Revenue is recognised when control over a product or service is transferred tothe customer at the amountof promised course oftheGroup’sbusiness. the ordinary in goods of the sale services and of arises fromtheprovision revenue it as when the Group by classified Income is increase intheprovisionduetopassageoftimeisrecognisedasinterestexpense. obligation thatreflects current market assessments ofthe time value ofmoney andthe risks specific tothe obligation. The Provisions are measured atthe present value ofthe pre-tax amount ofexpenditures expected to be required to settle the included inthesameclassofobligationsmaybesmall. item one any to respect with outflow an of likelihood the if even recognised is Aprovision asawhole. ofobligations class are a number of similar obligations, the likelihood that an outflow will be required in settlement isdetermined by considering the estimated. Where been reliably there has the amount and to settletheobligation, be required resources will of outflow that an as aresultofpastevents, are it isprobable Provisions recognisedwhentheGrouphaspresent legal orconstructiveobligations method. the effective interest using cost measured atamortised subsequently and value at fair are recognisedinitially payable Accounts operating cycleofthebusinessiflonger).Ifnot,theyarepresentedasnon-currentliabilities. suppliers. Accounts payable are classified ascurrent liabilities ifpayment isdue within one year or less (or inthe normal from business course of the ordinary in or services have beenacquired that pay forgoods to are obligations payable Accounts of servicesobligation; other internet relatedservices, fulfillment and are recognised upon technology communications information application, customers; (Continued)

table column width 65pt 119 ANNUAL REPORT 2020 ANNUAL (Continued) message, cool ringtone, personalised ring, caller number display and secretarial services to subscribers etc., are are etc., to subscribers services and secretarial display number caller ring, personalised cool ringtone, message, are rendered; recognised when services are rendered; network, are recognised when services of the Group’s telecommunications lines and customer-end equipment to customers for usage and related services, are recognised upon fulfillment of service period; services obligation over the respective usage and when title have been passed to the buyers; telecommunications equipment, are recognised of and sales revenue to service is allocated packages preferential of such consideration total contract The services. handsets standalone based on their relating to the sale of handset is recognised when the title is selling prices. Revenue passed to the customer whereas service revenue is recognised based upon the actual usage of telecommunications immediately to the statement of income upon revenue recognition. services. The cost of the mobile handset is expensed • use for the operators telecommunications and foreign domestic other from revenue which represent fees, Interconnection • transmission offering from income represent which mainly services, and associated usage lines transmission from Revenue • Standalone sales of telecommunications products, which mainly represent handsets and accessories, and • and provision of of mobile handsets packages to customers which include bundle sale The Group offers preferential In general, revenue fromrendering of telecommunication services are recognised over-time during the period of fulfillment of obligation, services from sales whereas revenue of handsets and other telecommunications equipment, in case they are treated at a point in time. as separate performance obligations, are recognised deposits incomefrom financial in banks or other Interest institutions proportion is recognised on a time basis, using effective the interest method. For financial assets measured amortised at cost that are not credit-impaired, the effective interest rate is applied amount to the gross carrying impaired of the asset. For credit applied is financial interest rate to the the effective assets, amortised cost of the asset. Dividend income is recognised when the right to receive payment is established. • • such as short of services provision the from revenue represents which mainly revenue, services value-added Other 2.26 Interest income 2.27 Dividend income 2.25 Revenue recognition (Continued) 2. 2. POLICIES ACCOUNTING SIGNIFICANT OF SUMMARY table column width 65pt 120 CHINA UNICOM (HONG KONG) LIMITED Asalessee (a) Leasedassets 2.28 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED economic benefitsfromthatuse. is conveyed ofthe all where the customer substantially right todirect has both the asset use ofthe and toobtain identified Control exchange forconsideration. time in of asset foraperiod identified an the useof control to the contractconveysright a leaseif a lease.A of acontract,assesseswhether contract is,orcontains, the Group the contractis,orcontains, At inception of theright-of-useassethasbeenreducedtozero. if thecarrying asset, or lossamount is madetothecarrying of theright-of-use or isrecorded profit adjustment amount in purchase, extension or termination option.When the lease liability isremeasured inthisway, acorresponding or there isachange arising from the reassessment ofwhether the Group willbe reasonably certain toexercise a guarantee, value aresidual under payable be to expected amount the of estimate Group’s the in achange is there rate, or The lease liability isremeasured when there isa change infuture lease payments arising from a change inanindex or those ofpropertyandequipment. of the unexpired term oflease. The estimated useful lives ofright-of-use assets are determined onthe same basisas line methodfrom the commencement date to the earlier of the asset life ofthe end ofthe right-of-use or useful the end the straight- depreciated using assets are subsequently Right-of-use (see Note2.13). losses impairment and depreciation accumulated stated atcostless subsequently asset is present value,lessanyleaseincentivesreceived. The right-of-use remove theunderlying assetortorestore the underlyingasset orthe siteonwhichitislocated, discounted totheir Where anestimate and the costs incurred. cost oftheassets of coststodismantle also includes applicable, right-of-use direct any leasepaymentsmadeatorbeforethecommencement any initial date, plus and of theleaseliability amount initial the comprises which atcost, measured initially is capitalised is alease when assetrecognised right-of-use The accounting periodinwhichtheyareincurred. the in loss or profit to arecharged hence and liability lease the of measurement the in included ratearenot or index interest expense iscalculated using the effective interest method. Variable leasepaymentsdepend thatdonot onan and cost measured atamortised is the leaseliability recognition, rate.After initial borrowing a relevant incremental using be readilydetermined, that rate the leaseor, if cannot in the interestrate over implicit using the leaseterm, discounted the leasepaymentspayable recognised atthepresentvalueof initially is the leaseliability Where capitalised, the leaseis capitalised arerecognisedasanexpenseonasystematicbasisovertheleaseterm. are not leases which those with The leasepaymentsassociated a lease-by-leasebasis. theleaseon capitalise whether to decides asset,theGroup alow-value respectof in alease entersinto theGroup When furniture. office and computers leases that have alease term of12months or less andleases oflow-value assets which, for the Group are primarily At the lease commencement date, the Group recognises aright-of-use asset andalease liability, except for short-term the contracttoeachleaseandnon-leasecomponentonbasisoftheirrelativestand-aloneprices. in the consideration allocates the Group a leasecomponent, reassessment oron of acontractthatcontains At inception (Continued)

table column width 65pt 121 ANNUAL REPORT 2020 ANNUAL (Continued) The lease liability is a change in is when there also the scope of a lease or the consideration remeasured lease that is for a not originally providedin contract (“lease modification”) for the lease lease. In this not accounted for as a separate that is lease liabilitythe case using discount lease payments and based on a revised lease term the revised at is remeasured rate modification. the effective date of the In the consolidated of statement financial position, portion the current of long-term liabilities lease is as the determined due to be settled within twelve months after the reporting period. present value of contractual payments that are liabilities and lease property, of investment definition the that do not meet assets right-of-use presents Group The position. separately in the consolidated statement of financial When the Group acts as a lessor, it determines at lease inception whether each is lease a finance lease or an operating lease. A lease is classified finance as a lease if it transfers substantially all the risks and rewards incidental to the If this is not the case, the lease is classified as an operating lease. ownership of an underlying assets to the lessee. When a contract contains lease and non-lease components, the Group allocates the consideration in the contract to each component on a relative stand-alone selling price basis. The rental income from operating leases is recognised in profit or loss in equal instalmentsover the periods covered by the lease term, except where an alternative basis is more are granted incentives Lease asset. leased of the use the from derived be to of benefits pattern of the representative Variable recognised in payments net lease payments receivable. lease profit or loss as an integral part of the aggregate as income in the accounting period in which they are earned. that do not depend on an index or a rate are recognised classified the sub-leases When the Group is an intermediate lessor, are as a finance lease or as an operating lease with to the right-of-use reference asset arising from the head If the head lease. lease is a short-term lease to which the Group lease. applies the exemption described in Note 2.28(a), then the Group classifies the sub-lease as an operating Borrowing costs are expensed as incurred, except for interest directly attributableacquisition, the for interest to except construction expensed as incurred, production or Borrowing costs are of a substantialan asset that necessarily takes period for its of ready intended time to get use, in which capitalised case they are as part of the cost of that asset. Capitalisation of borrowing costs when expenditures commences for the asset and borrowing costs are being incurred and the activities to prepare the asset for its intended use are in progress. Borrowing costs are capitalised up to the date when the project is completed and ready for its intended use. To the extent that funds borrowed specifically are for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation actual borrowing at the costs incurred on that borrowing during the period less any is determined investment income on the temporary investment of those borrowings. amount of the of obtaining a qualifying asset, purpose the for and used generally borrowed that funds are extent To the borrowing costs eligible for capitalisation is determined by applying a capitalisation to the expenditures on that asset. The rate outstanding borrowing costs applicable of the Group that are borrowings of the to the capitalisation average weighted is the rate during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalised during a period should the amount of borrowing cost incurred during not exceed that period. Other borrowing costs are recognised as expenses when incurred. (b) As a lessor 2.29 Borrowing costs 2.28 Leased assets (Continued) (a) As a lessee (Continued) 2. 2. POLICIES ACCOUNTING SIGNIFICANT OF SUMMARY table column width 65pt 122 CHINA UNICOM (HONG KONG) LIMITED Dividenddistribution 2.31 Deferredincometax (b) Currentincometax (a) 2.30Taxation SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED period inwhichthedividendsareapprovedbyCompany’sshareholders. Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the Any suchreductionisreversedtotheextentthatitbecomesprobable sufficienttaxableprofitswillbeavailable. to beutilised. the relatedtaxbenefit to allow be available will profits taxable that sufficient longer probable no that itis The carrying of adeferred amount tax assetisreviewed is reducedtotheextent and at theendofeachreporting period is probablethattheywillreverseinthefuture. it reversedifferences, not unless the case the foreseeable of deductible that thedifferences will future, orin in probable is the reversal it of and the timing controls differences, theGroup taxable the caseof to theextentthat,in subsidiaries in temporary differencesrelatingtoinvestments and combination), a business part of they are not (provided profit taxable nor affect neitheraccounting that assets orliabilities of recognition theinitial for taxpurposes, deductible not goodwill from arising differences temporary arethose liabilities and taxassets deferred of recognition to exceptions limited The expected toreverseinaperiod,orperiods,whichthetaxlosscreditcanbeutilised. are and entity, sametaxable the and authority sametaxation the to relate they if account into aretaken differences those credits, tax lossesandthatis, of deferred from unused temporary the recognitiontax assetsarising differences support asset canbe carriedbackorforward.The same criteria are adopted when determining whether existing taxable from thedeferred tax arising a taxloss which into periods temporary difference orin expected reversal the deductible of to the same authority andthe same taxation taxable entity, and are expected to reverse either in the same period asthe arise from thereversalthose thatwill taxable temporary of existing include differences, those differences relate provided taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences Future arerecognised. utilised, be assetcan the which against available be will profits taxable future that probable Apart fromcertain limited exceptions, alldeferred taxliabilities, andalldeferred taxassets tothe extent thatitis Deferred taxassetsalsoarisefromunusedlossesandcredits. differences between the carrying amountsofassets andliabilities for financialreporting purposes andtheir taxbases. the being respectively, differences temporary taxable and fromdeductible arise liabilities Deferred taxassetsand to bepaidthetaxauthorities. expected the amount of the basis on where appropriate provisions establishes and interpretation subject to is regulation tax applicable which in situations to respect with taxreturns in taken positions evaluates periodically Management generate income. operate and taxable subsidiaries its and where the Company the countries date in position financial of enacted atthestatement of thetaxlawsenactedorsubstantially the basis The current income taxchargeon is calculated (Continued)

table column width 65pt 123 ANNUAL REPORT 2020 ANNUAL (Continued) subsidiary is related to the others); group of which the other entity is a member); (i) has control or joint control over the Group; (ii) has significant influence over the Group; or (iii) is a member of the key management personnel of the Group or the Group’s parent. (i) subsidiary group (which that each parent, of the same means and members The entity and fellow the Group are (ii) of a One entity is an associate or jointof the other entity (or an associate or joint of a member venture venture (iii) Both entities are joint ventures of the same third party; (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity; Basic earnings per share is computed by dividing the profit attributable to equity shareholders of the Company by the weighted during the year. average number of ordinary shares outstanding weighted the by Company of the shareholders to equity attributable profit the dividing by is computed share per earnings Diluted dilutive of the adjusting potential effects after for the outstandingordinary shares number of ordinary during year, the average shares. (a) family, is related to the Group if that person: A person, or a close member of that person’s (b) An entity is related to the Group if any of the following conditions applies: A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrenceof one or more uncertain future not events wholly within the control of the Group. It can also be a present obligation arising that is not events from past recognised because it is not probable that outflow of economic resources of obligation cannot be measured reliably. will be required or the amount A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability the liability will then be recognised as a provision. resources occurs so that outflow is probable, of an outflow of economic A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence events not wholly within the control of the Group. or non-occurrence of one or more uncertain future benefits of economic an inflow when statements financial the to notes in the but is disclosed is not recognised asset contingent A asset is recognised. is probable. When an inflow is virtually certain, an 2.33 Earnings per Share 2.34 Related parties 2.32 Contingent liabilities and contingent assets 2. 2. POLICIES ACCOUNTING SIGNIFICANT OF SUMMARY table column width 65pt 124 (i) Foreign Foreign (i) exchange risk CHINA UNICOM (HONG KONG) LIMITED (a) Market risk Financialrisk factors 3.1 FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS 3. Relatedparties(Continued) 2.34 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED operating units. Directors ofthe Company. The Group’s headquarter identifies andevaluates financialrisks inclose co-operation withthe Group’s Financial risk management iscarried outby the Group’s headquarter, following the overall direction determined by the Executive unpredictability offinancialmarketsandseekstominimisepotentialadverseeffectsontheGroup’sperformance. flow andfairvalueinterest rate risk. TheGroup’soverallrisk management risk), credit program risk and liquidity focuses onthe The Group’s operating activities expose ittoavariety offinancialrisks: market risk (including foreign currency risk, price risk, cash person intheirdealingswiththeentity. Close members of thefamilyapersonare those familymembers who may by, that be expected or beinfluenced to influence, AnentityisrelatedtotheGroupifanyoffollowingconditionsapplies:(Continued) (b) vi A person identified in(a)(i)hassignificant influence over the entity or isamember ofthe key management (vii) Theentityiscontrolledorjointlybyapersonidentifiedin(a); (vi) for thebenefitofemployees of either benefit plan the Grouporanentityrelated Theentityisapost-employment (v) not enteredintoanyforwardexchangecontractsorcurrencyswapcontracts. currency the yearsswap contractstomitigatetheforeignexchange risk. During of2020 2019, and the Grouphad in foreigncurrencies. From time totime, theGroupmayconsiderentering intoforwardexchange contractsor denominated of monetary the amount assets and liabilities formonitoring The Group’s headquarter is responsible with internationalcarriers,cashandequivalentsfinancialassetsdenominatedinforeigncurrencies. respect existswith to thebalances Exchange riskmainly Euro. and respect HKdollars primarily with to USdollars, exposures, currency various from arising risk exchange foreign to exposed is Group The RMB. in denominated are the transactions amajorityof and China Mainland are in activities carried out The Group’smajoroperational personnel oftheentity(oraparententity). to theGroup; (Continued)

table column width 65pt 125 2 8 2 6 4 31 42 16 441 715 274 RMB 1,349 1,630 6,104 millions equivalent

rate 2019 ANNUAL REPORT 2020 ANNUAL

2 0.90 1 7.82 5 7.82 2 7.82 1 5.17 1 4.88 35 0.90 33 6.98 232 62 6.98 433 19 7.82 146 31 0.06 400 7.82 3,125 231 6.98 1,612 166 6.98 1,160 millions Original currency Exchange

(Continued) 1 8 7 1 — 40 18 16 243 465 222 RMB RMB 2,594 1,446 5,712 millions equivalent

rate 0.06 5.02 2020

1 0.84 2 8.03 1 8.03 2 8.03 1 4.93 — — 48 0.84 31 6.52 204 36 6.52 235 30 8.03 241 208 8.03 1,672 219 6.52 1,429 353 6.52 2,305 millions Original currency Exchange

denominated in HK dollars denominated in Euro denominated in US dollars denominated in US dollars denominated in HK dollars denominated in Euro denominated in Euro denominated in US dollars denominated in Euro denominated in US dollars denominated in Euro denominated in Japanese Yen denominated in SGD denominated in AUD — — — — — — — — — — — — — —

The following table details the Group’s exposure at the end of the reporting period to risk arising currency from to which liabilities entity functional or of the than the recognised assets other currency denominated currency a in and they relate have been translated to RMB at the applicable rates quoted 2020 the PBOC as at 31 December by and 2019. Sub-total Total Sub-total Accounts receivable: Sub-total Financial assets measured at FVOCI: Total Borrowings: Sub-total Accounts payable: Cash and cash equivalents: 3.1 Financial risk factors (Continued) (a) Market risk (Continued) (i) Foreign exchange risk (Continued) 3. 3. INSTRUMENTS FINANCIAL OF VALUES FAIR AND MANAGEMENT RISK FINANCIAL table column width 65pt 126 (iii) Cash flow and fair value interest rate risk rate interest value fair and flow Cash (iii) Price (ii) risk CHINA UNICOM (HONG KONG) LIMITED (Continued) risk exchange Foreign (i) Marketrisk(Continued) (a) Financialriskfactors(Continued) 3.1 FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS 3. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED the Groupdidnotconsideritwasnecessary todosointheyearsof2020and2019. agreements tomitigate itsexposure tointerest rate risksin connection with the floating rate borrowings, although with reference to the latest market conditions. From time to time, the Group may enter into interest rate swap financial position.Management continuously monitors the interest rate positionof the Group andmakes decisions have amaterialadverse therefore rate the Group’s effect borrowings, and could on floating Group’s outstanding Increases in interest rates will increase the cost of new borrowing andthe interest expense with respect to the borrowings weremainlyatfixedratesanddenominatedin RMB. Duringtheyearsof2020and2019,Group’s marketconditions. dependingontheprevailing borrowings rate floating rateor fixed its of amount the determines Group The renewal. upon raterisk interest value rates expose the Group tocashflowinterest rate at fixedrates risk. Borrowingsissued expose the Group tofair at floating issued Borrowings lease liabilities. and related partiesloans notes, corporatebonds, papers, promissory The Group’s interest rate risk mainly arises from interest-bearing borrowings including bank loans, commercial significant. impact onthe financialstatements asthe deposits are allshort-term innature andthe interest involved willnotbe have significant market interestrates will expectthechangesin deposit not Management does (recycling). FVOCI The Group’s interest-bearing assets are mainlyrepresented by bank deposits anddebt securities measured at million (2019:approximatelyRMB313million). RMB167 be approximately constant, theeffect other comprehensiveincome, RMB againstEuroisheld on would 31 December 2020, if the share had increased/decreased price of Telefónica by 10%, while the exchange rate of As at (“Telefónica”). S.A. Telefónica securities of equity comprise primarily assets measuredatFVOCI The financial consolidated statementoffinancialpositionasassetsmeasuredatFVOCI. The Group is exposed to equity securities price risk because investments held by the Group are classified in the value throughothercomprehensiveincome. fair were currency, foreign recorded in which in assets denominated for financial RMB313 million) approximately (2019: RMB167million approximately be would income comprehensive other effecton the and currencies, foreign in andaccountspayabledenominated accountsreceivable borrowings, forcashandequivalents, million) RMB170 (2019:approximately RMB268million approximately be after taxwould theeffectonprofit constant, othervariablesareheld all Euro,JapaneseYen,SGDandAUD,while HKdollars, dollars, respecttoUS with primarily currencies, foreign 10%against by strengthened/weakened RMB had the 2020,if As at31December into RMBattheexchangeratesquotedbyPBOC. The Groupdidnothaveanddoes notbelieve itwillhaveanydifficultiesinexchanging itsforeigncurrency cash

(Continued) table column width 65pt 127 ANNUAL REPORT 2020 ANNUAL (Continued) As at 31 December 2020, the Group had approximately RMB12,910 million (2019: approximately RMB19,496 million RMB12,910 the Group had approximately As at 31 December 2020, (2019: approximately RMB19,496 million RMB37,900 and approximately borrowings rate fixed and short-term borrowings rate million) of floating and lease liabilities. million) of long-term fixed rate borrowings (2019: approximately RMB42,669 if on interest rates the floating 2020, borrowings rate ended 31 December and For the year short-term fixed rate on effect the constant, held are variables other all while points 50 basic increased/decreased had borrowings approximately RMB73 million). profit after tax is approximately RMB48 million (2019: Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the the to loss financial in a resulting obligations contractual on its default will counterparty a that risk the to refers risk Credit bank and short-term cash equivalents risk arises from cash and Credit Group. Credit risk is managed on a group basis. and general subscribers individual customers, corporate to major exposures as credit as well banks, with deposits corporate customers, related parties and other operators. Group primarily bank deposits, the relating to cash and cash equivalents To limitrisk and short-term exposure to credit financial institutions in the state-owned with large only deposits bank and short-term cash and cash equivalents places is no significant that there the Group expects credit risk banks with acceptable credit ratings. PRC and Therefore, other losses from non-performance by these counterparties. and does not expect that there will be any significant In addition, the Group has no significantto individual with respect concentrations risk of credit subscribers and corporate and sales of mobile handsets. customers. The Group has policies for services exposure on receivables to limitcredit the The Group assesses the credit quality of all its customers and sets credit limits on them by taking into account their financial position, the availability of guarantee from third parties, their credit history and other factors such as current market conditions. The normal credit period granted by the Group to individual subscribers and general corporate major For criteria. assessment credit specified certain meet they unless of billing date the from days is 30 customers corporate customers, the credit period granted by the Group is based on the service contract terms, normally not the by monitored regularly are of customers pattern and settlement limits utilisation of credit The year. 1 exceeding individual receivables, of other on all Group. performed credit credit evaluations counterparties requiring In respect are and due when payments of making past history counterparties’ focus on the evaluations amount. These a certain over current ability to pay, and take into account information specific to the counterparties as well as the economic environment in which the counterparties operates. Credit risk relating to amounts due from related parties and other telecommunications operators is not considered to be significant as these companies are reputable and their receivables are settled on a regular basis. 3.1 Financial risk factors (Continued) (a) Market risk (Continued) (iii) Cash flow and fair value interest rate risk (Continued) 3. 3. INSTRUMENTS FINANCIAL OF VALUES FAIR AND MANAGEMENT RISK FINANCIAL risk Credit (b) table column width 65pt 128 CHINA UNICOM (HONG KONG) LIMITED Financialriskfactors(Continued) 3.1 (c) Liquidity FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS 3. risk (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Corporate bonds Promissory notes Long-term bankloans At 31December2020 2.2(a) fordetails. statements, please refer to Note financial its of for thepreparation concern basis the going useof Regarding theGroup’s Promissory notes Long-term bankloans At 31December2019 time fromtheendofperiodunderreviewtocontractualmaturitydate: The followingtables showthe undiscounted balances ofthe financialliabilities (including interest expense) categorised by and cashequivalentsutilisingdifferentsourcesoffinancingwhennecessary. ofcash adequateamount throughhaving funding in flexibility maintains theGroup’sheadquarter business, underlying the nature of the dynamic Due to corporate bonds. and notes commercial papers,promissory of issuance and loans bank of raising the including funds of availability and cash sufficient maintaining includes management risk liquidity Prudent

Other obligations Lease liabilities Amounts duetorelatedparties Amounts duetoultimateholdingcompany Accounts payableandaccruedliabilities Commercial papers Short-term bankloans Other obligations Lease liabilities Corporate bonds Bills payable Commercial papers Short-term bankloans Dividend payable Amounts duetodomesticcarriers Amounts duetodomesticcarriers Amounts duetoultimateholdingcompany Accounts payableandaccruedliabilities Amounts duetorelatedparties

Less than 6,7 1971,5 ,8 194,294 3,189 19,853 11,917 163,573 121,564 7,5 4021,1 ,2 201,300 2,928 10,617 14,032 176,759 134,437 1051,8 21214032,325 1,430 12,112 10,183 11,085 1771,5 ,0 ,9 27,961 1,498 6,203 10,352 11,757 1 year ,5 62 92,778 3,304 49 132 29 7,984 1,779 46 9,116 5,704 2,657 2,174 ,8 2,034 1,088 ,2 52 82,627 58 27 15 2,529 5,482 7,007 2,291 1,640 ,1 3 3,172 132 9,315 4 3 ,4 ,1 3,306 1,710 1,344 434 448 0 ,8 2,034 1,088 108 920 2 6 ,1 ,7 2,900 1,372 1,215 469 428 751 43 1,030 34 34 41,030 34

Between 1 and2 years — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —

(Continued) Between 2 and5 years — — — —

5 years Over Over — — — —

amounts Carrying 134,437 121,564 12,225 10,893 2,999 5,482 7,000 2,291 1,640 1,779 8,995 5,564 2,998 2,174 998 998 740 920 table column width 65pt 129 — 998 437 2019 5,564 2,869 2,998 8,995 3,092 15.2% 57,278 21,535 10,790 378,033 320,755 31 December

ANNUAL REPORT 2020 ANNUAL 740 998 418 2020 2,482 1,999 7,000 3,042 1,000 12.2% 45,640 16,458 11,503 373,160 327,520 31 December

(Continued) for other stakeholders. Short-term bank loans Long-term bank loans Promissory notes Corporate bonds Commercial papers Lease liabilities (non-current portion) Amounts due to related parties Current portion of long-term bank loans Current portion of corporate bonds Lease liabilities (current portion) — — — — — — — — — —

• To support the Group’s stability and growth. • To provide capital for the purpose of strengthening the Group’s risk management capability. to and regularly its capital actively and manages structure to maintain Group reviews In order the or adjust capitalthe structure, Group and into taking of the future capital optimal account the requirements ensure and shareholder returns, capital structure and expenditures capital projected flows, cash operating projected profitability, and projected prevailing efficiency, capital projected strategic investment opportunities. The Group monitors capital basisdebt-to-capitalisation on the of the ratio. This is calculated as interest-bearing debts over ratio interest-bearing debts plus total commercial papers, short-term bank loans, equity. long-term Interest-bearing debts represent consolidated as shown in the parties, to related and amounts due liabilities, lease corporate bonds, promissory notes, bank loans, of financialstatement position. The interest-bearing debts do not include by Finance deposits balance of Company received from Unicom Group and its subsidiaries and an associate million of RMB5,112 and of RMB58 million, as at 31 December respectively, respectively). 2020 (2019: RMB4,879 million and RMB8 million, follows: The Group’s debt-to-capitalisation ratios are as The Group’s objectives when managing capital are: The Group’s objectives when • To safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits Interest-bearing debts plus total equity Debt-to-capitalisation ratio Interest-bearing debts: Total equity 3.2 Capital risk management 3. 3. INSTRUMENTS FINANCIAL OF VALUES FAIR AND MANAGEMENT RISK FINANCIAL table column width 65pt 130 CHINA UNICOM (HONG KONG) LIMITED Financialassetsmeasuredatfairvalue (a) Fairvalueestimation 3.3 FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS 3. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED term bankloans,otherobligationsandamountsduetoultimateholdingcompany,relatedpartiesdomesticcarriers. papers,corporatebonds,promissorynotes,long- short-termbankloans,commercial accounts payableandaccruedliabilities, related parties anddomestic carriers, financialassets measured atfair value. Financialliabilities ofthe Group mainly include accounts receivable, prepayments andothercurrent assets, contractassets, amountsduefromultimate holdingcompany, Financial assets ofthe Group mainly include cash andcash equivalents, short-term bank deposits andrestricted deposits, Total Equity securitiesmeasuredatFVOCI(non-recycling) Recurring fairvaluemeasurement: The followingtablepresentstheGroup’sassetsthataremeasuredatfair valueat31December2019: Total Equity securitiesmeasuredatFVOCI(non-recycling) Recurring fairvaluemeasurement: The followingtablepresentstheGroup’sassetsthataremeasuredatfairvalue31December2020: Level3valuation:fairvaluemeasuredusingsignificantunobservableinputs. • Level 2valuation: observable inputswhichfailtomeet Level 1, andnotusingsignificant unobservable inputs. • at the measurement pricesinactive quoted Levelmarkets assets 1 or liabilities valuation: unadjusted for identical • defined asfollows: levels havebeen different The method. value, byvaluation carried atfair instruments analyses financial below table The

Financial assetsmeasuredatFVPL Debt securitiesmeasuredatFVOCI(recycling) Financial assetsmeasuredatFVPL Unobservable inputsforwhichmarketdataarenotavailable. date.

ee ee ee Total Level3 Level2 Level 1 ee ee ee Total Level3 Level 2 Level 1 661109127,682 981 100 26,601 23,350

3,419 3,268 1,786 ,6 0 2 2,494 929 100 1,465 151

(Continued) 1634,093 623 51 158770 568 51 — — —

53,323 55 1,838 52 —

23,350 table column width 65pt 131

as at as at 2019 Fair value 31 December

ng 998 1,010 2019 2,998 3,081 2,869 2,849 Carryi amount as at 31 December

ANNUAL REPORT 2020 ANNUAL — — — Level 3

— — (Continued) 2,552

— Fair value measurement Level 1 Level 2 as at 31 December 2020 categorised into

as at as at 2020 Fair value Fair value 31 December

998 1,005 1,005 as at as at 2020 1,999 2,050 2,050 2,482 2,552 amount amount Carrying Carrying 31 December

Non-current portion of bondscorporate Non-current portion of promissory notes The fair value non-current portion of the of long-term loans bank iscash flows based on the expected of principal and per annum. interests payment discounted at market rates ranging from 0.57% to 4.35% (2019: 0.70% to 4.41%) amounts other financial carrying of the Group’s the and Besides, assets liabilities at amortised cost approximated carried instruments. their fair values as at 31 December 2020 and 2019 due to the nature or short maturity of those Non-current portion of long-term bank loans The fair value of financial instruments traded in active markets is based on quoted market prices at the statement of of statement the at prices market on quoted based is markets active in traded instruments of financial value fair The an from available and regularly readily are prices if quoted as active is regarded market A position date. financial and actual represent prices those and agency, regulatory or service, pricing group, industry broker, dealer, exchange, transactions basis. length price used for financial an arm’s on The quoted occurring market market regularly assets held bid Group by the is the current included instruments price. Theseare in 1 and level equity securities of comprise primarily issued classified Telefónica, debt securities by banks which are financial as at FVOCI certain equity measured and assets assets financial as classified are which products management wealth funds and in monetary investments investments, measured at FVPL. no Level 1 and transfer between were into Level 2, or transfer 2020 and there During ended 31 December 2019, the years of the end as at the of fair value hierarchy levels between 3. The Group’s policy transfers or outis to recognise of Level reporting period in which they occur. Group’s financial of fair values of the level amounts, fair values and the carrying the and 2019, 2020 December 31 at As below: liabilities carried at amortised cost are disclosed (b) carried at other than fair value Fair value of financial liabilities 3.3 Fair value estimation (Continued) (a) measured at fair value (Continued) Financial assets 3. 3. INSTRUMENTS FINANCIAL OF VALUES FAIR AND MANAGEMENT RISK FINANCIAL table column width 65pt 132 CHINA UNICOM (HONG KONG) LIMITED SEGMENT INFORMATION 5. Allowancefor ECLs 4.3 Impairmentof Non-FinancialAssets 4.2 Depreciationonproperty,plantandequipment 4.1 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS 4. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED for 10percentormoreoftheGroup’s revenueinallperiodspresented. The Group primarily operates inMainlandChina andaccordingly, nogeographic information ispresented. No single customer accounted segment andtherefore,noinformationispresented. one operating or geographicalregions.Accordingly,theGrouphas only lines of byseparate instead business integrated as one business performance and assessthe The CODM based oninternalmanagementGroup’sbusiness make decisions functions resources allocation reports thattheCODMreviewsregularlyinallocatingresourcestosegments andinassessingtheirperformances. internal of the basis on Operating segments are identified as theCODM. havebeenidentified the Company The ExecutiveDirectorsof assets andliabilitieswithinthenextfinancialyeararediscussedbelow. of to thecarrying amounts a materialadjustment risk ofcausing that have a significant assumptions The estimatesand results.actual estimates may to therelated concerning thefuture.Theresultingaccounting not beequal makes The Group estimates andassumptions future eventsthatarebelievedtobereasonableunderthecircumstances. of expectations other factors,including experience and historical on are based evaluated and are continually judgments Estimates and ECL regularly.FortheGroup’sdetailedassessmentofcreditrisk,please refer toNote3.1(b). to relating reviewed the assumptions and monitored Group The date. at thereporting conditions forecast generaleconomic and experience, credit loss and adjustedforfactorsthatare historical to the specific the current debtors andanassessment of both the Group’s matrix basedon a provision contract assetsusing receivable and accounts on allowance Management estimates ECL 2019. No significant impairment loss onproperty, plant and equipment was recognised for the years ended 31 December 2020 and there will be an impact to the future results ifthere isa significant change in the recoverable amounts ofthe non-financial assets. Accordingly, income. the statement of are in recognisedlosses impairment affected. Such be significantly would Group’s results projection,or growthratesinthefuture theestimatedrecoverableamountsof cashflow non-financialassetsandthe rates discount change the If there in management’s including asset lowest leveltowhich belongs. is anysignificant assumptions, at the generating unit the cash of flows cash pre-tax future estimated discounted on use based in Management estimatesvalue stated inNote 2.13. The recoverable amount ofanasset isthe higher ofitsfair value less costs tosell anditsvalue inuse. The Group tests whether non-financial assets have suffered from any impairment, inaccordance with the accountingpolicy previously estimatedusefullives,theamountofdepreciationexpensesmaychange. experience, accountanticipated technologicalchanges.Iftherearesignificantchangesfrom takinginto based onhistorical equipment and property, values of plant residual lives and estimates theuseful The Group equipment. and from property, plant benefits of economic the expected with pattern ofrealisation are rates consistent and ofdepreciation ensure thatthemethod residual values over the estimated useful lives ofthe assets. The Group reviews the useful lives andresidual values periodically to to up cost allocate to method straight-line the using calculated is equipment and plant property, Group’s the on Depreciation

table column width 65pt 133 2019 1,183 4,456 26,128 26,440 37,218 21,251 12,893 15,595 264,387 290,515 289,332 146,534

ANNUAL REPORT 2020 ANNUAL 2020 1,106 3,865 28,024 23,183 47,923 21,287 12,307 16,519 275,814 303,838 302,732 150,730

Revenue from telecommunications services are subject to Value-added tax (“VAT”) and VAT rates applicable to various various to applicable rates and VAT tax (“VAT”) to Value-added subject are services telecommunications from Revenue of Administration and General of Taxation (“SAT”) Administration State the Finance, of Ministry The services. telecommunications for basic rate of VAT downward adjustments stipulates dated 20 March 2019 which a notice PRC jointly issued Customs of the 1 April from to 13% 16% from products of telecommunications sales for rate VAT and to 9% 10% from services telecommunications 2019. The VAT rate for value-addedtelecommunications services remains at 6%. Basic telecommunications servicesinclude business and activities for the provision transmission of voice services, lines usage and etc. Value-added associated services telecommunications broadband and mobile service, include multimedia and business message services provision service activities for the of short message from the revenue. internet application services etc. VAT is excluded data services, and data and services and products: Disaggregation of revenue from customers by major Sales of telecommunications products Revenue from other sources Total service revenue Total Include: Revenue from contracts with customers within the scope of IFRS/HKFRS 15 from the provision is broadband primarily generated The Group’sof voice usage, revenue and data and mobile internet data services, application services, other value-added services, transmission lines usage and associated services and sale of telecommunication products. The Group bills on the majority of its customers based volume each month, and and a fixed then has a right to service rate of the end the of as obligations performance unsatisfied to allocated were that prices Transaction customers. the from consideration rendered. The Group reporting period expected to be recognised within are has are when services applied one to five years the practical expedient in paragraph 121 of IFRS/HKFRS 15 and the information therefore about remaining obligations performance is not disclosed for contracts that have an original duration expected or less and of also obligations one year for those performance which regarded are as satisfied as invoiced. Voice usage and monthly fees Broadband and mobile data services Data and internet application services Other value-added services Interconnection fees Transmission lines usage and associated services Other services 6. REVENUE 6. table column width 65pt 134 CHINA UNICOM (HONG KONG) LIMITED NETWORK, OPERATION AND SUPPORT EXPENSES 7. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED (iii) Expense relating to short-term leases, leases of low-value assets and variable lease payments not included in the measurement of of measurement the in included not payments lease variable assetsand oflow-value leases leases, toshort-term relating Expense (iii) charges components non-lease the assetsincluded tower of use for 2019,charges 2020and 31December yearsended the During (ii) mainly facilities and equipment premises, network, of use for 2019,charges 2020and 31December years ended the During (i) Others Charges foruseoftowerassets Charges foruseofnetwork,premises,equipmentandfacilities Power andwatercharges Repairs andmaintenance

Variable leasepaymentsnotincludedinthemeasurementofliabilities* lease liabilities: Company”), seeNote45.2. which are recorded inprofit or lossasincurred. For related party transactions withChinaTower Corporation Limited (“Tower (maintenance service, usage and other certain ancillary facilities related services support charges) and variable lease payments lease paymentswhicharerecordedinprofitorlossasincurred. variable and assets low-value of leases leases, short-term to relating charges and charges components non-lease the included Expense relatingtoshort-termleasesandotherwithremainingleasetermending * During the years the measurement During ended 31 December in of leaseliabilities 2020 2019, included and variable leasepaymentsnot * on orbefore31December2019,andleasesoflowvalueassets revenue orusageandrecordedinprofitlosswhentheeventcondition that triggersthosepaymentsoccurred. on are measured based which facilities, network, and premises, tower assetsand equipment charges foruseof included mainly

(ii), (iii) (i), (iii) Note

46,286 11,246 12,901 10,750 5,415 2,209 9,180 1,322 2020 2020

43,236 10,492 12,319 10,303 4,478 1,976 8,146 1,971 2019 2019 table column width 65pt 135 16 571 107 427 435 444 409 2019 7,080 2,471 3,235 37,143 50,516

— — — — — 10 44 31 509

124 942 129 894 129 1,050 129 958 552 6,219 ANNUAL REPORT 2020 ANNUAL 17 schemes Total 375 to pension 2020 5,534 3,794 3,486 42,534 55,740 Contributions

payable Bonuses paid and

44 —————————— 17 17 55 423 Note 199 619 199 566 221 700 199 630 and Salaries

allowance

— — — — — — 427 435 444 409 107 Fees 1,822 890 2,955 (RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)

(c) (a) (d) (b) Note

Fan Yunjun Cheung Wing Lam Linus Wong Wai Ming Chung Shui Ming Timpson Law Fan Chiu Fun Fanny Cesareo Alierta Izuel Li Guohua Shao Guanglu Zhu Kebing

The remuneration of each Director for the year of 2020 is set out below: The remuneration of each Director for the year Wang Xiaochu Total Li Fushen Name of Director

Salaries and wages contribution pension schemes Contributions to defined Share-based compensation Contributions to medical insurance Contributions to medical fund Contributions to housing Other housing benefits 8. 8. EXPENSES BENEFIT EMPLOYEE 8.1 Directors’ emoluments table column width 65pt 136 CHINA UNICOM (HONG KONG) LIMITED Seniormanagement’semoluments 8.2 Directors’emoluments(Continued) 8.1 EMPLOYEE BENEFIT EXPENSES 8. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Law FanChiuFunFanny Chung ShuiMingTimpson Wong WaiMing Cheung WingLamLinus Cesareo AliertaIzuel Zhu Kebing Shao Guanglu Li Fushen Li Guohua Wang Xiaochu Total d Mr.CesareoAliertaIzuelretiredasnon-executivedirectoron25May2020. (d) Mr.FanYunjunappointedasexecutivedirector on17February2020. (c) Mr.ShaoGuangluresignedasexecutivedirectoron16January2020. (b) Mr.LiGuohuaresignedasexecutivedirectoron11March2020. (a) Notes: * In addition, according to the “Notice on the Compensation Information Disclosure of the Central Government Controlled Government Central the of Disclosure Information Compensation the on “Notice the to according addition, In * management, allfall withinthebandfromRMBNiltoRMB1,000,000. threesenior oftheremaining theremuneration Note8.1.For in beendisclosed has remuneration andtheir Company ofthe 31December 2020,fourofthemaredirectors fortheyearended oftheCompany management Of thesevensenior to anydirectorjointheCompany. the years During of 2020 of officeorasaninducement 2019, not incuranypayment and to anydirectorforloss the Companydid No directorswaivedtherighttoreceiveemolumentsduringyearsended 31December2020and2019. During theyearsof2020and2019,noshareoptionsweregrantedto Directors. The remunerationofeachDirectorfortheyear2019issetoutbelow: Name ofDirector RMB75,300, RMB488,000,RMB477,100andRMB65,500respectively. wereRMB542,200, Kebing Zhu Mr. and Guanglu Shao Mr. Fushen, Li Mr. Guohua, Li Mr. Xiaochu, Wang Mr. to paid bonuses [2016]339 Enterprises” (Guozifenpei [2016]No.339) Enterprises” (Guozifenpei (translated from 號） ), certain Directors were alsoentitled todeferred bonuses inrelation tothe years of2016 to 2018. The deferred (Continued)

RB00 RB00 RB00 RB00 (RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000) 《關於做好中央企業負責人薪酬信息披露工作的通知》（國資分配 ,6 ,3 2,043 1,039 1,962 Fees 405 440 431 422 264 — — — — —

Salaries and allowance

9 295 477 448 199 331 199 492 199 221 221 — — — — — — — — — —

payable* paid and Bonuses

Contributions to pension cee Total schemes 1 608 802 773 114 678 126 839 126 126 126 1 5,662 618 — — — — —

405 440 431 422 264 table column width 65pt 137 78 912 192 704 2019 2019 2019 3,663 3,378 2,563 2,937 3,601 2,188 1,606 1,471 1,236 2,179 5,263 64,480 16,130 26,220 26,412 23,010 11,840 13,981 (RMB’000)

ANNUAL REPORT 2020 ANNUAL 77 243 827 911 2020 2020 2020 5,584 5,624 2,723 2,490 6,696 2,744 3,007 1,332 1,372 1,353 2,365 3,995 70,237 13,147 26,619 26,862 21,041 21,243 (RMB’000)

15 Note

(Continued)

Of the five highest paid individuals five of 2020, ended them are staffs for the year 31 December and fall three within band the and one falls within the to RMB3,000,000 one falls within band RMB2,500,001 the from to RMB2,500,000, RMB2,000,001 from to from RMB2,500,001 band and two fall within the staffs of them are five (2019: to RMB4,000,000 band from RMB3,500,001 and two fall one falls within to RMB3,500,000 within the band the bandfrom RMB3,500,001 RMB3,000,000, from RMB3,000,001 to RMB4,000,000). are as follows: in respect of the five (2019: five) individuals The aggregate of the emoluments Salaries and allowances Bonuses paid and payable Contributions to pension schemes

Handsets and other telecommunication products Credit loss allowance and write-down of inventories Commission and other service expenses Others Advertising and promotion expenses Property management fee Internet access terminal maintenance expenses Customer retention costs Auditors’ remuneration Office and administrative expenses Transportation expense Miscellaneous taxes and fees Service technical support expenses Loss on disposal of property, plant and equipment Others Repairs and maintenance expenses 10. 10. EXPENSES OPERATING OTHER 9. 9. SOLD PRODUCTS TELECOMMUNICATIONS OF COSTS 8.3 Five highest paid individuals 8. 8. EXPENSES BENEFIT EMPLOYEE table column width 65pt 138 CHINA UNICOM (HONG KONG) LIMITED 13. TAXATION OTHER INCOME 12. FINANCE COSTS 11. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Others Gains ondisposaloffinancialassetsmeasuredatFVPL Fair valuegainsonfinancialassetsmeasuredatFVPL Additional deductionforVAT Government grants Dividend fromfinancialassetsmeasuredatFVOCI(non-recycling) Total interestexpense Finance costs: 15%). income taxrate in thePRCatapreferential is 25% tax rate was calculated (2019: for certain of 15% subsidiaries 25%). Taxation (2019: statutory enterprise operate the PRC mainly inandtheapplicable the Groupoperates.TheCompany’s subsidiaries which countries in the in prevailing for theyear profits at theratestaxation the estimatedassessable of on been calculated Hong Konghas outside profits on for theyear. Taxation profits been providedattherate 16.5% (2019:theestimatedassessable tax hasof 16.5%) on Kong profits Hong Investment incomefromdebtsecuritiesmeasuredatFVOCI(recycling) — — — — — — — — Less:AmountscapitalisedinCIP Interestonbankloansrepayableover5years Interestonrelatedpartyloansrepayablewithin5years Others Netexchangeloss Interestonleaseliabilities Interestoncorporatebonds,promissorynotesand Interestonbankloansrepayablewithin5years commercialpapersrepayablewithin5years — NET

Note 15

1,234 1,456 1,612 2,911 1,747 2020 2020 (206) 122 324 154 506 210 312 112 174 38 87 89 46

1,349 2,016 1,735 2,123 2019 2019 (387) 133 603 385 205 359 519 422 43 24 68 39 96 — table column width 65pt 139 66 (22) (79) (66) 372 556 366 (250) (121) (139) (162) (274) (250) 2019 2019 2,423 3,542 2,795 2,795 14,167

ANNUAL REPORT 2020 ANNUAL — 99 40 40 (39) (68) 453 447 (140) (268) (332) (197) 2020 2020 2,997 4,007 3,450 3,450 2,858 16,027

(i) (i) (ii) Note

(Continued) Enterprise under the tax law are entitled to a preferential income tax rate of 15% (2019: 15%). Certain subsidiaries of 15% (2019: rate entitled to a preferential income tax of the Group Enterprise under the tax law are obtained the approval of High Technology and entitled New Enterprise and of to a preferential income were tax rate 15% (2019: and and development costs of the Group’s PRC subsidiaries certain research 15%), qualified 75%) additional are (2019: for 75% deduction for tax purpose. RMB249 million) in respect of tax losses amounting to approximately RMB726 million (2019: approximately RMB997 million), since it is not probable that future taxable profits will be available against which tax asset can be utilised. the deferred The tax the year of 2025. losses can be carried forward for five years from the year incurred and hence will be expired by Hong Kong countries Mainland China and other — — Deferred taxation

Profit before taxation rate of 25% Expected income tax expense at PRC statutory tax Impact of different tax rates outside Mainland China Actual tax expense (i) Technology and New as High qualified that are entities regulations, tax law and its relevant income enterprise PRC to the According (ii) approximately (2019: million RMB181 of approximately tax assets deferred did not recognise Group the 2020, December at 31 As Provision for income tax on the estimated taxable profits for the year Provision for income tax Income tax expenses and accounting profit at PRC statutory tax rate: Reconciliation between actual income tax expense Tax effect of preferential tax rate development costs Additional deduction for qualified research and Tax effect of non-deductible expenses profit of associates Tax effect of non-taxable income from share of net Under/(over) provision in respect of prior years Tax effect of unused tax losses not recognised, net of utilisation Under/(over) provision in respect of prior years Under/(over) provision in profit of joint ventures Tax effect of non-taxable income from share of net Others 13. TAXATION TAXATION 13. table column width 65pt 140 CHINA UNICOM (HONG KONG) LIMITED 13. TAXATION (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Net deferredtaxliabilitiesafteroffsetting Deferred taxliabilities: Deferred taxassets: Net deferredtaxassetsafteroffsetting Deferred taxliabilities: Deferred taxassets: The analysisofdeferredtaxassetsandliabilitiesareasfollows: benefit willberealised. changes infair value onfinancial assets through other comprehensive income (non-recycling), since itisnotprobable that the related tax respect of in (2019: RMB2,085 million) RMB2,448 recognise deferred million tax assetsof not As at31December did 2020, the Group — — — — — — — — Deferredtaxliabilitiestobesettledwithin12months Deferredtaxassettoberecoveredwithin12months Deferredtaxassettoberecoveredwithin12months Deferredtaxliabilitiestobesettledwithin12months Deferredtaxliabilitiestobesettledafter12months Deferredtaxassettoberecoveredafter12months Deferredtaxliabilitiestobesettledafter12months Deferredtaxassettoberecoveredafter12months (Continued)

(10,360) (11,113) 11,858 3,542 8,316 2020 (753) 745 (82) (64) (82) 18 18 — —

(8,292) (8,630) 2,914 6,942 1,226 9,856 2019 (338) (87) (87) (87) — — — — table column width 65pt 141 1 (5) 1 681 — 24 (87) (111) 2019 1,226 3,672 (2,447)

1 (5) 247 (2,423)

— — 99 20 1,080 (453) 370 2,064390 1,139 3,139 271 1,816 3,561 5 ANNUAL REPORT 2020 ANNUAL assets Others Total 18 (64) (87) (10) 745 charge of (471) 2020 right-of-use 1,226 Depreciation

— — — 39 costs Contract

— — ii)) (2,527) (8,572) (39) (11,099) plant and (Note ( equipment Accelerated of property, of property, depreciation

— — — — — Tower Assets Disposal Gain from

— — (64) 372 (2,651) 190 (64) the 445 (372)381 (5,921) (229) 317 Company Unrealised profit from with Tower transactions

— — 4,183 for tax not yet purpose expenses deductible Accruals of

— — — 370 3,341 tax losses Deductible

— — (48) (933) 161 (48) (370) 842 1,354 1,303 3,180 1,306 1,258 (Note (i)) (Note surplus on under PRC regulations revaluation the leasehold Unrecognised land determined prepayments for

— — 575 204 2,493 1,918 1,714 allowance Credit loss

(Continued) End of year Balance at 1 January 2020 and 2019 Balance at 1 January 2020 End of year Beginning of year Deferred tax (charged)/credited to other comprehensive income Deferred tax (charged)/credited to other comprehensive Deferred tax credited to the statement of income comprehensive income Deferred tax credited to the statement of other Deferred tax charged to the statement of income Deferred tax charged to — — — — — — — — Credited to other comprehensive incomeCredited to other comprehensive Charged to other comprehensive incomeCharged to other comprehensive Credited/(Charged) to the statement of incomeCredited/(Charged) to the statement At 31 December 2020 At 1 January 2019 of incomeCredited/(Charged) to the statement At 31 December 2019 Deferred tax arising from:

The movement of the net deferred tax assets/(liabilities) is as follows: The movement of the net The components of the deferred tax assets/(liabilities) recognised in the consolidated statement of financial position and the the and position financial of statement consolidated the in recognised assets/(liabilities) tax deferred the of components The movements during the year are as follows: Net deferred tax assets after offsetting: Net deferred tax assets after Net deferred tax liabilities after offsetting: 13. TAXATION TAXATION 13. table column width 65pt 142 CHINA UNICOM (HONG KONG) LIMITED 13. TAXATION (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Deferred taxliabilities: Deferred taxassets: Net deferredtaxliabilitiesafteroffsetting: Deferred taxliabilities: Deferred taxassets: Net deferredtaxassetsafteroffsetting: offsetting ofbalancesrelatedtothesametaxauthority: the consideration into taking temporarydifferences, following effectofthe asatyear-endrepresentsthetaxation Deferred taxation Others Contract costs Accelerated depreciationfortaxpurpose Credit lossallowance Accelerated depreciationofproperty,plantandequipment Deductible taxlosses Unrecognised revaluationsurplusonprepaymentsfortheleaseholdland Credit lossallowance Others Intangible assetsamortisationdifference Government grantsrelatingtoassets Unrealised profitfortheinter-companytransactions Deferred revenueonsubscriberpointsrewardprogram Depreciation chargeofright-of-useassets Unrealised profitfromthetransactionswithTowerCompany Accruals ofexpensesnotyetdeductiblefortaxpurpose determined underPRCregulations (Continued)

Note (ii) (i)

(11,099) (11,113) 11,858 1,258 2,475 1,409 4,183 2020 745 422 794 368 242 390 317 (14) (82) (64) 18 — —

(8,572) (8,630) 1,306 1,918 1,226 9,856 3,341 2019 464 695 227 229 370 381 370 555 (19) (39) (87) (87) — table column width 65pt 143 0.37 2019 11,330 30,598

ANNUAL REPORT 2020 ANNUAL 0.41 2020 12,493 30,598

(Continued) resulting revaluations for the leasehold under IFRSs/HKFRSs. of the prepayments not land recognised were Accordingly, deferred by the Group under IFRSs/HKFRSs. tax assets were recorded the 2014, from starting PRC, the of SAT the MOF and the by issued No.75) [2014] (Caishui and Equipment” Plant Property, accelerated the under depreciated to be allowed tax policy are with this that comply plant and equipment property, Group’s depreciation fully method, or deducted for tax purpose in of the year purchase. arise from the different Temporary differences have been recorded as deferred tax liabilities. useful lives under tax basis and accounting basis computing basic/diluted earnings per share computing basic/diluted earnings per share

Basic earnings per share for the years ended 31 December 2020 and 2019 were computed by dividing profit the attributable were to equity and 2019 2020 December 31 ended years for the share Basic earnings per number of ordinary shares outstanding during the years. shareholders of the Company by the weighted average computed by dividing and were Diluted 2020 2019 ended 31 December the profit earnings the years per share for attributable to equity shareholders of number of ordinary the Company shares outstanding by the weighted average adjusting after during for the the years, No dilutive potential ordinary shares for the years ended 31 December 2020 and 2019. effects of the dilutive potential ordinary shares. basic and diluted earnings per share: The following table sets forth the computation of (i) leasehold for the the The prepayments and 2003 land revalued for PRC tax purposes2004. However, as at 31 December were (ii) Depreciation of Accelerated in the Involved to “Announcement According for Those Enterprise Tax Policy on Enterprise Income Numerator (in RMB millions): Company used in Profit attributable to equity shareholders of the Denominator (in millions): Weighted average number of ordinary shares outstanding used in Basic/Diluted earnings per share (in RMB) 14. 14. SHARE PER EARNINGS 13. TAXATION TAXATION 13. table column width 65pt 144 CHINA UNICOM (HONG KONG) LIMITED PROPERTY, PLANT AND EQUIPMENT 15. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Net bookvalue: Accumulated andimpairment: depreciation Cost: The movementsofproperty,plantandequipmentfortheyearsended31December20202019areasfollows:

Disposals Charge fortheyear End of year of End year of End Beginning of year of Beginning End of year of End year of Beginning Additions year of Beginning Transfer fromCIP Transfer tootherassets Disposals

Buildings 3,4)(6,7)(15,641) (568,173) (39,243) 3,4)(6,3)(15,658) (563,735) (36,840) 668841,394 76,658 830269,688 38,320 745273,221 37,415 833,423 75,160 260 (58,319) (2,680) 1,801 37 (57,643) (337) 277 34 —

communications equipment 53,881 64,847 Tele- 767 —

Office furniture,Office fixtures, motor vehicles and equipment

20,255 20,092 (1,222) (1,285) 1,239 4,434 4,614 1,142 other 306 — 2020

improvements Leasehold (2,908) (2,919) 3,701 3,728 (403) (414) 414 809 793 1 (68,004) 214 173 —

821990,259 48,251 410367,401 54,150 814364,187 48,144 986,664 54,261 67,647 (5,649) 17 (626,072) (107) 11 (619,263) (111) CIP — 4 (59,683) (4) 4

(62,624) 55,815 68,927 (5,649) Total — table column width 65pt 145 — Total (4,415) 56,435 47,719

(5) (65,012) 12 CIP (12) (51,458) (118) (601,970) (111) (619,263) (4,415) 55,565 42,306 986,102 54,150 367,401 54,261 986,664 42,188 384,132 ANNUAL REPORT 2020 ANNUAL

— 194 (39,183) 116 809 938 498 (498) (439) 3,916 3,728 (2,978) (2,919) Leasehold improvements

2019 — 839 369 4,434 4,521 1,127 (1,196) (1,226) 20,080 20,092 vehicles and vehicles fixtures, motor fixtures, Office furniture, other equipment

— 225 Tele- 36,871 45,956 equipment communications

— 160 126 (155) (49,597) 1,279 (2,744) (60,598) 73,876 845,924 38,320 269,688 75,160 833,423 39,654 296,831 (34,222) (549,093) (15,559) (36,840) (563,735) (15,658) Buildings

(Continued) Disposals Transfer to other assets Additions Transfer from CIP At 1 January 2019 At 1 January 2019 Disposals End of year End of year At 1 January 2019 End of year Charge for the year

depreciation and impairment: Accumulated Cost:

value: book Net interest expense of approximately million RMB206 2020, approximately million) ended 31 December (2019: RMB387 For the year was capitalised the cost of capital as CIP. The capitalised for raising borrowings represents the related 2.35% and varied from borrowing rate to 3.12% for the year ended 31 December 2020 (2019: 3.07% to 3.49%). Mainly Group’s ongoing the as a result of modification telecommunications of its and following network subscribers’ voluntarily cross- network migration the Group progress, disposed plant certain property, and equipment with carrying amounts million of RMB3,868 for million million, RMB3,739 and (2019: RMB1,560 respectively), 2020 consideration million December ended 31 of RMB1,503 for the year resulting in a net loss of approximately RMB2,365 million for the year ended 31 December 2020 (2019: approximately RMB2,179 million). 15. 15. EQUIPMENT AND PLANT PROPERTY, table column width 65pt 146 CHINA UNICOM (HONG KONG) LIMITED RIGHT-OF-USE ASSETS 16. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Net bookvalue: Accumulated depreciationandimpairment: Cost:

End ofyear Beginning ofyear End ofyear End ofyear Beginning ofyear Beginning ofyear Disposals Charge fortheyear Disposals Additions

Buildings 15,867 17,730 (4,584) 817 (21,898) (8,197) (8,140) (14,062) (3,885) (8,405) 2,721 9,325 7,670 4,093

communications qimn Landuserights equipment

23,922 20,558 42,456 37,984 5,023 Tele- (551) 304

2020 13,709 13,682 (4,802) (4,509) 9,173 8,907 (298) (14) 41 5

Others 1,133 (230) 38 (35,205) (308) (27,260) (284) 24 (12,577) (254) 653 825 230 937 426

43,073 37,960 73,165 70,333 (5,379) 4,632 8,211 Total table column width 65pt 147 461 (461) Total 6,906 63,888 70,333 43,073 47,359

— — 643 937 294 653 505 (138)(146) (16,529) (11,192) (284) (27,260) Others ANNUAL REPORT 2020 ANNUAL

— — 178 (295) 9,173 9,290 (4,214) (4,509) 13,504 13,682 2019

461 (461) Tele- 2,814 (7,215) (7,308) 35,631 37,984 23,922 28,416 equipment rights Land use communications

— — 9,325 9,148 3,620 (4,962) (3,443) (8,405) (14,062) 14,110 17,730 Buildings

(Continued)

Charge for the year Disposals Additions Disposals End of year End of year At 1 January 2019 At 1 January 2019 End of year At 1 January 2019 Goodwill arising from the acquisitions of Unicom New Century Telecommunications Co., Ltd. and Unicom New World World Ltd. and Unicom New Co., Telecommunications Century Goodwill arising from the acquisitions of Unicom New purchase consideration of the over excess the represented respectively, Telecommunications and 2003, Group in 2002 Co., Ltd. the by adoption of HKFRSs and AG 5 in 2005. the Group’s shares of the fair values of the separately identifiable net assets acquired prior to the Goodwill is allocated to the Group’s cash-generating units (“CGU”). amount The recoverable of goodwill is determined based on value in use calculations. calculations Thesebased on financial cash flow use pre-tax projections years by management, for 5 budgets approved including service revenue annual growth rate of 1% (2019: and 1%) the applicable discount rate of 11% (2019: 11%). Management determined growth rates and operating expected results based on past performance and its expectations in relation to market assessment on management’s Based CGU. the to relating risks specific reflects and is pre-tax used rate discount The developments. results, there was no impairment of goodwill as at 31 December 2020 and 2019, any reasonably possible change in the assumptions used in the calculation of recoverable amount would not result in impairment losses.

Net book value: analysis of lease liabilities are set out in Notes 29(c) and 36, respectively. Details of total cash outflow for leases and the maturity Cost: Accumulated depreciation and impairment: 17. GOODWILL 17. 16. 16. ASSETS RIGHT-OF-USE table column width 65pt 148 CHINA UNICOM (HONG KONG) LIMITED INVESTMENTS IN SUBSIDIARIES 18. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Chin Japan, 25January2007, Corporation Unicom(Japan)Operations China TheUnited Kingdom, 8November 2006, Limited Operations Unicom(Europe) China China United Network Communications UnitedNetworkChina Communications Name As at31December2020,thedetailsofCompany’ssubsidiariesareasfollows: Chin China Unicom (Australia) Operations Pty Limited Australia, 27May2014, Australia, PtyLimited Operations Unicom(Australia) China Company Unicom(MYA)Operations China (Pty) Africa) Operations Unicom(South China China Unicom (Hong Kong) Operations Limited Hong Kong, 24May2000, Kong, Hong Limited Operations Kong) Unicom(Hong China hn ncm(mrcs prtosLmtdUSA, 24May2002, Limited Unicom(Americas) Operations China Limited UnicomGlobal China Corporation Limited(“CUCL”) Corporation Liability Company Liability Limited Limited Limited a Unicom (Russia) Operations Limited a Unicom(Russia)Operations Pte Operations a Unicom(Singapore) The PRC, 21 April 2000,The PRC, 21April

establishment andnature oflegalentity Place anddateofincorporation/ Russia, 28December 2016, Myanmar of the Union of The Republic Africa,South 19November 2012, 5August2009,Singapore, Hong Kong, 29May2015, Kong, Hong limited liability company liability limited company limited limited liability company liability limited limited liability company liability limited company liability limited company limited company limited limited liability company liability limited (“Myanmar”), 7June 2013, limited company limited company limited limited company limited

equity interests held ietIndirect Direct 100% 100% Percentage of Percentage of — — — — — — — — —

0%100shares, 100% 1,000 shares, 100% 0%7, 100% 0%RUB10,000 100% 2, 100% 30,000,000 shares, 100% 4,861,000 shares, 100% 0%5,000 shares, 100% 0%HKD1,510,100,000 100%

— — paid upcapita Parti

RMB213,044,797,828 HKD2,625,097,491 152,953 shares, 150,000 shares, JPY366,000 each ZAR 1each RMB1 each GBP1 each USD100 each AU USD1 each cular ofissuedsharecapital/ D 1each l Telecommunications operation operation Telecommunications Telecommunications operation operation Telecommunications Telecommunication operation Telecommunications of operation

Pr Telecommunications se Telecommunications Telecommunication Telecommunications service Telecommunications Communication Inve Telecommunication Telecommunications se incipal activities andplace the in in Australia in Sin in in train in Russia in thePRC in Hong Kong Hong stme Japan Sou theUnite USA in gapore nt holding th Africa g in Myanmar g in d Kingdom s technology s op s operation s op rvice rvice eration eration eration in in in in in

table column width 65pt 149 in in in rvice rvice inrvice rvice in rvice rvice rvice s service in s service s se s se s service in s service

ing information internet ia nd esia nt hold of of pines lecommunication orea te Brazil equipment and provision of technical services in the PRC Vietnam communications technology services in PRC the information services and value-added telecommunications services in PRC the Indon Malaysia Thaila K Cambod Philip incipal activities and place and place incipal activities ANNUAL REPORT 2020 ANNUAL Investme Provision Telecommunications se Telecommunication Telecommunication Provision Telecommunication Telecommunication Sales of handsets, Telecommunications se Pr

of operation Telecommunications se Telecommunications in service

ach l ach ach 000,000 cular of issued share capital/ Riels4,000 each Baht100 each MYR1 e KRW5,000 e Php100 each Rp1 e

Parti paid up capita 100% R$21,277,298 100% RMB6,749,318,313.27 100% shares, 40,000 100% 10,000 shares, 100% RMB400, 100% R$21,165,840 100% VND2,276,000,000 100% shares, 20,000,000,001 100% shares, 60,000 100% RMB610,526,500 100% shares, 103,012 100% shares, 3,200,000

— — — — — — — — — — — — Percentage of Direct Indirect equity interests held equity

(Continued) limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company Brazil, 27 October 2017, Brazil, 27 October 2017, The PRC, 30 April The PRC, 2006, The PRC, 29 March 2006, 29 March 2006, The PRC, Place and date of incorporation/ of legal entity nature and establishment

Brazil, 23 June 2016, Brazil, 23 June 2016, Vietnam, 19 April 2018, 19 April Vietnam, 2018, 25 OctoberIndonesia, 2019, Korea, 24 November 2017, 2017, 24 November Korea, 19 August 2008, The PRC, a Unicom Operations Co., Ltd Korea Company Limited Limited Limited Limited China (Brazil) Unicom Holdings Ltda. Unicom Digital Technology Co,.Ltd China Unicom (Cambodia) Operations Co. Ltd Cambodia, 2018, 11 May China Unicom Online Information Technology China Unicom Operations (Thailand) Limited 2017, Thailand, 20 November Name China (Brazil) Unicom Telecommunications China Unicom (Vietnam) Operations Company PT China Unicom Indonesia Operations Unicom Vsens TelecommunicationsUnicom Vsens Company China Unicom (Philippines) Operations Inc Philippines, 2019, 6 November China Unicom Operations (Malaysia) Sdn. Bhd. 2017, 10 November Malaysia, Chin 18. 18. SUBSIDIARIES IN INVESTMENTS table column width 65pt 150 CHINA UNICOM (HONG KONG) LIMITED INVESTMENTS IN SUBSIDIARIES 18. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Beijing Telecom Planning and Designing Institute andDesigning TelecomPlanning Beijing Name China Unicom Intelligence Security UnicomIntelligence Technology China UnicomCommunication Guangdong Unicompay CompanyLimited ThePRC, 21December 2005, KaichengCompany Limited Zhengzhou Industrial Huaxia P&T Project Consultation and Huaxia P&TProjectConsultation Company Navigation UnicomInformation China ejn oDgtlMdaAvriigC. t ThePRC, 21July2006, Ltd Co., Media Advertising WoDigital Beijing & Designing Technology Information China Company Limited Corporation Limited Corporation Ltd Co., Construction Management CompanyLimited Limited Consulting Institute CompanyLimited Consulting The PRC, 25 April 1996,The PRC, 25April

establishment andnature oflegalentity Place anddateofincorporation/ The PRC, 11 April 2011,The PRC, 11April The PRC, 15August2007, The PRC, 28May2013, The PRC, 5March 1998, The PRC, 17September 1998, The PRC, 11November 1991, limited liability company liability limited company liability limited limited liability company liability limited company liability limited limited liability company liability limited limited liability company liability limited limited liability company liability limited company liability limited limited liability company liability limited (Continued)

equity interests held ietIndirect Direct Percentage of Percentage of — — — — — — — — —

0%RMB250, 100% RMB2, 100% 0%RMB150, 100% RMB30, 100% 0%RMB264,227,115 100% 0%RMB50,100,000 100% 0%RMB20,000,000 100% RMB6,825,087,800 100% 0%RMB430,000,000 100%

paid upcapita Parti

cular ofissuedsharecapital/ 200,000 000,000 000,000 000,000 l of operation

Pr Provision of Provision Provision Provision Provision Provi Provision Provision Provision of Provision Provision incipal activities andplace publication in the PRC in publication agency and production, PRC the management services in thePRC in monitoring and consultation services in the PRC services in maintenance andtechnical network construction, te consultation in thePRC in consultation development and thePRC in the PRC in industry telecommunications the projectsin construction projectsand information to services relating survey, design andcontract in thePRC in PRC the servicesin consulting andtechnical planning network construction, te si lecommunications lecommunications lecommunications lecommunications on of e-payment services services e-payment of on of of of of of of advertising design, advertising project design prop technical customer services consultancy, erty table column width 65pt 151 y rvices inrvices in PRC the stment stment stment stment chnolog ve ve ation data processing technology technology technology of of of of ess iness the PRC iness the PRC service in the PRC development, transfer and development, consulting service in the PRC business in the PRC development and promotion in the PRC the PRC development, technology development, consultation and other services in PRC the busin busin business in the PRC promotion service of intelligent transportation productssystem’s in the PRC incipal activities and place and place incipal activities ovision of financial se ANNUAL REPORT 2020 ANNUAL Provision Venture capital in Communications te Auto informatis Pr Venture capital inve Provision Venture capital in Provision Venture capital inve Provision Pr

of operation l 796,148 000,000 cular of issued share capital/

Parti paid up capita 91% RMB3,000,000,000 60% RMB1,000,000 100% RMB3,040,000,000 100% RMB200,000,000 100% RMB200,000 100% RMB4,000,000,000 100% RMB79,300,000 100% RMB500,000,000 68.88% RMB246, 55.10% RMB10,000,000 68.88% RMB10,

— — — — — — — — — — — Percentage of Direct Indirect equity interests held equity

(Continued) limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company limited partnership limited liability company limited liability company limited liability company The PRC, 24 October 2014, 24 October 2014, The PRC, 7 August 2015, The PRC, 28 January 2016, The PRC, The PRC, 8 October 2016, 8 OctoberThe PRC, 2016, 2016, 1 February The PRC, The PRC, 17 June 2016, The PRC, 2017, 24 August, The PRC, The PRC, 26 September 2018, 2018, 26 September The PRC, 2018, 28 September The PRC, Place and date of incorporation/ of legal entity nature and establishment

The PRC, 4 June 2013, 4 June 2013, The PRC, Company Limited Limited (Shenzhen) (Guizhou) Limited Centre Investment (Beijing) Co., Ltd. (Shanghai) Co., Ltd Unicom Innovation Company Limited Investment 29 April PRC, The 2014, Xiaowo Technology Co. Ltd China Unicom Smart Connection Technology China Unicom Innovation Company Investment China Unicom Innovation Company Investment China Unicom Innovation (Shenzhen) Investment Finance Company Unicom Big Data Co., Ltd. Unicom Intelligent RuixingNetwork Technology Unicom Intelligent TechnologyVehicle Name Unicom Cloud Data Company Limited 18. 18. SUBSIDIARIES IN INVESTMENTS table column width 65pt 152 CHINA UNICOM (HONG KONG) LIMITED INVESTMENTS IN SUBSIDIARIES 18. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Liantong Travel Service (Beijing) Company TravelServiceLiantong (Beijing) Name China Unicom (Shaanxi) Industrial Internet Industrial Unicom(Shaanxi) China Internet Industrial Unicom(Liaoning) China Internet Unicom(Sichuan)Industrial China Internet Industrial UnicomXiongan China Internet Industrial Unicom(Shanxi) China IndustrialInternet Unicom(Fujian) China Internet Industrial Unicom(ShanDong) China Branch)Internet Unicom(Guangdong China China Unicom (Zhejiang) IndustryInternet Unicom(Zhejiang) China Limited Company Limited Company Limited Company Limited Company Limited Company Limited Company Limited Company Limited Industry Limited Company Limited The PRC, 30September, 2017,

establishment andnature oflegalentity Place anddateofincorporation/ The PRC, 27March, 2018, The PRC, 28March, 2018, The PRC, 29March, 2018, The PRC, 25April, 2018, The PRC, 21March, 2018, The PRC, 23February, 2018, The PRC, 3March, 2017, The PRC, 5January, 2017, The PRC, 20June, 2017, limited liability company liability limited limited liability company liability limited company liability limited company liability limited company liability limited company liability limited company liability limited company liability limited company liability limited limited liability company liability limited (Continued)

equity interests held ietIndirect Direct Percentage of Percentage of — — — — — — — — — —

0%RMB30,000,000 100% 0%RMB20, 100% RMB20, 100% RMB50, 100% RMB15, 100% RMB50, 100% RMB50, 100% RMB50, 100% RMB100, 100% 0%RMB11, 100%

paid upcapita Parti

cular ofissuedsharecapital/ 000,000 000,000 000,000 000,000 000,000 000,000 000,000 000,000 000,000 l of operation

Pr Provision Provision Provision Provision Provision Provision Provision Provision Provision Provision incipal activities andplace services in the PRC services in communications technology the PRC services in communications technology the PRC services in communications technology the PRC services in communications technology the PRC services in communications technology the PRC services in communications technology the PRC services in communications technology the PRC services in communications technology PRC the servicesin information services in the PRC services in communications technology of of of of of of of of of of information information information information information information information information information and tourism information information table column width 65pt 153 technology of internet things Music Network Financing leasing Online Video, Big Data Service, Big Data Service, information information information information of of of of of of of of of of research and development, and development, research consultation of and services TV Video and Mobile Video in the PRC system technology, development and technical consultation, sales and of maintenance system and equipment and online data processing and transaction business in the PRC in the PRC Service business in the PRC Online Reading Material in the PRC cloud computation and infrastructure in service the PRC communications technology services in PRC the communications technology services in PRC the communications technology services in PRC the communications technology services in PRC the incipal activities and place and place incipal activities ANNUAL REPORT 2020 ANNUAL Provision Provision Provision Provision Provision Provision Provision Provision Provision Provision Pr

of operation l 000,000 000,000 000,000 000,000 000,000 000,000 000,000 cular of issued share capital/

Parti paid up capita 51% RMB10, 40% RMB53, 100% RMB207, 100% RMB26,200,000 100% RMB51,000,000 100% RMB100, 100% RMB20, 100% RMB50, 100% RMB100,

— — — — — — — — — 25% 75% RMB2,500,000,000 Percentage of Direct Indirect equity interests held equity

(Continued) limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company limited liability company The PRC, 16 March, 2018, 16 March, The PRC, 2018, 29 March, The PRC, 11 April, 2018, The PRC, The PRC, 13 March, 2018, 2018, 13 March, The PRC, 2018, 14 March, The PRC, 30 May 2019, The PRC, Place and date of incorporation/ of legal entity nature and establishment

The PRC, 9 May, 2018, 2018, 9 May, The PRC, Limited Intelligence Co., Technology Ltd. (Chengdu) Company Limited Company Limited Co, Ltd Company Limited China Unicom Internet of Things Corporation China Big Data Artificial Unicom High-tech China Unicom Leasing Co., Ltd. China Unicom WO Music & Culture Co., Ltd. 2018, 8 May, The PRC, China Unicom iRead Science and Culture Co., Ltd. Co., and Culture Science iRead China Unicom 28 April, 2018, The PRC, China Unicom (Shanghai) Industrial Internet China Unicom (Heilongjiang) Industrial Internet Henan Industrial Interconnection & Technology China Unicom Video Technology Co., Ltd. 2018, 17 January, PRC, The Name China (Jiangsu) Industrial Unicom Internet 18. 18. SUBSIDIARIES IN INVESTMENTS table column width 65pt 154 CHINA UNICOM (HONG KONG) LIMITED INTEREST IN ASSOCIATES 19. INVESTMENTS IN SUBSIDIARIES 18. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED The followinglistcontainstheparticularsofamaterialassociateasat31December2020: Share ofnetassets Yunjing Culture AndTourismTechnologyCo., LTD The aboveassociateisaccountedforusingtheequitymethodinconsolidated financialstatements. Tower Company Name Name Yichun Digital Economy Industry Operation Co., Co., IndustryOperation Yichun DigitalEconomy Technology Changchun FAW Communications Co., (Tianjin) Technology Information Wobaifu ThePRC, 11November 2019, Ltd Co., SecurityTechnology Yundun Intelligent Ltd Ltd. Co., LTD Incorporated structure Form ofbusiness

The PRC, 27February2019,

establishment andnature oflegalentity Place anddateofincorporation/ The PRC, December 14, 2020, The PRC, September 27, 2002, 17, 2020, The PRC, April limited liability company liability limited limited liability company liability limited company liability limited company liability limited limited liability company liability limited (Continued) The PRC Place ofincorporation

and business

equity interests held ietIndirect Direct edb usdayPaidupcapital held byasubsidiary Percentage of Percentage of ownership interest — — — — — Proportion of

20.65% RMB176,008,471,024 Construction, maintenance and maintenance Construction, RMB176,008,471,024 20.65% 0%RMB10,000,000 100%

1 RMB51, 51% 1 Not applicable 51% RMB86, 51% 0 RMB20,000,000 60% paid upcapita Parti

cular ofissuedsharecapital/ 000,000 458,600

l

Principal activitiesPrincipal 38,802 in thePRC(Note 45.2) in towers communications of operation 2020 of operation

Pr Provision Provision Provision Telecommunications op Telecommunications Provision incipal activities andplace services in the PRC services in andother consultation development, technology thePRC service in technology information thePRC development in and promotion development; technology the PRC services in andapplication processing in thePRC in

of of of of technology technology software and software data analysis, 36,445 eration 2019

table column width 65pt 155 2019 5,221 5,221 (1,521) 40,995 76,428 37,697 36,176 20.65% (27,142) 297,072 182,561 (128,364) (182,561)

ANNUAL REPORT 2020 ANNUAL 2020 36,176 56,000 6,427 6,427 amount Fair value (1,262) 38,460 37,198 43,204 81,099 Carrying Tower Company 20.65% (44,499) 294,176 186,246 As at 31 December 2019 (186,246) (106,635)

37,198 34,873 amount Fair value Carrying As at 31 December 2020

(Continued) Tower Company from the Group’s Tower Assets Disposal —

Summarised financial information of the material associate, adjusted for any differences in accounting policies, and reconciled to the the to and reconciled in accounting policies, differences for any adjusted associate, material information of the financial Summarised below: financial statements, are disclosed carrying amount in the consolidated Equity Carrying amount in the consolidated financial statements The fair values of the interests in Tower Company is based on quoted market prices (level 1: quoted price (unadjusted) in active markets) at the financial position date without any deduction for transaction costs and disclosed as follows: Current assets Non-current assets Current liabilities Non-current liabilities Revenue Profit for the year The Group’s effective interest gain Adjustment for the remaining balance of the deferred Total comprehensive income for the year Reconciled to the Group’s interest in the associate: Net assets of the associate Interest in listed associate the fair value of investment in million million) Tower Company 2020, was RMB34,873 RMB56,000 As at 31 December (2019: based on its which amount. price, was no quoted was below its carrying and The directors of the Group an impairment test there market performed impairment of the investment as at 31 December 2020. 19. 19. ASSOCIATES IN INTEREST table column width 65pt 156 CHINA UNICOM (HONG KONG) LIMITED INTEREST IN JOINT VENTURES 20. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED The Group’seffectiveinterest Net assetsofthejointventure Reconciled totheGroup’sinterestsinjointventure: Income taxexpense Interest expense Interest income Included inaboveincome: Total comprehensiveincomefortheyear Profit fortheyear Revenue Carrying amountintheconsolidatedfinancialstatements Equity Liabilities Assets market priceasat31December2020: quoted available has no corporate entitywhich unlisted venture, is which ofamaterialjoint the particulars contains list The following Share ofnetassets carrying amountintheconsolidatedfinancialstatements,aredisclosedbelow: and reconciledtothe venture, policies, for any of thematerialjoint differences inaccounting adjusted information Summarised financial Finance Consumer Merchants Union Name Company Limited (“MUCFC”) structure Form ofbusiness

Incorporated and business Place ofincorporation

The PRC

held by a subsidiary Paid up capital Principal activities Principal Paidupcapital held byasubsidiary ownership interest Proportion of

50% RMB3,868,960,000 Consumer finance consulting in the PRC in consulting finance Consumer RMB3,868,960,000 50%

108,311 (11,028) (97,283) 11,028 15,710 12,651 (3,059) 1,668 1,668 5,514 5,656 2020 2020 (728) 50% MUCFC

(83,337) 13,055 10,740 92,697 (9,360) (3,178) 1,466 1,466 9,360 4,680 4,771 2019 2019 (426) 50% table column width 65pt 157 47 595 2019 2019 1,856 1,903 1,150 (1,308) 39,498 40,648

ANNUAL REPORT 2020 ANNUAL 94 832 926 103 (823) 2020 2020 1,104 41,537 42,641

(i) Note

performance obligations. It would be recognised as revenue upon the rendering of services. Almost all of the contract contract all of the Almost of services. rendering upon the as revenue recognised It would be obligations. performance 2020. liability balance as at 31 December 2019 was recognised as revenue for the year ended 31 December net of allowance

Others Less: Current portion Contract assets from bundle sales of mobile handsets and provision of service,Contract assets from bundle Sub-total The Group offers preferential packages to the customers which include the bundle sales of mobile handsets and provision of based of handsets and sales revenue service to is allocated packages of such preferential consideration total contract The service. on their standalone selling prices. relating The to revenue the sale of the handsets is recognised when the titles passed are to the and the consideration customers allocated to the sales of mobile during handsets the contract period when is gradually received the customers pay the monthly package fee. Advances received from customers for future services (i) satisfying Group the before customers from received considerations the to relates from arises primarily liabilities Contract Others (a) Contract assets 21. 21. LIABILITIES CONTRACT AND ASSETS CONTRACT (b) Contract liabilities table column width 65pt 158 CHINA UNICOM (HONG KONG) LIMITED FINANCIAL ASSETS MEASURED AT FAIR VALUE 23. CONTRACT COSTS 22. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Current portion: Non-current portion: the Group. contracts with new customersenteringinto resulted in activities selling agents whose to are paid commissions Sales (ii) and IPTV broadband the costs ofinstalling and IPTVsubscribersmainlyinclude Direct incremental costsforactivatingbroadband (i) Sales commissions Direct incrementalcostsofbroadbandandIPTVservice

Debt securitiesmeasuredatFVOCI(recycling) Debt securitiesmeasuredatFVOCI(recycling) Financial assetsmeasuredatFVPL Financial assetsmeasuredatFVPL Equity securitiesmeasuredatFVOCI(non-recycling) RMB396 million(2019:RMB811million). expected toberecovered that is after one year more than is sales commissions capitalised of the year The amount (2019: Nil). million). There was nosignificant impairment inrelation tothe opening balance ofcapitalised costs or the costs capitalised during (2019: the year RMB1,472 during was RMB1,152 or loss million profit recognised in sales commissions The amountofcapitalised RMB893 million). expected to berecovered that is (2019: IPTV subscribers and after one year more RMB719 than million is broadband activating loss duringthe yearwasRMB2,524 million(2019: RMB2,891 million).The amountofcapitalised direct incremental costsfor or profit recognised in subscribers IPTV and broadband activating for costs direct incremental capitalised of amount The period. overtheexpectedservice andareamortised ofbroadbandandIPTVservices, atcustomer’shomesfortheprovision terminals

Note Note (iii) (iii) (ii) (ii) (ii) (i) (i)

22,629 27,682 24,189 1,560 1,262 1,838 2,410 3,672 3,493 2020 2020 721 934

1,844 3,323 3,079 4,923 4,093 3,891 2019 2019 568 202 202 — — table column width 65pt 159 — 55 995 216 143 2019 2019 2019 1,273 3,323 3,716 3,716 3,125 11,324 13,808

ANNUAL REPORT 2020 ANNUAL 52 442 114 2020 2020 2020 1,894 1,838 6,900 5,089 1,281 1,672 11,989 10,974 14,591

(i) 42 (ii) Note Note

(Continued)

Listed in the PRC products. by both the collection of contractual cash flows and sale. within a business model whose objective is achieved Listed outside the PRC Unlisted held issued certain debt investments are at FVOCI by banks and the investments measured (recycling) represent Debt securities at FVPL represent certain Financial assets measured investments equity investments, funds and wealth management in monetary other services VAT recoverable Others

Short-term bank deposits Restricted deposits Intangible assets (ii) (iii) Prepaid services charges for transmission lines and electricity cables and 25. 25. ASSETS OTHER 24. 24. DEPOSITS RESTRICTED AND DEPOSITS BANK SHORT-TERM (i) securities measured at FVOCI (non-recycling) Equity 23. 23. VALUE FAIR AT MEASURED ASSETS FINANCIAL table column width 65pt 160 CHINA UNICOM (HONG KONG) LIMITED Intangibleassets (i) OTHER ASSETS 25. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED (ii) VAT recoverable includes inputVAT andprepaid VAT whichwilllikely be deducted beyond one year. VAT recoverable whichwillbe Cost: deducted withinoneyearareincludedin“Prepaymentsandothercurrent assets”.SeeNote28(i). Net bookvalue: Accumulated amortisationandimpairment:

Disposals Disposals Transfer fromCIP Additions At 31December2019 Disposals Transfer fromCIP Additions At 1January2019 At 31December2019 At 31December2020 At 31December2020 Amortisation chargefortheyear At 31December2019 Disposals Amortisation chargefortheyear At 1January2019 At 31December2020 (Continued)

Computer software (19,745) (22,657) (21,773) 28,956 31,358 32,004 (1,728) (3,736) (3,596) (4,331) 3,956 9,585 1,708 3,447 4,097 9,347 174 145

Others 220 (24,917) (2,260) (23,612) (1,839) 140 (21,205) (1,460) 3,578 1,627 3,887 3,405 1,739 (103) (509) (427) 399 205 (53) 88 13 21 48

34,936 10,974 35,891 32,361 11,324 (3,699) (4,840) (1,781) (4,163) 4,496 3,535 4,161 1,756 Total 158 195 table column width 65pt 161 16 316 2019 2019 2019 2,359 9,472 2,545 3,881 1,335 2,027 (7,368) 24,601 17,233 17,233

1 ANNUAL REPORT 2020 ANNUAL 644 268 2020 2020 2020 1,951 8,963 2,766 3,914 1,682 (9,722) 16,287 16,287 26,009

The gross carrying amount of accounts receivable from contracts with amounted customers to RMB25,933 million December as at 31 2020 (2019: RMB24,569 million). on the billing date and net of credit loss allowance, is as follows: The aging analysis of accounts receivable, based Within one month More than one month to three months More than three months to one year More than one year The normal credit period granted by the Group to individual subscribers and corporate customers is thirty days from the date of general the by granted period credit the customers, corporate major For criteria. assessment credit specified certain meet they unless billing Group is based on the service contract terms, normally not exceeding one year. There is no significant concentration of credit risk with as the Group to customers receivables, has respect number of a large customers. The Covid-19 pandemic since early 2020 has brought about additional uncertainties in the operations and financial position of the ECL in the used information forward-looking the evaluating when impact of Covid-19 the considered Group The customers. Group’s model expected loss and reassessed provisions including assessing the risk associated factors with various customer sectors and applying an upward risk weighting to those sectors with a significant increase in credit risk. Handsets and other telecommunication products Handsets and other telecommunication Accounts receivable Less: Credit loss allowance Consumables Others 27. 27. RECEIVABLE ACCOUNTS 26. 26. CONSUMABLES AND INVENTORIES table column width 65pt 162 Formajorcorporatecustomers CHINA UNICOM (HONG KONG) LIMITED Forindividualsubscribersandgeneralcorporatecustomers ACCOUNTS RECEIVABLE 27. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED More than3yearspastdue 2 More than180dayspastdue 1 91 Within 1yearpastdue 1 Current (notpastdue) Current (notpastdue) 2020: receivable asat31December accounts for ECLs credit riskand exposure to the Group’s about information provides table following The loss allowancebasedonpastduestatusisdistinguishedbetweentheGroup’sdifferentcustomertypes. customer types, patterns fordifferentthe that there are experience different loss indicate credit loss As theGroup’shistorical matrix. a provision using calculated is which ECLs, lifetime to equal amount receivable atan for accounts allowances measuresGroup loss The – – – 3 yearspastdue 2 yearspastdue 90 dayspastdue – 180 dayspastdue (Continued)

Expected Expected loss rate loss rate 100% 100% 89% 68% 90% 50% 24% 5% 6% % %

Gross carrying Gross carrying amount amount 19,260 1,758 2,147 2,020 1,195 7,899 6,641 2,696 6,749 942 711

allowance allowance (1,758) (2,147) (1,382) (1,867) (6,178) (3,544) (839) (637) (599) (332) (161) Loss Loss table column width 65pt 163 Loss Loss Loss Loss (372) (674) (498) (699) (175) (683) (755) (3,505) (3,863) (1,262) (2,250) allowance allowance

ANNUAL REPORT 2020 ANNUAL 795 840 9,602 4,517 1,037 2,929 7,382 1,363 1,268 2,250 17,219 amount amount Gross carrying Gross carrying

% % 4% 6% 15% 48% 88% 50% 90% 100% 100% loss rate loss rate Expected Expected

(Continued) 180 days past due – 2 years past due 3 years past due 90 days past due – – –

The following table provides information about the Group’s exposure to credit risk and ECLs for accounts as at 31 December receivable 2019: Within 1 year past due 1 2 More than 3 years past due Current (not past due) between differences to reflect adjusted are rates These past years. over loss experience on actual based are loss rates Expected economic conditions during the period over which the historic data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables. Current (not past due) 1 91 More than 180 days past due subscribers and general corporate customers For individual 27. 27. RECEIVABLE ACCOUNTS For major corporate customers table column width 65pt 164 CHINA UNICOM (HONG KONG) LIMITED PREPAYMENTS AND OTHER CURRENT ASSETS 28. ACCOUNTS RECEIVABLE 27. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED As at31December2020,therewasnosignificantimpairmentfortheprepayments andothercurrentassets. Prepayments andothercurrentassetsareexpectedtoberecoveredor recognised asexpenseswithinoneyear. VATrecoverableincludestheinputandprepaidthatcan bedeductedwithinoneyear. (i) Others Prepaid enterpriseincometax VAT recoverable Deposits andprepayments Prepaid powerandwatercharges Prepaid serviceschargesfortransmissionlinesandelectricitycables mentioned above. The maximumexposure tocredit risk asofthe statement offinancialpositiondateisthe carryingvalue ofaccountsreceivable receivable. are account charged generally written-off whenthere to theallowance no expectationofrecovering is reliableevidence to indicate the Amounts statement income. of the consolidated receivables have beenrecognisedin for impaired release allowance and of The creation Balance, endofyear Written-off duringtheyear Allowance fortheyear Balance, beginningofyear The natureofprepaymentsandothercurrentassets,netcreditlossallowance,areasfollows: The movementinthecreditlossallowancerespectofaccountsreceivableduringyear,isasfollows: other services (Continued)

Note (i)

15,882 (2,743) 2,363 5,726 3,607 3,549 9,722 5,097 7,368 2020 2020 625 12

12,456 (2,469) 2,072 5,286 2,068 2,053 7,368 3,128 6,709 2019 2019 329 648 table column width 65pt 165 (7) 90 (88) (395) (838) 8,000 8,170 2,740 7,422 (7,564) 2019 (11,696) (10,000) 34,945

— — — — — — — — — — — — (50) (50) 283 283 Other

borrowings Total

ANNUAL REPORT 2020 ANNUAL 2020 — — — — — — — — — — (838) 23,085 8,170 Lease (11,696) (11,696) 233 (18,689) liabilities

1 1 7,332 — — — — — — — — — — — — —

bonds Corporate

— — — — — — — — — — — — — — — notes Promissory

(7) — — — — — — — — — 12 12 8,000 papers (10,000) Commercial

— — — — — — — — — — 77 77 (88) (395) Long-term Long-term bank loans

— — — — — — — — — — — — 740 2,900 7,000 998 2,999 27,961 8,212 50,810 2,740 5,564 3,306 8,995 998 2,998 32,325 7,979 62,165 (7,564) (4,824) (395) (2,007) (Note 39)(Note 33) (Note 40) (Note 34) (Note 35) (Note 36) (Note bank loans Short-term

parties papers new leases during the year during the leases new Net deposits with Finance Company by related Company by related with Finance deposits Net Capital element of lease rentals paid of lease Capital element Payment of issuing expense for commercial for commercial of issuing expense Payment Repayment of related parties loan parties of related Repayment Repayment of long-term bank loans bank of long-term Repayment Repayment of commercial papers of commercial Repayment Others Repayment of short-term bank loans of short-term Repayment Decrease due to termination of lease contracts to termination of lease due Decrease Proceeds from commercial papers Proceeds Other changes: into from entering liabilities Increase in lease Changes from financing cash flows: from short-term bank loans Proceeds At 31 December 2020 Total changes from financing cash flows Exchange adjustments changes Total other At 1 January 2020

Cash at bank and in hand to all cash on hand Cash and cash equivalents and refer highly deposits, demand short-termliquid readily are investments that are subject to an insignificant risk of changes in value. convertible to known amounts of cash and which changes. non-cash and both cash including activities, financing from liabilities Group’s in the changes details below table The Liabilities arising from financing activities are liabilities for which cash flows or future cash flows were, will be, classified in the cash flows from financing activities. Group’s consolidated statement of cash flow as (a) Cash and cash equivalents 29. 29. INFORMATION FLOW CASH OTHER AND EQUIVALENTS CASH AND CASH (b) activities Reconciliation of liabilities arising from financing table column width 65pt 166 CHINA UNICOM (HONG KONG) LIMITED Reconciliationofliabilitiesarisingfromfinancingactivities(Continued) (b) CASH AND CASH EQUIVALENTS AND OTHER CASH FLOW INFORMATION 29. (All amountsinRMBmillionsunlessotherwise stated) c Totalcashoutflowforleases (c) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Within financingcashflows Within investingcashflows Within operatingcashflows

Amounts includedintheconsolidatedstatementofcashflowsforleases comprisethefollowing: At 1January2019 Others into fromentering lease liabilities Increase in Other changes: At 31December2019 other changesTotal Exchange adjustments cashflows changes from financing Total Proceeds fromshort-termbankloans Changes fromfinancingcashflows: Loans fromrelatedparties Proceeds fromcorporatebonds Proceeds from promissory notesProceeds frompromissory Proceeds fromcommercialpapers Repayment of short-term bankloans Repayment of Repaymentrelated partiesloan of Repayment of long-term bankloans Repaymentlong-term of Repaymentcorporate bonds of Capital element of lease rentals paid lease rentals element of Capital Net Companybyrelated depositswith Finance new leases during theyearnew leasesduring parties Short-term bank loans Nt 9 Nt 3 Nt 0 Nt 4 Nt 5 (Note 36) (Note 35) (Note 34) (Note 40) (Note 33) (Note 39) (38,290) 5053,614 15,085 28,784 956 48 8,995 (418) (9,506) ,6 ,0 8,995 3,306 5,564 (15) — — — — — — — — — — — —

bank loans Long-term Long-term (418) 83 27 83 — — — — — — — — — — —

Commercial papers 8,995 — — — — — — — — — — — — — — —

Promissory Promissory

notes 9 1,0)(113 3 (25,822) 238 (11,123) (15,000) 992 9 ,9 23579962,165 7,979 32,325 2,998 998 992 (Continued) — — — — — — — — — — — — — 6 6

Corporate (17,000) 7933,2 ,4 81,153 7,741 36,720 17,993 bonds 2,000

— — — — — — — — — — — 5 6,728 5

liabilities (11,123) Lease 6, 19,708 11,696 728 7,971 2020 — — — — — — — — — — — —

41 orwnsTotal borrowings

Other 236 (48) 50 — — — — — — — — — — — —

19,099 11,123 7,798 (38,290) (17,000) (11,123) 2019 28,784 6,822 6,728 2,000 8,995 178 (418) 992 236 (48) 94 12 50

table column width 65pt 167 3,648 Share l equity capital

5,101 (4,100) (4,100) (4,529) (4,529) profits Tota 15,106 14,533 ANNUAL REPORT 2020 ANNUAL Retained Retained shares 30,598 254,056 millions

Number of — — — — 572 22,021 268,616 572 11,015 258,183 572 22,021572 268,616 22,593 267,735 Other Other reserve

— — (573) (1,453) reserve Investment revaluation revaluation

— — — — Share capital 254,056 (8,033) 254,056 (9,486) 254,056 (8,033) 254,056 (7,460)

Balance at 31 December 2019 Balance at 1 January 2020 Balance at 31 December 2020 Balance Balance at 1 January 2019 Balance Total incomecomprehensive for the year Dividends relating to 2018 Total incomecomprehensive for the year Dividends relating to 2019

At 1 January 2019, at 31 December 2019 and at 31 December 2020 At 1 January 2019, at 31 Issued and fully paid: 31. RESERVES 31. Company The (a) Movement in components of equity 30. 30. CAPITAL SHARE table column width 65pt 168 CHINA UNICOM (HONG KONG) LIMITED Investmentrevaluationreserve (iv) (iii) Other reserve Generalriskreserve (ii) Natureandpurpose (b) (i) Statutory 31. RESERVES reserves (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED (Continued) capital contributionrelatingtoshare-based paymentbornebyAShareCompany. of retainedprofits,and under commoncontrol,theeffect of entitiesand businesses of CUCL’scapitalisation combination business for value assets net the and consideration the between difference the represents reserve mainly Other income, netoftax,untilthefinancialassetsarederecognised. other comprehensive assets through financial value of reserve fair investment revaluationThe representsthechangesin Document. the in assets,asdefined of risk balance oftheending than1.5% notbeless should reservebalance risk assets. Thegeneral torisk relating losses potential to addressunidentified ofretainedprofits, throughappropriation equity, shareholders’ the riskreservewithin ageneral Companyestablishes 2012(the“Document”),theFinance effective on1July [2012]No.20)issuedbytheMOFwhich forFinancialInstitutions” (Caijin onImpairment Allowance “Requirements CUCL andUnicom Group established the Finance Company toprovide certain financialservices. Pursuant to connection feesarerecognisedafterwards. was made of approximatelyRMB12,289 to thestatutoryreserve million accumulated appropriation and nomore upfront 2011,an Asat31December reserve. statutory the to profits retained from transferred been had profits retained not subject tothe PRC enterprise income taxandanamountequal tothe upfront connection fees recognised inthe According to the PRC tax approval document issued by the MOF and the SAT ofthe PRC, the upfront connection fees were 31 December2020and2019,noappropriationtostaffbonuswelfarefundhasbeenmadebyCUCL. to theemployees.Foryears belong ended fund this through any assets acquired asexpensesincurredsince income of are welfare charged and fund to thestatement to thestaffbonus the appropriations Under IFRS/HKFRSs, cash dividends. as be distributed cannot the employeesand or thecollectivewelfare of bonuses for special beused can only welfare fund and bonus Directors. Thestaff the Boardof of made atthediscretion is welfare fund and bonus to thestaff Appropriation reserve fundfortheyearended31December2020. to the (2019: RMB1,246 general RMB1,273 approximately approximately Accordingly, CUCL appropriated million million) capital. from therelevant reserve authority, tooffsetaccumulatedlossesorincrease approval obtained be used,upon can only Company Law to the general reserve funduntil the cumulative amounts reach 50% ofthe registered capital. The statutory CUCL isrequired toallocate atleast 10% ofitsprofit after taxandnon-controlling interests determined under the PRC are appropriatedfromprofitaftertaxandnon-controllinginterestsbutbeforedividenddistribution. which welfare fund, and for certainstatutoryreserves, bonus provide staff required to namely, generalreserve and fund is it Association, of Articles the with accordance In PRC. the in enterprise investment asaforeign registered is CUCL

table column width 65pt 169 2019 4,529

ANNUAL REPORT 2020 ANNUAL 2020 5,018

At the annual general meeting held on 25 May 2020, the shareholders of theCompany approved the payment of a final dividend of million totaling reflected approximately RMB4,529 which has been 2019, December ended 31 year for the ordinaryshare per RMB0.148 profit for the year ended 31 December 2020. as a reduction of retained At a meeting held on the Board 11 March 2021, of Directors of Company the proposed the payment of a final dividend of RMB0.164 per This proposed million. RMB5,018 approximately totaling 2020 December 31 ended year the for shareholders the to share ordinary but will be 2020, 31 December as at financial statements reflected as a dividend payable in the consolidated dividend has not been December 2021. financial statements for the year ending 31 reflected in the consolidated Proposed final dividend: by the Company RMB0.164 (2019: RMB0.148) per ordinary share Pursuant to the PRC enterprise income tax law, a 10% withholding income tax is levied on dividends declared on or after 1 January 2008 by foreign investment enterprises to their foreign enterprise shareholders unless the enterprise investor is deemed as a PRC Tax the Company Resident Enterprise (“TRE”). obtained 2010, an approval pursuant On 11 November from the SAT of the PRC, to which the Company qualifies the Company’s 2020, subsidiaries as a PRC TRE as at 31 December from 1 January 2008. Therefore, in the PRC did not for withholding accrue tax on dividends distributed to the Company and has tax liability been no there deferred accrued in the Group’s profits of the Company’s subsidiaries in the PRC. consolidated financial statements for the undistributed For the Company’s non-PRC TRE shareholders (including HKSCC Nominees Limited), the Company would distribute dividends after deducting income tax payable by these non-PRC the amount of enterprise TRE shareholders thereon and dividend reclassify the related to the apply not does tax withhold to requirement The dividends. of such declaration upon the tax payable to withholding payable in its share register. Company’s shareholders appearing as individuals 32. DIVIDENDS 32. table column width 65pt 170 CHINA UNICOM (HONG KONG) LIMITED LONG-TERM BANK LOANS 33. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Less: Portionclassifiedascurrentliabilities Balances due: The repaymentscheduleofthelong-termbankloansisasfollows: by thirdparties. As at 31 December were (2019: 2020, approximately RMB61 guaranteed of approximatelyRMB46 million) million loans long-term bank Less: Currentportion Sub-total Euro denominated USD denominated RMB denominated

— — — — bank loans bank loans bank loans laterthanfiveyears laterthantwoyearsandnofive laterthanoneyearandnotwoyears nolaterthanoneyear Interest ratesandfinalmaturity Fixed interestratesrangingfrom1.10%to2.50%(2019:2.50%) Fixed interestratesrangingfromNilto1.55%(2019:1.55%)per Fixed interestratesrangingfrom1.08%to1.20%(2019:1.20%) per annumwithmaturitythrough2034(2019:2034) annum withmaturitythrough2039(2019:2039) per annumwithmaturitythrough2036(2019:2036)

1,072 2,900 2,678 2,482 2,900 2,482 2020 2020 (418) (418) 966 444 418 204 18

1,273 1,183 3,306 3,032 2,869 3,306 2,869 2019 2019 (437) (437) 413 437 232 42 table column width 65pt 171 1,430 (2,485) 12,112 32,325 23,725 34,810 10,183 11,085 Total minimum lease payments

2019 ANNUAL REPORT 2020 ANNUAL 1,062 9,602 10,871 21,535 32,325 10,790 Present Present value of the minimum lease payments

1,498 6,203 (1,849) 18,053 29,810 27,961 10,352 11,757 Total minimum lease payments

2020 1,113 5,575 9,770 16,458 27,961 11,503 Present value of the minimum lease payments

After 5 years Less: total future interest expenses Less: total future interest Present value of lease liabilities After 2 years but within 5 years Within 1 year After 1 year but within 2 years

At 31 December 2020 and 2019, the lease liabilities were repayable as follows: At 31 December 2020 and 2019, the lease liabilities On 18 November 2019, CUCL 2019, issued On November 18 tranche one of 2019 promissory notes in an amount of RMB1 billion, with maturity period a of 3 and which carries interest at 3.39% per annum. years from the date of issue interest at 3.43% per annum. issued RMB1 billion 5-year corporate bond, bearing On 7 June 2016, the Group bearing interest at 3.67% per annum. issued RMB2 billion 3-year corporate bonds, On 19 June 2019, the Group 36. 36. LIABILITIES LEASE 35. 35. BONDS CORPORATE 34. 34. NOTES PROMISSORY table column width 65pt 172 CHINA UNICOM (HONG KONG) LIMITED DEFERRED REVENUE 37. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Balance atendoftheyear Sub-total Reductions fortheyear Sub-total Additions fortheyear Balance atbeginningoftheyear Deferred revenuemainlyrepresentstheunamortisedportionofgovernmentgrants. — — — — others governmentgrants others recognitionofgovernmentgrantsinprofitorloss

(1,043) 1,204 5,927 2,119 4,851 2020 (452) (591) 915

4,851 2,002 3,687 1,017 2019 (838) (369) (469) 985 table column width 65pt 173 174 282 2019 2019 5,564 2,778 2,496 (2,604)

ANNUAL REPORT 2020 ANNUAL 98 740 131 2020 2020 2,627 2,496 (2,529)

(a) Note

maturity through 2021 (2019: maturity through 2020) Fixed interest rates are 1.85% (2019: 2.15% to 3.92%) per annum with Interest rates and final maturity Certain staff quarters, prior to 1998, were sold to certain of the Group’s employees at preferential prices, subject to a number of subject sold at preferential prices, of the Group’s employeesto certain were prior to 1998, Certain staff quarters, eligibility requirements. In 1998, the State Council issued a circular which stipulated that the sale of quarters to employees at preferential prices should the State Council be terminated. In 2000, issued a further circular stating that cash subsidies should be made to certain eligible employees following the withdrawal of the allocation the specific timetable of However, staff quarters. municipal or provincial individual by determined to be were policies of these implementation the for and procedures the provinces or municipality. governments based on the particular situation of Based on the relevant detailed local government regulations promulgated, certain entities within the Group adopted cash housing subsidy plans. plans, In accordance with these for those eligible who had not been allocated employeesor with quarters were of quarters sales discounted the before standards prescribed up to the with quarters allocated who had not been terminated, the Group determined to pay them one-off cash housing subsidies based on their years of service, positions and other criteria. Based on available the information, the Group estimated the required provision for these cash housing subsidies (the year 2000 million, ended 31 December amounted to RMB4,142 of incomefor the year which to the statement was charged subsidies was issued). in which the State Council circular in respect of cash by CUCL and the absorption of China”) (“CNC (Group) Company Limited absorption of China Netcom through the In January 2009, formerly rights and obligations the Group”) by Unicom Group, Communications Group Corporation (“Netcom China Network 2020, December at 31 As and Unicom Group separately. by CUCL over taken Group were undertaken by CNC China and Netcom the Group’s unpaid one-off cash housing subsides amounted to approximately RMB2,496 million. If the actual payments required one-off for these housing subsidies differ from the amount provided, Unicom Group will bear any additional payments required. Group. If the actual payments are lower than the amount provided, the difference will be paid to Unicom bank loans

At 31 December 2020 and 2019, all short-term bank loans were unsecured. RMB denominated One-off cash housing subsidies Sub-total Less: Current portion Others 39. 39. LOANS BANK SHORT-TERM 38. 38. OBLIGATIONS OTHER (a) One-off cash housing subsidies table column width 65pt 174 CHINA UNICOM (HONG KONG) LIMITED ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 41. COMMERCIAL PAPERS 40. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED More thanoneyear Six monthstooneyear Less thansixmonths The aginganalysisofaccountspayablesandaccruedliabilitiesisbasedon theinvoicedateasfollows: Others Accrued expenses VAT receivedfromcustomerinadvance Amounts duetotechnicalsupportservicesandotherserviceproviders/contentproviders Interest payable Salary andwelfarepayables Repair andmaintenanceexpensepayables Customer/contractor deposits Payables totelecommunicationsproductssuppliers Payables tocontractorsandequipmentsuppliers maturity periodof90daysfromthedateissueandwhichcarriesinterestat2.17%perannum. a with RMB2billion, of amount an in papers termcommercial short 2020 super of four tranche issued 2020,CUCL 5November On period of90daysfromthedateissueandwhichcarriesinterestat1.57%perannum,wasfullyrepaidinNovember2020. amaturity with RMB1billion, of amount an in papers termcommercial short of2020super three tranche issued 2020,CUCL 6August On period of180daysfromthedateissueandwhichcarriesinterestat1.89%perannum. a maturity with RMB3 billion, of amount an term commercial papersin 2020 supershort of tranche two issued 2020, CUCL 15 July On period of180daysfromthedateissueandwhichcarriesinterestat1.89%perannum. On 15July2020, tranche one of2020 CUCL issued with amaturity super shortterm commercial ofRMB2 papers inanamount billion, maturity periodof270daysfromthedateissueandwhichcarriesinterestat2.20%perannum,wasfullyrepaidinAugust2020. a with RMB4billion, of amount an in papers termcommercial short 2019super twoof tranche issued 2019,CUCL 15November On maturity periodof270daysfromthedateissueandwhichcarriesinterestat2.24%perannum,wasfullyrepaidinJuly2020. On 25 October 2019, CUCL issued tranche one of2019 super short term commercial papers inan amount ofRMB5 billion, with a

116,553 134,437 134,437 17,186 12,248 73,046 9,038 8,846 9,481 2,746 4,852 5,261 5,723 3,779 2020 2020 115

101,324 117,525 117,525 16,486 63,390 6,951 9,250 7,263 3,052 3,988 5,129 5,771 5,096 7,249 2019 2019 101 table column width 65pt 175 ANNUAL REPORT 2020 ANNUAL On 16 April 2014, the Company adopted a new share option (the “2014 Share Option Share Option Company adopted share a new the scheme Scheme”). The 2014 Scheme April 2014, On 16 is valid and effective for a period of 10 years commencing on 22 April 2014 and will expire on 22 April 2024. Under the 2014 Share Option Scheme, the share options may be granted to employees including all directors; any grant of share options to a Connected Person Company of the directors non-executive independent the by approved must be Company of the Rules) Listing in the (as defined to grants all and options) of the grantee is a director such case in the Company the of director non-executive independent any (excluding prior the necessary where including Rules, Listing of the requirements the with compliance to subject be shall persons connected Option 2014 Share under the for issue available options were 1,777,437,107 2020, at 31 December As shareholders. approval of the Scheme. Pursuant to the 2014 Share Option Scheme, the consideration payable by a participant for the grant of share options will be at their by the Board of Directors determined of an option will be exercise by a participant upon the payable price exercise The HKD1.00. is the higher of: discretion at the date of grant, except that such price may not be set below a minimum price which (i) The closing price of the shares on the SEHK on the offer date in respect of the share options; and (ii) The average closing price of the shares on the SEHK for the five trading days immediately preceding the offer date; The option period on the date on commences any day after which such from the share option 10 years but not is offered, may exceed offer date. No share options had been granted since adoption of the 2014 Share Option Scheme. No options outstanding as at 31 December 2020 and 2019. On 6 September 2009, the Company the Company announced 2009, On 6 September that in order to strengthen the cooperation the Company between and Telefónica, the and into a subscription alliance pursuant parties entered a strategic agreement to which conditionally each party agreement, to agreed of each other’s shares. billion in each other through an acquisition invest an equivalent of USD1 (a) Telefónica that: with Telefónica alliance strategic the to enhance into an agreement entered Company the 2011, On 23 January and (b) the parties; third acquisition from through million of USD500 a consideration for Company of the shares ordinary purchase would (“Telefónica of Telefónicashares ordinary Shares”) for an held in Company would treasury Treasury acquire from Telefónica 21,827,499 aggregate purchase price of Euro374,559,882.84.the On 25 January 2011, Company completed the purchase of Telefónica Treasury million in the of USD500 its investment completed Telefónica During 2011, agreement. strategic with the in accordance Shares Company. and received dividend of a scrip means it by to implement chose Company The a dividend. declared Telefónica 2012, On 14 May million. 1,646,269 ordinary shares of approximately RMB146 As at 31 December 2020, the related financial assets measured at FVOCI amounted to approximately RMB1,672 million (2019: in fair value of the financial through other decrease assets the 2020, December million). ended 31 approximately RMB3,125 year For the million), in of approximately RMB573 recorded million has been decrease RMB1,453 income was approximately (2019: comprehensive the consolidated statement of comprehensive income. 43. 43. SCHEMES OPTION SHARE EQUITY-SETTLED 42. 42. OTHER EACH IN TELEFÓNICA AND COMPANY THE OF INVESTMENT MUTUAL table column width 65pt 176 CHINA UNICOM (HONG KONG) LIMITED RESTRICTED A-SHARE INCENTIVE SCHEME 44. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED during theyearunderRestrictedA-ShareIncentiveScheme(2019:RMB571 million). For theyearended 31December 2020, the Group recognised share-based payment expenses andotherreserve ofRMB375million 7,262,000). the year 18,110,200 of ended 31December of repurchased(2019:RestrictedShares During 2020, RestrictedShares were and forfeited Board ofDirectorsAShareCompany. the fulfilment ofthe vesting conditions, Restricted Shares of303,314,400 under the first tranche were approved for unlocking by the Pursuant tothe Restricted A-Share Incentive Scheme, the first Lock-UpPeriod of approximately2 years has expiredinApril2020. With Shares basedontherespectivesubscriptionpricefromParticipants. repurchase the Restricted shall be unlocked,theA hence theRestricted Share Company Shares cannot and are not fulfilled conditions vesting the If shares. incentive these to entitled fully be will Participants the and tranche each for Period Lock-Up corresponding (collectively referred to as “vesting conditions”), the restriction over the Restricted Shares will be removed after the expiry ofthe achievement ofcertain revenue andprofittargets ofthe AShare Company, the Participants’ individualperformance appraisal, etc. Subject to fulfilment ofall service and performance conditions under the Restricted A-Share Incentive Scheme which include the Lock-Up Period. of 40%, three 30% tranches inproportion and 30% of the total numberofthe Restricted the Shares grantedexpiry of each upon of the separately in by theAShareCompany) cancelled (or repurchasedand be unlocked The RestrictedSharesshall guarantee or indemnity. norsubjecttoany thesesharesarenottransferrable, Period, theLock-Up fromtheGrantDates.During immediately respectively, The Restricted Shares are subject tovarious lock-up periods (the “Lock-Up Period”) ofapproximately 2 years, 3 years and4 years, RMB3.79 pershare. of price Dates,andthesubscription Grant pershareattherespective ofRMB6.13pershareandRMB5.36 Company ofAShare price themarket between difference onthe based asdetermined respectively, pershare, RMB1.57 and RMB2.34 Datesis Grant respective Dates”), respectively, with a subscription price ofRMB3.79 per share. The fair value ofthe Restricted Shares granted under the Grant 1 February2019 (“the 21 March2018and on subsidiaries) the Company’s certain core employees of including Participants”,(“the them by 13,156,000weresubscribed of Shares Restricted granted batch second 793,861,000and of Shares Restricted granted batch first the Group, were forgranting tothecoreemployeesof (“Restricted Shares”) approved A ShareCompany restricted shares of million 848 more than Restricted A-ShareIncentiveScheme”),not (“the to theshare Pursuant incentive schemeA ShareCompany (PhaseI)of

table column width 65pt 177 20 77 69 370 203 989 290 2019 1,052 2,417 1,537 11,434 11,134

ANNUAL REPORT 2020 ANNUAL 47 77 387 229 979 999 283 188 2020 2,735 2,034 16,500 13,704

Note (i), (v) (i), (ii) (i), (xi) (i), (xi) (i), (ix) (i), (ix) (i), (iv) (i), (vi) (i), (iii) (i), (vii) (i), (viii)

Unicom Group related services services charges Lending by Finance Company to Unicom Group and its subsidiary (i), (xi) Repayment of loans lending by Finance Company to Interest income from lending services Income from comprehensive support services Charges for ancillary telecommunications services Charges for comprehensive support services Charges for short-term lease of telecommunications resources and Charges for engineering design and construction services Charges for shared services Charges for materials procurement services

The following is a summary of significant recurring transactions carried out by the Group with Unicom Group and its its and Group Unicom with Group the by out carried transactions recurring of significant summary is a following The were carried out in the ordinary course of business. subsidiaries. In the directors’ opinion, these transactions Rental charges for short-term property leasing and related Transactions with Unicom Group and its subsidiaries: Charges for value-added telecommunications services Unicom Group is directly controlled a state-owned enterprise is government by the PRC government. The PRC the Company’s ultimate financial statements available for public use. Unicom Group nor the PRC government publishes controlling party. Neither The PRC government controls a significant portion the of productive assets and entities in the PRC. The Group provides transactions of other extensive employees with the telecommunications of its retail transactions, thus, is likely to have as part services state-controlled entities, including personnel management their key and their close family These transactions members. are carried out are consistently applied to all customers. on commercial terms that Management considers certain state-owned enterprises have material transactions with the Group in its ordinary course of business, which include but not limited to 1) rendering and telecommunicationsincluding receiving services, 2) interconnection revenue/charges; of placing and 4) utilities; of public use including of goods, purchasing 3) infrastructure; network telecommunications certain sharing bank deposits and borrowing money. The Group’s telecommunications network depends, in large part, on interconnection with the network and on transmission lines service provided by other domestic carriers. These transactions mainly are carried out on terms been and have authorities government relevant by promulgated standards or parties with third conducted to those comparable from domestic carriers are all derived from contracts with customers. reflected in the financial statements. Amounts due relating to related party transactions has been disclosed below. Management believes that meaningful information (a) Recurring transactions Recurring (a) 45.1 Connected transactions with Unicom Group and its subsidiaries 45. 45. TRANSACTIONS PARTY RELATED MATERIAL table column width 65pt 178 CHINA UNICOM (HONG KONG) LIMITED Recurringtransactions(Continued) (a) ConnectedtransactionswithUnicomGroupanditssubsidiaries(Continued) 45.1 MATERIAL RELATED PARTY TRANSACTIONS 45. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED (vi) Unicom Group and CUCL agreed to provide shared services to each other and would share thecostsrelatedto CUCL agreed UnicomGroupand to providesharedservices would to eachotherand (vi) Unicom Group agreed toprovide engineering design, construction andsupervision services andIT services to CUCL. (v) international resources(including telecommunications international certain toCUCL Groupagreedtolease Unicom (iv) are Rentals from eachother. facilities ancillary lease properties and agreedmutually Group to Unicom and CUCL (iii) UNISK (Beijing) Information Technology Corporation Limited (“UNISK”) agreed toprovide the mobile subscribers of (ii) i On25 November 2016, CUCL entered the agreement, into “2017 (i) For theyearended31December2020, theserviceschargespaidbyUnicomGrouptoCUCLwasnegligible. shared services proportionately inaccordance with their respective totalassets value with certain adjustments. settled whentherelevantservicesareprovided. The charges payable by CUCLforthe above services are determined with reference to the market price and are market ratesoracost-plusbasisiftherearenorates. to reference with determined and CUCL by borne be would charges service maintenance such Group, Unicom otherwiseagreed by CUCLand aforementioned, unless facilities maintenance service tothetelecommunications providedthatsuchchargeswouldnotbe highercharges ofsuchresourcesandfacilities thanmarketrates. For telecommunications resources andother telecommunications facilities are based onthe annualdepreciation ofinternational fortheleasing charges Therental operations. forits facilities telecommunications other certain and facilities) satellite international and cables land international capacity, cable submarine telecommunications channel gateways, international telecommunications service gateways, international based onthelowerofmarketratesanddepreciationcoststaxes. depending onthetypesofvalue-addedserviceprovidedtoGroup. The percentage the same region. content totheGroupin of revenue to UNISK varies by theGroup to beallocated independent value-added telecommunications content providers whoprovide value-added telecommunications to allocated averageproportion the exceed not does toUNISK allocated proportion such that condition the UNISK fees toforsettlement, on such of a portion allocates and received by theGroup) actually (and subscribers The Group retains aportion ofthe revenue generated from the value-added services provided tothe Group’s network data platform. and communications services its cellular various typesofvalue-added through CUCL with changed underthenewagreementascomparedtoyearended31December2019. calculated onthe same basisasunder previous agreement. Annual caps for those transactions have notbeen as those set out in the “2017 the in setout as those and theirrespective The services connected transactions terms the same are are existing continuing substantially the “2020 entered into Group Unicom 21 October2019, and On CUCL Agreement” hasatermofthreeyearscommencingon1January2017andexpired31December2019. continuingconnectedtransactions.“2017 Grouptorenewcertain Unicom – 2019 Comprehensive Services Agreement”, and the service fees payable shall be shall payable fees service the and Agreement”, Services 2019 Comprehensive (Continued)

– 2019 Comprehensive Services Agreement” with – 2022 Comprehensive Services Agreement”. – 2019 Comprehensive Services2019 Comprehensive table column width 65pt 179 ANNUAL REPORT 2020 ANNUAL (Continued) telecommunications materials and other domestic non-telecommunications materials to CUCL. Unicom Group has installation, specifications, of technical verification of tenders, on management services to provide also agreed consulting and In agency services. addition, Unicom Group will sell cable, modem and other materials operated by itself to CUCL and will also provide and storage logistics in services relation to the above materials procurement. guidance government rates, market values, based on contract payable by CUCL to Unicom Group are The charges price or cost-plus basis where applicable. telecommunications pre-sale, on-sale and after-sale services such assembling as and repairing of certain of maintenance services, delivery printing and invoice services, agency sales equipment, telecommunications on based are charges The service. customers’ and other acquisitions and servicing customers booths, telephone guidance price or cost-plus government rates, basis are market and settled as and services when the relevant are provided. facilities (excluding leasing services those facilities health mentioned and in medical vehicle services, (iv) above), and decoration services, gardening services, and conference hotel services, security services, labour services, renovation services, salesservices, construction agency, equipment maintenance services, market development, technical staff support andsanitary parking research development trainings, services, services, services, services, and information services, management property marketing, services, advertising services, storage communications (including technology services construction and installation integration services, system services, and consultation services, and maintenance operation services, and agent sales product development, software guidance cost-plus price or government basis settled as and rates, are based on market are The charges services). and when the relevant services are provided. trademark Bureau. Pursuant to an exclusive PRC at the PRC State Trademark “Unicom” registered logo, which are licence agreement between Unicom Group and the Group, the Group has been granted the right to use these trademarks on a royalty free and renewal basis. services, lending and other credit services, and other financial services. For the lending from Finance will Company to Unicom Group and its subsidiaries,services rate follow the interest to offered rate interest minimum the than no less be will and PBOC, the by promulgated standard rate interest the other clients type of loan,for the same and the applicable offered to Unicom Group by the general interest rate commercial banks in PRC for the same type of loan. (vii) (vii) Unicom Group agreed to provide comprehensive procurement services for imported and domestic (viii) certain include services These CUCL. to services telecommunications ancillary provide to agreed Group Unicom (ix) agreed to provide comprehensive Unicom Group and CUCL including support services to each other, dining services, (x) Unicom Group proprietor of is the “Unicom” in the registered English trademark bearing the and the trademark (xi) Finance to provide financial Company to Unicom Group has agreed and its subsidiaries, services including deposit 45.1 and its subsidiaries (Continued) Connected transactions with Unicom Group (a) (Continued) Recurring transactions 45. 45. TRANSACTIONS PARTY RELATED MATERIAL table column width 65pt 180 (ii) Lease of the Tower Assets and other related services related other and Assets Tower the of Lease (ii) Company Tower to Assets Tower of Sale (i) CHINA UNICOM (HONG KONG) LIMITED RelatedPartytransactions (a) RelatedpartytransactionswithTowerCompany 45.2 AmountsduefromandtoUnicomGroupitssubsidiaries (b) ConnectedtransactionswithUnicomGroupanditssubsidiaries(Continued) 45.1 MATERIAL RELATED PARTY TRANSACTIONS 45. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED respect oftransactionswithUnicomGroupanditssubsidiariesasdescribedin(a)above. are unsecured, interest-free, repayable on demand/on contract terms and arise in the ordinary course of business in subsidiaries its and Group Unicom to from and due Note 45.3below,amounts in as disclosed Apart fromtheaboveand 110% ofthebenchmarkinterestratepublishedbyPBOC). rateat90%to interest floating respective with (2019:RMB7,704million (NIFC) Center Funding Interbank National the by published Prime Rate (“LPR”) Loan interest rate of respective with floating total in RMB10,500 of million subsidiaries its to UnicomGroupand Company from Finance as at31December loans Group Amount duefromUnicom 2020 included leased towerportfolioasconfirmed bybothpartiesareeffectivefrom1January2018foraperiodoffiveyears. rates offered totheGroupregardingdiscount towers arrangements.under co-sharing Thenew terms to the apply cost-plus margin ofTower Company which forms the benchmark for pricing andanincrease inco-tenancy in toareduction relate mainly 2016,which basedontheAgreement dated8July provisions supplementary certain agreed Tower Company on CUCL and discussions, and 31 January2018, On after further arm-lengthnegotiations have beensignedsubsequently. relevant service period etc. Provincial service agreements anddetailed lease confirmation for specified towers “Agreement”). The Agreement finalised terms including assets categories, pricing basisfor usage charges, and assets(the related and towers telecommunications certain of usage the to relation in arrangements related a framework entered and agreement into Tower Company the pricing 8 July2016, and On to confirm CUCL respectively. 2019, June 2017and 2016,December February in weresettled Company Tower by payable RMB382 million and RMB18,322million RMB3,000million, of VAT related and Consideration Cash remaining Consideration, tranche Cash first The carries interestat3.92%perannum. related VAT and Consideration Cash outstanding The Consideration”). cash (“Cash payable in RMB21,322 of approximately million the balanceofconsideration and price ofRMB1.00per share to CUCLatanissue 33,335,836,822Shares”) issued Company shares (“Consideration amount for the Tower Assets Disposalattributed tothe Group wasdetermined asRMB54,658 million.Tower consideration final The Date”). on31October2015(“Completion wascompleted The TowerAssetsDisposal Company. Tower for sharesof subscription made acash CRHC In addition, cash consideration. by TowerCompanyand issued shares for exchange in Company Tower to Assets”) “Tower assets(the related and towers telecommunications Pursuant totheTransferAgreement, the Group, ChinaMobileandTelecomsoldcertainoftheir Company. Tower and (“CRHC”) Limited Corporation Holdings Reform China Telecom, China Mobile”), (“China related subsidiaries its and Limited Company Communications Mobile Agreement”), “Transfer China (the amongst of theentered Company) a subsidiary transfer into agreement of CUCLandanindirectlywholly-owned subsidiary On 14October 2015, CUCLandUnicomHorizonMobileCommunicationsCompanyLimited (awholly-owned (Continued)

table column width 65pt 181 48 64 258 132 2019

ANNUAL REPORT 2020 ANNUAL — 74 233 132 2020

(i) (ii) (iii) (iii) Note

(Continued) The Group provide engineering design and construction services, including system integration and engineering and engineering integration system including services, and construction design engineering provide Group The (2019: million was RMB295 2020 December 31 ended year the for Income Company. Tower to services design RMB262 million). interest-free, unsecured, are Company and to Tower from amounts due in 45.2(a)(i), as mentioned Except repayable on demand/on contract terms and arise in the ordinary course of business in respect of transactions with Tower Company as described above. The Group has initially applied IFRS/HKFRS 16 as from 1 January 2019. Based on IFRS/HKFRS 16, the minimum The Group has initially applied the minimum IFRS/HKFRS 16, Based on IFRS/HKFRS 16 as from 1 January 2019. in connection amount of the arrangement of lease payments payable by the Group with under the terms its use of telecommunications assets had resulted in recognition and related liability of a lease towers with the balance of million of RMB17,005 balance the with asset and a right-of-use million), RMB22,076 (2019: million RMB17,837 million) RMB21,269 (2019: 2020. In addition, as of December 31 the Group depreciation recorded of right-of-use asset of million RMB7,088 million), RMB6,498 (2019: expense of interest RMB757 million (2019: RMB894 million), million million) of and RMB11,246 charges variable lease payments and RMB10,492 other related service (2019: in ended 31 December 2020. its consolidated statement of income for the year The total amounts of lease payments and charges incurred service by the Group with under Tower the Agreement million). million RMB17,652 RMB19,023 (2019: The related were 2020 December ended 31 Company for the year Company included payable balance to Tower in December the balance of amounts parties as at 31 due to related 2020 was RMB3,893 million (2019: RMB2,745 million). million with a maturity period of 5 years and interest rate at 4.28% per annum. Company

Interest expenses on the deposits in Finance Company Net deposits by Unicom Group and its subsidiaries with Finance Transactions with Unicom Group and its subsidiaries: Interest expenses on unsecured entrusted loan Repayment of loan from a related party (i) of RMB3,042 Company Share A loan from entrusted an unsecured borrowed Group the 2018, On 26 December 45.3 Related party transactions with Unicom Group and its subsidiaries (a) Related party transactions 45.2 (Continued) Related party transactions with Tower Company (a) transactions (Continued) Related Party (ii) Lease of the Tower Assets and other related services (Continued) 45. 45. TRANSACTIONS PARTY RELATED MATERIAL (iii) Income from engineering design and construction services table column width 65pt 182 CHINA UNICOM (HONG KONG) LIMITED Capitalcommitments 46.1 CONTINGENCIES AND COMMITMENTS 46. AmountsduetoUnicomGroupanditssubsidiaries (b) Relatedpartytransactions(Continued) (a) RelatedpartytransactionswithUnicomGroupanditssubsidiaries(Continued) 45.3 MATERIAL RELATED PARTY TRANSACTIONS 45. (All amountsinRMBmillionsunlessotherwise stated) 62 Contingentliabilities 46.2 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED telecommunications network,asfollows: As at 31 December 2020 and2019, the Group had capital commitments, mainly inrelation tothe construction of As at31December2020,theGrouphadnomaterialcontingentliabilities andnomaterialfinancialguaranteesissued. Authorised andcontractedfor Authorised butnotcontractedfor rate at4.28%perannum. from A with amaturityperiodof5 entrusted loanShareCompanyofapproximatelyRMB3,042years and interest million Amount due toUnicom Group and itssubsidiaries asat31 December 2020 and2019 alsoincluded abalance ofunsecured 0.42% to2.75%perannum). 2.75% per annumfor saving and deposits of different terms (2019: RMB4,879 million with interest rates ranging from interest rates ranging from 0.42%to with RMB5,112 of million subsidiaries its and Group fromUnicom Company Finance by received ofdeposits abalance asat31December2020included subsidiaries Groupandits Amount duetoUnicom deposit the For subsidiaries. its and Group Unicom to services financial provide to agreed has Company Finance (iii) period amaturity with ofRMB48million BVI Group fromUnicom aloan borrowed 2018,theGroup 28December On (ii) for thesametypeofdeposit. PRC in interest rate offered bythegeneralcommercialbanks the applicable and other clients offered to deposit of maximum interest rate promulgated bythePBOCforsame type theinterest of deposit,rate for thesame type nomorethanthe be will subsidiaries andits Group Unicom by placed ratefordeposits theinterest services, fully repaidinJanuary2019. andtheloanwas interestrateat1yearHIBORplus1.11%, of1yearandfloating period amaturity with million HKD2 and annum per rateat4.77% interest 1yearand of period amaturity with RMB46million which 1year,of of (Continued)

Land and ulig Equipment buildings 0866,8 73,883 62,987 10,896 ,1 94747,801 26,082 39,487 23,500 8,314 2,582

2020

Total

71,519 47,645 23,874 Total 2019 table column width 65pt 183 3 — 31 22 230 796 2019 3,125 4,529 (7,461) 12,241 16,852 15,804 17,492 237,426 269,678 254,056 268,616 252,826

3 ANNUAL REPORT 2020 ANNUAL 10 215 171 989 2020 5,300 1,672 6,492 5,018 (8,914) 23,484 15,617 17,575 237,426 267,895 254,056 267,735 244,411 As at 31 December

Proposed final dividend Others — — Loan to a subsidiary Right-of-use assets Financial assets measured at fair value Reserves Retained profits Investments in subsidiaries Share capital Property, plant and equipment Current portion of loan to a subsidiary Amounts due from subsidiaries Dividend receivable Prepayments and other current assets Cash and cash equivalents

Total assets EQUITY Equity attributable to equity shareholders of the Company Total equity ASSETS Non-current assets Current assets 47. 47. POSITION FINANCIAL OF STATEMENT COMPANY-LEVEL table column width 65pt 184 CHINA UNICOM (HONG KONG) LIMITED COMPANY-LEVEL STATEMENT OF FINANCIAL POSITION 47. (All amountsinRMBmillionsunlessotherwise stated) FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED Director Wang Xiaochu Approved andauthorisedforissuebytheBoardofDirectorson11March 2021andsignedonbehalfoftheBoardby: Total assetslesscurrentliabilities Net currentassets Total equityandliabilities Total liabilities Current liabilities Non-current liabilities LIABILITIES

Taxes payable Amount duetoasubsidiary Dividend payable Loan fromasubsidiary Accounts payableandaccruedliabilities Lease liabilities Lease liabilities Director Zhu Kebing (Continued)

As at31December 267,735 267,895 23,324 2020 160 160 60 89 10 — — — — 1

268,626 269,678 15,800 1,062 1,052 2019 920 21 90 21 10 10 — — table column width 65pt 185 ANNUAL REPORT 2020 ANNUAL The financial statements were approved by the Board of Directors on 11 March 2021. were approved by the Board of Directors on 11 The financial statements After the statement of financial the statement After position of Directors proposed the Board date, a final dividend to Note 2020. For details, for please refer 32. Proposed dividend 49. STATEMENTS FINANCIAL OF APPROVAL 48. 48. PERIOD REPORTING THE AFTER EVENTS NON-ADJUSTING table column width 65pt 186 — — Earnings pershareforprofitattributabletoequity Profit attributableto: Profit fortheyear Income taxexpenses Profit beforeincometax Finance costs Other operatingexpenses Costs oftelecommunicationsproductssold Employee benefitexpenses Network, operationandsupportexpenses Depreciation andamortisation Interconnection charges Revenue CHINA UNICOM (HONG KONG) LIMITED Selected StatementofIncomeData position datafor2016,2017,2018,2019and2020werepreparedinaccordancewithIFRSs/HKFRSs. financial statement of consolidated and data income statement of selected consolidated 2020, summary 2016 to including for Selected financial (All amountsinRMBmillions, except persharedata) For the five-year ended 31December 2020 Other income Share ofnetprofitjointventures Share ofnetprofitassociates Interest income RESULTS FINANCIAL SUMMARY diluted(RMB) basic(RMB) shareholders oftheCompany: Non-controlling interests Equity shareholdersoftheCompany — net

303,838 (70,237) (26,862) (55,740) (46,286) (83,017) (10,574) 12,493 12,577 16,027 (3,450) (1,747) 2,911 1,588 1,366 2020 0.41 0.41 787 84

9,1 9,7 7,2 274,197 274,829 290,877 290,515 6,8)(251 5,6)(54,585) (39,301) (36,907) (57,166) (51,167) (26,643) (76,805) (42,471) (62,561) (12,739) (54,507) (27,604) (77,492) (48,143) (64,480) (12,617) (55,077) (26,412) (75,777) (50,516) (12,579) (43,236) (83,080) (11,513) 1301,9 1,828 10,197 1,850 11,330 10,257 2,593 11,372 13,081 14,167 275 284 73 (154) (743) (2,824) (5,017) (2,795) (5,734) (1,625) (2,123) 1,735 ,7 ,1 ,4 1,160 1,647 2,477 1,712 1,359 1,272 0921 072016 2017 2018 2019 0.37 0.37 646 42

0.33 0.33 8 ,8 1,591 1,280 783 598 60

0.07 0.07 893 574 22

0.03 0.03 625 630 784 204 153 5 table column width 65pt 187 — — — 161 2,000 17,906

— — — — — 410 ANNUAL REPORT 2020 ANNUAL 8,991 35,958 17,960 18,976

— — — — — — 441 999 17,981 17,970 16,994

— — 437 998 2019 2018 2017 2016 8,995 5,564 15,085 22,500 76,994 4,093 4,673 4,446 4,449 2,8692,998 3,173 3,473 4,495 10,790 21,535 83,59517,23334,945 75,909 14,433 30,060 76,722 13,964 32,836 82,218 13,622 23,633 43,073 205,190117,525 214,910 122,458 242,622 125,211 342,655 143,156 562,499 540,320 571,983 614,154 367,401 384,475 416,596 451,115 241,744320,755 226,034 314,286 267,636 304,347 386,472 227,682

— 740 418 998 2020 7,000 1,000 2,482 1,999 11,503 16,458 27,682 16,287 23,085 37,960 222,028 134,437 108,636 580,616 364,187 253,096 327,520

RESULTS (Continued) RESULTS

Selected Statement of Financial Position Data Selected Statement of Financial Commercial papers Current portion of corporate bonds Accounts payable and accrued liabilities Short-term bank loans Lease liabilities (current portion) Current liabilities Lease liabilities (non-current portion) Financial assets measured at fair value Financial assets measured Current assets Accounts receivable Cash and cash equivalents Total assets Property, plant and equipment Right-of-use assets Total equity Current portion of promissory notes Current portion of long-term bank loans Long-term bank loans Promissory notes Corporate bonds Total liabilities CORPORATE INFORMATION

BOARD OF DIRECTORS (As at 11 March 2021) MAJOR SUBSIDIARY Executive Directors China United Network Communications Corporation Limited Wang Xiaochu Executive Director, Chairman and Chief Executive Officer No. 21 Financial Street, Chen Zhongyue Executive Director and President Xicheng District, Beijing 100033, P.R.C. Li Fushen Executive Director Tel: (86) 10 6625 9550 Zhu Kebing Executive Director and Chief Financial Officer Fan Yunjun Executive Director and Senior Vice President SHARE REGISTRAR Hong Kong Registrars Limited Independent Non-Executive Directors Shops 1712-1716, Cheung Wing Lam Linus 17th Floor, Hopewell Centre Wong Wai Ming 183 Queen’s Road East, Chung Shui Ming Timpson Wanchai, Hong Kong Law Fan Chiu Fun Fanny Tel: (852) 2862 8555 Fax: (852) 2865 0990 Audit Committee Email: [email protected] Wong Wai Ming (Chairman) Cheung Wing Lam Linus AMERICAN DEPOSITARY RECEIPTS DEPOSITARY Chung Shui Ming Timpson The Bank of New York Mellon Law Fan Chiu Fun Fanny BNY Mellon Shareowner Services P.O. Box 505000, Remuneration Committee Louisville, KY 40233-5000 Cheung Wing Lam Linus (Chairman) Tel: 1-888-269-2377 (toll free in USA) Wong Wai Ming 1-201-680-6825 (international) Chung Shui Ming Timpson Email: [email protected]

Nomination Committee PUBLICATIONS Chung Shui Ming Timpson (Chairman) Under the United States securities law, the Company is required to file Wang Xiaochu an annual report on Form 20-F with the United States Securities and Law Fan Chiu Fun Fanny Exchange Commission by 30 April 2021. Copies of the annual report as well as the U.S. annual report on Form 20-F, once filed, will be available QUALIFIED ACCOUNTANT AND COMPANY SECRETARY at: Yung Shun Loy Jacky Hong Kong China Unicom (Hong Kong) Limited 75th Floor, The Center, AUDITOR 99 Queen’s Road Central, Hong Kong KPMG United States The Bank of New York Mellon Public Interest Entity Auditor registered in accordance with the 240 Greenwich Street, Financial Reporting Council Ordinance New York, NY 10286, USA

LEGAL ADVISORS STOCK CODE Freshfields Bruckhaus Deringer Hong Kong Stock Exchange: 762 Sullivan & Cromwell LLP New York Stock Exchange: CHU

REGISTERED OFFICE COMPANY WEBSITE 75th Floor, www.chinaunicom.com.hk The Center, 99 Queen’s Road Central, Hong Kong Tel: (852) 2126 2018

188 CHINA UNICOM (HONG KONG) LIMITED CorporateCULTURE

OUR VISION Be a Creator of Smart Living Trusted by Customers

OUR MISSION Connect the World to Innovate and Share a Good Smart Living

OUR CORE VALUES Customer-oriented Team Collaboration Open and Innovation Committed to Excellence