(incorporated in the Cayman Islands with limited liability) Stock Code:1310

Stronger as ONE Annual Report 2019 Stronger as ONE

For all businesses, change is constant. Every day, 2013 2016 customers and markets are increasingly demanding more of it. At HKBN, we firmly believe that to succeed – and, yes, even survive – we must evolve relentlessly. Broader coverage. More innovation. The latest technologies. And with the digital world sprouting exciting new possibilities, we’re delivering even better products, services and solutions to make daily life easier and doing business far more profitable. *

To achieve all this, we’ve embraced an accelerated 2018 expansion of our expertise through corporate acquisitions – spurring change on the inside. By uniquely combining the elite strengths of past acquisitions and mergers - Y5Zone, NWT, ICG and WTT – and soon adding 2019 JOS to our bench (pending shareholders’ approval), we have transformed our competitiveness and capabilities to create one united, stronger HKBN – ready to disrupt and lead the market. * JOS acquisition is subject to shareholders’ approval

Unless otherwise stated, all monetary figures from this report are in dollars. This report is published in both English and Chinese. Where the English and the Chinese texts conflict, the English text prevails. Jacky Lo , Co-Owner and Manager – Technical Service Will Chung, Senior Unit Manager – Customer Service, Residential Solutions Anita Chau, Director – Major Accounts, Enterprise Solutions Samuel Hui, Co-Owner and Head of Digital Representing different facets of HKBN ’ s integrated operations, Talents featured on cover: (From left) 3 References toHKEXESGReportingGuide 237 Corporate Information 236 FiveYear Summary 234 Financial StatementsandNotestoFinancial 127 Auditor 117 Other Information Corporate GovernanceReport 102 Our Governance 094 Environment 082 Community 078 Suppliers 060 Talents 044 Customers ReportoftheDirectors 032 ManagementDiscussionandAnalysis 028 KeyFinancialandOperationalSummary 024 Our Performance OurStrategy 020 BoardofDirectorsandSeniorManagement 012 ShareholderLetter 008 ThisisHKBNGroup 004 Our Company 2019ataGlance 002 Contents

’ s Report 001

HKBN Ltd. Annual Report 2019 002 HKBN Ltd. Annual Report 2019 * Year-on-year increase in the financial performance indicated above is based on the corresponding financial information information financial corresponding the on based is above indicated performance financial the in increase Year-on-year * 2019 ataGlance Environment Community Financial Performance Group reported in FY18 and FY19, where FY19 includes the operating results of WTT Holding Corp and its subsidiaries ( subsidiaries its and Corp Holding WTT of results operating the includes FY19 where FY19, and FY18 in reported ” ) for the four months ended 31 August 2019. August 31 ended months four the for ) Number of Adjusted FreeCashFlowgrowth 2,676 hours volunteered 29 30 operations in HongKong carbon emissions Reduction oftotal 15.69 Revenue growth % % % 45 EBITDA growth* in HongKongoperations Waste recoveryrate 60.31 69 Enterprise Revenuegrowth % 412 % Volunteers % “ WTT WTT 2019 ataGlance Talents Customers Network coversover Co-Owners (Co-OwnershipPlan II) 7,200 330 Over 878,000 subscriptions Residential broadband 103,000 Enterprise customers buildings &facilities commercial Over 4,400 Talents 35.8 2.4 Network covers (residential market) Activated mobilesubscriptions 277,000 103,093

30 June2019 services asof residential broadband Market shareof million % hours provided Total training homes 003

HKBN Ltd. Annual Report 2019 004 HKBN Ltd. Annual Report 2019 Purpose atHKBN Given the context of our Core Purpose, join this purposeful profit evolution. driving factor for private business. At every possible occasion, we do our best to inspire different stakeholders to the world a better place. We actively encourage more people to realise a future where purpose becomes the We believe the role of PURPOSE, when unleashed by more businesses, can have a transformative effect to make Communications Technology( we strivetobecomeHongKong Profits, Passionate Pursuit ofPurposeful Driven bya This isHKBNGroup Our Company better profits overall. customers. As a result, our offerings always maintain an exceptional level of desirability, driving better uptake and purpose functions as an integrated failsafe which guarantees that HKBN delivers the best of all possibilities for is better served when we are PURPOSE + PROFIT driven rather than PROFIT-only focused. By no coincidence, this each day as a chance to realise our Core Purpose: ICT solutions,ortheeffortsweundertaketoempowerself-sustenanceforunderprivilegedcommunities,greet Whether it is connecting millions of Hong Kongers and thousands of businesses through a wide range of premier city we call home, our Hong Kong. daughters and much more. While we wear many different hats, what we share in common is the love for the At HKBN, we are innovators, managers, marketers, technologists, Co-Owners, mothers, husbands, sons, to build long-lasting relationships as we continuously improve how customers live, learn, work and play. best, most innovative and reliable service possible, delivered at highly competitive prices. This has allowed us providers. Throughout this journey of incredible change, our goal has remained the same: give customers the Since 1999, we have transformed from a fledgling start-up into one of Hong Kong Make ourHongKong a BetterPlacetoLive ‘ Make our Hong Kong a Better Place to Live ‘ Make our Hong Kong a Better Place to Live “ ICT ’ s mostpreferredInformationand ” ) solutionsprovider. ’ , we believe HKBN ’ s largest ICT solutions ’ . ’ s business * Please refer to the notes on page 11 for further details. further for 11 page on notes the to refer Please * integrated one-stop ICT business. As a result, we approval, JOS (technology partner and system integrator), HKBN will evolve from a telco into a fully-fledged do and achieve more for their customers. perfectly positioned to enable businesses to and system integration and so on – and we data centre services, business continuity information security to managed services, Internet anddataconnectivity,cloudsolutions, deliver powerful, scalable ICT solutions – from Couple that with our one-stop capabilities to built-in and always on. offer network resilience that is intelligently depend on mission-critical applications, we businesses, particularly those who operate or and WTT worth over $15 billion invested. For comprising three networks from HKBN, NWT unprecedented route diversity and reliability – ultra-resilient fibre network advantage offers powered by tri-carrier fibre networks. This HKBN is now the only carrier in Hong Kong With our completed integration of WTT, Tri-carrier NetworkDiversity As the world changes, customers won enhancement. extremely fast to integrate , solutions, operations, and expertise for maximum competitive our strengths and create new areas of specialisation. And in the past several months, our teams have worked 2016, ICG (cloud specialist) in 2018, WTT (telecom and ICT service provider) in 2019 and, pending shareholders Through past acquisitions* like Y5Zone (Wi-Fi specialist) in 2013, NWT (telecom and ICT service provider) in This isHKBNGroup One-stop ICTAdvantage From TelcotoOne-stopICTSolutionsProvider More innovation. More compelling value. We of it. Thanks to our enhanced Talent force and expanded scope of services, HKBN is armed to deliver far more. integration capabilities and more – in a faster timeframe. change everything – empowering better possibilities via cutting-edge technology solutions, IT expertise, system ’ t be content with just connectivity. They want possibilities – and more ’ re ’ re on it! For enterprise customers in all industries, we ’ re acquiring some of the most elite industry experts to augment +

’ re ready to ’

005

HKBN Ltd. Annual Report 2019 006 HKBN Ltd. Annual Report 2019 Multi-play servicesforhouseholds: This isHKBNGroup

As a leading provider of premier ICT solutions, our work contributes indispensably to making Hong Kong Music Streaming Over-The-Top Entertainment& Mobile Services Home Telephone Network SecurityandParentalControl Managed Wi-FiwithHome High SpeedFibreBroadband a modern, thriving interconnected society. HKBN 1 HK families ensures that customers can rely on us to stay connected and to do business better. in HKBN transformsthewaypeopleandbusinessesconnect 3

and domoreinthedigitalera Billing Relationships HKBN Recurring What wedo ’ HK activecompanies s comprehensive range of products and services services forenterprises: Diverse ICTsolutionsandbespoke 1

Data Connectivity High-speed FibreBusinessBroadband System Integration Business Continuity Information Security Managed Wi-Fi Data CentreServices Integrated CloudServices Mobile Services Voice communication in 2

This isHKBNGroup From every facet of HKBN success. Co-Owners runHKBN with 330 skin inthegame Over ’ s business and operations, our 300+ Co-Owners are aligned in their motivation for growth and over all aspects of HKBN Co-Owners of HKBN. Talents out of about 4,400 the opportunity to become which will kickstart in FY20, offering more than 1,000 shareholders approved Co-Ownership Plan III Plus, In August 2019, an overwhelming majority of our over 330 Co-Owners under Co-Ownership Plan II. at heart. During this fiscal year period, HKBN had Co-Owners always have the Group competitiveness. Far from typical, our dedicated are incentivised with role as both investors and Talents, our Co-Owners salary to acquire HKBN stock. Through this dual in the amount of between 2 and 12 months of level Talents to voluntarily invest their own savings Plans which allows all supervisory and management Our leadership is powered by unique Co-Ownership amazing shareholder returns. our business, surpass the competition, and to deliver Co-Owners who have a vested financial interest to grow HKBN is the only telecom carrier in Hong Kong driven by Structure Our Co-Ownership ‘ skin in the game ’ s performance and ’ s best interest ’ to watch 007

HKBN Ltd. Annual Report 2019 008 HKBN Ltd. Annual Report 2019 Co-Owner andChiefExecutive Officer NiQ Lai Shareholder Letter Our Company Co-Owner andExecutiveVice-chairman William Yeung Management Diversity in 2018, WTT perspectives originating from within HKBN as well as our peers, with an awesome mix of veteran and fresh management team is by far the most diverse amongst the acquiring or acquired company. Today, our and capability rather than whether they are from i.e. we retain and promote Talents based on mindset Core toourintegrationis Our – Y5Zone Through fully integrating a sequence of transactions Dear FellowShareholders, Shareholder Letter far more than merely a fixed-line telecom carrier. residential and enterprise segments, i.e. we are now and Communications Technology) partner across services into the leading integrated ICT (Information transform from a commodity provider of telecom our new suite of capabilities, our objective is to combinations with revenue of over $5 billion. With enterprise centric after a series of business billion revenue, whereas today, we have become residential broadband centric with just over $2 transform HKBN. At our IPO in 2015, we were shareholders Comprising elites from HKBN and Y5Zone, NWT, ICG and WTT, HKBN management team is by far the most diverse and agile amongst our industry to meet challenges head-on. “ Best ofBreed (Note 1) (Note 4) ’ approval in 2019), we will completely in 2013, NWT in 2019 and JOS ” (Note 2) “

Best ofBreed in 2016, ICG (Note 5) (pending ” approach, approach, (Note 3)

September 2019. of the Group), i.e. Associate Directors and above, as at Table: Profile of HKBN common goal. Plan III Plus, putting skin in the game towards one Co-Owners as part of our upcoming Co-Ownership newly acquired senior executives intend to join us as technology changes. Furthermore, the majority of our makes us far more ready to take advantage of rapid or regular recruitment in the past few years, which through Talents who joined from acquisitions, merger NWT WTT 5 years or less with HKBN More than 5 years with HKBN HKBN Company ofOrigin Y5Zone ICG Total ’ s top 64 executives (top 1.4% Total 625% 45% 16 29 4100% 64 5 7 3 4 % ofTeam 11% 8% 5% 6% 009

HKBN Ltd. Annual Report 2019 010 HKBN Ltd. Annual Report 2019 (Rebased) Chart: TotalReturnsSinceHKBNIPOVsHangSangIndex $22 billion At the current total market capitalisation of gains and operating efficiency gains. means we need to achieve assertive market share period from FY19-21; given our matured market, this deliver significant growth in AFF/share in the 3-year Co-Ownership Plan III Plus incentive range, we must attained inFY18.Inshort,forCo-Ownerstoachieveour of between $2.53-3.03 between FY19-21, versus $0.57 achieving aspirational goals for cumulative AFF/share as to qualify to earn matching free bonus shares by audacity to personally buy the base shares upfront so accept possible dilution AND incredible management requires both incredible shareholder generosity to 3% of HKBN market capitalisation incentive which current Co-Ownership Plan III Plus is essentially a but our culture is almost impossible to recreate. Our our Company can be replicated by our competitors, culture. With money and time, all other elements of At HKBN, our major LUCA is our Co-Ownership Competitive Advantage( Our Co-OwnershipLegalUnfair Shareholder Letter including our Co-Owners. how wecreatedistributedwealthforourshareholders, max-out on the incentive parameters. In short, this is per Co-Ownership Plan III Plus Co-Owner if we can represents an average of approximately $1 million II take-up rate to, say, 700 Co-Owners, this incentive million. AssumingadoublingoftheCo-OwnershipPlan actual timingofdividendspayment; Note: Basedonmarketdataas ofOct23,2019; Source: HKBN’sdisclosure,FactSet 100 120 140 160 180 200 60 80 (Mar

IP 2015) O

(Note 6) HKBN (withdividends) Hang SengIndex Launched OTT , 3% is worth approximately $700

3 HangSengIndexreflectscash dividendordistributioninthetotalreturnindexcounterpart asreinvestmentontheex-date

2016 3 Announced NWT 1 BothofHKBNsharepriceand HangSengIndexwererebasedto100onMar12,2015; 2

acquisition “ Launched Performance MVNO LUCA 2017

” ) of HKBN vs . Hang Announced HKBN- set pain/GAIN KPIs, we have real skin in the game. donated to a charity of their choice. In short, when we their committed salary will be taken away as pain and as GAIN. Conversely if they fail to meet the target, exceeded, they will get a multiple of their pain back salary (the pain), such that if the KPIs are achieved or half-yearly reporting focus of our competitor peers. in the 3-4 year Co-Ownership trenches rather than the “ our pain/GAIN scheme allows the team leaders to if the project team feels strongly about the return, way for resource prioritisation. For a specific project, company, has limited resources, so we must have a our unique pain/GAIN incentive. HKBN, like any we offer additional project related alignment via In addition to our Group alignment via Co-Ownership, Our pain/GAINAlignment our families 330 plus Co-Owners, the chart represents a big part of price chart is just a detached graphic, whereas for our For salaried employees, the following HKBN stock Co-Owner Families Stock PriceChart= underwrite WTT merger 2018 Seng

2 IncludesaccumulatedDPSbased on

1 ” ’ net worth. At HKBN, we think and execute the project KPIs with a part of their Regulatory approvalon HKBN-WTT merger 2019

’ NetWorth Announced JOS acquisition (Oct 2019) Current +11.5% +80.6%

Excess

r 69.1% eturn

HSI

HKBN

6. Assuming full Vendor Loan Notes conversion, i.e. 1.479 billion shares x $14.94 stock price as at the close of trading on 23 23 on trading of close the at as price stock $14.94 x shares billion 1.479 i.e. conversion, Notes Loan Vendor full Assuming 6. 5. HKBNGL proposed to acquire the entire issued share capital of Jardine OneSolution Holdings (C.I.) Limited, Adura Hong Hong Adura Limited, (C.I.) Holdings OneSolution Jardine of capital share issued entire the acquire to proposed HKBNGL 5. 4. Metropolitan Light Company Limited ( Limited Company Light Metropolitan 4. 3. HKBNGL acquired the entire issued share capital of HKBN Enterprise Solutions Cloud Services Limited (formerly known as as known (formerly Limited Services Cloud Solutions Enterprise HKBN of capital share issued entire the acquired HKBNGL 3. 2. HKBNGL acquired the entire issued share capital of Concord Ideas Ltd. and Simple Click Investments Limited on 31 March March 31 on Limited Investments Click Simple and Ltd. Ideas Concord of capital share issued entire the acquired HKBNGL 2. Notes: 1. HKBN Group Limited ( Limited Group HKBN 1. Co-Owner and Executive Vice-chairman William YEUNG Sincerely yours, China, and Stanley Chiu – JOS Group Financial Controller as Co-Owners and pain/GAIN participants. forward to welcoming Mark Lunt – Group Managing Director of JOS, Eric Or – Managing Director, JOS Greater We hope that the above gives you a sense of what makes our HKBN culture unique. Post JOS completion, we look Shareholder Letter October 2019. October Kong Limited and Adura Cyber Security Services Pte Ltd on 23 August 2019 (the (the 2019 August 23 on Ltd Pte Services Security Cyber Adura and Limited Kong issued share capital of WTT Holding Corp on 30 April 2019 (the (the 2019 April 30 on Corp Holding WTT of capital share issued 2016 (the (the 2016 capital of Y5Zone Limited in 2013 (the (the 2013 in Limited Y5Zone of capital “ section under under section I Consulting Group Limited Group Consulting I “ NWT “ Significant Investments, Acquisitions and Disposal and Acquisitions Investments, Significant ” ). “ HKBNGL ” ) on 8 May 2018 (the (the 2018 May 8 on ) ” ), an indirect wholly-owned subsidiary of the Company, acquired the entire issued share share issued entire the acquired Company, the of subsidiary wholly-owned indirect an ), “ “ MLCL Y5Zone ” ), a direct wholly-owned subsidiary of the Company, acquired the entire entire the acquired Company, the of subsidiary wholly-owned direct a ), ” ). “ ICG ” ). Co-Owner and Chief Executive Officer NiQ LAI “ WTT Merger WTT ” on page 31. page on ” or or “ “ WTT JOS ” ” ). ). For details, please refer to the the to refer please details, For ). 011

HKBN Ltd. Annual Report 2019 012 HKBN Ltd. Annual Report 2019 Board ofDirectorsandSeniorManagement Our Company State University, U.S. with a Bachelor of Science Degree in August 1978. of the Center for Global Development and the Mobile Giving Foundation. Mr. Horwitz graduated from San Diego International Operations and the Director of Business Development. Mr. Horwitz presently serves as the Director also worked in various management capacities for McCaw Cellular including serving as the Vice President of was the founder and the Chief Operating Officer of SmarTone Mobile Communications Limited. Mr. Horwitz 1995 while also serving as the Executive Vice President of Western Wireless Corporation. Previously, Mr. Horwitz Partners, Mr. Horwitz served as the President of Western Wireless International, having founded the company in wireless assets, primarily in South America and the Caribbean. Prior to establishing Trilogy International established to acquire wireless international assets in Haiti and Bolivia and to develop additional international President and the Chief Executive Officer of the company since it was founded. Trilogy International Partners was and industry. Mr. Horwitz founded Trilogy International Partners in 2005 and has been the Committee of the Company on 6 February 2015. Mr. Horwitz has over 30 years of experience in the wireless the board of directors of the Company (the Mr. BradleyJayHORWITZ, aged 64, was appointed as an Independent Non-executive Director, the Chairman of Chairman andIndependentNon-executiveDirector Board ofDirectorsandSeniorManagement 5 1 2 6 3 7 4 8 “ Board ” ) and a member of the Audit Committee and the Nomination 8. 7. 6. 5. IndependentNon-executiveDirector 4. 3. IndependentNon-executiveDirector 2. Non-executiveDirector 1. Executive Director NiQ LAI Non-executive Director Deborah KeikoORIDA Executive Director William YEUNG Non-executive Director Teck ChienKONG Stanley CHOW Chairman andIndependentNon-executiveDirector Bradley JayHORWITZ Yee KwanQuinnLAW Zubin JamshedIRANI 013

HKBN Ltd. Annual Report 2019 014 HKBN Ltd. Annual Report 2019 is a proud Co-Owner of the Company. Resources by The Hong Kong HRM Awards. Mr. Yeung Mr. Yeung was recognised as Champion of Human University of Hong Kong in November 2001. In 2010, Electronic CommerceandInternetComputingfromthe November 1995 and a Master of Science Degree in Degree from the University of Strathclyde, U.K. in and obtained a Master of Business Administration from Hong Kong Baptist University in December 1992 Force. Mr. Yeung obtained a Bachelor of Arts Degree served as a police inspector with the Hong Kong Police at SmarTone Mobile Communications Limited, and Mr. Yeung was the Director of customers division opportunities for the Group. Prior to joining the Group, key strategic partners and exploring new business Vice-chairman, stepping up to focus on engaging 2018, Mr. Yeung was appointed as the Executive strategies and overseeing operations. On 1 September Officer with the responsibility of developing corporate 2008, Mr. Yeung was appointed as the Chief Executive management and network development. In November overseeing customer engagement, relationship Group in October 2005 as the Chief Operating Officer, Committee of the Company. Mr. Yeung joined the Committee and a member of the Remuneration Executive Director, the Chairman of the Nomination YEUNG), aged 58, is the Executive Vice-chairman, an Mr. ChuKwongYEUNG(alsoknownasWilliam Executive Directors Board ofDirectorsandSeniorManagement the Director of Cambodian Children of Asia recognised as 1st for Best CFO by FinanceAsia Survey CFOs in the industry to watch. In March 2016, he was Global Telecoms Business in 2013 as one of the Top 50 by The Hong Kong HRM Awards, and was selected by was recognised as Champion of Human Resources Accountants (HKICPA) and CPA Australia. In 2009, he member of Hong Kong Institute of Certified Public HKUST, Hong Kong in June 2009. Mr. Lai is a fellow of Business Administration Degree from Kellogg- Degree in April 1990 and obtained an Executive Master of Western Australia with a Bachelor of Commerce Kong) Limited. Mr. Lai graduated from the University (formerly known as of Advisory Board of Shyam Spectra Private Limited Benson Securities (Asia). He is currently a member as a strategic planning manager, and Kleinwort Prior to Credit Suisse, Mr. Lai held positions in HKT, initiatives for a wide range of Asian telecom carriers. he was involved in numerous global fund raising of Asia Telecom Research for Credit Suisse, where Lai was an analyst and the Director and the Head a better place to live. Prior to joining the Group, Mr. class products and services to make our Hong Kong 2018, leading all HKBN Talents to deliver world the helm as the Chief Executive Officer in September and the Chief Operating Officer in 2017. Mr. Lai took in 2006, the Chief Talent & Financial Officer in 2016 Mr. Lai was appointed as the Chief Financial Officer , research and finance industries. the Group in 2004 and has rich experience in the an Executive Director of the Company. Mr. Lai joined 49, is the Chief Executive Officer of the Group, and Mr. NiQuiaqueLAI(alsoknownasNiQLAI), aged a proud Co-Owner of the Company. ’ s Best Companies 2016 (Hong Kong). Mr. Lai is “ Citycom Networks Pvt. Ltd. ’ s Fund (Hong ” ) and change within businesses. At TPG Capital, Mr. Irani strong teams, driving performance and managing He brings over 20 years of experience in building with TPG Capital and leads the Asia Operations Group. of the Company on 30 April 2019. Mr. Irani is a Partner Committee andamemberofRemuneration as a Non-executive Director, a member of the Audit Mr. ZubinJamshedIRANI, aged 47, was appointed Queen and a Bachelor of Laws and a Bachelor of Arts from of Business Administration from The Wharton School, healthcare startup company. Ms. Orida holds a Master of the Board of Directors of Vitalhub Corp., a mobile the Bridgepoint Health Foundation and was the Chair the Board of Directors of the Investment Committee of the Board of Directors of Nord Anglia Education and & Graydon in Toronto. Ms. Orida previously served on Ms. Orida was a securities lawyer at Blake, Cassels financing transactions. Prior to Goldman Sachs & Co., teams and boards on mergers and acquisitions and York and Toronto where she advised management investment banker at Goldman Sachs & Co. in New Investing. Prior to joining CPPIB, Ms. Orida was an Equity Investments Latin America and Sustainable Thematic Investing, Fundamental Equities Asia, Direct Fundamental Equities, Relationship Investments, Active Equities department, which includes Active Asia. Ms. Orida is responsible for leading the global recently Managing Director and Head of Private Equity International, covering Europe and Asia, and was most Managing Director, Head of Relationship Investments Toronto andhasheldseniorleadershiproles,including of the Company. Ms. Orida joined CPPIB in 2009 in the Securities and Futures Ordinance (the a substantial shareholder (as defined in Part XV of at Canada Pension Plan Investment Board ( Managing Director & Global Head of Active Equities from 20 November 2015. Ms. Orida is the Senior Nomination Committee of the Company with effect as a Non-executive Director and a member of the Ms. DeborahKeikoORIDA, aged 52, was appointed Non-executive Directors Board ofDirectorsandSeniorManagement ’ s University, Canada. “ SFO “ CPPIB ” )) ” ), Business School, U.S. an executive management programme at Harvard Michigan Business School, U.S., and has completed of Business Administration from the University of known as WTT HK Limited). Mr. Kong holds a Bachelor and HKBN Enterprise Solutions HK Limited (formerly Investment Corporation, Luye Pharma Group Ltd China Network Systems Co., Ltd., Gala TV Corp., GSE Directors of Beijing Bowei Airport Support Limited, Limited, and has experience serving on Board of Ltd., and Wendu Education & Technology Group Corporation, Teamsport Topco Limited, Siyanli Co. of Directors of, among others, Apex International Hong Kong. Mr. Kong currently serves on the Board division at Salomon Smith Barney in New York and office, and three years in the investment banking was Vice President and co-head of the Singapore spent five years at Carlyle Asia Partners, where he and Gala TV Corp. Prior to MBK Partners, Mr. Kong WTT Holding Corp, China Network Systems Co., Ltd. industries, he has led MBK Partners experiences in both the telecommunication and media is based in Hong Kong. With extensive investment 2019. Mr. Kong is a Partner at MBK Partners and Nomination Committee of the Company on 30 April as a Non-executive Director and a member of the Mr. TeckChienKONG, aged 44, was appointed Technology Kanpur, India. in Materials Engineering from Indian Institute of of Technology, U.S. and a Bachelor of Technology Science andEngineeringfromMassachusettsInstitute management. Mr. Irani holds a Masters in Materials with afocusonautomotive,industrial and post-merger Mumbai offices, serving several multi-national clients and worked in the Cleveland, Detroit, Copenhagen and Mr. Irani started his career at McKinsey & Company Refrigeration, Otis Elevators and UTC Fire & Security. India which included Carrier Air-conditioning and Corporation ( TPG Capital, Mr. Irani was with United Technologies services, telecom and technology sectors. Prior to has worked in the consumer, healthcare, financial “ UTC ” ) where he led the business in ’ investments in 015

HKBN Ltd. Annual Report 2019 016 HKBN Ltd. Annual Report 2019 the Listing Rules. Prior to Mr. Chow including in the context of the Stock Exchange and finance and mergers and acquisitions transactions, Mr. Chow has advised on a broad range of corporate for over 8 years. As a corporate lawyer in Hong Kong, 2009 where he was a partner in its Hong Kong office international lawfirm,fromNovember1996toJanuary Mr. Chow practised law with Allen & Overy, another February 2014. Prior to joining Latham & Watkins, Exchange practice, he was a senior manager in the Stock the firm department in Hong Kong. He was also a member of he was the local department chair of the corporate law firm, from March 2009 to February 2014 where Kong office of Latham & Watkins, an international Stock Exchange. Mr. Chow was a partner in the Hong a company which is listed on the Main Board of the PuraPharm Corporation Limited (stock code: 1498), Mr. Chow is currently a Non-executive Director of manager in the Stock Exchange during his time in private practice and as a senior graduated from Queen in 1994 and in Ontario, Canada in 1991. Mr. Chow as a barrister and solicitor in British Columbia, Canada in England and Wales in 1994. He was also admitted was admitted as a solicitor in Hong Kong in 1995 and Committee from August 2011 to October 2018, and of The Law Society of Hong Kong in Hong Kong and Canada. Mr. Chow was a member 1996 and also practised law with Canadian law firms from the University of Toronto, Canada in June 1989. and obtained a Juris Doctor with Honour Standing Bachelor of Commerce (Honours) Degree in May 1986 Limited (the Securities on The Stock Exchange of Hong Kong in dealing with the Rules Governing the Listing of and Canada, including over 18 years of experience years ofexperienceasacorporatelawyerinHongKong Company on 6 February 2015. Mr. Chow has over 21 Audit Committee and the Nomination Committee of the of the Remuneration Committee and a member of the Independent Non-executive Director, the Chairman Mr. StanleyCHOW, aged 55, was appointed as an Independent Non-executiveDirectors Board ofDirectorsandSeniorManagement ’ s Initiatives Committee from March 2012 to ’ s Listing Division from May 1995 to October “ Stock Exchange ’ s University, Canada with a ” ) (the ’ s Listing Division. ’ s Company Law ’ s time in private “ Listing Rules ” ) Mr. Law and Administrators on 11 November 1980. In view of Associate of the Institute of Chartered Secretaries Certified Accountants. Mr. Law was admitted as an and is also a Fellow of the Association of Chartered Hong Kong Institute of Certified Public Accountants organisation in Hong Kong. Mr. Law is a Fellow of the Director of the Urban Renewal Authority, a statutory Mr. Law was the Deputy Chairman and the Managing Technology. From 1 March 2008 to 28 February 2013, Chairman at the Hong Kong University of Science and Mr. Law was a council member cum Audit Committee December 2018. From 1 August 2012 to 31 July 2018, Kong Institute of Certified Public Accountants on 31 of Professional Conduct Committee of the Hong 2018. Mr. Law ceased to be the Deputy Chairman University of Science and Technology since 4 October has been a member of the Court of the Hong Kong the Vice President of such Association. Mr. Law Association, and he was previously the Director and an advisor of the Hong Kong Business Accountants Stock Exchange. Mr. Law also presently serves as 2388), all of which are listed on the Main Board of the and BOC Hong Kong (Holdings) Limited (stock code: ENN Energy Holdings Limited (stock code: 2688) Director of Bank of Tianjin Co., Ltd. (stock code: 1578), Mr. Law is currently an Independent Non-executive Committee of the Company on 6 February 2015. of the Remuneration Committee and the Nomination the Chairman of the Audit Committee and a member appointed as an Independent Non-executive Director, Mr. YeeKwanQuinnLAW,SBS,JP, aged 66, was for the purposes of Rule 3.10 of the Listing Rules. accounting or related financial management expertise the Directors believe that Mr. Law has the appropriate financial statements of private and public companies, ’ s experience in reviewing or analysing audited Board ofDirectorsandSeniorManagement 1 2 6 3 7 4 8 5 8. 7. 6. 5. 4. 3. ChiefLegalOfficer 2. 1. Co-Owner andChiefFinancialOfficer Andrew WONG Co-Owner andChiefExecutive Officer NiQ LAI Co-Owner andChiefInformationOfficer Eric HO Co-Owner andChiefMarketingOfficer–ResidentialSolutions Elinor SHIU Co-Owner andExecutiveVice-chairman William YEUNG Co-Owner andChiefExecutiveOfficer–EnterpriseSolutions Billy YEUNG Agnes TAN Chief StrategyOfficer Almira CHAN 017

HKBN Ltd. Annual Report 2019 018 HKBN Ltd. Annual Report 2019 proud Co-Owner of the Company. from Charles Sturt University, Australia. Eric is a University, U.S., and a Master in Accountancy Degree in Business Administration from Oklahoma City from the University of Hong Kong, a Master Degree Group in July 2012 and is responsible for the Group Chief Information Officer of the Group. Eric joined the Mr. ChanFaiHO(alsoknownasEricHO), aged 62, the Co-Owner of the Company. from theUniversityofBirmingham,U.K.Billyisaproud Billy holdsaMasterofBusinessAdministrationDegree acquired by HKBN Group Limited in January 2013. wholesale Wi-Fi suppliers in Hong Kong, which was he steered the company to become one of the largest out to spearhead Y5Zone in Hong Kong. In nine years, the Internet service. In 2004, Billy branched carriers in Asia Pacific. While at PCCW, he developed regional Internet backbone for telecommunication carrier customers. In 1995, he pioneered the Netplus professionals to service corporates of all sizes and Group in January 2013 and leads a team of sales Enterprise Solutions of the Group. Billy joined the YEUNG), aged 53, the Chief Executive Officer – Mr. TakWaWilliamYEUNG(alsoknownasBilly page 14. Mr. NiQLAI, his biographical details are set out on out on page 14. Mr. WilliamYEUNG, his biographical details are set Senior Management Board ofDirectorsandSeniorManagement (CISM) and holds a Bachelor 2013. Eric is a Certified Information Security Manager by Computerworld Hong Kong and CIO Connect in CIO of the Year (Medium Enterprise) jointly conferred Westpac, CSL and Bank of America. He was awarded Software Technology, Emperor International Holdings, before that, he held senior IT positions at Huawei SmarTone Mobile Communications Limited, and Eric was the Head of IT and Service Platform at integration and management. Prior to joining HKBN, and processes through IT system development, leads the IT Department to optimise business support information technology strategy development and ’ s Degree in Science ’ s of the Group auditing and finance experience to guide his leadership control and compliance. He leverages over 16 years of the external auditing, accounting and finance, internal joined the Group in 2006. He has extensive experience in and the Company Secretary of the Company. Andrew WONG), aged 40, the Chief Financial Officer of the Group Mr. YueKitAndrewWONG(alsoknownas Andrew holds a Bachelor Company. has committed to become a proud Co-Owner of the Institute of Certified Public Accountants. Almira Accountants. She is also a member of the Hong Kong a member of The Chartered Association of Certified Lingnan College and is a qualified accountant and Almira holds an Honours Diploma in Accountancy from determined to help the company reach a new peak. the telecommunications technology industry, she is management experience, coupled with a passion for as a new challenge. With a wealth of financial Fully inspired, she sees this newly created role strategic investments, acquisitions and divestitures. including business development and joint ventures, implementation of HKBN her current role, Almira leads the development and was appointed Chief Strategy Officer in July 2019. In zone. Following the integration of HKBN and WTT, she as motivated as ever to evolve beyond her comfort Whilst Almira Relations and Building Access for network rollout. management of Accounting & Finance, Investor undertaken a wide range of responsibilities, including PricewaterhouseCoopers to CFO at WTT, she has In her 30-year journey from an Audit Assistant at Atos Origin and Wharf T&T (later renamed WTT). accountant. Following this experience, she joined where she began her professional life as an graduation, Almira joined PricewaterhouseCoopers, Almira aged 53, the Chief Strategy Officer of the Group. Ms. WingYeeCHAN(alsoknownasAlmiraCHAN), Andrew is a proud Co-Owner of the Company. the Hong Kong Institute of Certified Public Accountants. Chinese University of Hong Kong. He is also a member of Master of Business Administration Degree from the from the University of Manchester, U.K. and an Executive ’ s dream job was an accountant. After ’ s finance and investor relations endeavours. ’ s dreams have come true, she remains ’ s Degree in Accounting and Law ’ s overall corporate strategy overall business management for HKBN for residential and corporate sectors, all the way to Her array of experiences extended from marketing across various business areas and functional teams. with HKBN, Elinor earned wide-ranging exposure She rejoined HKBN in 2004. Throughout her years HGC, where she focused on corporate marketing. left the Group for a brief two-year intermission with industry with over 4,400 Talents today. In 2002, Elinor Talents to a powerhouse in the telecommunications for growing HKBN from a startup of less than 100 way up, she is one of the key individuals credited of HKBN residential market business. Working her 2019 to lead the marketing strategies and operations Marketing Officer – Residential Solutions in March as a Marketing Trainee and was appointed as Chief sense of the word, Elinor joined the Group in 1994 Solutions of the Group. A home-grown Talent in every aged 48, the Chief Marketing Officer – Residential Ms. YungYinSHIU(alsoknownasElinorSHIU), Senior Management Board ofDirectorsandSeniorManagement of the Group business in Kowloon East district, managing 25% and was granted the mantle to oversee the Group business. In 2008, she was appointed as a Mini-CEO to become HKBN into an experienced management executive driven her belt, Elinor transformed from a seasoned marketer Kong. After five successful years of leadership under Elinor is a proud Co-Owner of the Company. Degree from The Chinese University of Hong Kong. holds an Executive Master of Business Administration showcase of best practices for the telco industry. She Elinor is relentlessly driving HKBN her appointment as CMO – Residential Solutions, quad-play provider of choice for Hong Kongers. With transformation from a broadband provider into the experience, as well as the Group steering digitalisation and omni-channel customer was appointed as Head of Residential Marketing, ’ s residential business revenue in Hong ’ s CXO of the future. In 2018, she ’ s highly successful ’ s growth as a ’ s residential ’ s Company. has committed to become a proud Co-Owner of the including pottery, painting, and home décor. Agnes found enjoying more creative and injury. If she were not a lawyer, she would likely be is skiing, as it requires focus or the risk of serious enjoys travelling and reading. Her favourite sport Communications Authority. Outside of work Agnes Regulatory Affairs Advisory Committee, Office of the She is also a member of the Telecommunications Group, Communications Association of Hong Kong. of Commerce; and President, Regulatory Issues Chair, Legal Committee, Hong Kong General Chamber Laws from the Australian National University. Agnes is the University of New South Wales and a Bachelor of Agnes holds a Bachelor of Commerce (Marketing) from property rightsprotectionandtheircommercialisation. specialising in technology licensing, intellectual relocating to Hong Kong, Agnes worked in Australia Group brings over her extensive experience to advance HKBN and Carrier Affairs. In her current capacity, Agnes Agnes was WTT and interconnection regime. Prior to the WTT Merger, and industry players for a pro-competition regulatory years, Agnes has actively engaged with the regulator telecommunication networkserviceslicences.Overthe in 1995 with the issuance of additional local fixed government deregulated the local fixed-line market competing with the incumbent when the Hong Kong interconnection issues. She was a primogenitor in that covered all facets of legal, policy, regulatory and Kong and began her telecommunications journey studies in Australia. In 1994, she relocated to Hong Born and raised in Malaysia, Agnes furthered her TAN), aged 60, the Chief Legal Officer of the Group. Ms. KokPengAgnesTAN(alsoknownas ’ s interests in legal and regulatory areas. Before ’ s Vice President, Legal, Regulatory ‘ hands-on ’ pursuits 019

HKBN Ltd. Annual Report 2019 020 HKBN Ltd. Annual Report 2019 is purposely aligned with our Group performance in five key stakeholder areas. They are: both to inform our strategies and to measure our define our sustainable growth. For us, ESG serves a major role in shaping the underlying drivers which requirements embedded. As such, ESG factors play aim to go beyond merely fulfilling legal and regulatory society, environment and corporate governance that of our business, actions are rigorously executed with strategy. This approach ensures that in all aspects Our Environment, Social and Governance ( follow. Talents will have passion to execute, and profits will positive social impact. When we do this right, our We believe our business is best served by creating driving us, HKBN is built on making purposeful profits. omnipresent at all times. With this core purpose “ In everything we do, and in every decision we take, Our ESGCommitment work and play. way they live, learn, improvements to the customers with vast has provided service experiences product and as well as exceptional delivering innovation business, a legacy of In terms of our action to do better. and followed up with market inadequacies always sought out As a company, we have Customers Our Strategy Our Company Make our Hong Kong a Better Place to Live “ Make ourHongKongaBetterPlacetoLive From howweoperatetothedecisionstake;ourultimatepurposeseeks professionally. ensure they flourish opportunities that and entrepreneurship offer development efficiently, as well as enjoy life and perform work flexibility to Talents with excellent initiatives, we provide Through a range of priority number one. Talents are treated as example – in how HKBN pride – and lead by China, we take great Kong and mainland As an employer in Hong Talents Being apurpose-drivencompanymeanswealsomeasure success inwaysbeyondfinancialperformance. ’ s overall corporate “ ESG ” is than off each other. money together, rather to workwithusmake partners and suppliers end, we want all our partnerships. To this concept of win-win Paramount is the laws and regulations. of the respective rigorous compliance respect, fairness and built on mutual trust, and suppliers are business partners HKBN and our which exist between The relationships Suppliers ” ) policy not contain figures relating to WTT operations. end of August 2019, our ESG reporting for FY19 does began in May 2019 and was largely completed at the Guangzhou. Due to our integration with WTT, which HKBN Group operations in Hong Kong, Shenzhen and scope of ESG reporting herein covers all aspects of our guidelines. Unless specifically stated otherwise, the we can better improve HKBN refer to the ESG Framework on page 21 for details,) By striving to address these prioritised goals (please reporting principles and provisions set forth by the In preparing this report, we have adhered to the profits in a purposeful way. addressed, overall performance will increase to deliver enhance our reputation. When these issues are mitigate the risks affecting the Group, as well as Minimising Environmental Footprint Technology&ExpertiseforCommunityBetterment Responsible&Win-Win SupplyChainPartnerships Total Rewards for Talents Innovation for Customers donations. over philanthropic and collaboration favours investing Investment ( Corporate Social which we term all, our approach, circumstances. Above of underprivileged especially for people uplift and empower, a responsibility to believe HKBN has community, we our role in the By actively embracing Community “ CSI ” ), ’ s ESG ’ s prospects for business, reduction and more. carbon footprint reduction, recycling, consumption, waste better results in energy ideas to help us realise friendly solutions and utilising the latest eco- This we achieve by good of our planet. to be smarter for the company, our goal is As a technology-based Environment “ comply or explain ” . ”

HKBN ESGFRAMEWORK Our Strategy Community Betterment Technology &Expertisefor Minimising EnvironmentalFootprint Innovation forCustomers With HKBN Co-Ownership, we drive disruptive innovation to harvest substantial and sustainable With HKBNCo-Ownership,wedrivedisruptiveinnovationtoharvestsubstantialandsustainable EmpowerTalents toservetheHongKongcommunity Utilise HKBN Minimise overall waste impact Increase energy efficiency of overall operations Promote healthy content & usage Improve customer privacy protection Uphold fair and transparent marketing Innovate for better and more accessible services business to make sustainable social impact communication benefits forHongKongandourstakeholders.Throughoutthisjourney,aimistowork Environmental Minimising Footprint Innovation for ’ s expertise in technology & Customers beyond merecompliancewithlawsandregulations. Pursue PurposefulProfits a BetterPlace Hong Kong Make Our to Live Supply ChainPartnership Responsible &Win-Win Total RewardsforTalents Pursue long-term win-win relationships Procure responsibly and ethically Incentivise excellence via performance- Create pride & passion by pursuing difference- HKBN Co-Ownership fosters interest Champion LIFE-work priority & based remuneration with suppliers making purpose for Hong Kong and service excellence alignment for sustainable business growth life-long development Technology &Expertise for CommunityBetterment for Talents Total Rewards Partnership Win SupplyChain Responsible &Win-

021

HKBN Ltd. Annual Report 2019 022 HKBN Ltd. Annual Report 2019 Our ESGGovernanceStructure group workshops and interviews have been regularly HKBN. Informing this process, online surveys, focus environment, social and governance aspects of a comprehensive materiality assessment on the appointed an independent consultant to administer from a sustainability perspective. In FY17, we helps enlighten our understanding of key priorities Communicating and listening to our stakeholders important to the Group and our stakeholders. tackle ESG-related aspectswhich are consideredmost formance in the material issues demonstrates how we upon. Viewed in their entirety, our strategy and per- social and governance aspects to address and report transparent window into HKBN Through our materiality approach, we provide a Our MaterialApproach Our Strategy . Led by the Head of Talent Engagement & Corporate 2. At the execution level, representatives from different business 1. (MC) and benchmarks latest ESG trends that impact HKBN reports on ESG performance to the Management Committee Taskforce conducts periodic review with business units, progress on the pre-set ESG goals and objectives. The collaborating with business units to deliver and monitor implementation throughout HKBN, including guiding and departments, which co-ordinates ESG planning and Organization Development, and Corporate Communications representatives from the CSI, Internal Audit & Risk, Talent & Social Investment (CSI), the ESG Taskforce consists of made towards our ESG commitments. units drive and coordinate actions, as well as review progress ESG strategy. Business Units 4 3 2 1 ’ s pertinent economic, ESG Taskforce ’ s published in our 2020 annual report. The results of these materiality assessments will be identified material issues for the next fiscal year. us to formulate an up-to-date ESG strategy against of materiality assessments. The results will guide consultant in August 2019 to kick-start a new round stakeholder concerns, we engaged an external operational integration with WTT), as well as evolving To effectively reflect changes in our business (e.g. the table on the next page for details). priorities important to our company (please refer to identified a number of material issues and formulated and non-Co-Owner Talents). From these exercises, we regulators) and internal stakeholders (i.e. Co-Owners (i.e. customers, suppliers, community partners and conducted with different external stakeholders . The Board of Directors oversees and is accountable for 4. Our MC, led by the CEO and composed of our c-suite 3. HKBN updates to the Board of Directors on a regular basis. and reporting of our ESG performance. The MC provides ESG strategy. Together they oversee the development, execution executives, is responsible for formulating HKBN Management Committee ’ s ESG strategy, development and performance. Board ofDirectors ’ s ESG Stakeholder Our Priorities The following table highlights the many issues identified as important to our Group from the perspective of sustainability: Our Strategy Partners Business Suppliers & Talents Customers Environment Community performance Drive excellence in Talent performance via Fairly rewardedremuneration innovate and stay competitive Key Priorities towards a sustainable planet Enable an integrated waste system to contribute Waste minimisation use of energy Fight climate change by smart and efficient Carbon emissionsreduction Leverage HKBN Technology forGood Ensure compliancewithHKBN suppliers and business partners Establish long-term win-win partnership with partner andsuppliersatisfaction Effective communicationandunderstandingof productive lives which drive HKBN Empower Talents to enjoy happy, healthy and LIFE-work priority ensure customer privacy is protected at all times Treat customer data with utmost priority and Customer privacy and products make informed decisions regarding our services Empower potential and current customers to advertising approach Fair andtransparentmarketing currently not served by our network coverage more accessible to those living in locations Provide best value to customers and make services Service reliability,coverageandaffordability Align suppliers code ofconduct HKBN the local community Leverage Talent expertise to contribute to Talent volunteering the digital divide in local communities technology to promote cyber wellness and narrow purposeful profits ’ s ESG practices to drive responsible and ” culture ’ /business partners ’ s competitive advantage in ’ s supplier ’ ’ s capabilities to practices with “ pay for Empower Talents to grow and develop Talent development drive business success Align HKBN Talent interests with shareholders to Co-Ownership Other Priorities and healthy for our customers Ensure all HKBN products and services are safe Safeguard customerhealthandproductsafety service options via applying innovative technology Offer disruptive customer experiences and new in ourservices Promote innovationandembed appropriate channels for information and service Offer great customer experience through the Accessibility forinformationandassistance 023

HKBN Ltd. Annual Report 2019 024 HKBN Ltd. Annual Report 2019 Table 1:Financialhighlights Key FinancialandOperationalSummary Our Performance Adjusted NetProfit Transaction costs in connection with proposed Transaction costs in connection with business Adjusted Net Profit Originating fee for banking facility expired Deferred tax arising from amortisation of Profit for the year Amortisation of intangible assets Reconciliation of Adjusted Net Profit EBITDA – Product – Enterprise – Residential Revenue Key financials($ EBITDA margin Profit fortheyear Adjusted Free Cash business combination combination intangible assets 1,3 1,4 ’ 000) 1,2 1,5 1,2 31 August 2,324,329 2,472,707 5,107,637 1,709,348 538,175 214,527 283,776 310,601 214,527 538,175 750,170 For theyearended (45,599) 75,608 33.5% 9,863 2019 – 31 August 1,379,183 2,278,241 3,948,952 1,179,588 575,423 396,897 129,627 291,528 396,897 575,423 578,499 (20,164) 18,031 49,275 29.9% 1,757 2018 Change +3.6pp >100% >100% >100% -100% +30% +69% +29% +45% -45% -46% -46% +7% +9% -6% -6% YoY * Excluded $191 million payment for the purchase of properties in Shatin and excluded $296 million paid on acquisition of of acquisition on paid million $296 excluded and Shatin in properties of purchase the for payment million $191 Excluded * Notes: The Group had changed its accounting policies with effect from 1 September 2018 as a result of adopting HKFRS 15, 15, HKFRS adopting of result a as 2018 September 1 from effect with policies accounting its changed had Group The Notes: Key FinancialandOperationalSummary Adjusted FreeCashFlow Changes in working capital Customer acquisition and retention costs Income tax paid Other non-cash items Net interest paid Capital expenditure* EBITDA Transaction costs in connection with Transaction costs in connection with Amortisation of customer acquisition and Amortisation of intangible assets Depreciation Income tax Interest income Finance costs Reconciliation of EBITDA & Adjusted Free Cash Flow Profit fortheyear proposed business combination business combination retention costs were completed in September 2018. September in completed were Cosmo True Limited, a property holding the two network centres currently occupied by the Group, which which Group, the by occupied currently centres network two the holding company holding property a Limited, True Cosmo HKFRS 15, certain incremental costs were required to be capitalised as an asset when incurred, and amortised over over amortised and incurred, when asset an as capitalised be to required were costs incremental certain 15, HKFRS telecommunications service contracts were recognised in the consolidated income statement when incurred. Under Under incurred. when statement income consolidated the in recognised were contracts service telecommunications Revenue from Contracts with Customers ( Customers with Contracts from Revenue expected customer relationship period. Please refer to note 1(c)(ii) on pages 137 to 142 for further details. further for 142 to 137 pages on 1(c)(ii) note to refer Please period. relationship customer expected “ HKFRS 15 HKFRS 1,3,5 ” ). In previous reporting periods, the incremental costs of obtaining obtaining of costs incremental the periods, reporting previous In ). 31 August 1,709,348 (231,901) (117,396) (276,802) (413,860) 750,170 240,793 283,776 534,758 259,271 214,527 For theyearended 77,256 75,608 94,835 (4,083) 3,525 9,863 2019 31 August 1,179,588 (116,234) (101,935) (394,480) 578,499 129,627 425,258 117,288 396,897 10,236 18,031 92,371 (1,641) 1,324 1,757 2018 – – Change >100% >100% >100% >100% >100% >100% >100% +30% +45% +26% -45% -46% +1% +5% +3% YoY n/a n/a 025

HKBN Ltd. Annual Report 2019 026 HKBN Ltd. Annual Report 2019 Table 2:Operationalhighlights Key FinancialandOperationalSummary Mobile business Mobile business services network telecommunications Fixed Market share - Voice Subscriptions ( Commercial building coverage ( Enterprise business Enterprise customers ( Market share - Voice - Broadband Subscriptions ( Residential customers ( - Mobile (with broadband services) - Broadband Residential business Broadband churn rate - Voice - Broadband - Mobile (without broadband services) Mobile ARPU - Mobile (with broadband services) - Mobile (without broadband services) Subscriptions ( Broadband churn rate - Voice - Broadband Residential homes passed ( Enterprise ARPU Residential ARPU Total full-time permanent Talents 6 6 ’ ’ ’ 000) 000) 000) 10 8 7 9 ’ 000) ’ 000) ’ 13 000) ’ 000) 12 11 31 August For theyearended $1,742 25.3% 36.5% 21.9% 35.8% 1,019 2,360 4,131 1.3% 0.9% 2019 $312 $148 $185 454 500 878 116 277 103 144 133 7.2 31 August $1,510 19.2% 21.8% 36.1% 1,017 2,297 2,981 7.7% 1.2% 1.1% $321 $147 $176 2018 140 500 860 265 128 137 2.4 57 57 +17.6pp +17.3pp Change +0.1pp +0.1pp >100% >100% >100% -0.3pp -0.2pp +81% +13% +39% +15% +0% +2% +3% +1% +5% +5% -0% -3% -3% YoY (7) Calculated by dividing the sum of the monthly broadband churn churn broadband monthly the of sum the dividing by Calculated (7) (8) ARPU means average revenue per user per month. Calculated Calculated month. per user per revenue average means ARPU (8) (2) Adjusted Net Profit means profit for the period plus amortisation of of amortisation plus period the for profit means Profit Net Adjusted (2) (3) EBITDA means profit for the period plus finance costs, income income costs, finance plus period the for profit means EBITDA (3) (5) Adjusted Free Cash Flow means EBITDA less capital expenditure, expenditure, capital less EBITDA means Flow Cash Free Adjusted (5) (6) Our market share in broadband or voice services in Hong Kong, Kong, Hong in services voice or broadband in share market Our (6) (4) EBITDA margin means EBITDA divided by revenue. by divided EBITDA means margin EBITDA (4) (1) EBITDA, EBITDA margin, Adjusted Free Cash Flow and Adjusted Adjusted and Flow Cash Free Adjusted margin, EBITDA EBITDA, (1) Notes: Key FinancialandOperationalSummary Service Provider(s). Service were revised to reflect the adjustments filed by the Internet Internet the by filed adjustments the reflect to revised were data, total market figures from January 2016 to November 2016 2016 November to 2016 January from figures market total data, Based on the latest disclosure from OFCA for June 2019 market market 2019 June for OFCA from disclosure latest the on Based respective month and multiplying the result by 100%. by result the multiplying and month respective the industry definition of ARPU due to our tracking of revenue revenue of tracking our to due ARPU of definition industry the number of residential broadband subscriptions during the the during subscriptions broadband residential of number Our use and computation of residential ARPU may differ from from differ may ARPU residential of computation and use Our by other companies. other by subscription terminations in a month divided by the average average the by divided month a in terminations subscription the beginning of the period and the end of the period by two. two. by period the of end the and period the of beginning the may not be comparable to other similarly titled measures used used measures titled similarly other to comparable be not may is calculated by the sum of the number of residential broadband broadband residential of number the of sum the by calculated is are calculated by dividing the sum of such subscriptions at at subscriptions such of sum the dividing by calculated are cash requirements. In addition, our definitions of these measures measures these of definitions our addition, In requirements. cash of months in the financial period. Monthly broadband churn rate rate churn broadband Monthly period. financial the in months of the relevant period. Average residential broadband subscriptions subscriptions broadband residential Average period. relevant the an indication of whether cash flow will be sufficient to fund our our fund to sufficient be will flow cash whether of indication an rate for each month of the given financial period by the number number the by period financial given the of month each for rate subscriptions and further dividing by the number of months in in months of number the by dividing further and subscriptions accordance with HKFRSs. These measures are not necessarily necessarily not are measures These HKFRSs. with accordance mobile services), by the number of average residential broadband broadband residential average of number the by services), mobile net income or cash flows from operations as determined in in determined as operations from flows cash or income net or other entertainment services (excluding revenue from IDD and and IDD from revenue (excluding services entertainment other or do not represent, and should not be used as substitutes for, for, substitutes as used be not should and represent, not do costs in connection with proposed business combination. business proposed with connection in costs include broadband services and any bundled voice, IP-TV and/ IP-TV voice, bundled any and services broadband include costs in connection with business combination and transaction transaction and combination business with connection in costs Co-Ownership Plan II related non-cash items. non-cash related II Plan Co-Ownership services subscribed by residential broadband subscribers, which which subscribers, broadband residential by subscribed services non-recurring item, in the period under review, include transaction transaction include review, under period the in item, non-recurring include amortisation of obligations under granting of rights and and rights of granting under obligations of amortisation include by dividing the revenue generated in the relevant period from from period relevant the in generated revenue the dividing by in corresponding period) and other non-recurring item. Other Other item. non-recurring other and period) corresponding in revenue. Other non-cash items, in the period under review, review, under period the in items, non-cash Other revenue. intangible assets (net of deferred tax credit and direct cost incurred incurred cost direct and credit tax deferred of (net assets intangible contract liabilities, deposits received and deferred services services deferred and received deposits liabilities, contract interest income. interest joint ventures, amounts due to joint ventures, trade payables, payables, trade ventures, joint to due amounts ventures, joint in connection with proposed business combination and less less and combination business proposed with connection in deposits and prepayments, contract assets, amounts due from from due amounts assets, contract prepayments, and deposits in connection with business combination, transaction costs costs transaction combination, business with connection in assets, inventories, trade receivables, other receivables, receivables, other receivables, trade inventories, assets, Communications Authority ( Authority Communications of customer acquisition and retention cost, transaction costs costs transaction cost, retention and acquisition customer of non-cash items. Working capital includes other non-current non-current other includes capital Working items. non-cash broadband or voice subscriptions recorded by the Office of the the of Office the by recorded subscriptions voice or broadband (net of direct cost incurred in corresponding period), amortisation amortisation period), corresponding in incurred cost direct of (net tax paid, and adjusted by changes in working capital and other other and capital working in changes by adjusted and paid, tax a given point in time by the total number of corresponding corresponding of number total the by time in point given a tax expense, depreciation and amortisation of intangible assets assets intangible of amortisation and depreciation expense, tax customer acquisition and retention costs, net interest paid and and paid interest net costs, retention and acquisition customer the number of broadband or voice subscriptions we have at at have we subscriptions voice or broadband of number the for residential or enterprise business, is calculated by dividing dividing by calculated is business, enterprise or residential for Financial Reporting Standards ( Standards Reporting Financial Net Profit are not measures of performance under Hong Kong Kong Hong under performance of measures not are Profit Net “ OFCA “ HKFRSs ” ) at the same point in time. time. in point same the at ) ” ). These measures measures These ). (9) Calculated by dividing the sum of the monthly broadband churn churn broadband monthly the of sum the dividing by Calculated (9) (10) ARPU means average revenue per user per month. Calculated by by Calculated month. per user per revenue average means ARPU (10) (13) Enterprise customers means total number of enterprise enterprise of number total means customers Enterprise (13) (12) Mobile (with broadband services) ARPU means average revenue revenue average means ARPU services) broadband (with Mobile (12) (11) Mobile (without broadband services) ARPU means average average means ARPU services) broadband (without Mobile (11) ARPU on a bundled rather than standalone basis. standalone than rather bundled a on ARPU the performance of our business as we track our residential residential our track we as business our of performance the subscribers. We believe this gives us a better tool for observing observing for tool better a us gives this believe We subscribers. ARPU may be different if WTT Group WTT if different be may ARPU generated from all services subscribed by residential broadband broadband residential by subscribed services all from generated twelve months ended 31 August 2019. As such, the enterprise enterprise the such, As 2019. August 31 ended months twelve the four months ended 31 August 2019 and those for HKBN for for HKBN for those and 2019 August 31 ended months four the respective month and multiplying the result by 100%. by result the multiplying and month respective and average number of enterprise customers of WTT Group for for Group WTT of customers enterprise of number average and standalone basis. standalone number of enterprise broadband subscriptions during the the during subscriptions broadband enterprise of number the year ended 31 August 2019 includes the relevant revenue revenue relevant the includes 2019 August 31 ended year the we track our residential mobile ARPU on a bundled rather than than rather bundled a on ARPU mobile residential our track we subscription terminations in a month divided by the average average the by divided month a in terminations subscription have with enterprise customers. Enterprise ARPU calculation for for calculation ARPU Enterprise customers. enterprise with have us a better tool for observing the performance of our business as as business our of performance the observing for tool better a us calculated by the sum of the number of enterprise broadband broadband enterprise of number the of sum the by calculated distorted by the impact of certain particularly large contracts we we contracts large particularly certain of impact the by distorted mobile subscribers (with broadband services). We believe this gives gives this believe We services). broadband (with subscribers mobile of months in the period. Monthly broadband churn rate is is rate churn broadband Monthly period. the in months of the period and the end of the period by two. This metric may be be may metric This two. by period the of end the and period the revenue generated from all services subscribed by residential residential by subscribed services all from generated revenue rate for each month of the given financial period by the number number the by period financial given the of month each for rate bundled rather than standalone basis. standalone than rather bundled by dividing the sum of enterprise customers at the beginning of of beginning the at customers enterprise of sum the dividing by differ from the industry definition of ARPU due to our tracking of of tracking our to due ARPU of definition industry the from differ of our business as we track our residential mobile ARPU on a a on ARPU mobile residential our track we as business our of period. Average number of enterprise customers is calculated calculated is customers enterprise of number Average period. and computation of Mobile (with broadband services) ARPU may may ARPU services) broadband (with Mobile of computation and believe this gives us a better tool for observing the performance performance the observing for tool better a us gives this believe and further dividing by the number of months in the relevant relevant the in months of number the by dividing further and beginning of the period and the end of the period by two. Our use use Our two. by period the of end the and period the of beginning residential mobile subscribers (without broadband services). We We services). broadband (without subscribers mobile residential mobile services) by the average number of enterprise customers customers enterprise of number average the by services) mobile are calculated by dividing the sum of such subscriptions at the the at subscriptions such of sum the dividing by calculated are tracking of revenue generated from all services subscribed by by subscribed services all from generated revenue of tracking enterprise telecom business (excluding revenue from IDD and and IDD from revenue (excluding business telecom enterprise Average residential mobile subscriptions (with broadband services) services) broadband (with subscriptions mobile residential Average ARPU may differ from the industry definition of ARPU due to our our to due ARPU of definition industry the from differ may ARPU dividing the revenue generated in the relevant period from the the from period relevant the in generated revenue the dividing further dividing by the number of months in the relevant period. period. relevant the in months of number the by dividing further month August 2019 was $2,356. was 2019 August month use and computation of Mobile (without broadband services) services) broadband (without Mobile of computation and use residential mobile subscriptions (with broadband services) and and services) broadband (with subscriptions mobile residential used. For information, the Enterprise ARPU for the Group for the the for Group the for ARPU Enterprise the information, For used. beginning of the period and the end of the period by two. Our Our two. by period the of end the and period the of beginning services revenue (excluding IDD services), by the number of average average of number the by services), IDD (excluding revenue services are calculated by dividing the sum of such subscriptions at the the at subscriptions such of sum the dividing by calculated are mobile subscribers (with broadband services), which include all all include which services), broadband (with subscribers mobile residential mobile subscriptions (without broadband services) services) broadband (without subscriptions mobile residential in the relevant period from services subscribed by residential residential by subscribed services from period relevant the in dividing by the number of months in the relevant period. Average Average period. relevant the in months of number the by dividing per user per month. Calculated by dividing the revenue generated generated revenue the dividing by Calculated month. per user per mobile subscriptions (without broadband services) and further further and services) broadband (without subscriptions mobile broadband services), by the number of average residential residential average of number the by services), broadband which include all services revenue (excluding IDD and and IDD (excluding revenue services all include which residential mobile subscribers (without broadband services), services), broadband (without subscribers mobile residential generated in the relevant period from services subscribed by by subscribed services from period relevant the in generated revenue per user per month. Calculated by dividing the revenue revenue the dividing by Calculated month. per user per revenue customers excluding IDD and mobile customers. mobile and IDD excluding customers ’ s full year information was was information year full s 027

HKBN Ltd. Annual Report 2019 028 HKBN Ltd. Annual Report 2019 million, $1,709 million and $750 million. year by 29%, 45% and 30%, respectively, to $5,108 Adjusted Free Cash Flow ( results of WTT Group, our Group revenue, EBITDA and in return. As a result of consolidating four months of Group with higher ARPU at a low monthly churn rate money services to our customers, which rewarded the customer-focused, integrated and high value-for- continued to thrive as we relentlessly delivered ICT company in Hong Kong. Residential business 30 April 2019 and transformed to the second largest 31 August 2019. HKBN completed the WTT Merger on operational and financial results for the year ended The Group continued to deliver a solid set of Business Review Management DiscussionandAnalysis Our Performance Residential revenue grew by 9% year-on-year to Enterprise revenue increased by 69% year-on- available OFCA statistics). to 36% as at 30 June 2019 (based on the latest by broadband subscriptions decreased slightly monthly churn rate remained low. Our market share month in FY18 to $185/month in FY19, while our ARPU hasincreasedby5%year-on-year,from$176/ of 31 August 2019. Historical full base residential reached 50% of our total broadband customers as offerings whereby our triple/quad-play upsell has has shown good receptiveness of our quad-play improved customer stickiness. Our customer base of our multi-play strategy that increased ARPU while $2,473 millionasaresultofthesuccessfulexecution exploit the upsell potential through integration. we streamline our combined operations and fully base. We see many more growth opportunities as at competitive value to a much larger customer enabled us to provide integrated ICT solutions capabilities in the enterprise segment, which has The WTT Merger increased both our presence and enterprise ARPU improved from $1,510 to $1,742. customers doubled to 103,000 while our million. Duringtheyear,totalnumberofenterprise Group, increased by 17% year-on-year to $1,619 Enterprise revenue, before accounting for WTT months of operating results of WTT Group in FY19. year to $2,324 million after consolidating four “ AFF ” ) increased year-on- to the consolidation of four months of WTT Group year from $2,117 million to $2,735 million mainly due Other operating expenses increased by 29% year-on- contribution from WTT Group. by 31% year-on-year to $1,630 million, excluding the costs. Network costs and costs of sales increased mobile service subscription and OTT related content the continued expansion in the enterprise businesses, on-year to $1,545 million which was mainly driven by network cost and other cost of services by 59% year- results. The increase primarily includes the increase in consolidation of four months of WTT Group year-on-year to $1,834 million mainly due to the Network costs and costs of sales increased by 47% to ongoing operational efficiency initiatives. on-year to $2,130 million. The slight increase was due with business combinations, increased by 1.6% year- from WTT Group and transaction costs in connection Other operating expenses, excluding the contribution year-on-year to $693 million. to $85 million and the increase in Talent costs by 42% proposed businesscombinationby332%year-on-year transaction costs in connection with completed and 126% year-on-year to $276 million, the increase in the increase in amortisation of intangible assets by operating results. The increase primarily includes Product revenue increased by 7% year-on-year voice, content and mobile standalone segments. convenience to disrupt the legacy broadband, fixed- unprecedented household savings and service integrated multi-play price strategy to deliver As always, the Group will continue to extend our content for customers at competitive prices. the opportunity for us to offer new and exciting the growth in subscription revenue as it provide penetration into the OTT market has fostered their entertainment needs. Our successful ordered at least one OTT set-top box to meet residential broadband customers have already play strategy, whereby the majority of our to be the key contributor to our quad- Over-the-top ( mobile business. of smartphone products that complements our to $311 million, mainly represented by the sale “ OTT ” ) services continued ’ s operating ’ s financial synergies to shareholders. organisation shall deliver both operational and complementary, we are confident that the combined since listing in 2015. As both businesses are highly success in integrating several add-on acquisitions competition in the enterprise space. HKBN had proven reach, wider service offerings and enhanced market to new heights, in terms of extended customer due to the consolidation of fourmonthsWTT Group AFF rose by 30% year-on-year to $750 million mainly million in FY18 turned to a loss of $12 million in FY19. due to the fair value gain on interest-rate swap of $59 by 6% year-on-year to $538 million. This was mainly finance costs and non-recurring items, decreased amortisation of intangible assets, non-recurring Adjusted Net Profit, excluding the impact of year-on-year from $397 million to $215 million. attributable to equity shareholders decreased by 46% As the result of the aforementioned factors, profit deferred tax assets. of tax losses that were not previously recognised as the statutory income tax rate due to the utilisation FY19 and FY18. The effective tax rate was lower than approximately 15% and 15%, respectively, for the back for the calculation of AFF. costs from EBITDA, which is substantially deducted the amortisationofcustomeracquisitionandretention on EBITDA of $241 million was due to the exclusion of did not have any impact on AFF. The positive impact inflow from working capital. The adoption of HKFRS 15 operating results, leading to a increase in EBITDA and acquisition shall bring the combined Group The successful WTT Merger and the proposed JOS Outlook Management DiscussionandAnalysis deductible expenses (the after adjusting for these finance costs and non- Income tax as a percentage of profit before taxation, HKFRS 9 and finance costs were not tax deductible. trade receivables recognised as the result of adopting million to $95 million. The expected credit losses on Income tax increased by 3% year-on-year from $92 on senior notes of $103 million from the WTT Merger. $117 million to $259 million mainly due to the interest Finance costs increased by 121% year-on-year from “ effective tax rate ’ ” s business ) was ’ s following initiatives: growth in revenue, EBITDA and AFF through the and mobilepartnerships,aswelldrivingsustainable relationship by upselling more services through OTT substantially invested network and our monthly billing existing business. We shall focus on harvesting our Market competition continues to be intense for our Further penetrate the enterprise market through To further lower finance costs by refinancing To expand our quad-play bundle plans to multi- Continue to cultivate our Talent-oriented Co- Seamlessly execute the integration of WTT and more network capacity; our broad range of business-imperative services 20% of the senior notes via cheaper financing. Management intends to partially redeem up to better interest rate grid of existing bank facility. to below 4x net debt to EBITDA ratio to enjoy a relatively expensive senior notes and deleverage services; and multimedia content and mobile standalone and disrupt the legacy broadband, fixed-voice, play to drive ARPU and subscription growth revamped Co-Ownership Plan III Plus; a broader Talent base at HKBN/WTT Group in the with shareholders by extending the invitation to Ownership culture that aligns risks and rewards year ending 31 August 2021; achieve $300 millions synergy per annum by the business community; Management targets to synergy benefits and to better serve the Group, in order to maximise the potential 029

HKBN Ltd. Annual Report 2019 030 HKBN Ltd. Annual Report 2019 banking facilities. the period with internal resources and the available expenditures and working capital requirements for as at 31 August 2019, the Group can fund its capital Under the liquidity and capital resources condition facility of $200 million (31 August 2018: $200 million). 2019, the Group had an undrawn revolving credit 31 August 2019 and 31 August 2018. As at 31 August and in hand. There was no pledged bank deposit as at Cash and cash equivalents consisted of cash at bank arrangements for speculative purposes. activities. The Group would not enter into hedging for planning, executing and monitoring the hedging The Group Hedging to the consolidation of WTT Group The significant increase in gross debt is mainly due of $9,049 million (31 August 2018: $3,527 million). 2018: $3,900 million), which led to a net debt position outstanding borrowing) of $9,712 million (31 August $373 million) and gross debt (principal amount of cash equivalents of $663 million (31 August 2018: As at 31 August 2019, the Group had total cash and Liquidity andCapitalResources Management DiscussionandAnalysis guidance, the Group for overseeing the hedging activities. Under their Chief Financial Officer are primarily responsible interest-rate swaps. The Chief Executive Officer and the debt instruments and facilities by entering into rate risk arising from the variable interest rates of (equivalent to $5,232 million) senior note in FY19. The Group The Group (equivalent to $5,232 million) senior notes. EBITDA ratio is mainly due to the US$670 million 2018: 3.0x). The significant increase in net debt to loan facilities is approximately 4.2x (31 August in accordance with the term of the Group as at 31 August 2019 (31 August 2018: 3.8x). a ratio of the gross debt over total equity, was 1.3x ’ s policy is to partially hedge the interest ’ ’ s net debt to EBITDA ratio as computed s gearing ratio, which was expressed as ’ s finance team is responsible ’ s US$670 million ’ s various instruments where necessary to address short-term imbalances. level of buying or selling foreign currencies at spot rates ensures that the net exposure is kept to an acceptable to limit this foreign currency risk exposure, the Group and the Renminbi arising from its operations. In order exchange risk based on fluctuations between the HKD The Group is also exposed to a certain amount of foreign exchange gains or losses between the two currencies. 1983, management does not expect significant foreign to the current pegged rate of HKD7.80 = USD1.00 since exchange rate of the HKD to the USD has remained close ( primarily denominated in either Hong Kong dollars trading and measured at fair value through profit or loss. Charge onGroupAssets qualify for hedge accounting under HKFRS 9, each reporting period. The interest-rate swap does not initially at fair value and remeasured at the end of This interest-rate swap arrangement is recognised 2.26% per annum. substantially fixed the HIBOR interest rate exposure at Benefiting from the hedging arrangement, the Group of 1.8 years from 31 August 2018 to 29 May 2020. with an international financial institution for a term arrangement in the principal amount of $2,635 million The Group entered into an interest-rate swap All of the Group Exchange Rates utility vendors in lieu of payment of utility deposits. respect of bank guarantees provided to suppliers and liabilities of $8 million (31 August 2018: $7 million) in As at 31 August 2019, the Group had total contingent Contingent Liabilities banking facilities. of the Group were pledged to secure its loans and As at 31 August 2019 and 31 August 2018, no assets “ HKD ” ) or United States dollars ( , and therefore, it is accounted for as held for ’ s monetary assets and liabilities are “ USD ” ). Given the Financial Financial October 2018 for further details. April 2019, and the circular of the Company dated 26 7 August 2018, 18 January 2019, 17 April 2019, 30 refer to the announcements of the Company dated completion dateislargerthanwhatitwouldbe.Please Notes), the goodwill recognised for WTT Merger at the and also the conversion price of the Vendor Loan reference share price in determining the consideration date at $14.04 (as compared to $11.60, which is the ordinary shares of the Company on the completion determined with reference to the market price of the As the accounting for the aggregate consideration was and indirect wholly-owned subsidiary of the Company. has become direct wholly-owned subsidiary of MLCL Wireman and Twin Holding; and (iii) WTT Holding Corp amount of $970,468,828 being issued to each of TPG $1,940,937,656 have been issued, with a principal Loan Notes with an aggregate principal amount of of TPG Wireman and Twin Holding; (ii) the Vendor duly allotted and issued by the Company to each (i) 152,966,345 consideration shares have been 2019. Following the completion of the WTT Merger, completion of the WTT Merger took place on 30 April set out in the Merger Agreement were satisfied and “ be satisfied by issuance of vendor loan notes (the consideration shares; and (ii) $1,940,937,656 would would be satisfied by the allotment and issuance of of $5,489,756,860, of which: (i) $3,548,819,204 WTT Holding Corp for an aggregate consideration agreed to sell, the entire issued share capital in and TPG Wireman and Twin Holding conditionally other things, MLCL conditionally agreed to purchase, “ Holding L.P. ( On 7 August 2018, the Company, MLCL, TPG Wireman, Acquisitions andDisposals Significant Investments, Management DiscussionandAnalysis Vendor Loan Notes Merger Agreement “ TPG Wireman ” ) entered into a merger agreement (the ” ” ) and Twin Holding Ltd ( ” ), pursuant to which, among ). The condition precedents as “ Twin during the year ended 31 August 2019. relation to its subsidiaries and associated companies significant investments, acquisitions or disposals in Save as disclosed, the Group did not make any for further details. announcement of the Company dated 23 August 2019 subsidiaries of the Company. Please refer to the subsidiaries of HKBNGL and indirect wholly-owned Target Companies will become direct wholly-owned as set out in the Share Purchase Agreement, the Upon satisfaction of the condition precedent(s) its obligations under the Share Purchase Agreement. the proper and punctual performance by HKBNGL of Agreement. MLCL has agreed to guarantee to JTH by JTH of its obligations under the Share Purchase to HKBNGL the proper and punctual performance Technology Holdings Limited has agreed to guarantee certain closing and post-closing adjustments). Jardine (equivalent to $393,500,000) in cash (subject to Companies training programmes. competitive retirement benefits schemes, and Talent provides comprehensive medical insurance coverage, Security Services Pte Ltd (collectively, the Limited, Adura Hong Kong Limited and Adura Cyber share capital of Jardine OneSolution Holdings (C.I.) JTH has conditionally agreed to sell, the entire issued HKBNGL has conditionally agreed to purchase, and Agreement share purchase agreement (the JTH (as seller), amongst others, entered into the On 23 August 2019, HKBNGL (as purchaser) and Group payments are discretionary and dependent on both the of basic salary, bonus and other benefits. Bonus The Group provides remuneration package consisting full-time Talents (31 August 2018: 2,981 Talents). As at 31 August 2019, the Group had 4,131 permanent Talent Remuneration ’ s and individual performances. The Group also ” ” ), pursuant to which, among other things, ) for a consideration of US$50,000,000 “ Share Purchase “ Target 031

HKBN Ltd. Annual Report 2019 032 HKBN Ltd. Annual Report 2019 this annual report respectively. this annual report respectively. and Analysis and Analysis services, business continuity and system integration. solutions, data centre services, information security Wi-Fi, mobile, voice communications, integrated cloud including broadband, data connectivity, managed services to both enterprise and residential markets, Group offers a comprehensive range of premier ICT in Hong Kong. With extensive fibre-optic networks, the company. The Group is a leading ICT services provider been established by the Directors to ensure significant risks that most businesses face. Procedures have which the Group operates while others are common a variety of risks, some are specific to the industry in The Directors are aware that the Group is exposed to Principal RisksandUncertainties Operational Summary be found in the chapters headed Details of the financial key performance indicators can Performance Indicators Analysis UsingFinancialKey “ Group during the year, and the future developments of the discussion and analysis of the Group A fair review of the business of the Group and a Business Review subsidiaries, the HKBN Ltd. (the Principal Activities year ended 31 August 2019. the audited consolidated financial statements for the The Directors are pleased to present their report and Report oftheDirectors Our Performance Shareholder Letter ’ s business, are set out in the chapters headed ” ” on pages 8 to 11 and pages 28 to 31 of on pages 24 to 27 and pages 28 to 31 of “ Company “ Group ” and ” and ” ) is an investment holding “ ” Management Discussion , together with its “ Management Discussion “ Key Financial and ’ s performance report. More information about the Group consumption and encouraging reuse and recycling. the future. appear significant now but could turn out to be so in which are not known by the Group or which may not may be other risks, in addition to those highlighted, by no means exhaustive or comprehensive, and there materially and adversely affected. These key risks are operations and/or prospects of the Group could be Group on pages 102 to 116. If any of these events occur, the “ performance is set out in the chapter headed “ with our vendors, partners and community to and innovation. In addition, we have collaborated several energy reduction initiatives via collaboration and more sustainable future, we have been working on our generation of waste. Aiming to facilitate a greener continually improveourenergyefficiencyandminimise since 2017, we have adopted various initiatives to With the implementation of our Environmental Policy to the chapter headed industries in which the Group operates, please refer risks related to the Group measures are in place to mitigate those risks. For key and performance are identified and corresponding risks that may adversely affect the Group “ as minimise our generation of waste with a vision to considerations into our business process, as well the environment. We have integrated environmental energy efficiency to reduce any negative impact on has a role to constantly explore policy which prioritises As an environmentally responsible business, HKBN Environmental PoliciesandPerformance Environment reduce-at-source Make our Hong Kong a Better Place to Live ’ s businesses, financial conditions, results of ” on pages 94 to 101 of this annual ” , minimising waste by reducing “ Corporate Governance Report ’ s businesses and to the ’ s environmental ’ s operation ” . ”

under the related provision of the Employees which exceeds the legal requirements stipulated work are covered by and entitled to compensation All Talentswhosufferinjury arising outofandduring Employment of Young Persons (Industry) Regulations. the Employment of Children Regulations and the only employ young Talents in strict compliance with persons (aged 15 but under 18), the Company shall protection of children (under the age of 15) and young will not employ any children aged under 13. For the allowed. In line with the Employment Ordinance, we tolerance. Likewise, forced labour of any kind is not and treating all acts of discrimination with zero HKBN, we are committed to preventing discrimination or vilify a person on the grounds of their ethnicity. At pregnancy or family status or; discriminate, harass female) on the basis of gender, marital status, to discriminate against another person (male or Ordinance, it is unlawful for any person or organisation Discrimination Ordinance and Race Discrimination Under theSexDiscriminationOrdinance,FamilyStatus embrace our unique culture. have gotten to understand more about HKBN and and two-way communication sessions, ex-WTT Talents includes Townhall meeting, open house, office tours break down silos. After going through a journey that scale, HKBN has begun aiming to achieve synergy and Following the WTT integration, with a more enlarged better place to work. other companies to follow and make Hong Kong a welfare andworkingconditions,withaviewtoinspiring and other laws and regulations related to employee legal requirements set by the Employment Ordinance light, we seek to not only comply with but exceed the motivate the very best to work for our Company. In this opportunities to Talents so as to attract, retain and that is to provide the very best value, experience and success is attributed to a very simple philosophy, or her own respective skills and values. Our sustained our investment, with each individual possessing his At HKBN, people are Talents, not staff. Talents are Talents Relationships withKeyStakeholders Report oftheDirectors Compensation Ordinance. ’

annual report respectively. “ be found in the chapters headed More information of the Group 95% performers. concentrate on nurturing and rewarding our top Through this, the Group is better equipped to remains out of alignment, they are asked to leave. enhancement programme. If their performance performers and invite them to undergo an we identify the bottom 5% of our underachieving system and incentive bonus schemes. Every year, place a fair and effective performance appraisal performance-based monetary rewards, we have in Adhering to Total Rewards viz. Strict mobile office during normal working days. may apply, subject to supervisor approval, to work via who are not required to provide on-site support duties, 12:00pm and 2:30pm. In addition, full-time Talents and 15-minute lunch break taken flexibly between All non-shift duty Talents may also enjoy a 1-hour their working day between 8:30am to 10:00am. arrangement, non-shift Talents can decide to start typical 9-hour standard. Under Flexi Working Hours 1-hour-and-15-minute lunch break) instead of the allows our Talents to work 8 hours (including a technology. Self-service portals, payment kiosks, service trends by investing in multichannel support as possible, HKBN stays on top of the latest customer To make customer experiences as quick and effortless service installation has completed. peace-of-mind after service registration and after option for designated services let customers enjoy cooling-off periods and 180-day deferred start bill but to make life easier for them. Our dual 14-day service is not just about making the customer happy, our strategy. In a customer-in way, great customer customer experience is an important component in brand growth and loyalty. Providing a high-quality strong customer engagement strategy will foster For the residential market, HKBN believes a Customers Our Talents ‘ 9am to 5pm Flexible Working Hour Policy ” on pages 44 to 59 and pages 60 to 77 of this ’ s Talent culture can “ Customers ” ’ and

033

HKBN Ltd. Annual Report 2019 034 HKBN Ltd. Annual Report 2019 Awards ( in place to measure customer feedback with us. Customer satisfaction surveys are encourage customers to interact and share their requests are dealt promptly on first contact. We our company service processes. To meet this challenging business quality of our services and enhance the agility of our Solutions teams are striving to improve the overall carriers, our highly motivated and engaged Enterprise multinational corporates as well as international and markets, ranging from local retailers, SMEs to a broad array of customers across different sectors operations round-the-clock. To meet the needs for and better ways to connect with their business and more product options, customised with total solutions demanding greater mobility in their telecom services, For the enterprise market, customers today are high-quality services and commitment to customers. throughout the years. All these are indicative of our customer service agents and service technicians compliments praising the outstanding work of our In addition, we received around 2,500 written ( been granted service Quality Management Certificate Since 2016,ourResidentialServiceHotlinehas Relationship Management ( information about customers via our Customer correspondence. Armed with complete and real-time through live chat, social media, telephone, email or who prefer human interaction can contact us easily to interact with a sales or service agent. Customers who prefer to solve their own problems without having and organised FAQ section are in place for customers dynamic interactive voice response system, interactive Report oftheDirectors “ HKQAA Mystery Caller Assessment Award – Number Mystery Caller Assessment Award – Number Mystery Caller Assessment Award – Online Mystery Caller Assessment Award – Residential Mystery Caller Assessment Award – Residential Porting Hotline – Best IVRS Porting Hotline Customer Service VIP Hotline (four consecutive years) Service Hotline (six consecutive years) “ ” ). Additionally, we won five Corporate Gold HKCCA ’ s products, services or experiences. ” ) in 2018: “ CRM ’ s satisfaction level with ” ) system, customer to 59. this annual report. out in the chapter headed Details of our customer-focused initiatives are set initiatives in the coming two years. customer experience and plan for digitalisation the full integration of customers data for end-to-end journey to embrace the coming changes and enable our worldclassCRMsolutionpartnertoprepareforthe business solutions. Last year, we started working with to support enterprise customers while offering total approach to customer processes is what we need With the merger with WTT, we believe an agile delivering qualities services. enhance pre-sales and after-sales processes aimed at digital capabilities and are always looking for ways to environment, we continued to invest to improve our which is expounded in our Group role in our Corporate Social Investment strategy value, sustainable procurement plays an important With the strong foundation set by our corporate core with a proclivity to choose social enterprise suppliers. HKBN prefersanyopportunitytodiversifypartnerships Hong Kong a better place to live. Whenever possible, sourcing is essential to driving our vision in making when undertaking any sourcing activities. Diversity of guideline which we require all Talents to comply with sets out a consistent approach with comprehensive of quality and integrity. Our Procurement Policy procurement activities with the highest standards HKBN is committed to conducting our supplier Suppliers processes. More information about our Group Labour, Health and Safety in our supplier selection supplier sustainability concerning Environment, and added measurements and considerations on The Group has introduced criticality assessment their suppliers and subcontractors. requirements and a similar approach is expected for own business code of conduct that meets our with our Supplier Code of Conduct or have their Policy. We expect our suppliers either to comply chapter headed Procurement Policy and approaches is set out in the “ Suppliers “ ” Customers on pages 78 and 81 of ’ s Procurement ” on pages 44 ’ s level Talents from all departments. Ordinance on Talent Engagement departments. Likewise, training departments, as well as for Talents of Marketing and Communications Authority ( licence conditions, fines may be imposed by the them. If licensees fail to comply with the TO or relevant interconnection services and share facilities owned by providing satisfactory level of service, certain with the TO and relevant licence conditions including public, the Group is required to operate in compliance As licensees under the TO, and in the interests of the Telecommunications Ordinance( The Group Personal DataPrivacyOrdinance( Law training sessions on ended 31 August 2019, the Group has organised for the year ended 31 August 2019. During the year significant impact on the operations of the Group with all relevant laws and regulations that have the Company has complied in all material respects training provided to different units within the Group, approval procedures, and appropriate in-house the implementation of various internal controls and Ordinance (Cap. 57) and the Listing Rules. Through Competition Ordinance (Cap. 619), the Employment the Personal Data (Privacy) Ordinance (Cap. 486), the 106), the Trade Descriptions Ordinance (Cap. 362), include the Telecommunications Ordinance (Cap. applicable legal and regulatory requirements. They The Group and its activities are subject to various Impact ontheGroup Regulations whichhaveaSignificant Compliance withApplicableLawsand Report oftheDirectors securely equipped and compliant with the law. operation units had been held to ensure that we are sessions and meetings with relevant business and occurring, protective measures as well as training the PDPO. To prevent a breach of personal data from is required to comply with relevant requirements of personal datainitsusualandordinarycourseofbusiness “ What You Need To Know About Competition ” for managerial and above level Talents from all ’ s collection, holding, processing or use of ” was undertaken by managerial and above “ Overview on Intellectual Property “ CA ” ). “ TO “ PDPO ” ) ” ) pricing, contracts and strategy formation. involved with sales, marketing, business tenders, compliance guidelinemanualwaspreparedforTalents 2017 for managerial and above level Talents whilst a further update session was conducted in September before the CO came into effect on December 2015, a training sessionswereconductedforallbusiness units up to five years. To ensure compliance with the CO, three years) and Directors may be disqualified for of the gross Hong Kong turnover of the Group (up to the Competition Tribunal imposing a fine of up to 10% comply with these competition rules could result in or distorting competition in Hong Kong. Failure to has the object or effect of preventing, restricting abusing its power through engaging in conduct that degree of market power is also prohibited from Likewise, an undertaking that has a substantial distorting competition in Hong Kong are prohibited. have the object or effect of preventing, restricting or or concerted practices between undertakings that broadcasting licensees. Under the CO, agreements the CO, namely, in relation to telecommunications and to sales and marketing units from time to time. compliance andrefreshertrainingsessionsareoffered sales and marketing materials are reviewed to ensure imposed. To ensure compliance with the TDO, all prosecution and fine and imprisonment may be offences are committed, it may result in criminal prohibited under the TDO. If any of the aforesaid misleading omissions, bait advertising, etc., are TDO. False trade descriptions of goods and services, and Excise Department in the enforcement of the The CA has concurrent jurisdiction with the Customs Trade DescriptionsOrdinance( Competition Commission ( The CA has concurrent jurisdiction with the Competition Ordinance( “ CC “ CO ” ) in the enforcement of ” ) “ TDO ” ) 035

HKBN Ltd. Annual Report 2019 036 HKBN Ltd. Annual Report 2019 respectively. 12 and 13 to the of the Group as at 31 August 2019 are set out in notes Details of the principal subsidiaries and joint ventures Subsidiaries andJointVentures dividend will be paid by the Company. 6 January 2020, being the date on which the 2019 final by the Company to the holders of Vendor Loan Notes on for such final dividend. Such cash amount will be paid ordinary shares in the Company as of the record date the Vendor Loan Notes were holders of 167,322,212 months ended on 31 August 2019, as if the holders of ordinary share declared by the Company for the twelve to $60,235,996 based on the 36 cents final dividend per receive a cash amount payable by the Company equal the holders of Vendor Loan Notes were entitled to the terms and conditions of the Vendor Loan Notes, Group up to the completion of WTT Merger. Based on WTT Group) and the surplus cash accumulated at WTT Group (including the four months AFF contribution from The dividend will be funded by the contribution of the repayment, if required. relevant year/period, after adjusting for potential debt an intention to pay 100% of the AFF in respect of the in an amount of not less than 90% of the AFF with The dividend policy of the Company is to pay dividends (2018: $301,700,000). 2020, amounting to approximately $472,176,000 per ordinary share) to the shareholders on 6 January dividend of 36 cents per ordinary share (2018: 30 cents The Directors now recommend the payment of a final Recommended Dividend annual report. financial statements on pages 127 to 233 of this Group as at that date are set out in the consolidated ended 31 August 2019 and the financial position of the The financial performance of the Group for the year Consolidated FinancialStatements Report oftheDirectors “ Notes to the Financial Statements ” , share premium. Company lawfully available for distribution including or payable except out of the profits and reserves of the Statements Company (the Cayman Islands and the articles of association of the Under the Companies Law (2018 Revision) of the $5,334,175,000 (2018: $1,097,491,000). available for distribution to shareholders were are set out in note 8 to the Details of the retirement schemes of the Group Retirement Schemes annual report. years/period is set out on pages 234 and 235 of this and liabilities of the Group for the last five financial A summary of the results and of the assets, equity Financial Summary “ Company during the year are set out in note 28 to the Details of the movements in share capital of the Share Capital As at 31 August 2019, the Company Company Distributable Reservesofthe $1,056,000 (2018: $1,298,000). made charitable and other donations of approximately During the year ended 31 August 2019, the Group Donations Financial Statements 2019 are set out in note 20 to the Particulars of bank loan of the Group as at 31 August Bank Loan Notes to the Financial Statements ” . “ Articles ” . ” ), no dividend shall be declared “ Notes to the Financial “ Notes to the ” ’ s reserves . 1 Chairman of Audit Committee 2 Member of Audit Committee Audit of Member 2 Committee Audit of Chairman 1 Note: 4 Member of Nomination Committee 5 Chairman of Remuneration Committee 6 Member of Remuneration Committee Remuneration of Member 6 Committee Remuneration of Chairman 5 Committee Nomination of Member 4 A full list of names of the Directors of the Group Independent Non-executive Directors Non-executive Directors Executive Directors The Directors of the Company during the year ended 31 August 2019 and up to the date of this report are: Directors and Report oftheDirectors Chairman and Independent Non-executive Director subsidiaries can be found in the Company continue in office. eligible for re-election. All remaining Directors shall the forthcoming annual general meeting and shall be Director of the Company, shall retire from office at Yee Kwan Quinn LAW, an Independent Non-executive the Non-executive Directors of the Company, and Mr. Mr. Zubin Jamshed IRANI and Mr. Teck Chien KONG, Quiaque LAI, an Executive Director of the Company, In accordance with article 16.18 of the Articles, Mr. Ni every year at the Company At least one-third of Directors shall retire from office accordance with the Listing Rules and the Articles. rotation at least every three years and re-election in Currently, all Directors are subject to retirement by Governance at www.hkbnltd.net under ” . ’ “ s annual general meeting. Our Company/Corporate ’ ServiceContracts ’ s website ’ s existed during the year ended 31 August 2019. of the business of the Company were entered into or administration of the whole or any substantial part No contracts concerning the management and Management Contracts statutory compensation. year without payment of compensation, other than which are not determinable by the Group within one contracts with the Company or any of its subsidiaries forthcoming annual general meeting have service No Directors proposed for re-election at the Non-executive Directors are independent. considers that all of the Independent Rule 3.13 of the Listing Rules. The Company confirmation of his independence pursuant to the Independent Non-executive Directors, a The Company has received, from each of Mr. Stanley CHOW Ms. Deborah Keiko ORIDA Mr. Chu Kwong YEUNG Mr. Bradley Jay HORWITZ Mr. Yee Kwan Quinn LAW, SBS, JP Mr. Teck Chien KONG Mr. Zubin Jamshed IRANI Mr. Ni Quiaque LAI Name ofDirector 3 Chairman of Nomination Committee Nomination of Chairman 3 2,4,5 4 3,6 2,6 2,4 4 1,4,6 037

HKBN Ltd. Annual Report 2019 038 HKBN Ltd. Annual Report 2019 1. Mr. Teck Chien KONG, through corporations directly and indirectly controlled by him, namely MBK Partners JC GP, Inc., Inc., GP, JC Partners MBK namely him, by controlled indirectly and directly corporations through KONG, Chien Teck Mr. 1. Note: interests and short positions which they were taken to Divisions 7 and 8 of Part XV of the SFO (including to the Company and the Stock Exchange pursuant XV of the SFO) which (a) were required to be notified associated corporations (within the meaning of Part derivatives), and debentures of the Company and its (in respect of positions held pursuant to equity and short positions in the shares, underlying shares executives of the Company had the following interests As at 31 August 2019, the Directors and chief August 2019. Company or any of its associated corporations as at 31 pursuant to equity derivatives) or debentures of the underlying shares (in respect of positions held had any interests or short positions in any shares, Directors nor the chief executives nor their associates Other than the interests disclosed above, none of the Ordinary shares of $0.0001 each in the Company Long Position Directors Report oftheDirectors Mr. Teck Chien KONG Mr. Ni Quiaque LAI Mr. Chu Kwong YEUNG Mr. Bradley Jay HORWITZ Name ofDirector shares held by the aforesaid companies. aforesaid the by held shares in which 83,661,106 ordinary shares are under convertible instruments, and is accordingly deemed to be interested in the the in interested be to deemed accordingly is and instruments, convertible under are shares ordinary 83,661,106 which in MBK Partners JC GP, L.P., MBK Partners JC, L.P. and Twin Holding Ltd held 236,627,451 ordinary shares of the Company, Company, the of shares ordinary 236,627,451 held Ltd Holding Twin and L.P. JC, Partners MBK L.P., GP, JC Partners MBK ’ andChiefExecutives (Note 1) ’ InterestsinSecurities Rules: “ Transactions by Directors of Listed Issuers Exchange pursuant to the required to be notified to the Company and the Stock Company referred to therein; or (c) were otherwise SFO to be entered in the register maintained by the or (b) were required, pursuant to Section 352 of the or deemed to have under such provisions of the SFO); the Group. either directly or indirectly, with the businesses of business which competes or is likely to compete, Directors are considered to have an interest in any During the year ended 31 August 2019, none of the Interests inCompetingBusiness Model Code ” ) set out in Appendix 10 of the Listing 236,627,451 shares held 32,997,122 27,086,427 Number of 450,000 “ Model Code for Securities the issuedshare Percentage of capital ofthe ” (the Company 18.04% 2.52% 2.07% 0.03% Details of movements of the Co-Ownership Plan II during the year ended 31 August 2019 are as follows: listed on the Stock Exchange or (ii) 10% or less of the “ (i) 10% of the shares in issue on 12 March 2015 (the granted pursuant to the Co-Ownership Plan II shall be The totalnumberofsharesthatmayunderlietheRSUs one year of the annual compensation package. investment amount of each participant is limited to over 3 years after the date of grant. The maximum would also be 25%-25%-50% upon each anniversary every 7 purchased shares), and the vesting schedule units ( plan has a matching ratio of 7:3 (i.e. 3 restricted share adopted by the Company on 21 February 2015. The Co-Ownership Plan II is a restricted share unit scheme Co-Ownership PlanII Kong, Guangzhou and Shenzhen. Group all supervisors and above level Talents, spanning the executives, the Company giving stock options to a very limited group of senior the Group. Unlike the more traditional approach of of the commitment and belief our Talents have in respectively. Co-Ownership is a powerful expression 2015, 15 December 2017 and 4 September 2019 Plan III and Co-Ownership Plan III Plus on 21 February plans, namely Co-Ownership Plan II, Co-Ownership Talents, the Company adopted three Co-Ownership To attract, retain and motivate skilled and experienced Restricted ShareUnitSchemes Report oftheDirectors Listing Date h wn EN 20 June 2016 Chu Kwong YEUNG iQiqeLI20 June 2016 Ni Quiaque LAI 20 November 2015 Other Participants Total te atcpns20 June 2016 Other Participants te atcpns30 January 2019 20 July 2017 Other Participants 24 January 2017 Other Participants Other Participants Participants te atcpns26 February 2019 Other Participants “ ’ s operations including but not limited to Hong RSUs ” ” ) would be granted by the Company for ), the date on which the Company was grant Date of ’ s Co-Ownership is open to ,5,8 705,543 1,752,685 ,4,9 ,0,8 5,4 2,6 5,0 7,5 6,5 0,9 209,308 104,597 364,651 678,556 956,001 124,368 455,740 1,303,185 3,348,896 9,5 97,278 194,556 3,4 67,121 3,239 134,241 158,567 5,3 166,814 263,190 329,330 252,635 400,472 126,410 Granted September As at1 2018 – – the year Granted 2,3 37,238 329,330 126,410 during – – – – – – three years. matched with free shares at a certain ratio vested over shares at full market price. The shares are then to twelve months of salary to acquire the Company their personal savings in the amount of between two entire workforce. On their own volition, they invested above level Talents which constitutes over 7% of our Owners, representingamajorityofoursupervisorsand As at 31 August 2019, we now have over 330 Co- the RSUs. trust until their release to participants upon vesting of Co-Ownership Plan II trustee will hold such shares on share capital of the Company on the Listing Date. The represented approximately 0.56% of the total issued to the Co-Ownership Plan II trustee. Such shares Date, by way of capitalisation issue 5,666,666 shares RSU, the Company allotted and issued, on the Listing release shares to participants upon vesting of each In order to enable the Co-Ownership Plan II trustee to no further RSUs shall be offered or granted. terms of the Co- Ownership Plan II, after which period earlier date as it is terminated in accordance with the expiring on the tenth anniversary thereof or such for the period commencing on the Listing Date and The Co-Ownership Plan II shall be valid and effective approval of the renewed limit (as the case may be). shares in issue as at the date following the date of Forfeited the year 842657,071 48,472 8687,9 4,3 148,839 148,839 75,693 38,658 during – – – – – Number ofRSUs the year Vested 97,278 67,121 5591125111,215 111,215 55,599 during 3,239 – – As at31 2,1 1513,9 63,228 146,080 31,591 73,006 31,591 73,006 126,410 292,092 August 2019 – – – – 30 January/26February/20July 0022 2022 2021 2020 To bevestedon24January/ (As at31August2019) – – – – – – – – – – ’ s – – – – – – 039

HKBN Ltd. Annual Report 2019 040 HKBN Ltd. Annual Report 2019 adjusted available cash per share for distribution is financial year if the maximum targeted accumulated of the annual results of the Company for the 2021 of the RSUs will occur earlier than the publication award share for every purchased share. The granting vesting conditionsandonthe vestingdate,receive1.33 grantees would, subject to the satisfaction of the will be granted to the grantees on the basis that the financial years of the Company reaches $3.03, RSUs on a cumulative basis, over the 2019, 2020 and 2021 adjusted available cash per share for distribution, 2020 and 2021 financial years of the Company. If the in excess of $2.53 on a cumulative basis over the 2019, Company before any RSU will be granted is an amount share for distribution required to be achieved by the minimum level of the adjusted available cash per during the 2019, 2020 and 2021 financial years. The for distribution achieved, on a cumulative basis, the level of the adjusted available cash per share of the RSUs to the eligible participants depends on Under the Co-Ownership Plan III Plus, the granting on 4 September 2019. Ownership Plan III which was adopted by the Company Co-Ownership Plan III Plus is a replacement of Co- Co-Ownership PlanIIIPlus Plan III Plus as a replacement. Co-Ownership Plan III), and to adopt the Co-Ownership Co-Ownership Plan III (pursuant to the terms of the on 21 June 2019, the Board resolved to terminate the unit has been made under the plan since its adoption, the WTT Merger and (ii) no grant of restricted share distribution is different for the enlarged group after target of the adjusted available cash per share for event (i.e. WTT Merger) and that the aspirational However, by reason of (i) the occurrence of an M&A 2017 for details of the Co-Ownership Plan III. and the circular of the Company dated 16 November announcement of the Company dated 2 November 2017 Plan III on 15 December 2017. Please refer to the development, the Company adopted the Co-Ownership effort in promoting the Group support of relevant Talents to the Group and their incentivise Talents and to recognise the continual To provide additional means for the Company to Co-Ownership PlanIII Report oftheDirectors ’ s long-term growth and debentures) of, the Companyoranyotherbody corporate. acquisition of shares in, or debt securities (including of the Company to acquire benefits by means of the a party to any arrangements to enable the Directors August 2019 was the Company or any of its subsidiaries, Schemes would support the Company considers that this charitable element of the scheme of the RSUs to the Charitable Fund. The Company of their awarded shares receivable upon the vesting Fund by directing the plan trustee to transfer any part own discretion, make contributions to the Charitable under the terms of the scheme. Talents may, at their receive not more than 5,320,000 awarded shares and such RSUs will entitle the Charitable Fund to 4,000,000 shares donated by the Executive Directors, contributed to the Charitable Fund with respect to the Co-Ownership Plan III Plus would reserve RSUs to be With their contributions to the Charitable Fund, the a total of 4,000,000 shares to the Charitable Fund. Executive Directors of the Company agree to donate to the scheme rules of Co-Ownership Plan III Plus, the is included as a participant in the scheme. Pursuant HKBN Talent CSI Fund Limited (the a Corporate Social Investment element whereby the Additionally, Co-Ownership Plan III Plus also contains further entitlement. distribution in excess of $3.03 will not give rise to any Accumulated adjusted available cash per share for achieved prior to the end of the 2021 financial year. Saved as disclosed in the or Debentures Arrangements toPurchaseShares III Plus have been made. no invitations or grants under the Co-Ownership Plan total number of existing employees of the Group and Plan III Plus, representing approximately 24% of the Talents that are eligible to participate in Co-Ownership As at 31 August 2019, there are approximately 1,000 Plan III Plus. dated 29 July 2019 for details of the Co-Ownership dated 21 June 2019 and the circular of the Company Please refer to the announcement of the Company our Hong Kong a better place to live. ” above, at no time during the year ended 31 “ Restricted Share Unit ’ s core purpose of making “ Charitable Fund ” ) (h) Mr. Teck Chien KONG, through corporations directly and indirectly controlled by him, namely MBK Partners JC GP, Inc., Inc., GP, JC Partners MBK namely him, by controlled indirectly and directly corporations through KONG, Chien Teck Mr. (h) (g) Mr. Michael ByungJu KIM, through corporations directly and indirectly controlled by him, namely MBK GP III, Inc., MBK MBK Inc., III, GP MBK namely him, by controlled indirectly and directly corporations through KIM, ByungJu Michael Mr. (g) (f) Mr. James George COULTER, through corporations directly and indirectly controlled by him, namely TPG Asia Advisors VI, VI, Advisors Asia TPG namely him, by controlled indirectly and directly corporations through COULTER, George James Mr. (f) (e) Mr. David BONDERMAN, through corporations directly and indirectly controlled by him, namely TPG Asia Advisors VI, Inc. Inc. VI, Advisors Asia TPG namely him, by controlled indirectly and directly corporations through BONDERMAN, David Mr. (e) (d) 71,121,908 ordinary shares are controlled by Matthews International Capital Management, LLC in the capacity of of capacity the in LLC Management, Capital International Matthews by controlled are shares ordinary 71,121,908 (d) (a) Canada Pension Plan Investment Board is the beneficial owner of 182,405,000 ordinary shares of the Company. the of shares ordinary 182,405,000 of owner beneficial the is Board Investment Plan Pension Canada (a) (b) 87,284,797 ordinary shares are held by GIC Private Limited in the capacity of investment manager. investment of capacity the in Limited Private GIC by held are shares ordinary 87,284,797 (b) Notes: (c) The Capital Group Companies, Inc. through its subsidiaries, namely Capital International, Inc., Capital International International Capital Inc., International, Capital namely subsidiaries, its through Inc. Companies, Group Capital The (c) Ordinary shares of $0.0001 each in the Company Long Position relevant interests in shares and underlying shares shareholders, had notified the Company of their chief executives of the Company) were substantial the following persons (other than any Directors or Directors and chief executives of the Company, As at 31 August 2019, to the best knowledge of the Interests ofSubstantialShareholders Report oftheDirectors Teck Chien KONG Michael ByungJu KIM James George COULTER David BONDERMAN Matthews International Capital Management, LLC The Capital Group Companies, Inc. GIC Private Limited Canada Pension Plan Investment Board Name ofshareholder shares held by the aforesaid companies. aforesaid the by held shares in which 83,661,106 ordinary shares are under convertible instruments, and is accordingly deemed to be interested in the the in interested be to deemed accordingly is and instruments, convertible under are shares ordinary 83,661,106 which in MBK Partners JC GP, L.P., MBK Partners JC, L.P. and Twin Holding Ltd held 236,627,451 ordinary shares of the Company, Company, the of shares ordinary 236,627,451 held Ltd Holding Twin and L.P. JC, Partners MBK L.P., GP, JC Partners MBK to be interested in the shares held by the aforesaid companies. aforesaid the by held shares the in interested be to shares of the Company, in which 83,661,106 ordinary shares are under convertible instruments, and is accordingly deemed deemed accordingly is and instruments, convertible under are shares ordinary 83,661,106 which in Company, the of shares Partners GP III, L.P., MBK Partners Fund III, L.P., MBK Partners JC, L.P. and Twin Holding Ltd held 236,627,451 ordinary ordinary 236,627,451 held Ltd Holding Twin and L.P. JC, Partners MBK L.P., III, Fund Partners MBK L.P., III, GP Partners under convertible instruments, and is accordingly deemed to be interested in the shares held by the aforesaid companies. aforesaid the by held shares the in interested be to deemed accordingly is and instruments, convertible under Inc. and TPG Wireman, L.P., held 236,627,451 ordinary shares in the Company, in which 83,661,106 ordinary shares are are shares ordinary 83,661,106 which in Company, the in shares ordinary 236,627,451 held L.P., Wireman, TPG and Inc. convertible instruments, and is accordingly deemed to be interested in the shares held by the aforesaid companies. aforesaid the by held shares the in interested be to deemed accordingly is and instruments, convertible and TPG Wireman, L.P., held 236,627,451 ordinary shares in the Company, in which 83,661,106 ordinary shares are under under are shares ordinary 83,661,106 which in Company, the in shares ordinary 236,627,451 held L.P., Wireman, TPG and investment manager. investment ordinary shares held by the aforesaid companies. aforesaid the by held shares ordinary 62,186,000 ordinary shares of the Company respectively, and is accordingly deemed to be interested in the respective respective the in interested be to deemed accordingly is and respectively, Company the of shares ordinary 62,186,000 Sarl, and Capital Research and Management Company held 4,139,000 ordinary shares, 6,664,500 ordinary shares and and shares ordinary 6,664,500 shares, ordinary 4,139,000 held Company Management and Research Capital and Sarl, Section 336 of Part XV of the SFO: be recorded in the register required to be kept under and 3 of Part XV of the SFO, or which were required to be disclosed to the Company pursuant to Divisions 2 share capital of the Company which were required to derivatives) representing 5% or more of the issued (in respect of positions held pursuant to equity Note (h) (d) (b) (a) (e) (g) (c) (f) beneficially held ordinary shares 236,627,451 236,627,451 236,627,451 182,405,000 236,627,451 72,989,500 71,121,908 87,284,797 Number of of theCompany Percentage of voting shares the issued 18.04% 18.04% 18.04% 13.91% 18.04% 5.57% 5.42% 6.65% 041

HKBN Ltd. Annual Report 2019 042 HKBN Ltd. Annual Report 2019 Listing Rules. transaction as defined under Chapter 14A of the connected transaction or continuing connected for the year ended 31 August 2019 did not constitute derivatives) of the Company as at 31 August 2019. (in respect of positions held pursuant to equity or short positions in the shares or underlying shares has not been notified of any other relevant interests Other than the interests disclosed above, the Company of the Group the Group Group largest customers were approximately 8.8% of the amount of revenue attributable to the Group For the year ended 31 August 2019, the aggregate Major Customersand Suppliers details. and thecircularofCompanydated29July2019for announcement of the Company dated 21 June 2019 Chapter 14A of the Listing Rules. Please refer to the connected transaction of the Company under under the Co-Ownership Plan III Plus would constitute the granting of any RSU to the connected participants participants are connected persons of the Company, subsidiaries as at 23 June 2019. As the connected Company, or directors or chief executive of the Group participants who are directors or chief executive of the participate the scheme, which includes 8 connected Company may invite all the eligible Talents to According to the Co-Ownership Plan III Plus, the Ownership Plan III Plus on 4 September 2019. in September 2019, the Company adopted the Co- deal inthenewsharesunderRSUsofCompany Exchange granting the listing of and permission to August 2019 and the Listing Committee of the Stock extraordinary general meeting of the Company on 19 approval by the independent shareholders at the skilled and experienced Talents. After getting the Ownership Plan III to attract, retain and motivate Co-Ownership Plan III Plus as a replacement of Co- On 21 June 2019, the Board approved to adopt the Connected Transactions note 34 to the Certain related party transactions as disclosed in Related PartyTransactions Report oftheDirectors ’ s total revenue and the revenue attributable to ’ s largestcustomer wereapproximately2.8% ’ s total revenue. “ Notes to the Financial Statements ’ s five ”

’ s Listing Rules under Rule13.51B(1)ofthe Update onDirectors to the Group amount of purchases and costs incurred attributable For the year ended 31 August 2019, the aggregate to the Financial Statements 31 August 2019 are set out in notes 5 and 6 to the highest paid individuals of the Group for the year ended remuneration of the Directors and those of the five and comparable market statistics. Details of the Group and are decided by the Board, having regard to the are recommended by the Remuneration Committee The emoluments of the Directors of the Company Highest PaidIndividuals Directors listed securitiesduringtheyearended31August2019. purchased, sold or redeemed any of the Company Neither the Company nor any of its subsidiaries Company Purchase, SaleorRedemptionofthe Company since the publication of the Company the changes in information of the Directors of the Pursuant to Rule 13.51B(1) of the Listing Rules, its group companies with effect from 31 July 2019. Education & Technology Group Limited and certain of the Company, is appointed as a director of Wendu Mr. Teck Chien KONG, a Non-executive Director of interim report are set out below: approximately 40.8% of the Group the Company the knowledge of the Directors owns more than 5% of of aDirectororshareholdertheCompany,whichto At no time during the year, did a Director, an associate 14.9% of the total purchases and costs incurred. from the largest supplier accounted for approximately and costs incurred, and purchases and costs incurred or suppliers of the Group. in thesharecapitalofanyfivelargestcustomers ’ s operating results, individual performance ’ s five largest suppliers were ’ s issued share capital, have an interest ’ ’ s ListedSecurities EmolumentsandFive ” , respectively. ’ Information ’ s total purchases ’ s 2019 “ Notes ’ s to 116 of this annual report. will become direct wholly-owned subsidiaries of the Share Purchase Agreement, the Target Companies satisfaction of the condition precedent(s) as set out in under the Share Purchase Agreement. Upon punctual performance by HKBNGL of its obligations MLCL has agreed to guarantee to JTH the proper and obligations under the Share Purchase Agreement. the proper and punctual performance by JTH of its Holdings Limited has agreed to guarantee to HKBNGL and post-closing adjustments). Jardine Technology to $393,500,000) in cash (subject to certain closing for a consideration of US$50,000,000 (equivalent entire issued share capital of the Target Companies purchase, and JTH has conditionally agreed to sell, the other things, HKBNGL has conditionally agreed to Purchase Agreement, pursuant to which, among (as seller), amongst others, entered into the Share On 23 August 2019, HKBNGL (as purchaser) and JTH Subsequent Event force and was in force throughout this year. benefit of the Directors of the Company is currently in 469 of the Hong Kong Companies Ordinance) for the A permitted indemnity provision (as defined in section Indemnity ofDirectors 2019 and up to the date of this annual report. the Listing Rules during the year ended 31 August maintained a sufficient public float as required under the Directors of the Company, the Company has to the Company and within the knowledge of On the basis of information that is publicly available Sufficiency ofPublicFloat headed adopted by the Company is set out in the chapter Information on the corporate governance practices standard of corporate governance practices. The Company is committed to maintaining a high Corporate Governance the Company There are no provisions for pre-emptive rights under Pre-emptive Right Report oftheDirectors on a pro-rata basis to existing shareholders. which would oblige the Company to offer new shares “ Corporate Governance Report ’ s Articles, or the laws of Cayman Islands, ” on pages 102 completed using the Group remained outstanding. The redemption was in aggregate principal amount of the senior notes US$603,000,000 (equivalent to $4,745,610,000) the completion of the conditional redemption, accrued and unpaid interest. Immediately upon due 2022 at a redemption price of 103% plus conditional redemption of 10% of the senior notes On 16 September 2019, MLCL completed a a result of the above event. adjustments have been made to this annual report as completed as at the date of this annual report and no the Company. The proposed transaction was not yet HKBNGL and indirect wholly-owned subsidiaries of Hong Kong, 24 October 2019 Executive Director Mr. WilliamYEUNG On behalf of the Board meeting of the Company. re-appointment at the forthcoming annual general who shall retire and being eligible, offer itself for The financial statements have been audited by KPMG Auditor advised to consult an expert. in relation to the shares of the Company, they are disposing of, dealing in, or the exercise of any rights the taxation implications of purchasing, holding, If the shareholders of the Company are unsure about Recommended Professional TaxAdvice utilised amount. bank Offered Rate plus a margin per annum on the Hong Kong that bears interest at Hong Kong Inter- uncommitted revolving loan facility from a bank in of the Company, obtained a $1,000,000,000 Network Limited, an indirect wholly-owned subsidiary On 25 September 2019, Hong Kong Broadband ’ s internal resources. 043

HKBN Ltd. Annual Report 2019 Elaine Lau Shop Ambassador Better for Customers Every day, we connect customers with all the best possibilities offered by the digital world. And we do it tirelessly with a smile. 046 HKBN Ltd. Annual Report 2019 alignment across our various NOCs beginning in FY20. we standardised operational workflow for better reached 99.9985%. With the integration of WTT, For our enterprise customers, network availability availability wasat99.9864%forresidentialcustomers. manage our performance. In FY19, overall network embedded in all our offerings. like reliability, transparency, quality and safety are and experiences, but we also make sure factors and appeal across our products, services, solutions work endlessly not only to inject disruptive features Mindful that our success begins with customers, we ( and reliable, HKBN To ensure that our fibre network service is outstanding Network Performance helps reinforce customer trust in HKBN. Reliability of our services is an important attribute that Service Reliability Customers Our Performance “ NOC ” ) works around-the-clock to monitor and ’ s Network Operation Centre network availability 99.9985 customers for enterprise network availability for residential customers 99.9864 diversity. network architecture, configuration and vendor commenced an exercise to review, audit and enhance systems supported by the vendor. We have also measures across our entire network and all relevant we undertook a thorough review and enhancement order to prevent reoccurrence of similar incidents, problem was fixed by the vendor on the same day. In by software instability of the route processors. The telephony and Internet service degradation caused On 8 June 2019, some customers experienced an IP network surveillance capabilities and effectiveness. consolidate our existing alarms protocols for improved ing a Centralised Alarm System ( with affected stakeholders. In addition, we to customers, as well as ensure timely communication objective is to mitigate any impact or potential impact across different service platforms. Above all, our prime ensure rigorous monitoring of network performance Protocols and escalation guidelines are in place to % “ CAS ” ) to better % ’ re develop- As our fibre network remains a vital aspect of HKBN Network Improvements&Upgrades commercial buildings and facilities in Hong Kong. a total of about 2.4 million homes and over 7,200 As at the end of FY19, our fibre network reached year, in addition to the network coverage of WTT. buildings were added to our network coverage this Enterprise Solutions business, 334 commercial broadband services. To facilitate growth of our villages not previously served by high-speed fibre homes, 23% of which are in rural areas, including extended our coverage to over 62,000 additional across different parts of Hong Kong. In FY19, we continued expanding our fibre network coverage available for households and companies, we our high-value servicesTo make more widely Expanded NetworkCoverage Customers measures were undertaken: capabilities. During the reporting period, the following to maintain reliability as well as future-proof its business, we invest considerable effort and resources Maintaining service reliability is responsibilities. District Service Engineer) daily a critical part of Calvin Tam ’ s (our

know-how to assist customers. hong count on exceptional HKBN Service Technician Wong Wing- During on-site service visits, Talents like ’ s Offer customers tri-carrier network diversity, Developed automated service provisioning to Launched Hong Kong Restructured operations by creating two Streamlined network operations and holistically A new 5G mobile backhaul network Launched 2Gbps broadband service with technical network reliability providing ultra-high network resilience and reduce provisioning lead time Solutions and Enterprise Solutions needs dedicated NOCs to explicitly focus on Residential vendor IP core network) upgraded resilience levels (phasing in multi- Home Gateway route solution trunk to enable voice for Microsoft Teams direct needs from mobile network operators infrastructure is being built to meet 5G rollout ’ s first carrier hosted SIP 047

HKBN Ltd. Annual Report 2019 048 HKBN Ltd. Annual Report 2019 team to actively ensure everyone is always on track, is these challenges, MIT was formed as a close working closely coordinated with priorities aligned. Mindful of May to late August 2019). As such, decisions must be ours was an accelerated one of just four months (early concurrently in a relatively short time frame – and large number of decisions and processes running Any kind of business integration process involves a Merger IntegrationTeam(MIT) quality and business development. spectrum of specialties that are crucial to our service align and synergise two distinct entities across a broad our task force worked through the complications to and without losing objectivity about crucial priorities, Enterprise Solutions. Moving as quickly as possible and WTT, led by Billy Yeung, our Co-Owner and CEO – representatives from each key function layer of HKBN a special Merger Integration Team, comprising everything that needed to be done and structured Immediately after merging with WTT, we identified Growth Integrating for Customers * Due to lessons learned from NWT NWT from learned lessons to Due * integration aftermerger Time takentocomplete 9 months integration in 2016 in integration W WTT NWT 5 months* HKBN Enterprise Solutions synergy in terms of scale or scope, but rather to enhance From dayone,ourplanwasnotjusttoachieveoperational resilience with Hong Kong to engage business customers who desire ultra-high competitive advantage. We substantially-invested network infrastructure into a A good example is how we Co-Owner and CEO – Enterprise Solutions Billy Yeung that strengthens HKBN Group our Talentbasewithcomprehensiveprofessionalexpertise WTT. Through this integration, we network – powered by networks from HKBN, NWT and of all sizes and industry sectors in Hong Kong. deliver the very best end-to-end ICT solutions for customers integration process: MIT adopted the following principles in the 60-day, 100-day plans. ensure timelines and milestones are met on 30-day, Weekly meetings were held throughout the process to adequately supported or has the resources they need. Adhere to strict timelines Identify restructure leaders and their key Maintain mutual respect for Talents from both Clearly define MIT responsibilities and key tasks Integrate for growth (not just for operational Our agile MIT comprised a broad range of elite Talents from both HKBN and WTT. functions companies synergies and cost-savings) ’ ’ s first-ever tri-carrier fibre ve been able to leverage WTT ’ ’ re creating new opportunities ( “ ’ s scope of capabilities to HKBNES ’ ve crucially expanded ” ) upside for growth. ’ s Customers (From left) Our new Enterprise Solutions Almira Chan, Chief Strategy Officer and With adverts placed throughout Hong Kong As part of our integration efforts, a new tagline become the ICT solutions provider of choice. areas and public transport, we asserted our ambition to Doris Chan, Adrian Watt, Andy Lau and Clio Ip. commanders are Karina Tsoi, Henry Li, Mikron Ng, were instrumental co-leaders of MIT. Mobile Business, Enterprise Solutions Clio Ip (right), Co-Owner and Director – introduced for HKBN Enterprise Solutions. – Unleashing the Power of Business – was ’ s busiest CBD Co-Owner and MIT Co-Leader Clio Ip ‘ teams, to ease nervousness about how they would fit into the talks organised by our Talent Management and other functional – we made sure to engage Talents, via various meetings and Throughout the integration process – as a Talent-first company plan based on emergent needs, for maximum effectiveness. together with these key stakeholders to adjust our integration Early on, we identified leaders out of the restructure and worked smooth because we afforded much consideration to our Talents. terms of culture and the way we operated, the process was about four months. Whilst both companies were different in All the key integration tasks were completed extremely fast – list of priorities. gap between both companies and getting buy-in was high on our built around Talents and unleashing their potential, bridging the new ’ organisation. Because HKBN Key tasks completed: WTT renamed as HKBN Enterprise Solutions HK Financial reporting and billing consolidation IT system and platform reviewed and integrated Talent remuneration and benefits aligned Operations, business support and customer Product/service portfolio reviewed, consolidated Integration for tri-carrier network diversity Analysis and integration of customer profiles Limited service aligned and integrated for maximum synergy customers, up from 57,000 in FY18) and accounts (we now have 103,000 enterprise ’ s entrepreneurial culture is 049

HKBN Ltd. Annual Report 2019 050 HKBN Ltd. Annual Report 2019 OTT platformpartner.ServiceLevelAgreements( reviews and receive quarterly reports from TVB, our communication, we undertake regular technical For OTT services, apart from direct NOC-to-NOC to get timely mobile service performance updates. operation centres of the abovementioned MNOs communication with the corresponding network Our Network Operation Centre maintains close own mobile customers. same level of service quality as they would for their maintenance response obligations. In relationships for service availability, stability, support and system maintain service quality via clearly-defined terms and continuity, business partners are stipulated to or other issues. To safeguard service reliability minimise impact during service interruptions, outages partners exist which help shorten recovery time and and network escalation procedures with key business Operator ( ( Kong ( varied services. SmarTone and Hong with business partners to maintain reliability of our For the interest of our customers, we work closely Reliable Partners,Service Customers “ MNO Our highly trained CPE Talents are fully committed to serving customers with excellence, dependability and expertise. “ ” CMHK ) who support our Mobile Virtual Network “ MVNO ” ), the two Mobile Network Operators ” ) service, promise to provide the “ SLA ” ) ) FY18). satisfaction score of 5.64 out of 6 (5.61 out of 6 in our team received an average overall customer installation or maintenance visit completed. In FY19, surveys are automatically sent one day after every provided by our residential CPE Talents, electronic broadband service. To gauge the quality of service responsible for installation and maintenance of our Our Certified Professional Engineers ( Reliability ontheFrontlines support as needed. when networking issues arise, we provide backup measures to ensure reliability and continuity. And we maintain similar agreement obligations and where we provide network services for our partners, Certified ProfessionalEngineers customer satisfactionscoreforour 94 “ CPE ” ) team is % as they are needed. inspections on equipment and cabling – and remedies these free-of-charge visits saw our CPEs perform that have had the highest ratio of maintenance orders, to perform pre-emptive maintenance. Choosing sites proactively visited a total of 116 residential buildings issues andevenpre-emptthem.InFY19,ourCPEteam uniquely positioned to respond to recurring customer Serving on the frontlines means our CPEs are also Kong residential fibre broadband service at 1% of Hong continue to set the price ceiling for our 100Mbps a strong, prosperous society. For this reason, we to world class telecommunications is essential in Better Place to Live True to our Core Purpose to Service Affordability Customers To promote our Microsoft Cloud-based Phone System at a broad spectrum of business customers. bundle offer,welaunchedastrategic marketingblitzaimed ’ s median household income. ” , we believe broader accessibility “ Make our Hong Kong a this report. and more. For more details, please refer to page 87 of affiliated with over 460 social welfare agency members, HKCSS, one of the largest social welfare organisations to NGOs, underprivileged people, members of the play our part, we offer special pricing of our services contributions madebyNGOsandsocialenterprises.To As a socially engaged company, we fully support the our services: following to enhance the value-for-money appeal of During the reporting period, we undertook the services for the benefit of consumers. market practices, our disruptive DNA has led us to tailor benchmark market trends. But rather than follow legacy value for their money, we constantly track, analyse and As a company committed to bringing customers the best Starting from 1 April 2019, our CMHK mobile Working closely with our MNO and OTT partners, A special pricing discount for our Microsoft bundle In collaboration with Microsoft, we offered Hong myTV SUPER App local data per month to watch content via the customers can enjoy free 5GB or even unlimited myTV SUPER App (a value of $68/month) access to enjoy entertainment content via the we offered mobile customers 12/24 months free ( members of Hong Kong Council of Social Service was offered to NGOs, social enterprises and Kong and three phone systems 100Mbps broadband, three Microsoft 365 licenses enterprise customers at the price of $928 for “ HKCSS ’ s first MS Cloud-based Phone System to ” ) 051

HKBN Ltd. Annual Report 2019 052 HKBN Ltd. Annual Report 2019 our information security capabilities via the following: During the reporting period, we further strengthened only partially visible via our front-line system. number is stored. To this end, HKID numbers are now way each customer credit card payments. Furthermore, we altered the limit the exchange of sensitive data when processing our existing customers and practice the full 16 digits) for credit card numbers belonging to completely removed from our database 6 digits (out of we no longer store full credit card numbers. We have series of network security enhancement initiatives, and retention practices, as well as a comprehensive last year to implement industry-leading data collection As a result of strong, decisive measures introduced to enquiries within seven days. email, faxorletter.Wetargettoinvestigateandrespond complaints about data privacy via telephone hotline, ity systems. Customers can pose their enquiries or professionals to conduct periodic reviews of our secur- and Risk Department also commissions certified and manage customer information. Our Internal Audit a stringent privacy policy governing how we collect, use take data privacy protection as a top priority. We have Our customers trust us with their personal data, and we Customer Privacy Customers Redesigned and implemented the network Conducted numerous tests to check HKBN Chartered an information security consultant to response to unexpected cyber attacks consultant recommendations made by our external security infrastructure enhancements based on the audit can better predict and prevent cybersecurity threats introduce a long-term risk assessment process that ’ s Hong Kong Identity Card ( ‘ tokenisation “ ’ s HKID ’ to ” ) following initiatives were implemented: training andaugmentingsecurityawareness.InFY19,the HKBN and our customers Mindful thatTalentshaveacriticalroleinprotectingboth A total of seven phishing awareness assessments Since July 2019, all ex-WTT Talents (integrated as Two Cyber Security Roadshow sessions were held the live-webcast over 600 Talents attending in-person or viewing in March 2019 to arouse mass awareness with throughout FY20 vigilance, more training of this kind will be initiated and August 2019. To further improve our phishing failed our last three assessments conducted in July by our exercise, while an average of 5.8% of Talents conducted in April 2019, 8.3% of Talents were duped emails. During the first phishing email assessment improvements in their awareness towards phishing these seven assessments, our Talents showed clear were conducted for all HKBN Talents. As a result of awareness training and pass our examination China, and new joiners must undergo security part of our WTT Merger) in Hong Kong and mainland 2,733 cyber securitytraining ’ data, we focused heavily on hours ments, we Taking advantage of technology and software advance- continual improvements of our products and services. is helping to pave the way for faster delivery and respond to evolving market requirements. This to evolve collaboratively, and importantly, quickly a development approach which enables projects we continued to embrace the Agile methodology, To augment our speed and flexibility for change, Innovation Customers related laws and regulations. substan tiated legal case of non-compliance with the During the reporting period, there was no other them to the Privacy Commissioner for Personal Data. we have fulfilled those requirements and reported to take specified actions within 90 days. In May 2019, Hong Kong Broadband Network Limited was required enforcement notice on 21 February 2019, wherein an investigation report on the incident and issued an Privacy Commissioner for Personal Data published inactive database which occurred in April 2018, the Following the incident of unauthorised access to an that encourages our Talents to put innovative ideas adopts an entrepreneurial risk/reward approach In a highly unique way, our pain/GAIN initiative overall customer experiences. productivity, operational efficiency and enhance data analytics for wide-use applications that boost In collaboration with Disney, we introduced an all-new look for routers with ultra-cool Home Gateway designs featuring Toy Story and MARVEL characters. ’ re also deploying tools like AI, cloud and options for both 1Gbps and 2Gbps service. further expanded with new offers and bandwidth these highly desirable designs, Home Gateway was more are set to launch in November 2019). Along with chosen (two launched in September 2019 and two a result, four stunning Home Gateway designs were featuring iconic Disney and MARVEL characters. As their favourite limited-edition Home Gateway designs, a city-wide campaign asking consumers to vote for Working in collaboration with Disney, we rolled out from cyber risks and threats. controls so that children are properly safeguarded in enterprise-level protection, as well as parental service redefines home network security with built- and security solutions, the embedded HomeGuard by Trend Micro, a global leader in threat intelligence Parental Control in one easy to use device. Powered functionality, HomeGuard Network Security and 2Gbps broadband, Wi-Fi capabilities, home telephone Gateway, an unprecedented service that combines In November 2018, we launched the new Home Home Gateway2.0 legacy practices. supercharge – and even reinvent – how we disrupt Altogether, these measures serve as foundations to and shareholders (refer to page 10 for details). scheme potently delivers alignment between Talents salary. Like our approach to Co-Ownership, this the execution of their plans by investing part of their about an out-of-the-box idea, we invite them to back into practice. Whenever Talents feel extra confident 053

HKBN Ltd. Annual Report 2019 054 HKBN Ltd. Annual Report 2019 ments and premium bundles. These include: FY19 we worked to deliver a wide variety of enhance- To improve desirability of our offerings, throughout More forCustomers Customers March 2019: we launched a variety of new myTV SUPER free upgrade for over 10,000 In collaboration with big big channel, we offered In collaboration with myTV SUPER, we offered July 2019: we bundled thousands of free movie April 2019: our CMHK mobile customers can enjoy April 2019: myTV Gold package was launched to March 2019: we launched new movie and January 2019: we bundled thousands of free Blue Ant, and more) customers to enjoy premium content (Sony, BBC, international sports content (beIN Sports, NBA, etc.) management solutions by big big channel discount coupons for promotional event hosting/ our Enterprise Solutions customers significant myTV SUPER discount coupons to advertise commercials on our Enterprise Solutions customers significant tickets with our mobile service plans content on myTV SUPER App free 5GB/unlimited monthly local data to watch of content replace our Supreme Package with a higher variety Scene, Discovery) documentary content (Hollywood Movie, Gold movie tickets with our mobile service plans Over the past several years, we Cloud Services HKBN EnterpriseSolutions Internet and data connectivity interruption. solution which automatically mitigates the risk of business customers a cost effective network diversity advantage, we are now uniquely positioned to offer + NWT + WTT). Leveraging this as a competitive capabilities to offer tri-carrier fibre networks (HKBN now the only service provider in Hong Kong with the Following our completed integration with WTT, we are Tri-carrier NetworkDiversity Native Development. Platform, Next-genAI-based Cloud Security,and This includes Connectivity + Cloud, Storage + Data range from infrastructure to the application layer. services to a variety of advanced cloud solutions that capabilities, we can move up the stack from managed connectivity with cloud, mobility and data centre Combining our unique tri-carrier advantage in Cloud Solutions cloud selection, architecture design and deployment. We providecomprehensiveservicesinmultiandhybrid Public Cloud focuses on the following: the powerful capabilities, our Cloud Services business To help customers innovate by taking full advantage of services. cloud consulting, implementation and managed to provide complete end-to-end professional multi- Solutions Cloud Services, we rebranded (since October 2019) as HKBN Enterprise Following our May 2018 acquisition of ICG, which was transformation. from us to deliver on Hong Kong and efficiencies are spurring an accelerated focus medium and large – achieve far better performance services. The opportunities to help enterprises – small, establish ourselves as a leader in digital and cloud ’ ve built on our strengths ’ ve worked hard to ’ s inevitable digital FY19. These include: improvements were made to our online platforms in ing of our pricing, charges and more, continuous To further enhance customer access and understand- advertising regulations. tiated case of non-compliance against relevant During the reporting period, there was no substan- management teams. vetted and approved by our legal and/or senior available to customers, they must first be properly ordinances. Before any marketing material is made intellectual property laws and other pertinent compliant with the Trade Descriptions Ordinance, to ensure that all our marketing materials are Standard policies and procedures are in place solutions. decisions when choosing our products, services and is to ensure that customers can make well informed and integrity. For this crucial reason, our objective Our long term success is built on a relationship of trust Marketing Fair AndTransparentSales& the gap via cloud transformation. identify their IT strengths and weaknesses – and close Through cutting-edge expertise, we help enterprises Digital JourneyTransformation Customers In January 2019, we invited a legal consultant For Enterprise Solutions customers, we developed Defamation, Copyright & Trademark infringement on pertinent topics like Trade Descriptions, to share tips and advice on the legal pitfalls pricing for our products and services an online platform which provides transparent misleading information or behaves inappropriately. are enforced whenever a Talent deliberately gives policy and procedures ensure disciplinary actions as well as our Quality Management team. Internal sales teams is carefully monitored by team leaders As a further safeguard, performance of our frontline approved scripts and detailed procedural guidelines. telesales Talents operate with the support of pre- accurate information is relayed to customers, our they are always adequately prepared. To ensure that refresher trainings are regularly provided to ensure For existing sales Talents, on-the-job training and before being permitted to interact with our customers. ethics. Crucially, Talents must pass an assessment knowledge, sales techniques, company policy and comprehensive training covering product/service All our sales-related Talents are required to undergo products and services. service quality for all Talents involved with sales of our At HKBN, we put heavy emphasis on training and Selling Responsibly and possible escalation. to our Customer Service management team for review reports of unsettled complaint cases and send them basis, our Customer Service Talents will prepare a targeted resolution time of seven days). On a daily taken and the customer expresses satisfaction (within settled and closed after follow-up actions have been will provide a reply to the complainant. Cases are up. Once the investigation is completed, our Talent Service Talent who handles investigation and follow- received, is assigned a case number and Customer HKBN services very seriously. Each complaint, once We take customer feedback and complaints about Proper HandlingofComplaints In September 2019, we introduced an online Broadband, Business Voice, and Mobile Services now easily subscribe to bundle offers of Business acquisition portal where enterprise customers can 055

HKBN Ltd. Annual Report 2019 056 HKBN Ltd. Annual Report 2019 within seven days. investigation, aiming to provide a proper resolution Our Customer Service team will carry out immediate governing how we handle customer dissatisfaction. For service complaints, we follow a standard policy average score of 5.71 (5.64 in FY18). score of 5.5 out of 6, we outperformed in FY19 with an their satisfaction on a scale of 1 to 6. With a target customer service hotline, customers are asked to rate to us. Upon completing each enquiry made to our Gauging customer approval is extremely important exceeded our goals with a 99% performance. normal operating hours of 9am–9pm). In FY19, we customer enquiries within a 4-hour window (during For emails, our target is to respond to 95% of all has helped 1,940 users. to answer basic enquiries. Since January, this service we launcheda24x7FacebookchatbotinJanuary2019 expand our customer service reach and effectiveness, 9pm). In FY19, we achieved a performance of 83%. To 80% ofinquirieswithinnormaloperatinghours(9amto launched in February 2018, our target is to answer FY18 was 95%. For our online chat service, which first normal operating hours (9am to 1am), performance for enquiry hotline answered 94% of all calls within its quickly and easily. In terms of FY19 performance, our email and other channels, customers can get help Through our customer service hotline, online platform, Residential CustomerService: plan terms and conditions, and much more. contract terms and obligations, pricing, our latest offers, to conveniently check information such as service customers can use My HKBN mobile app or our website channels. Upon activating their subscribed service, service assistance via a multitude of online and offline Customers can easily reach us to obtain information or Information andAssistance Customer Accessibilityto Customers accessed. These include: options where information and help can be easily customers, we offer various channels and convenient To better address the needs of Enterprise Solutions Enterprise SolutionsCustomerService: Monthly e-surveys conducted to gather feedback Website and HKBNES e-newsletter Dedicated account managers & account Like Elaine Wu, our customer service representatives are always ready with expert knowledge to answer calls. from customers about the quality of our products and solutions service and support servicing relationship executives who oversee during normaloperatinghours of hotlinecallsanswered 94 % in FY19 Average rating Customer satisfactionsurveyresultsonHKBNfixed lineservices(ratedfrom1to5): in FY19 Average rating Customer satisfactionsurveyresultsonHKBNmobileservices(ratedfrom1to5): gather practical feedback for improvement: desire. The following highlights the many ways we Listening to customers helps us understand what they Improving UserExperiences Customers Our customer service hotline answered 91% of HKBNES My Account and other managed services Use surveys to regularly measure and monitor Useourmultitude ofonlineandofflinechannelsto Monitor and analyse market information, increase of 8%, compared to 83% for FY18 all calls during normal working hours in FY19, an to service settings and account information download user forms, make amendments online portals enable customers to check monthly usage, customer satisfaction collect and understand customer behaviour benchmarking global best practices Registration procedure service Sales ...... 4.4 4.4 4.5 4.5 4.2 4.2 4.7 4.8 4.6 ...... 4.6 4.4 4.1 4.6 4.9 4.6 4.7 4.7 ’ redemption SIM card Customer method services service Technical Sales Support ’ Network Professional speed Engineers Certified In FY19, 780 Enterprise Solutions customers Enterprise Solutions customers are regularly Service satisfaction surveys are conducted on a On a monthly and quarterly basis, we conduct increase of 3.8%, up from 7.5 in FY18) “ 6.7%, up from 7.3 in FY18) and 7.79 out of 10 for out of 10 for services. The average score achieved was 7.79 provided feedback on HKBNES comprehensive telephone surveys invited to participate in our e-surveys and the chart provided below) broadband services (for full details, please refer to a range of experiences for both mobile and fixed quarterly basis to monitor customer feedback on reputation and more awareness, purchase consideration, corporate in areas like brand awareness, advertising reviews of our brand using YouGov metrics Network stability overall performance of products and services Network Speed Local quality “ Voice products in use Overseas Network Customer Speed service ” (an increase of Network Stability Technical ’ products and support Evaluation Evaluation Overall Overall ” (an 057

HKBN Ltd. Annual Report 2019 058 HKBN Ltd. Annual Report 2019 comply with Hong Kong minimum, suppliers who do business with us must mentally responsible suppliers. This means, at a we will only do business with ethical and environ- requirements for consumer safety. Towards this goal, which comply fully with the legal and regulatory HKBN is committed to providing products and services Customer HealthandProductSafety media platforms. announcements on our website, hotline and social we take immediate action to inform customers via the event of service outage or scheduled maintenance, Network Operations team to take prompt action. In communicates any suspected problems with our keeps track of customer complaints and swiftly service reliability, our Customer Service team To further improve how we monitor and enhance Customers safety occurred. compliance court cases relating to product health and During the reporting period, no substantiated non- for all age-restricted content. this, we make sure that parental controls are available set-top box, computer or mobile device. Mindful of Viewers can select and watch these programmes via of programmes are provided by our OTT partner, TVB. For our OTT content, we understand that a wide range relevant safety tests. laboratory verifying that their products have passed certificates or reports from a third-party testing In addition, new suppliers are required to provide metrics, are met. regulations and standards, as well as sustainability for quality, compliance with international safety product design stage helps ensure our requirements Early involvement with our suppliers throughout the ’ s laws and regulations. i ConstructionIndustrySafetyTraining (i) them as permanent Talents: complete the following courses before we confirm All HKBN broadband engineers are required to Certified ProfessionalEngineers maintenance within 24 hours. Professional Engineers to perform on-site inspection/ investigate and, if needed, arrange for our Certified escalated to our Network Operation Centre, who will our Internet service, the case will be immediately If we receive any report of alleged safety issue with Product SafetyProtocol i) SafetyTraining (ii) with customers. should best manage emotions when interacting escalation procedures to take, and how Talents on how to deal with safety incidents, the proper Assurance team, the courses provided training Emotion Handling industry professionals. health and safety training for construction Council, this certification provides the relevant Granted by HKSAR Occupational Safety & Health new Talents attended courses on workshops and courses. Throughout FY19, 52 Talents are required to participate in various safety awarenessfromourCPEteam,newlyjoined To maintain a consistent level of service and Certificate ” . Conducted by our CPE Quality “ Emergency and Awards andRecognition Customers Service Provider Corporate Telecommunications The BestSMEPartners2018– Economic Digest HKCCA Awards2018–MysteryCallerAssessment Hong KongCallCentreAssociation OnlineCustomerService(Gold) ResidentialServiceHotline(Gold)(sixconsecutiveyears) ResidentialVIPHotline(Gold)(fourconsecutiveyears) BestIVRS

Number PortingHotline(Gold) Partners e-brand awards–TheBestDX e-zone 059

HKBN Ltd. Annual Report 2019 Kennedy Yeung Adele Chu Network Technician Senior Manager – Talent & Organization Development Kay Wong Senior Technical Support Executive Talents Leading the Way Talents are fundamental to every aspect of HKBN’s strategy and success. We prioritise enablement in every possible way to ensure our Talents live and work with purpose. 062 HKBN Ltd. Annual Report 2019 they arrive at work more motivated to perform. spend quality time with friends and family, we believe family should always come first – when Talents can principle, we maintain that personal well-being and work-life balance, we uphold LIFE-work priority. As a happy, fulfilled lives. While many are still grappling with success, we strive to ensure they can work and enjoy Mindful that Talents play a decisive role in our overall LIFE-work Priority for success. cultivating, incentivising and retaining the best Talents fundamental to our unique strategy of attracting, perspective, this holistic Total Rewards dynamic is a sense of pride and passion to perform. From HKBN HKBN Talents come to work thoroughly engaged with All combined, these compelling elements ensure that they serve. opportunity to prosper as part owners of the company Co-Ownership culture gives Talents a one-of-a-kind make will be fairly rewarded. In an analogous way, our structure, Talents understand all contributions they professionally. By championing objectivity in our pay provide them with copious opportunities to grow ional flexibility and employment benefits, and how we treat our Talents with respect, offer except- Talents as priority number one – substantiated by pioneer benefitsforHongKongsociety.Wealsouphold our Hong Kong a Better Place to Live that aren A career at HKBN entails Total Rewards for Talents Total Rewards that are unique to our company. Talents benefit from a broad range of inducements Whilst financial remuneration is important, HKBN Talents Our Performance know that by embracing our Core Purpose to 38 ’ t strictly monetary in nature. Our Talents Talent annually foreach additional daysoff ” , we ’ re striving to

“ Make ’ s ends at 5pm. to 6pm schedule, our normal workday begins at 9am and provide 5 days of paid leave). Rather than the typical 9am days of full-pay leave (Hong Kong law requires employers pay). Similarly, our Paternity Leave gives new dads 14 pay leave(HongKonglawrequiresonly10weeksat4/5th our expecting mothers who are afforded 16 weeks of full- Examples ofourexcellentleavebenefitsincludethosefor of about 38 additional days off annually for each Talent. the whole, our entitlement policies provide the equivalent benefits, far beyond the obligations stipulated by law. On Talents with a broad array of highly progressive leave For thesepracticalreasons,wecontinuetoprovideHKBN incorporated for all HKBN Talents to enjoy. were unique to WTT, like Birthday Leave, were also monthly half-day off Friday. Leave benefits that full-paid Paternity Leave, Grandparent Leave, and 5pm, 16 weeks full-paid Maternity Leave, 14 days Talents, including shortened work hours of 9am- leave benefits as all Hong Kong based HKBN HKBNers consolidated Talent benefits. Our One key result of integration is that we as part of one unified HKBN. groups, to ensure all ex-WTT Talents feel welcomed communication sessions with leaders and focus townhall meetings in Hong Kong and Guangzhou, numerous efforts, including organising Talent Over the past several months, we carried out down legacysilosbetweenteamsanddepartments. improved operational synergies as well as to break process of our two companies, aiming to harness 2019, we began a comprehensive integration Ever since the WTT Merger was completed in April Benefits &Alignment ’ in Hong Kong now enjoy all the same ‘ newly joined ’ ve # Applicable to Mainland China operations only operations China Mainland to Applicable # * Applicable to Hong Kong operations only operations Kong Hong to Applicable * The following table highlights our comprehensive benefits and entitlements which exceed our legal obligation: Talents TGIF 2 days 35 hrs family can spend quality time together with One day of paid leave so that Talents Family CareLeave to leave the office half day earlier Once a month, everyone is encouraged Monthly Half-dayoffFriday* enjoy On the eve of festive holidays, Talents important festiveoccasions Half-day leaveduring public holidays annually rank or seniority, enjoy 17 days All HKBN Talents, regardless of job, entitlement forallTalents* A 17-daypublicholiday work between 8:30 a.m. to 10 a.m. Talents enjoy the choice to begin Flexible workinghours beginning July 2015 daily, for a total of 35 hours per week, working hours from 8 to 7 hours Without cutting pay, we shortened Shortened workinghours* Investment volunteer for Corporate Social Two days Volunteer Leave* friends time and celebrate with family and children study of which can be used to help their of paid Exam Leave annually, two Talents can apply for up to five days Exam Leave* a half-day leave of paid leave for Talents who to spend more of of a Talents One dayofpaidleaveduringthemonth Anniversary Leave Paternity Leave 14 days of full-pay Upgraded PaternityLeave* Maternity Leave 16 weeks Upgraded MaternityLeave* Five days of paid Marriage Leave Marriage Leave* or dream opportunity to pursue a personal goal of no-pay Sabbatical Leave as an Talents can apply for up to one year Sabbatical Leave of service her contributions for a completed year annually day of pay, for up to 10 days of leave exchange two days of leave for one Talents can flexibly choose to 2-for-1 BonusLeave Talents One day of paid leave for shift-duty Dating Leave with family and friends during his/herbirthmonthtocelebrate Talents enjoy one day of paid leave Birthday Leave of full-pay ’ joining to celebrate his/ #

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HKBN Ltd. Annual Report 2019 064 HKBN Ltd. Annual Report 2019 flexible and accommodating in response to events and need arises. Throughout FY19 we our Talents by practising work flexibility whenever the Championing LIFE-work priority means we respect LIFE-work Priority:WorkFlexibility Talents relationships during Mother With a similar aim, we organised encourage HKBN fathers to enjoy quality time with their fathers/mothers and sons/daughters. During FY19, thanks to our Talent activity sponsorship scheme, Festive ActivitieswithFamily clean up a local park. Talents embarked on a mission to Forming teams with their kids, our Family Event: Father awarded prizes to the winners. selected the best dishes and as judges, our fellow Talents the office for sharing. Serving and brought their creations to made delicious food at home Talents and their family members Family Competition: Mother ’ s DayGreen ’ s DayCooking ’ s Day and Father ’ ve continued to be “ Thanks to Family Senior Web Designer Elsie Lam a way of life! As the mother of a 10-year old boy, I every Talent – LIFE-work priority isn I became very impressed by the level of respect and care given to bit of anxiety about the uncertainty. But to my pleasant surprise, When I first joined HKBN as part of the WTT Merger, there was a school examinations. Exam Leave to study with my child and get through the stress of ’ s Day. ” themed events for our Guangzhou Talents to strengthen earlier if personal safety was a concern. home or at our mobile office locations, or leave office traffic disruptions. We allowed Talents to work from unexpected situations such as typhoon and large-scale To celebrate Mother workshop for Talents to make traditional lucky buns. “ Let ’ s Go FUNd ” ’ , over 700 gifts were given to t a hollow promise, but rather ’ s Day, we organised a cooking ’ ve already used Talents hand appreciation of what we do, as well as take part in various fun activities. off Friday To help strengthen the bond between Talents and their families, this July we turned our Bring FamilytoHKBN (based in Guangzhou) Talent & Organization Development Co-Owner and Assistant Manager – Moon Chung health. I Having a good mood and adequate rest is important to friends and family. within working hours, so that I can spend great time with my it motivates me to enhance efficiency to complete my work ” into a special family day. We invited family members to our offices in Hong Kong to get a first- ’ m happy that HKBN supports LIFE-work priority – “ Monthly Half-day 065

HKBN Ltd. Annual Report 2019 066 HKBN Ltd. Annual Report 2019 performed in his/her position. benchmarks to measure how each Talent has effectively catalyse outstanding performance, and are used as the knowledge, skills and behaviours which serve to Value achieved (Core Value or Leadership Attributes). factors: WHAT has been achieved (KPIs) and HOW it was Individual performance is assessed based on two main enhancement programme. show improvement after undergoing a performance of our total salary base every year if they fail to as a rule, we terminate the bottom 5% non-performers Talents to deliver better, high quality work. Conversely, salary increments, we recognise and encourage HKBN rewarding high performers with more bonus and higher are compensated in a fair and objective manner. By By using a pay-for-performance approach, our Talents Fairly RewardingOurTalents Talents

” In September 2018, 250 of our best performing Talents from Hong Kong and Guangzhou were rewarded with a trip to Tokyo, Japan. and “ Leadership Attributes ” define the expected “ Core

leave the company. improvement is exhibited, Talents are then asked to length from three to six months. When no performance a Performance Improvement Plan which ranges in excellence, we also invite poor performers to undergo those rated as under-performers. To effectively boost average salary increment and bonus will be granted to 5% ofourbottommostperformers,whilealower-than- salary increment and/or bonus will NOT be given to the job promotion opportunities. At the same time, annual year-end bonuses, salary increments and potential As always, we reward high performers with better promotion nominations are based upon. salary reviews, discretionary bonus allocations and as a reference and criterion from which annual senior management level. The rated results serve wide performance calibration at the department or supervisory evaluation,reviewmeetings andcompany- Our performance reviews comprise self-assessment, offer local staff the opportunities to progress into operations in mainland China, it is unusual to For most Hong Kong-based companies with Mainland ChinaTalentDevelopment for details) and our Co-Ownership Plan. investment schemes (refer to page 10 and page 53 term rewards like annual KPI bonuses, pain/GAIN commissions and an array of incentives to long- range from short-term rewards such as monthly goals, key business strategies and KPIs. These can designed to motivate delivery of our company also have a variety of monetary reward mechanisms On top of the year-end performance reviews, we Talents management leaders. six locally nurtured Talents comprising our Guangzhou As a sign of our local leadership development, we now have Account Manager – Commercial Sales, Enterprise Solutions Alex Ng myself a job promotion! into a top 10% performing Talent this year and even earned worked hard to make big changes. As a result, I transformed months, I underwent the Performance Improvement Plan and asked to improve within a three month window. In those three Last year, I was rated as a bottom 5% performer and was local perspectives. As a result, we and a management team that is sympathetic to motivated individuals, increased group morale path, our operations can benefit from greatly Talents with a clear development and leadership management positions. By providing locally-hired to develop and promote local Talents into Since 2015, we have pursued a focused strategy differently. stationed inmainlandChina.AtHKBN,weseethings simply reserves such roles to Hong Kong employees management positions. The typical approach Guangzhou Talents to supervisory-level positions. Director, whilst in March 2019, we also promoted 26 promoted to be our first locally nurtured Associate leaders. In January 2019, a Guangzhou Talent was leadership team, which now comprises six local this has transformed the makeup of our Guangzhou of Talent development programmes. Accordingly, opportunities for high potential Talents via a variety ’ ve enhanced 067

HKBN Ltd. Annual Report 2019 068 HKBN Ltd. Annual Report 2019 responsibility and passion. our Co-Owners perform with an unmatched level of Through this dual role as both investor and Talent, a majority of our supervisors-and above level Talents. Plan II, we now have over 330 Co-Owners, representing Hong Kong and mainland China. Under Co-Ownership level Talents, spanning the Group Co-Ownership is open to all supervisors-and-above options to a very limited group of senior executives, our Unlike the more traditional approach of giving stock commitment and belief our Talents have in the Group. 2015. Co-Ownership is a powerful expression of the Talents, weadopted Co-Ownership Plan II on 21 February To attract, retain and motivate skilled and experienced Co-Ownership Opportunity Talents Facts aboutourTalents 40 7 1 % % % Employment Gender Type 92 60 % % ’ s operations across

Male Female Contractual Part-Time Permanent Full-Time Information Security Co-Owner and Assistant Manager – Kaho Fung with passion! in HKBN motivates me to think big and embrace every challenge cybersecurity professional who has put skin in the game, my stake for HKBN, instead of asking what HKBN can do for me. As a Becoming a Co-Owner has made me reflect on what I can do the circular dated 26 July 2019. refer to our announcement dated 21 June 2019 and total number of Talents. For details of CO3+, please CO3+, representing approximately 22% of our Group 2019, about 1,000 Talents are eligible to participate in III Plus ( approval from shareholders for Co-Ownership Plan term growth, we proposed, and subsequently received Ownership brings for both Talents and HKBN To extend the performance-inducing impact that Co- free shares at a certain ratio vested over three years. at full market price. The shares are then matched with twelve months of salary to buy the company personal savings in the amount of between two and Under the plan, individual Talents invested their 42 1% 26 22 7 % % % % “ CO3+ Age Group Location ” ) on 19 August 2019. As at 31 August 44 58 % %

Mainland China Hong Kong >59 50-59 40-49 30-39 <30 ’ s shares ’ s long- ’ s Our Open Culture for Talents At HKBN, a vehement embrace of open communication and total engagement means our Talents are always well-informed about key strategy directions impacting our business.

Rather than be passive onlookers in our evolution and growth, HKBN Talents are empowered as well as expected to think, perform and collaborate like a united team of aspiring entrepreneurs. At our Enterprise Solutions FY20 Kick-off, over 1,000 ES Talents can’t wait to take our business to new heights.

Ready to rock, Talents showed their enthusiasm to deliver at our Residential Services FY20 Kick-off event.

Shortly after our merger At our annual Vappy with WTT was completed, Parties in Hong Kong and we organised a town hall Guangzhou, fun and games meeting to welcome everyone are always on the ticket. on board our integrated team. At our Enterprise Solutions FY20 Kick-off, over 1,000 ES Talents can’t wait to take our business to new heights.

No challenge is ever too tough for our Talents, not even the fabled Spartan Race! Retro cosplay at its groovy best from our December 2018 Vappy Party. Following our merger with WTT, Talents stood proud with paddles as symbols of unity (one team, one dragon boat, one HKBN) at our Talent Meetings in Hong Kong and Guangzhou.

13 October (1310 being the number of our stock code and the wavelength of fibre optics) was Global HKBN Day, which we celebrated in Hong Kong and Guangzhou through awesome activities, prizes, rewards and more. After braving through super typhoon Mangkhut to ensure critical HKBN services could operate normally, we thanked our core teams with a delicious sushi feast.

Letting off stress from work, our Talents were treated to play sessions at eSports Stadium, Asia’s largest e-sports arena.

13 October (1310 being the number of our stock code and the wavelength of fibre optics) was Global HKBN Day, which we celebrated in Hong Kong and Guangzhou through awesome activities, prizes, rewards and more. Our Field Service Engineering Talents are always ready to serve enterprise customers. The following table highlights the amount of training we provided for Talents throughout FY19: Operations-related training Hong Kong We are taking a bold step to establish ourselves as Proficient ICTCompany Becoming HongKong 84,487 (81,100 in FY18) our Talents have all the development opportunities one. Our commitment in this area is to ensure that example of how we treat Talents as priority number Investing in life-long development remains a crucial Talent Development Talents cloud technology. businesses better understand the full potential of Talents with a competitive edge to advise and help This company-wide learning initiative augments our Talents have now received their cloud certifications. experts. As a sign of this determination, 1,300 HKBN provider with the most professionally-certified cloud Total TrainingHours ’ s most cloud-proficient ICT solutions ’ s MostCloud skills-related training Leadership & 11,294 (9,989 in FY18) Technical Service, Enterprise Solutions Co-Owner and Manager – Van Leung managing 30-40 Talents! Talents. They have now developed into team leaders, each subordinates from the junior level into supervisory-level at HKBN is that I personally groomed 80% of my direct-report of 120 Technical Engineers. One of my proudest achievements I began my career as a leader of eight and now I lead a team purposeful life. on their strengths, realise their dreams and live a goal is to engage Talents and empower them to build strongly believe in proactive learning. As such, our changing business and technology environments. We and tools to stay ahead of the game in today transformations. support our customers through their digital and cloud equipped our Talents with knowledge to guide and or Microsoft Azure. These expertise upgrades have certifications from Amazon Web Services ( To date, about 120 Talents have received cloud 1,300 cloud certifications HKBN Talentsreceived Compliance-related training 7,312 (3,095 in FY18) “ AWS ’ s ever- ” ) and/ 073

HKBN Ltd. Annual Report 2019 074 HKBN Ltd. Annual Report 2019 are offered to help unleash each participant management potential through entrepreneurship and innovation development. A series of development courses “ Be aPioneer knowledge for subordinates and peers, as well as find ways to give back for society. Talents are not only well equipped as leaders who think and act innovatively, but are also eager to pass on their From junior level to the most senior level Talents, these three key leadership competencies ensure that all HKBN Through these concepts, we unleash the full potential of our Talents to achieve purposeful profits. goal emphasises three key leadership competencies: leading disruption, empowerment and purposeful leadership. On top of a comprehensive array of training across product, leadership and compliance, our long-term development Leadership Development Talents leadership and finance. Be a Pioneer Programme technology and Talent strategies that are vital to its success. group was hosted by representatives from Huawei, who shared behind-the-scenes insights into business, In April 2019, over 80 Talents joined our company visit to Huawei Huawei ShenzhenVisit Over the years, our At Huawei headquarters, our Talents got a sneak peek at management-level positions. helped launch the careers of numerous Talents into robotics technology. some ofthelatestbreakthroughsintelecommunicationsand Be a Pioneer a Be ” is our flagship development programme which aims to nurture Talents with programme has ’ s potential in design thinking, leadership profiling, innovation from Wrexham Glyndw internationally recognised bachelor 34 Talents have completed their studies and earned an prospects. This year, after a 3-year journey of dedication, significant step forward in transforming their career company internationally recognised bachelor 60 Talents with a life-changing opportunity to earn an Station: University ( education, our flagship development programme, Next For ambitious Talents who missed out on a university Next Station:UniversityII Company visits help give our Talents inspiring new ’ s full support, Talents who graduate make a benchmarking perspectives to think beyond HKBN. ’ s global headquarters in Shenzhen. Our “ NSU ^ r University. ” ) has touched the lives of over ’ ’ s degree in business s degree. With the Cap59I of the laws of Hong Kong. Hong Kong and Construction Sites (Safety) Regulation, Screen Equipment) Regulation, Cap509B of the laws of Hong Kong, Occupational Safety and Health (Display Safety and Health Regulation, Cap509A of the laws of all health and safety regulations such as Occupational these standards, and worked diligently to comply with the appropriate resources to implement and maintain regular and timely basis. At all times, we committed of necessary control measures are undertaken on a of hazards, assessment of risks, and the implementation vigilant view over safety. This ensures that identification of conditions. In general, our objective is to establish a regularly reviewed and tested across a diverse variety health and safety management system that are To achieve this, we espoused policies for an occupational that Talents can work in a healthy and safe environment. Success ofourbusinesshingesgreatlyonhowweensure Workplace Health&Safety Talents August 2019, four future CXO candidates have been chosen for the programme. Talents the chance to assess their ICT strengths and interests and carve out a preferred at career path. As assignments will be given as part of this challenge. Rotations to different departments will give young potential Talents into capable team leaders. Extensive on-the-job training, coaching and various project Services Future CXO programme in June 2019. This 2-year fast track programme will help us develop high To identify and develop the next generation of leaders, we initiated the HKBN Enterprise Solutions Cloud HKBN EnterpriseSolutionsCloudServicesFutureCXOprogramme This year, our 16 Summer Innovators (selected from over 1,500 applicants) got to expand their horizons through inspiring opportunities from inside HKBN and beyond HKBN. Training for our individual frontline teams. courses like Dog Safety Training and Driver Safety safety concerns by tailoring a number of new training objectives are met. In March 2019, we responded to review mechanisms from which our health and safety regular review meetings, we define the monitoring and Safety & Health Management Strategy. Through departments, functions to formulate our Occupational Talents from several technical and Talent engagement Since 2017, an in-house Safety Committee, comprising Safety Committee 075

HKBN Ltd. Annual Report 2019 076 HKBN Ltd. Annual Report 2019 2. Lost day rate calculation: total number of lost days (1,882) x total working hours for 100 full-time Talents (200,000)/total (200,000)/total Talents full-time 100 for hours working total x (1,882) days lost of number total calculation: rate day Lost 2. 1. Injury rate calculation: total number of work injury (28) x total working hours for 100 full-time Talents (200,000)/total (200,000)/total Talents full-time 100 for hours working total x (28) injury work of number total calculation: rate Injury 1. Number of Fatalities: Nil During FY19, our performance in health and safety in Hong Kong is encapsulated by the following: decreased by 5% compared to FY18. number of work-related injuries that occurred in FY19 3,316 hours of health and safety-related training. The joiners and contractors with over 40 sessions and accidents from happening. We provided Talents, new workplace environment, as well as how to prevent Talent awareness about building a safe and healthy In 2019, we offered a wide range of training to enhance training. required to undergo mandatory safety certification Furthermore, Talents and relevant contractors are facilities to make improvements where necessary. ion reports, we reviewed existing work procedures and and network installation sites. Upon receiving the inspect- occasional safety inspections at various of workplace and safety management, we undertook regular and ing provided for frontline teams. To reinforce health of network installation sites, and in-house safety train- shops, as well as risk assessments, surprise inspections across office, data centre, warehouse, canteen and retail via exercises that include workplace safety inspection consultant to manage occupational health and safety In 2019, we continued to work with a certified safety Safety asaPriority Talents premises. Subsequently, our drinking water was rated as good in quality. to improve quality. A water assessment was conducted in June and August 2019 at all three of our office class was carried out in May and June 2019 at all three of our office premises. All premises were rated as Air Quality (IAQ) Certification Scheme and the Quality Water Recognition Assessment. An IAQ Assessment Mindful that good air and water quality is important, we participated in the Hong Kong Government allergies and more. on Pilates, fit ball, Tabata and circuit training, as well as a series of health talks about eczema & skin motivation and productivity. In addition, to encourage healthier lifestyles, we offered various fitness courses To uphold LIFE-work priority, we initiated wellness programmes like a workplace massage day to increase Health andWellness working hours for all Talents (3,650,790) Talents all for hours working working hours for all Talents (3,650,790) Talents all for hours working ” by the IAQ Certificates. In addition, we upgraded our drinking water system with a neutralising filter Injury rate: 1.5 1

the following areas: During FY19, we provided health and safety training in Talents attended the elementary first aid training. are recognised as qualified first aiders, whilst over 169 elementary first aid training. At present, 52 Talents We also offered certification in first aid training and this, we provided AED training to over 158 Talents. Defibrillators (AED) for resuscitation. Coinciding with mises are now equipped with Automated External To improve safety in the workplace, all office pre-

Elementary first aid Certification in first aid Fire safety Safety management Accident investigation Driver safety Dog safety Height work safety Automated external defibrillation Lost days rate: 103.1 2 ’ s Indoor “ good Awards andRecognition knowledge in handling similar incidents. 2018; and annual drills for technicians to gain practical sites by our safety consultant beginning in December an annual basis; quarterly surprise checks on hub the provision of applied training to all technicians on consultant); making available harmful gas detectors; electricity generators (with endorsement by a safety and revision of the operational procedure for using from reoccurring. These actions included review actions and improvements to avoid similar cases After the incident, we took immediate remedial inadequate. It was found that the ventilation in the premises was medical treatment and were discharged the same day. electricity generators in a hub centre. They received have suffered carbon monoxide poisoning after using On 28 April 2018, two Talents were diagnosed to of these incidents: The following describes the details pertaining to some with immaterial fines imposed on us. proceedings of the other three cases have concluded One of these cases has been withdrawn, whilst court the Occupational Safety and Health Regulations. the Occupational Safety and Health Ordinance and cases involving HKBN in relation to compliance with During the reporting period, there were four court Talents Silver Awards Employer Brand– Most Innovative LinkedIn & BenefitsAward Best Compensations Best HRAwards– CTgoodjobs similar incidents from reoccurring. initial inspection, initial inspection, we made improvements to avoid any violation of safety requirements. Shortly after the doors of the premises was padlocked which was in Chung. The Safety Officer noted that one of the exit workplace in Chuan Kei Factory Building in Kwai of the Labour Department conducted a visit at our On 25 May 2018, an Occupational Safety Officer Guided by a safety expert, we organised a workshop on Every year, we provide Talents with the skill to save lives safety for various Talents. through first-aid training. Asia 2019 To WorkForIn Best Companies HR Asia 077

HKBN Ltd. Annual Report 2019 Winning Partnerships Our business is better because we maintain honest and fair relationships with partners and suppliers. Rather than profit off one another, the aim is to prosper together – win-win. Karen Chan Senior Manager – Business Development & Partnership 080 HKBN Ltd. Annual Report 2019 we For a more robust assessment of supplier performance, proactive manner. and correct actions – ensuring risks are mitigated in a a systematic and consistent approach to review, track framework, first introduced in 2015, provides us with them as business partners. A supplier management like an extension of our operations and consider service for customers. As such, we value our suppliers the resilience capabilities to provide outstanding operate smoothly, as well as become equipped with operations. By working closely with suppliers, we can Supplier performance plays a crucial role in our Assessing SupplierPerformance Suppliers Our Performance supplier a solid indication of how we monitor and measure a proactively. Importantly, these assessments provide identify potentialrisksmuchearlierandmitigatehazards ability and reputation. Such assessments help us customers, operations, legal and regulatory, sustain- considered include assessments made on impact to criticality on a project by project basis. Key factors deliver world-class products and services. include business ethics, integrity and commitment to without trust, communication and shared values which requires two-way dialogue, and this cannot be done Building a long-term relationship with our suppliers parent and mutually beneficial win-win manner. business units and suppliers in a fair, open, trans- strong and effective relationships between our service supply, which we accomplish by maintaining activities is to ensure continuity of our product and Above all, the primary objective of our sourcing other time-bound deliverables are also clearly set. partners. In addition, key performance indicators and and responsibilities of our suppliers and business mutual commitments, rights and obligations, role service level agreements (SLA), we clearly specify Through entering into supplier contracts and ’ ve incorporated criteria to determine supplier ’ s performance, as well as manage relationships. 17 15 20 made available to our various functional teams), we Through this highly detailed survey (the full results are to deliver excellent services to HKBN as a critical factor. long-term relationship, while 23% saw their commitment 45% of suppliers who responded said they valued the suppliers to participate in our supplier satisfaction survey. that can be improved. Towards the end of 2018, we invited understanding abouttheirviewsandneeds,aswellareas Engaging suppliers for their feedback gives us a better Effective Communications Top ChallengesforSuppliers: 1 business withus: What suppliersvaluemostwhendoing engage and collaborate. by suppliers and will use the results to improve the way we gained better insights into a broad array of challenges faced 8 45 5 4.5 4.5 2018 SupplierSatisfactionSurvey % % % % % % % % % Challenges Values 26 23 13 17 % % % % Business Requirement

Other Person to talk to Getting the Right Approved Supplier Becoming an Delivery Lead-time Technical Requirement Understanding Understanding Other Communication Trust Flexibility Long Term Relationship Quality Commitment ’ ve working space, indoor activity parks, etc. food &beverage services, serviced offices and co- included the procurement of conferencing facilities, as ours. Past examples of such resource exchanges help specify and evaluate our suppliers of our sales and functional teams, who work closely to means of payment. This is done with the cooperation and services that we may need at a given time – as a – whereby we exchange our ICT services for goods flexibility enables us to accept resource exchanges on strategic requisition costs. As an example, this seek better prices, but rather a better deal based that favours flexibility, our aim is not to necessarily our company and those of our suppliers. In a process ideas whenever they can best serve the interest of Rather crucially, we champion innovative and creative Innovation &Flexibility Suppliers

Led by Elinor Shiu Co-Owner and CMO – Residential and Toy Story-themed Home Gateway devices. collaboration with Disney to create four ultra-cool MARVEL Services, (2nd from right), our Marketing team leveraged a O365 solutions in Hong Kong. conferencing enabled M365 and to pioneer voice and video- Yeung celebrate our collaboration CEO – Enterprise Solutions Billy Yeung, and HKBN Co-Owner and Executive Vice-chairman William Crozier, HKBN Co-Owner and Region Chairman and CEO Alain Chan, Microsoft Greater China and Macau General Manager Cally (From left) Microsoft Hong Kong ’ needs as well

included in our standard supplier agreement. Relevant provisions in relation to the SCoC are also our SCoC, we require each supplier to endorse the SCoC. subcontractors. To ensure that suppliers understand of expectations for their respective suppliers and own code of conduct which espouses a similar approach expected to either comply with our SCoC or have their implemented in 2018. Through this, suppliers are and safety standards and fair labour conditions was corporate governance, environment protection, health A Supplier Code of Conduct ( economic reasons. a positive impact for environment, social, ethical and suppliers. Through such practices, we aim to create broader range of businesses like social enterprise provide sourcing opportunities, when possible, to a For the purpose of diversity, HKBN endeavours to our sourcing assessment process. have added sustainability measurements as a part of supplier contracts and purchase orders. Similarly, we for environmental, health and safety provisions in our activities. Examples of this include the requirement procurement practices into our supplier chain past several years, we have integrated sustainable principles of sustainable development. Over the work with suppliers who favour and operate on the As a company committed to sustainability, we actively with HKBN Aligning Suppliers ’ s Values “ SCoC ” ) concerning 081

HKBN Ltd. Annual Report 2019 Hei Liu Co-Owner and Assistant Manager – Project Management, also an active Talent volunteer since 2015

Sandy Wong Manager – Corporate Social Investment

Tracy Chan Co-Owner and Officer – Corporate Social Investment Community Investment We have a role in making tomorrow better than today. Our Talents provide time and expertise to invest in sustainable opportunities for people from local communities. 084 HKBN Ltd. Annual Report 2019 video about Net Scan the QR code for a organisation funded by our Co-Owners. Talent CSI Fund, our independently operated charity Along the way, we have worked closely with HKBN and cooperative partnerships with social enterprises. through technology empowerment, Talent volunteerism Throughout this CSI journey, we and communities in a sustainable way. expertise asdriverstoboostbettermentforindividuals ( passionately embrace Corporate Social Investment Rather than corporate social responsibility, we can benefitbywayofsustainabilityandempowerment. that people, especially youths and the underprivileged, Going beyond pure philanthropy, we strive to ensure poseful initiatives aimed at our local communities. most direct way we achieve this is through pur- play in creating a better Hong Kong for everyone. The present at all times. As such, HKBN has a big role to a better and safer future. our own Talents and services, we are working towards with like-minded social partners, as well as mobilising social needs within the community. By teaming up expertise to help mitigate social issues and address CSI strategy millions in Hong Kong. Mindful of this, one of our Every day, HKBN connects and impacts the lives of Technology forGood “ In everything we do, and in every decision we take, Community Our Performance “ Make our Hong Kong a Better Place to Live CSI ” ) to focus our corporate resources and Talent ’ s core focus is to leverage technological ’ s Be Wise ’ re actively giving back ” is omni-

platform and offline school workshops. ship competencies through DQ World students participated to acquire eight digital citizen- reporting period, a total of 24 schools and 2,617 school students aged 8-12. As at the end of this enhances the 18-month Net with Junior Achievement Hong Kong to launch the In 2018, HKBN and HKBN Talent CSI Fund partnered Net sibly navigate the cyber world. modules whichempowerchildrentosafelyandrespon- with local primary schools to offer systematic learning digital devices. During the reporting period, we worked privacy, cyber bullying and excessive screen time on younger people, to risks like cyber security, data when used improperly, may expose us, especially we live. However, digital media and new technologies, The digital world is shaping and transforming the way Cyber Wellness 2,617 ’ s BeWise “ ’ s Be Wise programme. This initiative Digital Intelligence students Intelligence of Digital Enhanced ” ( “ DQ ’ s online learning ” ) of primary Community DQ scoresroseby Sacred Heart Canossian School student Ka Yu interesting. That I find browsing online fun. The information is the programme, I learnt I can have trouble controlling my screen time. Through determined to reduce my screen time! online, otherwise it can hurt my eyes! I am now ’ s why I will keep surfing online and HKKKWA Sun Fong Chung Primary School teacher Mr. SoLapMing become more aware about the online world just for the sake of revenge. I am very glad to see they have questioning themselves when posting negative comments of information. They have also learnt to show empathy, will cross-check different media to confirm the source distinguish the authenticity of online information. They Throughout the programme, our students learned how to ’ t spend so much time devices and media. average in the safe and responsible use of digital “ of 100, according to DQ Institute, is classified as whilst an average score of 100 was achieved. A score improvements as their DQ scores rose by 11-24%, World online learning platform experienced material Encouragingly, students who completed the DQ Satisfactory ” , meaning the participants are above 100 An averageDQscoreof ’ s cyber risks.

was achieved 085

HKBN Ltd. Annual Report 2019 086 HKBN Ltd. Annual Report 2019 Mindful that involvement from parents plays a crucial role in a child Cyber WellnessforParents Community real-world encounters. During the reporting period, the following were organised: these, our aim is to encourage parents to play a bigger role in helping children navigate digital challenges via initiatives wereintroducedbyHKBNandTalentCSIFundtobetterfacilitateparentalengagement.Through towards cyber information. digital footprint and espouse a more critical view master. Participants learned how to manage their to investigate the disappearance of a missing dye for a video of our cruise. offline cyber wellness experience and learning workshop in November 2018. Scan the QR code parent-child pairings to role-play as of our facilitators, this event allowed over 50 Running from April to July 2019 under the guidance Dyeing Experience Net This event invited 80 parent-child pairings to board the Net ’ ’ s BeWiseDetectiveGamex s BeWiseCharityFamilyHarbourCruise “ detectives ”

“ World Star evolving online challenges. equip parents with requisite awareness to face teams shared tips on cyber risks and security to from our Product Development and Management Through various sessions held at schools, Talents Cyber WellnessSeminarforParents ’ s cyber wellness development, various ” cruise and enjoy a 2-hour

as well as via fair and reasonable pricing of our services. underprivileged, we seek to make the digital world more accessible through knowledge sharing from our Talents, accessibility, affordability and people As the world increasingly goes digital, there remain groups of people at risk of being left behind. Enhancing tech Narrowing DigitalDivides Community make scheduled home visits, conduct basic Internet security and personal digital device privacy checks. families with children aged 3-16. Under this new arrangement, our CPE and FSE Talents have volunteered to In 2019, we continued to expand the scope of our PC Doctors to provide cyber wellness knowledge to local for Hong Kong Doctors programmeprovidesservicetodiagnoseandfixcomputers,aswellofferITclassesfreeofcharge Led by our Certificate Professional Engineers (CPE) and Facilities Services Engineers (FSE) Talents, our PC PC Doctor2.0 from Low-income Families concessions to more community groups in need. we are exploring opportunities to extend our broadband service fixed and affordable monthly price for three years. Likewise, initiate a wholly owned by the Hong Kong Council of Social Service to In 2019, we teamed up with Web Organic, a social enterprise Affordable BroadbandfortheUnderprivileged “ 888 Broadband Service Concession Scheme for Elderly for ’ s underprivileged families. families andindividuals PC Doctorshavedelivered 1,236.5 of servicesinceMay2015 ” , providing broadband service at a ’ s ability to use technology has become one of our top CSI priorities. For the hours 087

HKBN Ltd. Annual Report 2019 088 HKBN Ltd. Annual Report 2019 the first time. growing, we recorded a record-high rise in new volunteers. Out of these 412 volunteers, 65% (i.e. 268) joined for volunteer hours for our communities (versus 2,239 hours in FY18). And as a sign that our culture of giving back is Kong increased to 412, a 68.2% jump compared to the previous year. All combined, we contributed 2,676 volunteerism at HKBN has continued to grow year after year. In FY19, our total number of volunteers in Hong teer their time for socially-good causes are rewarded with up to two days of paid Volunteer Leave. As such, Talents are encouraged to give back by participating in volunteering activities. Every year, Talents who volun- Talent Volunteering Community quality of life. children experience a day as missions which included role-playing with primary school students to practice presentation skills, helping During FY19, we organised 17 tailor-made volunteer activities for 15 different teams, tasking them on supercharging the way we serve the community whilst strengthening team camaraderie – win-win. volunteer activities. This motivated us to introduce a From past experiences, we know that Talents can quickly build excellent chemistry through mission-based Team BuildingXVolunteering Major Account Relations, Enterprise Solutions Co-Owner and Senior Manager, Maggie Liu by HKBN It is more blessed to give than receive. Inspired by helping the community! timeout from work and still make a difference is incredible. It putting smiles on the faces of people in need passion for volunteering. The satisfaction from 412 Our totalnumberofvolunteers ’ s team of volunteers, I ’ s wonderful to be able to take a “ office assistant ’ ve discovered a ” , and installing smart home devices for elderly to improve their “ Team up for the Community 2,676 Volunteer hourscontributed ” volunteering series, IT Talents from Kwai Chung, Kowloon Bay and Team Up for the Community Scan the QR code for a video about A great example of how we for theCommunity Team Up Community – Information Technology said, Kim Ping Yeung, our Co-Owner and Associate Director bonds among our IT teammates. kindergarten, but also added extra value of building This meaningful day not only brought benefits to the conducting computer check-ups for Mui Wo games with students, renovating the school facilities and kindergarten, which include playing online programming utilised their IT expertise to assist an under-resourced neighborhood on the outlying island of Lantau. They over 50 teammates to spend a day at Mui Wo, a remote Information Technology (Enterprise Solutions), mobilised participating teams of volunteer activities with team building, one of our “ Team Up for the Community ’ ve fused mission-based “ It is rare that our ’ s residents. ” , less anxious, soon be moving to. I am now better prepared and feel “ surroundings and facilities. tour to familiarise the Kwu Tung seniors to the nearby teams organised a Sheung Shui public housing visit about relocating to public housing. As a result, our redevelopment, the seniors were extremely concerned area. They noticed that, due to plans for the area seniors who live alone in Kwu Tung, a remote rural System Support team spent four afternoons visiting Relations team and Information Technology Corporate Our HKBN Enterprise Solutions Major Account extended their caring to address community needs. Other than utilising expertise, our Talents also IT expertise to serve persons in need. for us to bond better through making good use of our Spending a day in Mui Wo is a wonderful opportunity Guangzhou office have the chance to get together. HKBN volunteers helped us tour the area where I will ” said Ms. Ko, a senior from Kwu Tung. ” ’ s 089

HKBN Ltd. Annual Report 2019 cyber wellness experience and learning workshop in November 2018. This event invited 80 parent-child pairings to board the Net ’ s BeWiseCharityFamilyHarbourCruise 090 HKBN Ltd. Annual Report 2019 volunteer recruitment purposes. develop a performance evaluation mechanism for and training expertise to help a non-profit organisation Social Investment,hasappliedhisTalentmanagement Owner and Head of Talent Engagement & Corporate enterprises. Similarly, since 2015, CY Chan, our Co- to help enhance operational capabilities for social finance management workshops throughout FY19 and Senior Manager – Finance, delivered a series of of Social Enterprises, Anthony Fung, our Co-Owner In collaboration with the Hong Kong General Chamber sustainable good for society. Examples of this include: and empowering beneficiaries, we aim to engender him for a lifetime. By transferring our knowledge him for a day. Teach a man to fish and you feed As the saying goes: Give a man a fish and you feed Knowledge Transfer Community Hand in hand with students, our volunteers created a beautiful mural inside ELCHK Hung Hom Lutheran Primary School. 110 participated Talents “ World Star Over ” cruise and enjoy a 2-hour offline Social EnterprisePartnership to accomplish some minority girls and students at a primary school, mobility-impaired to underprivileged ethnic vulnerable groups, ranging from the vision and transformed into dream-makers, helping nine Day in October 2018. This year, over 110 Talents grand scale, we again organised our Volunteer Continuing our momentum to give back on a HKBN VolunteerDay2018 Making dreams come true, our volunteers accompanied a Anthony Fung, our Co-Owner and Senior Manager group of seniors on a cycling trip to Shenzhen. individuals operating social enterprises. – Finance, shared his knowledge in finance to help ‘ impossible ’ milestones. we role in making society better. For this reason, Social enterprises are increasingly playing a bigger Community online chat service. of this collaboration has been extended to include our telephone hotline enquiry service. Since 2018, the scope of physically disabled individuals, who handle our 1083 2014, offers gainful employment opportunities to a team HKBN As one of our signature social enterprise collaborations, disadvantaged. reliant employment opportunities for the socially sustainable, and, when possible, help create self- empower and enable them to thrive and become self- collaborate with social enterprises. Our goal is to We custom-built a football gantry so that the students of ’ ve committed efforts to promote, support or Man Kiu Primary School could enjoy activities on campus. ’ s partnership with iEnterprise, which began in $ 13.06 in ethicalconsumption accumulated ethical consumption in 2018. a considerable increase from $10.74 million, our spent on ethical consumption was $13.06 million, Since 2013, the total accumulated amount we environment. grow from employment inside a conventional work immersion experience, allowing them the chance to we offered Talents with disabilities a 6-month job of Differences create social impact. Through this, Experience, a social enterprise which helps People “ During the reporting period, we participated in the premiums for joining or renewing our telecom services. can choose to receive these gift certificates as bonus rehabilitation supplies and groceries. Our customers the Hong Kong Society of Rehabilitation which sells from enterprises. This year, we purchased gift certificates customers with both ethical consumption and social We also made concerted efforts to engage our DE Empower Nothing beats the joy of helping others from our local communities. “ Live Smart

million ” programme organised by Dialogue ” , a social enterprise associated with ’ ve 091

HKBN Ltd. Annual Report 2019 092 HKBN Ltd. Annual Report 2019 long-term benefit of thousands of children. donated to a local primary school in Guangzhou for the resources to purchase 500 new books. The books were In December2018,ourGuangzhouTalentspooledtheir Charity BeginswithBooks Guangzhou Talents volunteered on CSI initiatives. at different community beneficiaries. In 2019, 122 difference-making via volunteer initiatives aimed This fiscal year, our teams in Guangzhou echoed our CSI inMainlandChina Community OurTalentsinGuangzhougavebackbydonating500books for school children. 500 Donated new books South China Guide Dogs Demonstration Base. and website module for attracting more volunteers for assisting their IT students to develop a mobile app from Guangdong University of Foreign Studies, assist them. In addition, we worked with volunteers visually-impaired, as well as meet the guide dogs who opportunity to better understand the daily lives of the South China Guide Dogs Demonstration Base for an In June 2019, our volunteers collaborated with Meeting GuideDogs Via our CSI initiative in mainland China, our Talents learned a ViaourCSIinitiativeinmainlandChina, ourTalentslearneda Books can unlock the hopes, dreams and imagination of lot more about the struggles of visually-impaired individuals. our next generation. 122 initiatives volunteered onCSI Guangzhou Talents Awards Community (TECM 2018) – SE Supporter Plus Award Tithe Ethical Consumption Movement 2018 Citizenship Award – Bronze Award (Enterprise) The 9th Hong Kong Outstanding Corporate Logo Awards 2018 Social Capital Builder HKQAA CSR Plus Mark Sustainability Benchmark Index Constituent Member of Hang Seng Corporate Company Award Scheme – Caring Shop and Company Award 2018 Tsuen Wan & Kwai Tsing District Caring Shop and Awards &Recognition Serving as gracious hosts, our Guangzhou Talents helped an unfamiliar city. children of migrant workers feel more at ease about life in Cantonese culture. activities designed to build a sense of belonging via volunteers served as guides in a series of learning Putting their fluency of Cantonese to use, our Talent parent-child relationships, mental health and more. life skills enhancement, community integration, migrant workers with the aim of helping them through Seedling Project In July 2019, we participated in World Vision World VisionYoungSeedlingProject The Fullness Social Enterprises Society Hong Kong Productivity Council Fund of the Labour and Welfare Bureau The Community Investment and Inclusion Hong Kong Quality Assurance Agency Hang Seng Indexes Company Limited Kwai Tsing District Social Welfare Office Social Welfare Department - Tsuen Wan / Conferred by ’’ . This initiative focuses on children of P HKQAA CSRINDEX LU S ’ s “ Young 093

HKBN Ltd. Annual Report 2019 Benson Ma Assistant Officer – Administration Smarter Approach to Green To tackle pressing environmental challenges, we’re looking beyond traditional methods. Our embrace of technology and smart solutions is transforming the way we consume and conserve. 096 HKBN Ltd. Annual Report 2019 verify our energy utilisation in Hong Kong. consumption, we appointed an energy consultant to not cover our operations in mainland China. For energy data and performance contained in this report does As such, all of the environmental-related initiatives, implemented as needed. outcome. Corresponding corrective measures are between the actual performance data and the expected to monitor progress and identify discrepancies, if any, reviews with functional units were carried out regularly based KPI target setting methodology. Performance from our energy consultant with the adoption of a data- mainland China environmental data (combined from Hong Kong and the most prudent way forward is to consolidate all also change as a result. In light of this, we believe our environmental footprint and performance will also expands our operational scope in the mainland, China operations. Because integration with WTT environmental datacollectionpracticetoourmainland In the reporting period, we began extending our data collection process and subsequent disclosure. internal management tool of our environmental in the quality of our data and served as a valuable in Hong Kong. This exercise provided us with insights assurance reviews for our environmental-related data We appointed an external consultant to conduct pre- Environmental Performance Pre-assurance of Our CO are always embedded in our daily operations. environmental practices and continual improvements to mitigate our eco-impact ensures that responsible materiality assessment exercises), our commitment via feedback from stakeholder engagement and a key issue for our various stakeholders (garnered Mindful that concerns about the environment are energy efficiency and minimise waste generation. newer, better and more innovative ways to improve activities. Cognisant of this, we networks, and the waste that is generated out of these of electricity to power our general operations and our main environmental footprint source is our use impact on the environment. As a technology business, HKBN is committed to protecting and reducing our Environment Our Performance 2 emissions reduction goal is set with assistance ’ s operations) for reporting in FY20. ’ re focused on exploring monitor and analyse progress. can be dynamically visualised to help Talents track, that performance across a variety of metric indicators this, we customised an environment dashboard so achievable, Talents play a deciding factor. Knowing To ensure our emissions reduction target is Environment PerformanceDashboard the following eco-initiatives: we have strived to enhance our energy efficiency via much we improve year-on-year. With this guiding us, smart ideas play an increasingly bigger role in how to operational workflow, ensures that ingenuity and which champions new solutions and enhancements on innovation and collaboration. This approach, A key pillar of our environmental strategy is based Smart EnergyEfficiency our energy and cost saving targets. from Nothing as well as new workflow enhancements, Something Thanks to the higher efficiency of replaced equipment fraction of our energy cost savings as compensation. was fully funded by our consultant, who shared a operations. Investments for all incurred retrofitting implemented at our offices and data centre despite numerous energy efficiency upgrades required no initial capital investment from HKBN, a smart and unique way, Something from Nothing consultant to improve overall energy efficiency. In began in 2016, saw us collaborate with an energy footprint. This highly pioneering initiative, which we to make huge improvements in our overall energy The Something from Nothing project has continued “ Something fromNothing ’ s performance has, to date, exceeded ” intensity when compared to the last fiscal year. have achieved 10.18% reduction in indirect energy With these adjustments in place, this fiscal year we modifications that included: also made some relatively small but impactful To provide a better and greener place to work, we Other EnergySavingInitiatives (and integration) of WTT related areas – prompted by our completed acquisition scope to other office premises, data centres and network two years, we plan to expand Something from Nothing Like the excellent performance achieved in the past The following table highlights the considerable energy savings achieved: Environment CRAC Unit Fan Retrofit (operating since 2016) LED lighting replacement at HKBN office Something fromNothinginitiative (operating since 2018) Chiller replacement at HKBN office CRAC Unit Fan Retrofit (operating since 2017) LED lighting replacement at two data centres Installing lighting motion sensors in most Readjusting office temperature to maintain at Adding heat resistant window films in office area common-use areas between 24 o C – 26 ’ o s operations. C ’ s A way that we Optimisation andManagement IoT EnergyConsumption annual energy reduction. solution to other floors in FY19 and achieved 36% As a direct result, we extended use of this IoT normal working hours. illumination or air conditioning at lunch or after mobile application – making it easy to switch off lighting and ventilation for individual zones via floors. This has enabled our Talents to manage and air conditioning systems at one of our office adopted an IoT approach to control our lighting by smart tech solutions. Since 2018, we have efficiency is through energy upgrades powered annual energyreduction ’ re effectively improving energy (Roughly 80% reduction annually) (Roughly 28% reduction annually) (Roughly 22% reduction annually) Achieved 36 Accumulated energysavings % (As atJuly2019) 2,054,404 kWh 640,124 kWh 948,392 kWh 097

HKBN Ltd. Annual Report 2019 098 HKBN Ltd. Annual Report 2019 # The environmental data provided above is based on operations owned and and owned operations on based is above provided data environmental The # CO factor was adjusted to 0.51kg CO our FY18 performance as calculation of the emission operations. Scope 2 emissions dropped 5.39% from FY18 mainly due to an overall expansion of our business For FY19, our scope 1 emissions rose by 25.15% over Key environmentaldataforFY19 Environment generated fell 22.28% versus FY18 due to comprehensive generated fell22.28% versusFY18duetocomprehensive maintenance). Encouragingly, our non-hazardous waste because of data centre usage (end of product lifecycle/ waste generated increased 25.07% over FY18, mainly to alter the usage habits of our Talents. Hazardous versus FY18 as a result of ongoing educational efforts the number of Talents. Water consumption fell 10.18% FY18, primarily due to an expansion of our business and sumption rose by 26.69% and 0.08% respectively over Direct energy consumption and indirect energy con- efforts to reduce business travel throughout the year. ions fell 56.97% versus FY18 because of concerted providers, CLP and Hong Kong Electric. Scope 3 emiss- Greenhouse gas emissions intensity Scope 3 emission Scope 2 emission Scope 1 emission Water consumption Indirect energy intensity Direct energy consumption Water intensity Greenhouse gas emissions Indirect energy consumption Direct energy intensity Waste diverted Non-hazardous waste intensity Non-hazardous waste generated Hazardous waste intensity Hazardous waste generated 2 e/kWh for FY18) by Hong Kong switch rooms. switch controlled in Hong Kong including offices, shops, data centres, hub sites and and sites hub centres, data shops, offices, including Kong Hong in controlled 10 4 3 2 7 1 5 8 6 2 e/kWh (versus 0.54kg ’ s two main electricity 9 10,441.92 kWh / $ million revenue 0.02 tonnes / $ million revenue 0.02 tonnes / $ million revenue 118.63 kWh / $ million revenue 5.45 tCO 0.47 m 2 e / $ million revenue 3 / $ million revenue 27,490.06 tCO 53,337,342 kWh 27,856.3 tCO which is 5% higher than the previous year. the reporting period, our waste diversion rate was 60.31% materials are properly collected and processed. During and handle operational waste, making sure recyclable recycling options. A regular review structure helps manage identified viable recovery channels to divert waste via other our resource footprint at the operational level and have Aiming for our supplier and partners. recycle and replace) strategy, and by collaborating with waste, we continued to focus on a 4R (reduce, reuse, sources ofwastegeneratedbyus.Toeffectivelyminimise Operational waste, e-waste and packaging are the main Consumption andWasteManagement performance. hazardous waste diversion rate rose 5% over FY18's operations. As a sign of progress in this area, our non- efforts to recycle, reduce and reuse across our 105.04 tonnes 103.31 tonnes 199.78 tCO 166.48 tCO 62.31 tonnes 605,949 kWh 2,401 m “ reduction-at-source 2 2 2 2 e e e e 3 9 Non-hazardous waste included included waste Non-hazardous 9 10 Waste diverted included paper, plastic, plastic, paper, included diverted Waste 10 8 Hazardous waste generated is included included is generated waste Hazardous 8 7 Water consumption included waters waters included consumption Water 7 6 Electricity purchases are included in in included are purchases Electricity 6 4 Scope 3 emissions included indirect indirect included emissions 3 Scope 4 5 Vehicle, generator and mobile mobile and generator Vehicle, 5 2 Scope 1 emissions are direct GHG GHG direct are emissions 1 Scope 2 1 Carbon emissions generated from the the from generated emissions Carbon 1 3 Scope 2 emissions are indirect GHG GHG indirect are emissions 2 Scope 3 60.31%. Overall waste diversion rate in FY19 is is FY19 in rate diversion waste Overall construction waste and general waste waste general and waste construction metal, wooden, e-waste and glass. glass. and e-waste wooden, metal, lighting tube only. tube lighting uninterruptible power system and and system power uninterruptible so this part is not included. not is part this so supply in hub sites and switch rooms, rooms, switch and sites hub in supply (Yuen Long). Since there is no water water no is there Since Long). (Yuen used in offices, data centres and shop shop and centres data offices, in used the indirect energy consumption. energy indirect the consumption. included in the direct energy energy direct the in included GHG emissions from sources not not sources from emissions GHG generator fuel consumption are are consumption fuel generator but related to our activities such such activities our to related but air conditioning and chiller. and conditioning air of electricity purchases by HKBN. by purchases electricity of transportation. vehicles and genset, the refrigerant of of refrigerant the genset, and vehicles emission resulting from the generation generation the from resulting emission as emissions from fuel of company company of fuel from emissions as owned or controlled by HKBN such such HKBN by controlled or owned emissions from sources that are are that sources from emissions rooms. data centres, hub sites and switch switch and sites hub centres, data Hong Kong including offices, shops, shops, offices, including Kong Hong operation owned and controlled in in controlled and owned operation in offices, shops and data centres. data and shops offices, in owned or directly controlled by HKBN HKBN by controlled directly or owned as office paper usage and oversea oversea and usage paper office as ” , we ’ ve strived to reduce posable cutlery. Besides discouraging the use of Talents are encouraged to eliminate the use of dis- we encouraged Talents to eat smart via the following: We are very conscious that personal consumption habits can have a big impact on the environment. To this end, tives to create a Since 2016, we have concentrated on several initia- Zero WastePantryandGreenCanteen compared to the previous year. the reporting period was 21,590 kg, a 41% reduction and more. All in all, our paper consumption during to replace paper-based internal memos, notices digital signboards were installed in our office premises platforms externally for customers. New for 2019, workflow internally for Talents and various online documentation, fostering an electronic paperless systems that eliminate the use of paper and physical usage. With an aim to reduce, we developed workflow to reduce the environmental impact of our paper As a responsible company, we have made every effort Paper Reduction Environment A WeekofBlemishedFruit canteen included ripened fruit as blemished fruits are just as tasty To convince our Talents that and nutritious, our in-house part of its lunch menu. “ zero waste pantry and fruit tea using leftover fruit and utilised design thinking processes to Through this workshop, our Talents made their own DIY edible cutlery brainstorm and identify solutions to minimise leftovers and wastage. ” in our offices. Zero-leftover Lunch recovered 3,720 kg of foodstuff waste. Through the above measures, we have successfully one of our office floors to turn leftover to compost. a food composting machine has been introduced in upcycled into planting pots or other items. In addition, renewable energy, whilst the ground coffee beans are waste is then transferred by our vendor to become and coffee waste collection boxes. The recovered food During the reporting period, we set up leftover food reduce reliance on disposables. plastic drinking straws, we provide reusable cutlery to 3,720 recovered of foodstuffwaste external caterers. veggie meals at our in-house canteen or our Talents were encouraged to enjoy levels of carbon emissions! In June 2019, impact as meat production incurs higher Vegetarian diets can have an excellent Veggie Meal

kg 099

HKBN Ltd. Annual Report 2019 100 HKBN Ltd. Annual Report 2019 disposal and recycling. from our uninterruptible power system for safe recycler to collect waste lead-acid battery (WLABs) we have committed ourselves to work with a battery licensed chemical waste collectors. Beginning 2019, In the handling of operational waste, we work with batteries was installed to facilitate recycling. ernment. Additionally, a collection box for lithium-ion and Electronic Equipment (WPRS) of the HKSAR Gov- Producer Responsibility Scheme on Waste Electrical and monitors for recycling in accordance with the ators, televisions, computers, printers, scanners regulated electrical equipment (REE) such as refriger- of our operation. In 2018, we recovered 5.79 tonnes of from lead-acid batteries are significant by-products As a technology business, electronic waste and waste Waste Recycling Electronic andHazardous Environment communities. will bedonatedtoourlocal toys. Someoftheseitems kitchenware, stationeryand household products, over 200itemsthatincluded in ourofficeandcollected organised barterexchanges waste less To encouragea Programme Barter Exchange ” practice,we “ use less, “ Ricky Ng,studentbeneficiary the post. and yourunderstandingof could showyourconfidence Therefore, beingwelldressed impressions areimportant. more. Atinterview,first me dressandpresentmyself “ very tightbudgets. education needswholiveon students withspecial students, graduatesand them tohelpuniversity work clothinganddonated business suitsandformal We collected60setsofused Collection Programme The second-handsuitlet Suit forYou ” ”

communities. powerful change can occur teaming up with our Whilst going green internally is vital, a broader more Green withtheCommunity we To minimise waste associated with our Talent uniforms, Uniform Design&Packaging around 3,500 plastic bags annually. no plastic wrap or tags! In total, this change has saved budgets towardcharity. reallocate theirmooncake business partnersto in need,andinvitedour and festivefoodstothose mooncakes, Christmas Talents todonateexcess wastage, weencouraged To minimisefestive Hamper Collection Mooncake andX ’ ve asked our vendors to go plastic-free in 2019 – ’ mas equipment recovered tonnes ofelectrical 5.79 women inKenya. subsequently deliveredto sanitary pads,whichwere fabrics tomakesustainable SAWAfrica andusedsurplus arranged aworkshopwith afford sanitarypads.We women inKenyacannot Due topoverty,halfofall Pads Workshop Sustainable Sanitary Awards of the Laws of Hong Kong). Hazardous Chemicals Control Ordinance (Cap. 595 (Cap. 354C of the Laws of Hong Kong) and the Disposal (Chemical Waste) (General) Regulation waste management, we have complied with Waste regulations relating to emissions. In terms of of non-compliance with environmental laws or During FY19, there was no substantiated case Environment Food Wise Charter The Green Mid-Autumn Festival Food Saving Pledge Energy Saving Charter 2019 and 4T Charter Charter on External Lighting WasteWi$e Certificate Hong Kong Green Organization Carbon Care Label – Level 3 Communication) – Gold Award Hong Kong Awards for Environmental Excellence (Media and Awards &Recognition Championing eco-engagement, we organised a fun mobile technology to grow and care for their very own plants. workshop demonstrating how Talents could use smart Environmental Protection Department Food Grace Environment Bureau Environment Bureau Environmental Campaign Committee Environmental Campaign Committee CarbonCare InnoLab Environmental Campaign Committee Conferred by 101

HKBN Ltd. Annual Report 2019 102 HKBN Ltd. Annual Report 2019 recommendations to the Board. process of identifying suitable candidates and making Chairman of the Nomination Committee by leading the he is capable of assuming the responsibility of the of a proposed Director, the Board considers that and can provide valuable insight on the suitability in the day-to-day management of the Company their respective role. Since Mr. Yeung is involved Directors could dedicate sufficient time to perform Director, especially the Independent Non-executive the Nomination Committee to make sure that each the Board appointed Mr. Yeung as the Chairman of Committee and Remuneration Committee respectively, appointed as the Chairman of the Board, Audit Non-executive Director of the Company has been the Company. By considering that each Independent by Mr. Chu Kwong YEUNG, an Executive Director of Nomination Committee of the Company is chaired Independent Non-executive Directors. However, the executive Director and comprise a majority of the Chairman of the Board or an Independent Non- the Nomination Committee should be chaired by Code Provision A.5.1 of the CG Code provides that August 2019 except for the following deviation: on the Stock Exchange throughout the year ended 31 Code Code and Corporate Governance Report provisions as set out in the The Company has complied with all the code Corporate GovernanceCode Corporate GovernancePracticesand the Company. Group sidered essential to safeguard the integrity of the responsibility to our stakeholders, which are con- by emphasising transparency, accountability and a good standard of corporate governance practices The Company is committed to the establishment of Corporate GovernancePractices Corporate GovernanceReport Our Governance 2019. Governance Report The Directors are pleased to present this ” ) contained in Appendix 14 to the Listing Rules ’ s operations and maintain stakeholder trust in ” for the year ended 31 August “ Corporate Governance ” (the “ Corporate “ CG the Company. on nominations fortheBoardor senior management of give valuable comments on and make good selections of their industry related experience, hence they could on the Nomination Committee are valuable because executive Directors and one Executive Director who sit Directors of the Company. Furthermore, the two Non- actions regarding nomination and/or removal of the than itself having the power to make decisions or take recommendations to the Board impartially, rather of the Nomination Committee, which is to make would not materially and negatively affect the role executive Directors and one Executive Director), it three Independent Non-executive Directors, two Non- current composition of Nomination Committee is ent Non-executive Directors of the Company (i.e. Committee does not comprise a majority of Independ- In respect of the composition, although the Nomination The overall management of the Company Roles andResponsibilities Board ofDirectors functions and work tasks are periodically reviewed. the senior management of the Group. The delegated Executive Vice-chairman, Chief Executive Officer and operation of the Company are delegated to the The day-to-day management, administration and advance notice. on issues arising at Board meetings with reasonable seeks to ensure that all Directors are properly briefed any reasonable notice by any Director. The Chairman reached, with the final version open for inspection at matters considered by the Board and the decisions minutes which are recorded in sufficient detail of written resolutions. The Company Secretary prepares conflicts of interest will be dealt with by way of which are immaterial and may not cause potential Physical Board meetings are normally held. Matters Company. make decisions objectively in the interests of the performance of the senior management. The Directors risk management systems, and monitoring the matters, overall strategies, internal control and including the formulation and approval of all policy to oversee all major matters of the Company, is vested in the Board. The Board takes responsibility ’ s business c leading the Board in establishing good corporate (c) ensuring that all key and appropriate issues are (b) a providing leadership and ensuring effective (a) mainly include: performing the role of Chairman, responsibilities and acts in the best interests of the Company. In and for ensuring that the Board functions effectively Chairman is responsible for leadership of the Board Jay HORWITZ and Mr. Ni Quiaque LAI respectively. The the Chief Executive Officer are served by Mr. Bradley As at 31 August 2019, the roles of the Chairman and Chairman andChiefExecutiveOfficer members of the Board are related to one another. Management are set out in the Kwan Quinn LAW). The Directors HORWITZ (Chairman), Mr. Stanley CHOW and Mr. Yee Independent Non-executive Directors (Mr. Bradley Jay Jamshed IRANI and Mr. Teck Chien KONG) and three Directors (Ms. Deborah Keiko ORIDA, Mr. Zubin YEUNG and Mr. Ni Quiaque LAI), three Non-executive including two Executive Directors (Mr. Chu Kwong The Board currently comprises eight Directors, Board Composition Corporate GovernanceReport Group; governance practices and procedures for the discussed by the Board in a timely manner; interests; including that it acts in the Company performance by the Board of its responsibilities, ” chapter on pages 12 to 19. None of the “ Board of Directors and Senior ’ biographical details ’ s best d keeping the Board informed of material (d) ensuring that strategies and policies approved by (c) recommending policies, business plans and (b) leading the management in the daily operations of (a) Officer, responsibilities include: time to time, in performing the role of Chief Executive Subject to specific delegations by the Board from ensuring effective communication with (e) encouraging constructive and timely (d) developments in the Group the Board are effectively implemented; and strategic directions for the Board the Group; communicated to the Board. shareholders and ensuring that their views are management; and communication between the Board and the ’ s business. ’ s approval; 103

HKBN Ltd. Annual Report 2019 104 HKBN Ltd. Annual Report 2019 meeting. from office every year atthe Company the Articles. At least one-third of Directors shall retire accordance with the provision of the Listing Rules and rotation at least every three years and re-election in Currently, all Directors are subject to retirement by meeting. hold office only until the next following annual general who is appointed as an addition to their number shall first general meeting after appointment. Any Director to fill a casual vacancy on the Board shall retire at the meeting. Any Director who is appointed by the Board and the Board and by the shareholders in a general recommendation of the Nomination Committee The appointment of a new Director is made on the Appointment andRe-ElectionofDirectors considered all of them to be independent. 2019 pursuant to Rule 3.13 of the Listing Rules, and of their independence for the year ended 31 August Independent Non-executive Directors a confirmation In addition,theCompanyhasreceivedfromeachof representing at least one-third of the Board. appointed Independent Non-executive Directors or related financial management expertise, and appropriate professional qualifications, or accounting one Independent Non-executive Director possessing Independent Non-executive Directors with at least Rules relating to the appointment of at least three at all times met the requirements of the Listing During the year ended 31 August 2019, the Board Independent Non-executiveDirectors Corporate GovernanceReport ’ s annual general responsibilities. Company Secretary and/or reading materials relevant to the seminars, trainings organised by the Company the Company, which includes attending professional they received during the year ended 31 August 2019 to All Directors have provided a record of the training practices of the Company. as well as the business and corporate governance duties and responsibilities necessitated as Director familiar with the role of the Board, the legal and other appointed Director (if any) to ensure that the Director is such, briefing materials are provided to each newly to the Board remains informed and relevant. As knowledge and skills to ensure that their contribution professional development to develop and refresh their Code, all Directors should participate in continuous According to the code provision A.6.5 of the CG Directors August 2019,noclaimwasmadeagainsttheDirectors. reviewed on an annual basis. During the year ended 31 out of corporate activities. The insurance coverage is to indemnify its Directors for their liabilities arising The Company maintains appropriate liability insurance and Indemnity Directors ’ s business or to the Directors ’ ’ Training LiabilityInsurance ’ duties and (2) By invitation By (2) (3) Mr. Zubin Jamshed IRANI and Mr. Teck Chien KONG were appointed as the Non-executive Directors of the Company on 30 30 on Company the of Directors Non-executive the as appointed were KONG Chien Teck Mr. and IRANI Jamshed Zubin Mr. (3) (1) Directors may attend meetings in person, or by means of telephone or video conference in accordance with the Articles. Articles. the with accordance in conference video or telephone of means by or person, in meetings attend may Directors (1) Notes: is set out in the following table: Director attheBoardmeetings,committeemeetingsandgeneralduringyearended31August2019 The Board meets on a regular and on an ad hoc basis, as required by business needs. The attendance of each Meetings Corporate GovernanceReport Mr. Chu Kwong YEUNG Executive Directors Mr. Bradley Jay HORWITZ Chairman andIndependent Independent Non-executive Mr. Teck Chien KONG Mr. Zubin Jamshed IRANI Ms. Deborah Keiko ORIDA Non-executive Directors Mr. Ni Quiaque LAI Mr. Yee Kwan Quinn LAW Mr. Stanley CHOW Non-executive Director Directors Meeting, two Remuneration Committee Meetings, nil Nomination Committee Meeting and one General Meeting. General one and Meeting Committee Nomination nil Meetings, Committee Remuneration two Meeting, April 2019. During the period from 30 April 2019 to 31 August 2019, there were four Board Meetings, one Audit Committee Committee Audit one Meetings, Board four were there 2019, August 31 to 2019 April 30 from period the During 2019. April The figures exclude resolutions in writing signed by all Directors. all by signed writing in resolutions exclude figures The (3) (3) Meeting Board 4/8 4/8 8/8 6/8 7/8 8/8 7/8 6/8 Committee Meeting Number ofMeetingsAttended/Held Audit N/A 3/3 1/3 3/3 1/3 3/3 3/3 3/3 (2) (2) (2) Remuneration Committee Meeting 1/4 4/4 1/4 2/4 1/4 4/4 4/4 4/4 (2) (2) (2) (2) Nomination Committee Meeting (1) N/A 1/1 1/1 0/1 1/1 1/1 1/1 1/1 (2) Meeting General 0/3 0/3 0/3 0/3 3/3 3/3 3/3 2/3 105

HKBN Ltd. Annual Report 2019 106 HKBN Ltd. Annual Report 2019 recommendations for the Board the adoption of Co-Ownership Plan III Plus and made remuneration policy of the Company, as well as proposed Directors, senior management and Talents, review the remuneration package and discretionary bonus of Committee held four physical meetings to review the During theyearended31August2019,Remuneration termination of office. and senior management in the event of loss or approve the compensation arrangement for Directors Company and Independent Non-executive Directors and the on the remuneration of Non-executive Director management, make recommendations to the Board packages of individual Executive Directors and senior recommendations to the Board on the remuneration and senior management on the Company Committee aretomakerecommendationstheBoard The primary responsibilities of the Remuneration Independent Non-executive Director of the Company. Remuneration Committee is Mr. Stanley CHOW, an Mr. Zubin Jamshed IRANI. The Chairman of the Yee Kwan Quinn LAW, Mr. Chu Kwong YEUNG and four members, namely Mr. Stanley CHOW, Mr. The Remuneration Committee currently comprises on the Company written terms of reference which are available for view The Remuneration Committee was established with Remuneration Committee Committee and the Audit Committee. namely the Remuneration Committee, the Nomination The Board has established three Board committees, Board Committees Corporate GovernanceReport the the year ended 31 August 2019 is set out in note 6 to the members of the senior management by band for Pursuant to B.1.5 of the CG Code, the remuneration of Kong Exchanges and Clearing Limited ( “ Notes to the Financial Statements ’ s Co-Ownership Plan(s), and review and ’ ’ s policy and structure for all Directors s website and the website of Hong ’ s remuneration, make ’ s approval. “ ” HKEX . ” ). ’

HKEX are available for view on the Company terms of reference of the Nomination Committee and authority of the Nomination Committee. The Code Governance Practices and Corporate Governance the Board. of the Company, as well as review the composition of Directors at the forthcoming annual general meeting Directors, consider the re-election of the retiring the independence of Independent Non-executive Committee held one physical meeting to assess During theyearended31August2019,Nomination Directors and succession planning for Directors. the Board on the appointment or re-appointment of of the Company, and make recommendations to independence of Independent Non-executive Directors of individuals nominated for directorships, assess the make recommendations to the Board on the selection suitably qualified to become Directors and select or Company proposed changes to the Board to complement the effectiveness, make recommendations on any Policy on a regular basis to ensure their continued the Nomination Policy and the Board Diversity of the Board and the Board committees, review are to review the structure, size and composition The principal duties of the Nomination Committee Company. Mr. Chu Kwong YEUNG, an Executive Director of the KONG. The Chairman of the Nomination Committee is Quinn LAW, Mr. Chu Kwong YEUNG and Mr. Teck Chien HORWITZ, Ms. Deborah Keiko ORIDA, Mr. Yee Kwan members, namely Mr. Stanley CHOW, Mr. Bradley Jay The Nomination Committee currently comprises six CG Code (please refer to the section under except for the deviation of Code Provision A.5.1 of the terms of reference in compliance with the CG Code, The Board has a Nomination Committee with written Nomination Committee ” ’ on page 102 for details), setting out the duties s website. ’ s corporate strategy, identify individuals ’ s website and “ Corporate b effect on the Board (b) age, gender, skills, knowledge, experience, (a) given to the following: directorship or re-appointment, considerations will be When selecting a candidate to be nominated for Nomination Criteria provision of the policy is set out below: to be appointed or re-appointed as directors. The main process to be adopted when considering candidates The policy sets out the criteria, procedures and Nomination Policy Corporate GovernanceReport c ability and commitment of the candidate to (c) Providesallrelevantinformation and makesrecommendationtotheBoard,includingterms and Mayuse any process it deems appropriate to evaluate the candidates, which may include personal Identifiesorselectscandidates,withwithoutassistance fromexternalagenciesortheCompany, Newly appointed Directors may only hold office until the next annual general meeting of the Company Deliberates and decides on the appointment based upon the recommendation of the Nomination VoteontheDirectors qualities of the candidate; qualifications, background and other personal expertise, professional and educational his/her duties. In this regard, the number and devote sufficient time to effectively carry out conditions oftheappointment reference interviews, background checks, presentations, written submissions by the candidate or third-party pursuant tothecriteriasetoutabove meeting containingallrelevantinformationwouldbesent toshareholdersbytheBoard. general meeting following their appointment. A circular accompanying the notice of the annual general under theArticles.Ifeligible,theywouldstandforelection bytheshareholdersatfirstannual Committee ’ s composition and diversity; ’ electionattheCompany Nomination Committee Shareholders Board ’ s annualgeneralmeeting the criteria set out above. newly appointed or re-appointed Directors based on procedures and process adopted by the Company for The following is a summary of the nomination Nomination ProceduresandProcess g other factors considered to be relevant on a case (g) independence of the candidate; and (f) the contributions that the candidate is expected (e) potential/actual conflicts of interest that may (d) by case basis. to bring; arise if the candidate is selected; be considered; appointments or significant commitments should companies or organisations, and other executive nature of offices held by the candidate in public 107

HKBN Ltd. Annual Report 2019 108 HKBN Ltd. Annual Report 2019 An analysis of the Board directors. While the ultimate decision on all Board background and other personal qualities of the ise, professional and educational qualifications, gender, skills, knowledge, cultural, experience, expert- the benefits of all aspects of diversity, including age, the NominationCommitteeandBoardwillconsider In considering and reviewing board composition, both Board. The main part of the policy is set out below: perspective, is one of the key drivers of an effective the view that a diverse Board, with a breadth of diversity across the organisation, and endorses The Company recognises the benefit and value of Board DiversityPolicy Corporate GovernanceReport 7 1 Gender Female 2 2 3 Male Finance Accounting & Arts Science Educational Background Directors Directors Directors Director Directors ’ s current composition based on the measurable objectives is set out below: Non-executive Directors Non-executive Directors Executive Directors Designation Administration Business 3 3 2 Independent 2 2 Legal Commerce 4 Directors Directors Directors Directors Directors Directors governance practices. both regulatory requirements and good corporate remains relevant to the Company The policy will be reviewed periodically to ensure it ion of the Board was balanced and diversified. Committee and the Board considered that the composit- During the year ended 31 August 2019, the Nomination ensuring a diverse Board with balanced composition. to bring, considerable weight would be given to contributions that the Director candidate is expected appointments would be based on meritocracy and the 5 3 Non-Chinese Ethnicity 4 Telecommunications Chinese 3 Directors Banking Business Experience Directors Directors Directors ’ s needs and reflects Age Group 2 3 3 2 2 Finance Accounting & Legal 61-70 51-60 41-50 Directors Directors Directors Directors Directors of the Company members of the Audit Committee are a former partner Independent Non-executive Directors. None of the The majority of the Audit Committee members are Independent Non-executive Director of the Company. Audit Committee is Mr. Yee Kwan Quinn LAW, an Mr. Zubin Jamshed IRANI. The Chairman of the Stanley CHOW, Mr. Bradley Jay HORWITZ and members, namely Mr. Yee Kwan Quinn LAW, Mr. The Audit Committee currently comprises four Company terms of reference which are available for view on the The Audit Committee was established with written Audit Committee Corporate GovernanceReport its resignation or dismissal, review of the Company ment of the external auditor and any questions of and toapprovetheremunerationtermsofengage- reappointment and removal of the external auditor recommendations to the Board on the appointment, The Audit Committee is mainly responsible for making the presence of any Executive Directors. Committee meets with the external auditor without the audit or review. At least twice a year the Audit area ofmajorauditandinternalcontrolconcernduring the external auditor to discuss their audit plan and any The Audit Committee meets, at least twice a year, with financial information and oversight of the Company following summary of work performed: Committee held three physical meetings with the During the year ended 31 August 2019, the Audit Audit Committee. year ended 31 August 2019 have been reviewed by the The audited consolidated financial statements for the results of the Company. also responsible for reviewing the interim and annual and internal control system and procedures. It is financial reporting system, risk management system ’ s website and HKEX ’ s existing external auditor. ’ s website. ’ s ’ s on 6 February 2015 and updated on 28 May 2019: Corporate Governance Manual adopted by the Board including the following, which are contained in the the corporate governance functions of the Company, The Board is primarily responsible for performing Corporate GovernanceFunctions reviewed the interim report and the interim results reviewed the internal audit work plan, risk reviewed and approved the reappointment reviewed the audited consolidated financial reviewing the Company developing, reviewing and monitoring this policy reviewing and monitoring the Company reviewing and monitoring the training and developing and reviewing the Company discussed the audit plan with the external auditor Board February 2019 and recommended them for the announcement for the six months ended 28 Group during the year; management and internal control systems of the of KPMG as the Company Board August 2018 and recommended them for the results announcement for the year ended 31 statements, the annual report and the annual Company; and applicable to Talents, Directors and officers of the and any other codes of conduct or policies and senior management; continuous professional development of Directors services. and reviewed the professional fees for the audit Report. Code and disclosure in the Corporate Governance regulatory requirements; and practices on compliance with legal and Meeting; appointment of KPMG at the 2018 Annual General recommendation to the Board for the re- making recommendations to the Board; and practices on corporate governance and ’ ’ s approval; and s approval; ’ s compliance with the CG ’ s auditor, with a ’ ’ s policies s policies 109

HKBN Ltd. Annual Report 2019 110 HKBN Ltd. Annual Report 2019 practice model known as the Our risk management structure is based on the best Controls Risk ManagementandInternal Corporate GovernanceReport and Review Monitor “ Three Lines of Defence Risk Monitoring Identification Risk Independent Assurance Second LineofDefence Third LineofDefence First LineofDefence External Assurance Risk Management Risk Oversight Internal Assurance and Enhancement ” Internal Control

Risk Review natural catastrophes, fraud, and errors of judgement. unpredictable risk or uncontrollable events such as As such, it does not provide absolute protection against manage and mitigate risks rather than eliminate all risks. model. This framework and its process are designed to Risk Reporting Reporting Communicate and Improve Corporate GovernanceReport

The Group First LineofDefence–RiskManagement control procedures. ’ s operation management includes company policies, risk identification and mitigation, and internal Company Policy and Business Conduct regulates the behaviour of our Talents which permeate the Group Group for non-compliance of any related laws and regulations. action will be taken on a case by case basis. During FY19, there was no material legal action against the investigated by Audit and Risk Department and result is reported directly to Audit Committee. Appropriate selected departments. During FY19, 8 trainings were provided for over 600 Talents. Any suspected cases are sector, customersandsuppliers.Trainingisprovidedtoallnewjoinersrefreshertrainingalso gifts or inducement s of any kind to and received from any person, including officials in the private or public What Could Go Wrong ( established for major operations. accounting standards and regulatory reporting requirements. Departmental Operating Procedures are complied with; and that reliable financial and accounting records are maintained in accordance with relevant against improper use or disposal; ensuring that relevant laws, rules and regulations are adhered to and appropriate policies and control procedures have been designed and established to safeguard our assets management is responsible for the design, implementation and maintenance of internal controls to ensure Ordinance always in compliance with anti-corruption laws, such as the Prevention of Bribery Ordinance (Cap.201) ( Anti-bribery, Anti-corruptionandConflictofInterestPolicyoutline our expected conduct to ensure we are integrity and ethical values as fundamental principles. a yearly basis through the Departmental Risk Register. each newly joined Talent of our Talents through ongoing training and phishing simulations. Security training is incorporated as part of Human error is an inherent risk in any cybersecurity issue. In light of this, we have raised security awareness our systems. scanning on our network and applications have been implemented to ensure we have identified any risks in Security Departments. From network segmentation to end-point protections and continuous vulnerability Numerous security measures were applied and carried out by our Information Technology and Information Cybersecurity and availability of the Company the Information Security Policy which outlines a set of rules about maintaining the confidentiality, integrity, best security practices, it reduces the security related risks for the Company. In FY19, the team has updated monitor for threats to our system. By ensuring the design of IT and network infrastructure is aligned with the security policies and procedures, implement hardware and software contents for network security, and An updated InformationSecurityTeam taking any investigation. Result is reported to Audit Committee directly and appropriate actions will be taken. subsequent discrimination, disadvantage or dismissal. Audit and Risk Department is responsible for under- suspected unethical behaviour or malpractice in confidence and without fear of reprisal, victimisation, A SpeakUpPolicyis in place to facilitate Talents and other stakeholders to report concerns to us about Sponsoring Organisations of the Treadway Commission The Group adopted an integrated framework of internal controls consistent with the Internal Control ing and implementing mitigating actions and reporting to the Internal Risk Management Team (the Leaders from different departments are responsible for performing risk assessment, risk ranking, establish- and third-party users in relation to information security. ” ). This includes compliance with all laws, domestic and foreign, prohibiting improper payment, “ WCGW ’ s training. ” ) are identified and controls are established to mitigate those risks. The ’ s information and establishes the responsibilities for all Talents, contractors was established during the year, mainly responsible for establishing ” framework (the “ framework ” “ ). Under this framework, Committee of “ IRM “ ” the ) on ’ s 111

HKBN Ltd. Annual Report 2019 112 HKBN Ltd. Annual Report 2019 processes to identify, assess, treat, monitor and communicate key risks.

an growth in our business. Because we embrace risk as an inherent component in our daily operation, we take It is our commitment to launch services quickly and meet market demands at a fast pace to pursue long-term Risk ManagementandPrincipalRisks Corporate GovernanceReport that are affecting the Group, and (ii) ensuring major risks are addressed with appropriate actions. comprises nominated department heads and executives. The team is responsible for (i) understanding risks sible for conducting independent reviews of the adequacy and effectiveness of the Group assessment on the Group External auditor and consultants further supplement the third line of defence by providing independent External AssuranceandConsultation the Chairman of the Audit Committee. to address such risks. The ARD has a reporting line to the Chief Executive Officer and has direct access to provide reasonable, though not absolute, assurance that adequate governance and controls are in place particular businessesorfunctionalareas,includingfraudcorruption,andconductsreviewsauditsto control and risk management systems. It also assists management in assessing the risks inherent in The Group Third LineofDefence–IndependentAssurance The second line of defence is overseen by the Internal Risk Management Team ( Second LineofDefence–RiskOversight identified over the financial reporting process. “ enterprise-wide approach ’ s internal audit function is performed by the Audit and Risk Department ( needed to review risks affecting the Group business, operations and ESG related issues. The IRM team meets twice a year and from time to time when accordingly. and any proposed changes to the audit plan will be communicated to and approved by the Audit Committee review. This audit plan is subject to changes according to the outcome of continuous risk review processes, audit plan. The annual audit plan is prepared based on the major risks identified during the latest risk Internal audit reports on control effectiveness are submitted to the Audit Committee in line with the agreed Internal Risk Management Team ( registers reported by different departments. risk assessment from the corporate level and is complemented by a bottom up approach of separate risk ’ s processes, especially with respect to the significant risks and control issues ” for the management of key business risks. This approach provides consistent “ IRM ” ) ensures appropriate actions are taken on risks affecting the Group ’ s operation. The Group Risk Register is the result of a top down “ IRM ” ) whose composition “ ARD ” ’ ). It is respon- s internal ’ s measures in place to minimise the exposure. In FY19, the Group has identified the following principal risks: for the Group. Through the effectiveness of risk management, risks are managed with appropriate mitigation The Group faces several risks and uncertainties which, if not properly managed, could create an adverse exposure Principal Risks Corporate GovernanceReport perform ongoing and periodic monitoring of the Risk MonitoringandReporting Risk criteria is assessed based on our Group increase in the future. market movements and may HIBOR, which is subject to determined by reference to bear floating interest rates majority of our indebtedness indebtedness and the A significant amount of Financial (InterestRateRisk) competitive pressures. subject to pricing and other markets which may be The Group operates in Market Potential risks risks and ensure that appropriate responses, Once an appropriate risk treatment has been determined, department heads and the IRM internal and external events that may affect controls and preventive actions are in place Risk ContextEstablishment the achievement of the Group our strategic planning process and daily management of the business to identify objectives. Following this, we examine and RiskIdentification ’ s objectives profitability. costs and adversely affect our rates could increase our finance Any significant increase in interest response to the competition we face. of the measures we adopt in competitors, and the effectiveness behaviour of customers and technological development, the conditions, regulatory development, factors, including economic are dependent on a variety of our business are uncertain and The effects of competition on Potential impact ’ s 4 1 3 2 Mitigating actions quantitatively and qualitatively iness and likelihood of a risk occurring both and rank the potential impact on bus- Identify the cause and source of the risks, Risk Evaluation to an acceptable level considered until the residual risks are reduced acceptable level, if not, further treatments are whether ornotitreducestheresidualrisktoan Treatment is identified and determined as to (Mitigation andAction) Risk Treatment Proactively monitor interest rates Continue to enter into interest-rate Closely monitor price levels and act Conduct responsive project manage- Proactively monitor market conditions Financial Statements in note 31(c) to the mise the risks (Details are set out and act upon the changes to mini- rate risks swaps to hedge against our interest accordingly of resources for strategy changes ment to allow flexible allocation “ Notes to the ” .) 113

HKBN Ltd. Annual Report 2019 114 HKBN Ltd. Annual Report 2019 Corporate GovernanceReport and regulatory requirements. require compliance with legal markets and industries which The Group operates in Legal &Regulatory short life cycles. and services with increasingly evolving customer demands and industry standards, rapidly changing technology industry is characterised by The telecommunications Technology The Group People customer data. as well as proper handling of network and infrastructure proper functioning of our is highly dependent on the The continuity of our services Operations Potential risks employed by our Group. service from Talents dependent upon continued ’ s success is financial performance. reputation, operations and may adversely affect the Group legal and regulatory requirements Failure to comply with applicable affected. and prospects could be adversely financial conditions, operations at competitiveprices,ourbusiness, customers in a timely manner and new services demanded by our technology expediently and offer If we cannot implement new operations. adversely affect the Group Leakage of customer data could business. could adversely affect our network or such infrastructure Any damage to or failure in our Potential impact financial performance. reputation, operations and Group materially and adversely affect the qualified personnel, could the inability to find additional The loss of key personnel, or ’ s prospects and results of ’ s ’ s Mitigating actions Provide network/IT security Undertake frequent reviews of Continuously update the incident Continuous monitoring of network AneffectiveandefficientInformation On-going trainings on legal and Legal and Regulatory Department Audit and Risk Department will New services are provided to A network strategy plan is in place The Group has a succession Continuously review and update awareness training for all Talents periodic upgrades of our network our network security and perform drills policy and procedures and conduct response and business recovery status Policy are in place Technology Policy and IT Security awareness and ensure compliance provided to Talents to promote regulatory compliance will be their execution (LRD) will review contracts before initiatives where appropriate business activities and new conduct compliance review on industry leaders customers by partnering with technology our ability to cope with evolving to enhance network agility and management positions planning strategy in place for key retention policy our customer data collection and Note: Other service fee includes the review of the Group the of review the includes fee service Other Note: 124 to 126 of this annual report. the year ended 31 August 2019 are set out on pages respect of the financial statements of the Group for Other services external auditor, KPMG, is set out as follows: remuneration paid or payable to the Company During the year ended 31 August 2019, the Auditor effective and adequate. risk management and internal control systems remain pliance controls of the Group, and that the existing affect the operational, financial reporting and com- no area of concern identified which might materially During the year ended 31 August 2019, there was management and controls systems in the Group. Committee The Board has considered and endorsed the Audit Board Confirmation Corporate GovernanceReport the Model Code for the year ended 31 August 2019. have complied with the required standard as set out in enquiries with all Directors, they confirmed that they by Directors of the Company. Having made specific code of conduct regarding securities transactions The Company has adopted the Model Code as its own Securities Transactions Model Codefor auditor The statement of the Directors Financial Statements Auditor Directors Audit services amounting to $3,850,000. to amounting combination and proposed business combination combination business proposed and combination professional fees mainly in connection with business business with connection in mainly fees professional advisory service amounting to $210,000 and other other and $210,000 to amounting service advisory interim financial report amounting to $635,000, tax tax $635,000, to amounting report financial interim ’ s statement of reporting responsibilities in ’ ’ ’ s assessment of the effectiveness of risk s Remuneration s Responsibilityinrespectof ’ (Note) Responsibilityand ’ responsibility and ’ s 10,360 $ 4,695 5,665 ’ ’ s s 000 show of hands. procedural or administrative matter to be voted by a cides to allow a resolution which relates purely to a Chairman of the general meeting, in good faith, de- meeting must be taken by poll except where the meetings. Any vote of the shareholders at a general whenever it deems fit convene extraordinary general an extraordinary general meeting. The Board may other than an annual general meeting, is called determined by the Board. Each general meeting, Company is held each year at a location as may be and the Board. An annual general meeting of the communication channel between the shareholders The general meetings of the Company provide a Shareholders Communication withShareholders the Company. the failure of the Board shall be reimbursed to them by expenses incurred by the requisitionist(s) as a result of date of deposit of the requisition, and all reasonable held after the expiration of three months from the provided that any meeting so convened shall not be in which meetings may be convened by the Board in the same manner, as nearly as possible, as that rights of all of them, may convene the general meeting representing more than one-half of the total voting days, the requisitionist(s) themselves or any of them convene the meeting to be held within a further 21 the date of deposit of the requisition proceed duly to Company. If the Board does not within 21 days from carries the right of voting at general meetings of the one-tenth of the paid up capital of the Company which the date of deposit of the requisition not less than ionists, provided that such requisitionists held as at objects of the meeting and signed by the requisit- office of the Company in Hong Kong specifying the house (or its nominee(s)) deposited at the principal or any one member which is a recognised clearing on the written requisition of any two or more members An extraordinary general meeting could be convened Extraordinary GeneralMeeting Procedures forShareholderstoConvenean ’ Rights 115

HKBN Ltd. Annual Report 2019 116 HKBN Ltd. Annual Report 2019 Company under the Corporate Governance section of the propose a person for election as a Director is available Meeting for Shareholders to Convene an Extraordinary General engage actively with the Company. allow shareholders and the investment community to exercise their rights in an informed manner, and to about the Company, in order to help shareholders access to balanced and understandable information investment community with ready, equal and timely procedures in providing shareholders and the Communication Policy to set out the Company The Company has adopted a Shareholder Shareholder CommunicationPolicy out on page 115 in the paragraph under general meetinginaccordancewiththeproceduresset new resolution may request the Company to convene a meetings. Shareholders who wish to put forward a shareholders toputforwardnewresolutionsatgeneral or the Companies Law of the Cayman Islands for There are no provisions in the Company Proposals atShareholders Procedures forShareholderstoPutForward at the Company deposited with the Board or the Company Secretary contact information of the requisitionists and The enquiries must be in writing with the detailed Procedures forSendingEnquiriestotheBoard Corporate GovernanceReport Hong Kong New Territories 18 Kin Hong Street, Kwai Chung 12th Floor, Trans Asia Centre HKBN Ltd. Kong as below: ” . Detailed procedure for shareholders to ’ s website. ’ s principal place of business in Hong ’ Meetings ’ s Articles “ Procedures ’ s return to shareholders, cash needed for the Group pay-out, a number of factors will be considered including returns to the shareholders. In determining the dividend The Company seeks to provide stable and sustainable Dividend Policy Company during the year ended 31 August 2019. no change on the constitutional documents of the 2015 and effective on the Listing Date. There is adopted by special resolution passed on 21 February The constitutional documents of the Company were Constitutional Documents dialogue with the Company The Board and the Company maintain an on-going Investor Relations Information Disclosureand ratio as appropriate from time to time. The Board will review the policy and dividend pay-out repayment, if required. relevant year/period, after adjusting for potential debt intention to pay 100% of the AFF in respect of the an amount of not less than 90% of the AFF with an The Company unforeseen market circumstances. opportunities, as well as a healthy financial buffer for expenditure requirementsandfundingforotherbusiness business operations, expansion and inventory, capital other corporate publications on the Company Stock Exchange and its corporate communications and making available all the disclosures submitted to the general meetings that may be convened, as well as by financial reports, annual general meeting and other investment community mainly through the Company ’ s dividend policy is to pay dividends in ’ s shareholders and the ’ s website. ’ s ’ s (Incorporated in the Cayman Islands with limited liability) limited with Islands Cayman the in (Incorporated the consolidated financial statements statements financial consolidated the compliance with the disclosure requirements of the Hong Kong Companies Ordinance. issued by the Hong Kong Institute of Certified Public Accountants ( cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ( position of the Group as at 31 August 2019 and of its consolidated financial performance and its consolidated In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial and notes to the consolidated financial statements, including a summary of significant accounting policies. consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended August 2019, the consolidated income statement, the consolidated statement of comprehensive income, the the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. fulfilled our other ethical responsibilities in accordance with these requirements and the Code. We believe that that are relevant to our audit of the consolidated financial statements in the Cayman Islands, and we have Our responsibilities under those standards are further described in the Group the HKICPA provide a separate opinion on these matters. our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not of the consolidated financial statements of the current period. These matters were addressed in the context of Key audit matters are those matters that, in our professional judgement, were of most significance in our audit Key auditmatters We conducted our audit in accordance with Hong Kong Standards on Auditing ( Basis foropinion We have audited the consolidated financial statements of HKBN Ltd. ( Opinion Independent auditor Auditor ” ) set out on pages 127 to 233, which comprise the consolidated statement of financial position as at 31 ’ ’ s s Report Code of Ethics for Professional Accountants Accountants Professional for Ethics of Code ’ s reporttotheshareholdersofHKBNLtd. section of our report. We are independent of the Group in accordance with ( “ the Code “ HKICPA ” ) together with any ethical requirements “ the Company Auditor ” ) and have been properly prepared in ’ “ s responsibilities for the audit of of audit the for responsibilities s HKSAs ” ) and its subsidiaries ( ” ) issued by the HKICPA. “ HKFRSs “ ” the ) 117

HKBN Ltd. Annual Report 2019 118 HKBN Ltd. Annual Report 2019 (Incorporated in the Cayman Islands with limited liability) limited with Islands Cayman the in (Incorporated Refer to note 30 and accounting policies in note 1(f) to the consolidated financial statements. financial consolidated the to 1(f) note in policies accounting and 30 note to Refer the Group represented the excess of the consideration paid over Goodwill arising from the WTT Acquisition, which Notes by issuance of the vendor loan notes ( the Company million was satisfied by allotment and issuance of the for consideration of $6,644 million, of which (i) $4,295 Key auditmatters(continued) Independent auditor Auditor future performance of the businesses acquired. and estimation, particularly in relation to the forecast of values required the exercise of significant judgements by a firm of external valuers. The assessment of fair directors based on an independent valuation prepared acquired in the WTT Acquisition was assessed by the The fair values of the identifiable assets and liabilities assets of the acquired entities. share capitalofWTTHoldingCorp( On 30 April 2019, the Group acquired the entire issued The KeyAuditMatter Accounting fortheacquisitionofWTTHoldingCorp ” ). ’ s shares; and (ii) $2,349 million was satisfied ’ s share of the fair value of the identifiable net ’ s Report ’ s reporttotheshareholdersofHKBNLtd.(continued) “ the WTTAcquisition “ Vendor Loan ” ) ) How thematterwasaddressedinouraudit obtaining and inspecting the valuation inspecting the sale and purchase agreements and with the assistance of our internal valuation assessing the external valuers independence; valued and considering their objectivity and experience and expertise in the assets being liabilities acquired was based; assessment of the fair values of the assets and engaged bytheGroupandonwhichmanagement assessments prepared by the external valuers standards; the requirements of the prevailing accounting set out in the sale and purchase agreements and for the WTT Acquisition with reference to the terms evaluating management WTT Acquisition; data and the Group assumptions and critical judgements with market impacted their valuation by comparing these the assumptions and critical judgements which prevailing accounting standards, and challenging industry standards and the requirements of the adopted by the external valuers with reference to specialists, assessing the valuation methodologies ’ s business plan supporting the ’ s accounting treatment ’ qualifications, ’ s Refer to note 30 and accounting policies in note 1(f) to the consolidated financial statements. financial consolidated the to 1(f) note in policies accounting and 30 note to Refer liability) limited with Islands Cayman the in (Incorporated increase the risk of error or potential management bias. requires significant judgements and estimation which and liabilities acquired can be inherently subjective and and because assessing the fair values of the assets significant to the consolidated financial statements as a key audit matter because the transaction was We identified the accounting for the WTT Acquisition The KeyAuditMatter Accounting fortheacquisitionofWTTHoldingCorp(continued) Key auditmatters(continued) Independent auditor Auditor ’ s Report ’ s reporttotheshareholdersofHKBNLtd.(continued) How thematterwasaddressedinouraudit evaluating management evaluating the information provided by assessing the disclosures in the consolidated documentation; the underlying contracts and relevant underlying management to the external valuers by inspecting the prevailing accounting standards. Acquisition with reference to the requirements of financial statements in respect of the WTT knowledge of the industry; and reference to future operating plans and our (ii) customer relationships and (iii) backlog, with estimated useful lives of (i) brand and trademark; ’ s assessment of the 119

HKBN Ltd. Annual Report 2019 120 HKBN Ltd. Annual Report 2019 statements. Refer to notes 9, 10 and 11 and accounting policies in notes 1(f), 1(h) and 1(i) to the consolidated financial financial consolidated the to 1(i) and 1(h) 1(f), notes in policies accounting and 11 and 10 9, notes to Refer liability) limited with Islands Cayman the in (Incorporated revenue growth rates and the discount rates applied. judgement, particularly in estimating the long term involves the exercise of significant management The preparation of a discounted cashflow forecast of impairment loss which should be recognised, if any. discounted cashflow forecast to determine the amount assets and PP&E have been allocated against a values of the CGU to which the goodwill, intangible assets and PP&E. Management compares the carrying assessment ofitsgoodwillandtheassociatedintangible Management performs an annual impairment telecommunications network services. unit ( respectively and were contained in one cash-generating to $8,788 million, $4,639 million and $4,342 million, assets and PP&E as at 31 August 2019, which amounted The carrying values of the Group The KeyAuditMatter Assessing ofpotentialimpairmentgoodwill,intangibleassetsandproperty,plantequipment( Key auditmatters(continued) Independent auditor Auditor “ CGU ” ) identified by management, the fixed ’ s Report ’ s reporttotheshareholdersofHKBNLtd.(continued) ’ s goodwill, intangible following: of goodwill, intangible assets and PP&E included the Our audit procedures to assess potential impairment How thematterwasaddressedinouraudit evaluating the Group evaluating the discounted cashflow forecast our understanding of the Group directors. Our evaluation has taken into account budget which was approved by the Board of discounted cashflow forecast with the financial specific data and significant assumptions in the prepared by management by comparing plans and the telecommunication sector; standards; the requirements of the prevailing accounting discounted cashflow forecast with reference to applied by management in the preparation of the services CGU and assessing the methodology allocated to the fixed telecommunications network the value of goodwill, intangible assets and PP&E ’ s identification of CGUs and ’ s future business “ PP&E ” ) statements. Refer to notes 9, 10 and 11 and accounting policies in notes 1(f), 1(h) and 1(i) to the consolidated financial financial consolidated the to 1(i) and 1(h) 1(f), notes in policies accounting and 11 and 10 9, notes to Refer liability) limited with Islands Cayman the in (Incorporated to management bias in their selection. rate and discount rate applied, which could be subject assumptions, particularly the long term revenue growth by management is complex and contains judgemental matter because the impairment assessment prepared goodwill, intangible assets and PP&E as a key audit We identified assessing the potential impairment of The KeyAuditMatter Assessing potentialimpairmentofgoodwill,intangibleassetsandproperty,plantequipment( Key auditmatters(continued) Independent auditor Auditor (continued) ’ s Report ’ s reporttotheshareholdersofHKBNLtd.(continued) How thematterwasaddressedinouraudit comparing the revenue and operating costs obtaining from management sensitivity analysis comparing the long term revenue growth rate and forecast with the current year included in prior year any indicators of management bias. impairment assessment and whether there were assumptions to the conclusions reached in the and assessing the impact of changes in these key rate adopted in the discounted cashflow forecast of long term revenue growth rate and the discount external market data; and forecast with that of comparable companies and discount rate adopted in the discounted cashflow identified; as to the reasons for any significant variation forecast and making enquiries of management order to assess the reasonableness of prior year ’ s discounted cashflow ’ s performance in “ PP&E ” ) ’ s 121

HKBN Ltd. Annual Report 2019 122 HKBN Ltd. Annual Report 2019 Refer to note 2 and accounting policies in note 1(v) to the consolidated financial statements. financial consolidated the to 1(v) note in policies accounting and 2 note to Refer liability) limited with Islands Cayman the in (Incorporated with price changes in the year. volumes of data including a variety of service packages The Group The KeyAuditMatter Revenue recognition Key auditmatters(continued) Independent auditor Auditor group financial statements is an inherent risk because the The accuracy of revenue recorded in the consolidated the year ended 31 August 2019. services and product sales, totalled $5,108 million for international telecommunications services, mobile from fixed telecommunications network services, ’ s billing systems are complex, and process large ’ s revenue, which comprises primarily income ’ s Report ’ s reporttotheshareholdersofHKBNLtd.(continued) revenue included the following: Our audit procedures to assess the recognition of How thematterwasaddressedinouraudit reconciling revenue recognised in the telecom assessing the design, implementation and with the assistance of our information technology sample basis; supported by underlying documentation, on a whether the reconciling items were properly billing system to the general ledger and assessing process; internal controls over the revenue recognition operating effectiveness of key non-automated • • • controls with particular emphasis on: and operating effectiveness of key internal specialists, evaluating the design, implementation calculating amounts billed to customers. authorising rate changes; and the capturing and recording of data usage; Refer to note 2 and accounting policies in note 1(v) to the consolidated financial statements. financial consolidated the to 1(v) note in policies accounting and 2 note to Refer liability) limited with Islands Cayman the in (Incorporated meet targets or expectations. incorrect period or could be subject to manipulation to inherent risk that revenue could be recorded in the and complex IT systems, both of which give rise to an matter because it involves management judgement We identified revenue recognition as a key audit elements of revenue. the appropriate allocation of prices for the different Group products, and complex settings are required in the telecommunication services and telecommunication within bundled sales packages, which may include timing of recognition of different elements of revenue in determining the appropriate measurement and Significant management judgement can be required The KeyAuditMatter Revenue recognition(continued) Key auditmatters(continued) Independent auditor Auditor ’ s information technology ( ’ s Report ’ s reporttotheshareholdersofHKBNLtd.(continued) “ IT ” ) systems to achieve How thematterwasaddressedinouraudit assessing, on a sample basis, the standalone comparing cash receipts from customers during evaluating journal entries posted to revenue customers; separately in similar circumstances and to similar when the Group sells such services or products observable prices for such services or products bundled sales packages, by comparison with the each distinct service and product offered in selling prices determined by management for on a sample basis. with invoices issued to customers during the year, the year and subsequent to the financial year end billing system; and included reports generated from the telecom with relevant underlying documentation, which and comparingthedetailsofthesejournalsentries accounts, on a specific risk-based sample basis, 123

HKBN Ltd. Annual Report 2019 124 HKBN Ltd. Annual Report 2019 (Incorporated in the Cayman Islands with limited liability) limited with Islands Cayman the in (Incorporated information, we are required to report that fact. We have nothing to report in this regard. If, based on the work we have performed, we conclude that there is a material misstatement of this other misstated. consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially information and, in doing so, consider whether the other information is materially inconsistent with the In connection with our audit of the consolidated financial statements, our responsibility is to read the other any form of assurance conclusion thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express The directors are assisted by the Audit Committee in discharging their responsibilities for overseeing the Group have no realistic alternative but to do so. concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going In preparing the consolidated financial statements, the directors are responsible for assessing the Group or error. preparation of consolidated financial statements that are free from material misstatement, whether due to fraud Kong Companies Ordinance and for such internal control as the directors determine is necessary to enable the and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong The directors are responsible for the preparation of the consolidated financial statements that give a true Responsibilities ofthedirectorsforconsolidatedfinancialstatements included in the annual report, other than the consolidated financial statements and our auditor The directors are responsible for the other information. The other information comprises all the information thereon Information otherthantheconsolidatedfinancialstatementsandauditor Independent auditor Auditor financial reporting process. ’ s Report ’ s reporttotheshareholdersofHKBNLtd.(continued) ’ s report thereon. ’ s report ’ s ability ’ s (Incorporated in the Cayman Islands with limited liability) limited with Islands Cayman the in (Incorporated whole are free from material misstatement, whether due to fraud or error, and to issue an auditor Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a Auditor Independent auditor Auditor scepticism throughout the audit. We also: As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional influence the economic decisions of users taken on the basis of these consolidated financial statements. or error and are considered material if, individually or in the aggregate, they could reasonably be expected to with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance responsibility towards or accept liability to any other person for the contents of this report. includes our opinion. This report is made solely to you, as a body, and for no other purpose. We do not assume Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business Evaluate the overall presentation, structure and content of the consolidated financial statements, including Concludeontheappropriatenessofdirectors Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are Identifyand assess therisksofmaterial misstatement of the consolidatedfinancialstatements,whether due for our audit opinion. responsible for the direction, supervision and performance of the group audit. We remain solely responsible activities within the Group to express an opinion on the consolidated financial statements. We are and events in a manner that achieves fair presentation. the disclosures, and whether the consolidated financial statements represent the underlying transactions and related disclosures made by the directors. Group appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the forgery, intentional omissions, misrepresentations or the override of internal control. misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence uncertainty exists, we are required to draw attention in our auditor cast significant doubt on the Group the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may events or conditions may cause the Group to cease to continue as a going concern. conclusions are based on the audit evidence obtained up to the date of our auditor the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our ’ ’ s responsibilitiesfortheauditofconsolidatedfinancialstatements s internal control. ’ s Report ’ s reporttotheshareholdersofHKBNLtd.(continued) ’ s ability to continue as a going concern. If we conclude that a material ’ useofthegoingconcernbasisaccountingand,basedon ’ s report to the related disclosures in ’ s report. However, future ’ s report that 125

HKBN Ltd. Annual Report 2019 126 HKBN Ltd. Annual Report 2019 Certified Public Accountants Public Certified liability) limited with Islands Cayman the in (Incorporated 24 October 2019 Central, Hong Kong 10 Chater Road 8th Floor, Prince key audit matters. We describe these matters in our auditor significance in the audit of the consolidated financial statements of the current period and are therefore the From the matters communicated with the Audit Committee, we determine those matters that were of most thought to bear on our independence and, where applicable, related safeguards. regarding independence and communicate with them all relationships and other matters that may reasonably be We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements during our audit. the audit and significant audit findings, including any significant deficiencies in internal control that we identify We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of (continued) Auditor Independent auditor Auditor The engagement partner on the audit resulting in this independent auditor outweigh the public interest benefits of such communication. be communicated in our report because the adverse consequences of doing so would reasonably be expected to disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not KPMG ’ s responsibilitiesfortheauditofconsolidatedfinancialstatements ’ s Report ’ s Building ’ s reporttotheshareholdersofHKBNLtd.(continued) ’ s report unless law or regulation precludes public ’ s report is Yip Ka Ming, Alice. Note: The Group has initially applied HKFRS 15 and HKFRS 9 at 1 September 2018. Under the transition methods chosen, chosen, methods transition the Under 2018. September 1 at 9 HKFRS and 15 HKFRS applied initially has Group The Note: Income tax Share of losses of joint ventures Other net income shareholders of the Company attributable to the profit for the year are set out in note 28(b). The notes on pages 133 to 233 form part of these financial statements. Details of dividend payable to equity Diluted Basic Earnings pershare oftheCompany Profit fortheyearattributabletoequityshareholders Profit beforetaxation Finance costs Other operating expenses Network costs and costs of sales Revenue (Expressed inHongKongdollars) For theyearended31August2019 Consolidated IncomeStatement comparative information is not restated. See note 1(c). note See restated. not is information comparative 13(b) Note 3(d) 3(b) 3(a) 4 7 3 2 (2,734,600) (1,834,054) 18.4 cents 19.4 cents 5,107,637 (259,271) 214,527 309,362 (94,835) 29,926 $ 2019 ’ (276) 000

(2,116,987) (1,247,031) 39.6 cents 39.6 cents 3,948,952 (117,288) 396,897 489,268 (92,371) 22,315 $ (Note) 2018 ’ (693) 000 127

HKBN Ltd. Annual Report 2019 128 HKBN Ltd. Annual Report 2019 Note: The Group has initially applied HKFRS 15 and HKFRS 9 at 1 September 2018. Under the transition methods chosen, chosen, methods transition the Under 2018. September 1 at 9 HKFRS and 15 HKFRS applied initially has Group The Note: of subsidiaries outside Hong Kong, with nil tax effect Exchange differences on translation of financial statements Item that may be reclassified subsequently to profit or loss: Other comprehensiveincomefortheyear The notes on pages 133 to 233 form part of these financial statements. Profit fortheyear (Expressed inHongKongdollars) For theyearended31August2019 Consolidated StatementofComprehensiveIncome equityshareholdersoftheCompany Total comprehensiveincomefortheyearattributableto comparative information is not restated. See note 1(c). note See restated. not is information comparative

214,527 208,329 (6,198) $ 2019 ’ 000 396,897 392,179 (4,718) $ (Note) 2018 ’ 000 Other non-current assets Interest in joint ventures Contract assets Customer acquisition and retention costs Investment properties Property, plant and equipment Intangible assets Total assetslesscurrentliabilities Net currentassets Deferred services revenue – current portion Deposits received Contract liabilities – current portion Other payables and accrued charges – current portion Trade payables Current liabilities Inventories Current assets Goodwill Non-current assets (Expressed inHongKongdollars) At 31August2019 Consolidated StatementofFinancialPosition Amounts due to joint ventures Obligations under granting of rights – current portion Amounts due from joint ventures Contract assets Other receivables, deposits and prepayments Trade receivables Tax payable Contingent consideration – current portion Cash and cash equivalents Note 14 13 16 15 11 11 10 16 19 19 15 22 26 22 16 17 17 24 27 18 9

18,634,897 18,636,900 4,341,590 4,638,643 8,788,319 1,745,124 1,747,127 598,030 222,041 219,763 907,317 365,976 241,717 240,894 557,439 158,480 662,816 72,443 32,105 29,168 10,750 15,093 $ 9,429 4,740 2,003 9,024 1,371 2019 ’ 000 – 2,293,950 1,453,588 1,801,393 5,621,976 5,668,181 (Restated) 908,192 954,397 461,373 138,918 292,646 247,210 109,410 373,293 46,205 69,343 64,950 98,653 32,704 10,000 11,471 $ (Note) 8,095 9,024 8,544 2018 ’ 000 – – – – – 129

HKBN Ltd. Annual Report 2019 130 HKBN Ltd. Annual Report 2019 Note: The Group has initially applied HKFRS 15 and HKFRS 9 at 1 September 2018. Under the transition methods chosen, chosen, methods transition the Under 2018. September 1 at 9 HKFRS and 15 HKFRS applied initially has Group The Note: Reserves Share capital CAPITAL ANDRESERVES NET ASSETS Deferred services revenue – long-term portion Contract liabilities – long-term portion Other payables and accrued charges – long-term portion Non-current liabilities (Expressed inHongKongdollars) At 31August2019(continued) Consolidated StatementofFinancialPosition Chu KwongYEUNG Approved and authorised for issue by the board of directors on 24 October 2019. TOTAL EQUITY Obligations under granting of rights – long-term portion The notes on pages 133 to 233 form part of these financial statements. Ni QuiaqueLAI Contingent consideration – long-term portion Deferred tax liabilities Senior notes Bank loans Provision for reinstatement costs set out in note 1(b)(i). note in out set ended 31 August 2018 has been restated as a result of finalised purchase price allocation of prior year acquisition as as acquisition year prior of allocation price purchase finalised of result a as restated been has 2018 August 31 ended comparative information is not restated. See note 1(c). Additionally, the comparative information in respect of the year year the of respect in information comparative the Additionally, 1(c). note See restated. not is information comparative ) ) ) ) ) ) Directors 28(c) Note 16 19 26 27 25 21 20

11,180,339 7,456,429 7,456,561 7,456,561 1,131,440 5,169,137 4,454,253 187,690 143,600 15,795 50,146 28,278 $ 2019 ’ 132 000 – 1,036,811 4,631,269 1,036,912 1,036,912 3,873,716 (Restated) 201,266 408,218 79,371 24,819 15,643 28,236 $ (Note) 2018 ’ 101 000 – – Note: The Group has initially applied HKFRS 15 and HKFRS 9 at 1 September 2018. Under the transition methods chosen, chosen, methods transition the Under 2018. September 1 at 9 HKFRS and 15 HKFRS applied initially has Group The Note: Equity-settled share-based transactions of Vendor Loan Notes Distribution to holders in respect of the current year shareholders of the Company Dividend declared to equity in respect of the previous year shareholders of the Company Dividend approved to equity transactions Equity-settled share-based Issue of Vendor Loan Notes in respect of the current year shareholder of the Company Dividend declared to equity Other comprehensive income The notes on pages 133 to 233 form part of these financial statements. Balance at31August2019 Issue of ordinary shares Total comprehensive income Other comprehensive income Profit for the year 31August2019: Changes inequityfortheyearended Adjusted balanceat1September2018 Balance at31August2018 in respect of the previous year shareholder of the Company Dividend approved to equity Total comprehensive income Profit for the year 31August2018: Changes inequityfortheyearended Balance 1September2017 (Expressed inHongKongdollars) For theyearended31August2019 Consolidated StatementofChangesinEquity Impact oninitialapplicationofHKFRS15 comparative information is not restated. See note 1(c). note See restated. not is information comparative (Note) 28(b)(ii) 28(b)(ii) 28(b)(i) 28(b)(i) 23(a) 23(a) 28(c) Note 29

capital Share $ ’ 0 $ 000 3 ,9,3 ,4,0 89256406446(503 7,456,561 (15,003) 694,466 596,420 38,912 2,349,204 3,792,430 132 101 105,880 101 101 14,295,264 31 – – – – – – – – – – – – – – – Attributable toequityshareholdersoftheCompanyandholdersVendorLoanNotes

premium (445,944) (105,880) (56,890) Share ’ 0 $ 000 – – – – – – – – – – – – – –

Vendor Loan 2,349,204 Notes ’ 0 $ 000 – – – – – – – – – – – – – – – – – –

reserve Capital 58356407169(,0)1,405,168 (8,805) 781,639 596,420 35,813 71256404332(,8)1,128,888 (4,087) 403,382 596,420 27,192 58356404333(,0)1,036,912 (8,805) 413,383 596,420 35,813 3,099 8,621 ’ 0 $ 000 – – – – – – – – – – – – – –

reserve Other ’ 0 $ 000 – – – – – – – – – – – – – – – –

Retained (301,700) (261,473) (125,423) 1,2 618 208,329 (6,198) 214,527 214,527 9,9 478 392,179 (4,718) 396,897 396,897 368,256 profits ’ 0 $ 000 – – – – – – – –

Exchange eev Total reserve 618 (6,198) (6,198) 478 (4,718) (4,718) ’ 0 $ 000 – – – – – – – – – – – –

2,349,204 4,295,295 (445,944) (301,700) (261,473) (231,303) 214,527 396,897 368,256 (56,890) 3,099 8,621 ’ 000 131

HKBN Ltd. Annual Report 2019 132 HKBN Ltd. Annual Report 2019 Note: The Group has initially applied HKFRS 15 and HKFRS 9 at 1 September 2018. Under the transition methods chosen, chosen, methods transition the Under 2018. September 1 at 9 HKFRS and 15 HKFRS applied initially has Group The Note: Dividend paid to the holders of Vendor Loan Notes Dividend paid to the equity shareholders of the Company Transaction costs paid for bank loans Interest paid on senior notes Interest paid on bank loans Interest paid on interest-rate swap Repayment of bank loans Effect offoreignexchangeratechanges Interest received Payment for investment in joint ventures – Hong Kong Profits Tax paid Tax paid: – Tax paid outside Hong Kong The notes on pages 133 to 233 form part of these financial statements. Cash andcashequivalentsattheendofyear Cash andcashequivalentsatthebeginningofyear Net increase/(decrease)incashandequivalents Net cashusedinfinancingactivities Proceeds from bank loans Financing activities Net cashusedininvestingactivities Cash from acquisition of subsidiaries Payment for contingent consideration Proceeds from sale of property, plant and equipment Payment for the purchase of investment properties Payment for the purchase of property, plant and equipment Investing activities Net cashgeneratedfromoperatingactivities Cash generated from operations Operating activities (Expressed inHongKongdollars) For theyearended31August2019 Consolidated CashFlowStatement Payment for acquisition of subsidiaries comparative information is not restated. See note 1(c). note See restated. not is information comparative 18(b) 18(a) 18(a) 30(a) 18(c) 18(c) 18(c) 18(c) 18(c) 18(c) 30(c) Note 1,469,569 1,352,173 (144,636) (126,915) (747,644) (400,000) (111,512) (296,390) (511,054) (550,041) (191,431) (413,860) 291,078 974,365 662,816 373,293 355,172 (56,890) (11,600) (8,850) (1,555) (5,884) $ 4,083 4,795 2019 ’ (484) (810) 000 1,192,771 1,076,537 (492,777) (111,177) (629,004) (458,572) (433,301) 373,293 385,052 (29,859) (96,743) (11,039) (19,324) (6,833) (2,792) (5,057) (9,501) $ (Note) 1,641 1,913 2018 ’ (720) 000 – – – – – – Significantaccountingpolicies 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (b) Basis ofpreparationthefinancialstatements (b) Statement ofcompliance (a) financial statements and major sources of estimation uncertainty are discussed in note 37. Judgements made by management in the application of HKFRSs that have significant effect on the periods. period, or in the period of the revision and future periods if the revision affects both current and future estimates are recognised in the period in which the estimate is revised if the revision affects only that The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting these estimates. assets and liabilities that are not readily apparent from other sources. Actual results may differ from circumstances, the results of which form the basis of making the judgements about carrying values of on historical experience and various other factors that are believed to be reasonable under the of assets, liabilities, income and expenses. The estimates and associated assumptions are based judgements, estimates and assumptions that affect the application of policies and reported amounts The preparation of financial statements in conformity with HKFRSs requires management to make stated at their fair values as explained in the accounting policies set out below in notes 1(f), 1(s) and 1(g). except that contingent consideration, share-based payments and derivative financial instruments are The measurement basis used in the preparation of the financial statements is the historical cost basis financial statements. extent that they are relevant to the Group for the current and prior accounting periods reflected in these on any changes in accounting policies resulting from initial application of these developments to the adoption for the current accounting period ofthe Group and the Company. Note 1(c) provides information The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adopted by the Group are disclosed below. the Listing of Securities on The Stock Exchange of Hong Kong Limited. Significant accounting policies financial statements also comply with the applicable disclosure provisions of the Rules Governing accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These by theHongKongInstituteofCertifiedPublicAccountants( Financial Reporting Standards, Hong Kong Accounting Standards ( subsidiaries (together referred to as the The consolidated financial statements for the year ended 31 August 2019 comprise the Company and its Reporting Standards ( These financial statements have been prepared in accordance with all applicable Hong Kong Financial “ HKFRSs ” ), which collective term includes all applicable individual Hong Kong “ Group ” ) and the Group “ HKICPA ’ s interest in joint ventures. “ HKASs ” ) and accounting principles generally ) andaccountingprinciplesgenerally ” ) and Interpretations issued 133

HKBN Ltd. Annual Report 2019 134 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (b) Basis ofpreparationthefinancialstatements(continued) (b) i Restatementofprior year (i) Restated consolidated statement of financial position as at 31 August 2018 is presented. 2017. Accordingly no restated consolidated statement of financial position as at 1 September 2017 2018 and hence have no financial impact on the consolidated financial position as at 1 September The above restatements relate to acquisition which was effected during the year ended 31 August comprehensive income for the year ended 31 August 2018 is presented. material. Accordingly no restated consolidated income statement and consolidated statement of respective assets subsequent to the acquisition date was not adjusted as the financial impact is not made as if initial accounting had been completed on the acquisition date. The amortisation of the The adjustments to the fair values at the acquisition date of the identifiable net assets were assets and liabilities of ICG and its subsidiary as a result of completing the initial accounting. reference to the finalised independent valuation, to the carrying amounts of the identifiable During the year ended 31 August 2019, the Group made certain fair value adjustments, with provisionally. completed andtherespectivefairvaluesofidentifiablenetassetsgoodwillweredetermined Contingent consideration – long-term portion Deferred tax liabilities Non-current liabilities Contingent consideration – current portion Current liabilities Intangible assets Goodwill Non-current assets at 31 August 2018 include the following: Details of the financial line items as restated in the consolidated statement of financial position as shareholders of the Company Total equity attributable to equity Group Limited ( During the year ended 31 August 2018, the Group acquired the entire shares of I Consulting Total non-current liabilities Total current liabilities Total current assets Total non-current assets price allocationofprioryearacquisition “ ICG ” ) and its subsidiary ( ’ s financialstatementsasaresultoffinalisedpurchase “ ICG Acquisition As originally As originally 46893 236 (4,631,269) (2,326) (4,628,943) 1,454,877 1,804,904 1,036,912 5,626,776 (408,431) (915,318) 954,397 2,9)(,3)(28,236) (2,539) (25,697) (18,597) ” ) of which the valuations have not been ttdAdjustments stated ttdAdjustments stated $ $ ’ ’ 000 000 129 1,453,588 1,801,393 (1,289) (3,511) 480 5,621,976 (4,800) $ $ ,2 (11,471) 7,126 ,2 (908,192) 7,126 ’ ’ 000 000 1 (408,218) 213 – - As restated As restated 1,036,912 954,397 $ $ ’ ’ 000 000 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (c) Change inaccountingpolicies (c) i HKFRS 9, (i) i HKFRS9, (i) accounting period. The Group has not applied any new standard or interpretation that is not yet effective for the current HK(IFRIC) 22, (iii) HKFRS 15, (ii) Group for the current accounting period of the Group. Of these, the following developments are relevant to the The HKICPA has issued a number of new HKFRSs, and amendments to HKFRSs that are first effective . Classification of financial assets and financial liabilities a. approach are set out below: Details of the nature and effect of the changes to previous accounting policies and the transition comparative information continues to be reported under HKAS 39. of initial application as an adjustment to the opening equity at 1 September 2018. Therefore, accordance with the transition requirements. The Group has recognised the cumulative effect The Group has applied HKFRS 9 retrospectively to items that existed at 1 September 2018 in to buy or sell non-financial items. requirements forrecognisingandmeasuringfinancialassets,liabilitiessomecontracts HKFRS 9 replaces HKAS 39, ’ s financial statements: instrument as a whole is assessed for classification. financial asset in the scope of the standard are not separated from the host. Instead, the hybrid characteristics. Under HKFRS 9, derivatives embedded in contracts where the host is a business model under which the financial asset is managed and its contractual cash flow measured at FVPL. The classification of financial assets under HKFRS 9 is based on the investments, loans and receivables, available-for-sale financial assets and financial assets through profit or loss (FVPL). These supersede HKAS 39 at amortised cost, at fair value through other comprehensive income (FVOCI) and at fair value HKFRS 9 categories financial assets into three principal classification categories: measured Financial instruments Financial Revenue from contracts with customers with contracts from Revenue Financial instruments Financial Foreign currency transactions and advance consideration advance and transactions currency Foreign Financial instruments: recognition and measurement and recognition instruments: Financial ’ s categories of held-to-maturity . It sets out the 135

HKBN Ltd. Annual Report 2019 136 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (c) Change inaccountingpolicies(continued) (c) i HKFRS9, (i) . Credit losses b. Classification of financial assets and financial liabilities (continued) a. 1(k)(i) and (ii). For further details on the Group the ECL assessment. Financial assets measured at fair value, including derivative financial assets, are not subject to and contract assets as defined in HKFRS 15 (see note 1(c)). cash and cash equivalents, trade receivables and other receivables, deposits and prepayments) The Group applies the new ECL model to financial assets measured at amortised cost (including model in HKAS 39. financial asset and therefore recognises ECLs earlier than under the model. The ECL model requires an ongoing measurement of credit risk associated with a HKFRS 9 replaces the September 2018. The Group did not designate or de-designate any financial asset or financial liability at FVPL at 1 not been impacted by the initial application of HKFRS 9. The carrying amounts for all financial assets and financial liabilities at 1 September 2018 have liabilities of the Group remain the same. HKFRS 15 (see note 1(c)), the measurement categories for all financial assets and financial reclassified to contract liabilities at 1 September 2018 as a result of the initial application of contract assets at 1 September 2018 and (ii) deferred services revenue of $178,024,000 were Except for (i) other receivables, deposits and prepayments of $150,949,000 were reclassified to (n) and (r). related gains and losses under HKFRS 9, see respective accounting policies in notes 1(g), (k)(i), For an explanation of how the Group classifies and measures financial assets and recognises Financial instruments Financial “ incurred loss ’ s accounting policy for accounting for credit losses, see note

(continued) ” model in HKAS 39 with the “ expected credit loss “ incurred loss ” accounting ” (ECL) Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (c) Change inaccountingpolicies(continued) (c) i) HKFRS15, (ii) HKFRS9, (i) from sale of goods and rendering of services, and HKAS 11, related tax impact at 1 September 2018: The following table summarises the impact of transition to HKFRS 15 on retained profits and the requirements only to contracts that were not completed before 1 September 2018. be reported under HKASs 11 and 18. As allowed by HKFRS 15, the Group has applied the new September 2018. Therefore, comparative information has not been restated and continues to cumulative effect of initial application as an adjustment to the opening balance of equity at 1 The Group has elected to use the cumulative effect transition method and has recognised the uncertainty of revenue and cash flows arising from contracts with customers. aim to enable users of the financial statements to understand the nature, amount, timing and HKFRS 15 also introduces additional qualitative and quantitative disclosure requirements which the accounting for construction contracts. c. Transition Net increase in retained profits at 1 September 2018 Related tax Capitalisation of contract costs (note 15(b)) Retained profits contracts with customers. HKFRS 15 replaces HKAS 18, HKFRS 15 establishes a comprehensive framework for recognising revenue and some costs from If, at the date of initial application, the assessment of whether there has been a significant – Information relating to comparative periods has not been restated, the information – retrospectively, except as described below: Changes in accounting policies resulting from the adoption of HKFRS 9 have been applied lifetime ECL has been recognised for that financial instrument. increase in credit risk since initial recognition would have involved undue cost or effort, a presented for the year ended 31 August 2018 continues to be reported under HKAS 39. Financial instruments Financial Revenue from contracts with customers with contracts from Revenue (continued) Revenue Construction contracts Construction , which covered revenue arising , which specified 368,256 433,755 (65,499) $ ’ 000 137

HKBN Ltd. Annual Report 2019 138 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (c) Change inaccountingpolicies(continued) (c) i) HKFRS15, (ii) . Timing of revenue recognition and selling price allocation for multiple element sale contracts a. below: Further details of the nature and effect of the changes on previous accounting policies are set out The adoptionofHKFRS15mainlyaffectstheaccountingtreatmentGroup timing of revenue recognition for individual performance obligations of the Group 2018. However, in future periods it may have a material impact, depending on the amount and This changeinaccountingpolicyhadnomaterialimpacton openingbalancesasat1September generally over the contract period. telecommunications and other services is recognised when services are rendered, which is which is generally upfront upon entering into the sale contracts. The revenue allocated to revenue being allocated to products and gifts is recognised upon the delivery to customers, individual performance obligations would be different after the adoption of HKFRS 15. The over the contract period is unchanged, the amount and timing of revenue recognition for Accordingly, although the total revenue being recognised for a multiple element sale contract their respective standalone selling price. contracts is allocated among all identified performance obligations of the Group in proportion to Under HKFRS 15, the total transaction price receivable from customers in multiple element sale consideration. delivered element by deducting the fair value of the undelivered element from the total contract passed to the customers. Residual value method was used to determine the fair value of the recognised at a point in time when the risks and rewards of ownership of the products had Previously, revenue from sale of products and gifts offered in the contracts was generally provision of telecommunication services, sale of products and gifts offered in the contracts. with customers in which the Group has multiple performance obligations to customers, such as element sale contracts. Revenue from contracts with customers with contracts from Revenue (continued) ’ s salecontracts ’ s multiple Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (c) Change inaccountingpolicies(continued) (c) i) HKFRS15, (ii) . Presentation of contract assets and liabilities c. Capitalisation of contract costs b. ii Amount of $79,371,000 which was previously included in deferred services revenue – (iii) Amount of $98,653,000 which was previously included in deferred services revenue – (ii) Amount of $150,949,000 which was previously included in other receivables, deposits and (i) September 2018, as a result of the adoption of HKFRS 15: To reflect these changes in presentation, the Group has made the following adjustments at 1 respectively. position under Previously, contract balances were presented in the consolidated statement of financial contract liabilities of unrelated contracts are not presented on a net basis. asset or a net contract liability is presented. For multiple contracts, contract assets and recognises the related revenue. For a single contract with the customer, either a net contract is contractually required to pay consideration and the amount is already due, before the Group contract liability, rather than a payable, is recognised when a customer pays consideration, or the contract, then the entitlement to consideration is classified as a contract asset. Similarly, a or being unconditionally entitled to the consideration for the promised goods and services in consideration. If the Group recognises the related revenue before receiving the consideration Under HKFRS 15, a receivable is recognised only if the Group has an unconditional right to liabilities by $65,499,000 and increased retained profits by $368,256,000. increased customer acquisition and retention costs by $433,755,000, increased deferred tax policy, the Group has made adjustments to opening balances at 1 September 2018 which included as costs of sales and services at that time. As a result of this change in accounting are charged to profit or loss when the revenue from the related revenue is recognised and are costs can be expensed when incurred. Capitalised customer acquisition and retention costs the date of initial recognition of the asset, in which case the customer acquisition and retention are expected to be recovered, unless the expected amortisation period is one year or less from to capitalise these customer acquisition and retention costs when they are incremental and as other operating expenses when they were incurred. Under HKFRS 15, the Group is required The Group previously recognised (i) customer acquisition costs and (ii) customer retention costs long-term portion is now included under contract liabilities – long-term portion (note 16(b)). current portion is now included under contract liabilities – current portion (note 16(b)); and prepayments (note 17) is now included under contract assets (note 16(a)); Revenue from contracts with customers with contracts from Revenue “ other receivables, deposits and prepayments (continued) ” and “ deferred services revenue ”

139

HKBN Ltd. Annual Report 2019 140 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (c) Change inaccountingpolicies(continued) (c) i) HKFRS15, (ii) . Disclosure of the estimated impact on the amounts reported in respect of the year ended 31 d. Total comprehensiveincome adoptionofHKFRS15: ended31August2019impacted bythe ofcomprehensiveincomefor theyear Line itemsintheconsolidatedstatement Diluted Basic Earnings per share ($ cents) shareholdersoftheCompany Profit attributabletoequity Profit fortheyear Income tax Profit beforetaxation Other operating expenses adoptionofHKFRS15: 31August2019impactedbythe statementforyearended Line itemsintheconsolidatedincome show only those line items impacted by the adoption of HKFRS 15: those superseded standards had continued to apply to 2019 instead of HKFRS 15. These tables of the hypothetical amounts that would have been recognised under HKAS 18 and HKAS 11 if amounts reported under HKFRS 15 in these consolidated financial statements with estimates consolidated financial statements for the year ended 31 August 2019, by comparing the The following tables summarise the estimated impact of adoption of HKFRS 15 on the Group August 2019 as a result of the adoption of HKFRS 15 on 1 September 2018 Revenue from contracts with customers with contracts from Revenue accordance reported in 27460 27578 (8,892) (2,725,708) (2,734,600) HKFRS 15 Amounts 0,2 213,208 208,329 219,406 219,406 214,527 214,527 0,6 318,254 309,362 9,3)(98,848) (94,835) $ ’ with 18.4 19.4 (continued) 000 (A) under HKASs Hypothetical 18 and11 amounts $ ’ 18.8 19.8 000 (B) adoption of Difference: Estimated HKFRS 15 impact of (A) –(B) on 2019 (4,879) (4,879) (4,879) (8,892) $ 4,013 ’ 000 (0.4) (0.4) ’ s Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (c) Change inaccountingpolicies(continued) (c) i) HKFRS15, (ii) . Disclosure of the estimated impact on the amounts reported in respect of the year ended 31 d. Trade receivables Total non-currentassets Trade receivables Contract assets Customer acquisition and retention costs HKFRS15: 2019impactedbytheadoptionof offinancialpositionasat31August Line itemsintheconsolidatedstatement August 2019 as a result of the adoption of HKFRS 15 on 1 September 2018 (continued) Deferred tax liabilities portion Deferred services revenue – long-term Contract liabilities – long-term portion Total assetslesscurrentliabilities Net currentassets Total currentliabilities – current portion Deferred services revenue Contract liabilities – current portion Total currentassets prepayments Other receivables, deposits and Contract assets shareholdersoftheCompany Total equityattributableto Reserves Net assets Total non-currentliabilities Revenue from contracts with customers with contracts from Revenue accordance 1,8,3)(11883 (61,486) (11,118,853) (11,180,339) reported in 864871,3,6 598,030 18,036,867 18,634,897 866901,3,7 598,030 18,038,870 18,636,900 11140 10994 (61,486) (1,069,954) (1,131,440) 17514 (1,745,124) (1,745,124) HKFRS 15 ,4,2 1,747,127 1,747,127 ,5,6 ,2,1 536,544 536,544 6,920,017 536,544 6,919,885 7,456,561 6,920,017 7,456,429 7,456,561 Amounts (187,690) (219,763) 5,3 6,4 (10,806) 568,245 557,439 598,030 4,9 7,0 (230,911) 471,805 240,894 241,717 $ 4,740 2,003 ’ with (continued) 000 (A) – – – Hypothetical HKASs 18 amounts 1760 187,690 (187,690) 2973 219,763 (219,763) and 11 under $ 4,740 2,003 ’ 000 (B) – – – – – adoption of Difference: Estimated HKFRS 15 impact of (187,690) (219,763) (A) –(B) 598,030 241,717 on 2019 (4,740) $ 4,740 ’ 000 – – – 141

HKBN Ltd. Annual Report 2019 142 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (c) Change inaccountingpolicies(continued) (c) i) HKFRS15, (ii) . Disclosure of the estimated impact on the amounts reported in respect of the year ended 31 d. Decrease in contract liabilities Decrease in deferred services revenue retention costs Increase in customer acquisition and above. The significant differences arise as a result of the changes in accounting policies described Increase in trade receivables Profit before taxation bytheadoptionofHKFRS15: 31August2019(note18(b))impacted fromoperationsforyearended beforetaxationtocashgenerated Line itemsinthereconciliationofprofit August 2019 as a result of the adoption of HKFRS 15 on 1 September 2018 (continued) and prepayments Increase in other receivables, deposits Increase in contract assets Revenue from contracts with customers with contracts from Revenue accordance reported in HKFRS 15 Amounts 0,6 318,254 309,362 4,3)(54,726) (45,334) (24,938) (6,292) 292 1,6)15,546 (18,468) (2,922) $ 8,892 ’ with (continued) 000 (A) – under HKASs Hypothetical 18 and11 amounts (6,292) $ ’ 000 (B) – – – adoption of Difference: Estimated HKFRS 15 impact of (A) –(B) on 2019 (24,938) (6,292) (8,892) $ 6,292 8,892 9,392 ’ 000 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (d) Subsidiaries Change inaccountingpolicies(continued) (c) disposal group that is classified as held for sale). impairment losses (see note 1(k)), unless the investment is classified as held for sale (or included in a In the Company initial recognition of an investment in a joint venture (see note 1(e)). regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on that former subsidiary at the date when control is lost is recognised at fair value and this amount is that subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in impairment. are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of the consolidated financial statements. Unrealised losses resulting from intra-group transactions flows and any unrealised profits arising from intra-group transactions are eliminated in full in preparing that control commences until the date that control ceases. Intra-group balances, transactions and cash An investment in a subsidiary is consolidated into the consolidated financial statements from the date (held by the Group and other parties) are considered. through its power over the entity. When assessing whether the Group has power, only substantive rights rights, to variable returns from its involvement with the entity and has the ability to affect those returns Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has HK(IFRIC) 22, (iii) 22 does not have any material impact on the financial position and the financial result of the Group. transaction for each payment or receipt should be determined in this way. The adoption of HK(IFRIC) there are multiple payments or receipts in advance of recognising the related item, the date of the the non-monetary asset or liability arising from the payment or receipt of advance consideration. If The Interpretation clarifies that a foreign currency. (or part of it) arising from a transaction in which an entity receives or pays advance consideration in determining the exchange rate to use on initial recognition of the related asset, expense or income This interpretation provides guidance on determining ’ s statement of financial position, an investment in a subsidiary is stated at cost less Foreign currency transactions and advance consideration advance and transactions currency Foreign “ the date of the transaction “ the date of the transaction ” is the date on initial recognition of ” for the purpose of 143

HKBN Ltd. Annual Report 2019 144 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (e) Joint ventures (e) When the Group comprehensive income. the investment (see notes 1(f) and (k)). Any acquisition-date excess over cost, the Group acquisition change in the Group assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post in the consolidated income statement, whereas the Group post-acquisition, post-taxresultsoftheinvesteesandanyimpairmentlossesforyeararerecognised any excess of the Group as held for sale). Under the equity method, the investment is initially recorded at cost, adjusted for equity method, unless it is classified as held for sale (or included in a disposal group that is classified An investment in a joint venture is accounted for in the consolidated financial statements under the control of the arrangement, and have rights to the net assets of the arrangement. A joint venture is an arrangement whereby the Group and other parties contractually agree to share items of the investees the Group incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, reduced to nil and recognition of further losses is discontinued except to the extent that the Group has the Group asset. recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial interest retained in that former investee at the date when significant influence or joint control is lost is the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any When the Group ceases to have joint control over a joint venture, it is accounted for as a disposal of profit or loss. evidence of an impairment of the asset transferred, in which case they are recognised immediately in eliminated to the extent of the Group Unrealised profits and losses resulting from transactions between the Group and its joint venture are venture. ’ ’ s interest is the carrying amount of the investment under the equity method together with s long-term interests that in substance form part of the Group ’ s share of losses exceeds its interest in the joint venture, the Group ’ other comprehensive income is recognised in the consolidated statement of ’ s share of the acquisition-date fair values of the investee ’ s share of the investee ’ s interest in the investee, except where unrealised losses provide ’ s net assets and any impairment loss relating to ’ s share of the post-acquisition post-tax ’ s net investment in the joint ’ s identifiable net ’ s interest is ’ s share of the Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements f Businesscombinationandgoodwill (f) i) the net fair value of the acquiree (ii) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling (i) Goodwill represents the excess of subsequent settlement is accounted for within equity. comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its or liability is recognised in accordance with HKFRS 9 either in profit or loss or as a change to other Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset existed at the acquisition date. period included in the calculation of the profit or loss on disposal. On disposal of a cash generating unit during the year, any attributable amount of purchased goodwill is note 1(k)). expected to benefit from the synergies of the combination and is tested annually for impairment (see combination is allocated to each cash-generating unit, or groups of cash generating units, that is Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business bargain purchase. When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a adjustments are adjustments that arise from additional information obtained during the retrospectively, with the corresponding adjustments made against goodwill. Measurement period date. Contingent consideration that qualify as measurement period adjustments are adjusted Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition acquiree either at fair value or at the non-controlling interest Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, assumed in a business combination are measured initially at their fair values at the acquisition date. The consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities consideration transferred includes the fair value of any asset or liability resulting from a contingent incurred to the former owners of the acquiree and the equity interests issued by the Group. The transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities The Group applies the acquisition method to account for business combination. The consideration acquiree; over interest in the acquiree and the fair value of the Group date. ’ (which cannot exceed one year from the acquisition date) about facts and circumstances that ’ s identifiable net assets. Acquisition-related costs are expensed as incurred. ’ s identifiable assets and liabilities measured as at the acquisition ’ s proportionate share of the recognised amounts of ’ s previously held equity interest in the ‘ measurement 145

HKBN Ltd. Annual Report 2019 146 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (h) Property, plantandequipment (h) Derivative financialinstruments (g) lives to the Group. charged to profit or loss. Major improvements are capitalised and depreciated over their expected useful Major costs incurred in restoring property, plant and equipment to their normal working condition are useful life of an asset and its residual value, if any, are reviewed annually. is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the Where parts of an item of property, plant and equipment have different useful lives, the cost of the item Investment properties are depreciated over the shorter of the unexpired term of lease and their – Motor vehicles – Telecommunications, computer and office equipment – Furniture, fixtures and fittings – Cable – Leasehold land classified as held under finance leases is depreciated over the unexpired term of – Leasehold improvements are depreciated over the shorter of the unexpired term of the lease and – Buildings situated on leasehold land are depreciated over the shorter of the unexpired term of lease – follows: estimated residual value, if any, using the straight-line method over their estimated useful lives as Depreciation is calculated to write off the cost of items of property, plant and equipment, less their and are recognised in profit or loss on the date of retirement or disposal. determined as the difference between the net disposal proceeds and the carrying amount of the item Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are (see note 1(k)). Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses in profit or loss. the fair value is remeasured. The gain or loss on remeasurement to fair value is recognised immediately Derivative financial instruments are recognised initially at fair value. At the end of each reporting period estimated useful lives, being no more than 50 years after the date of completion lease their estimated useful lives and their estimated useful lives, being no more than 50 years after the date of completion 4 – 25 years 5 – 25 years 4 – 5 years 4 – 5 years Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements i Intangibleassets(otherthangoodwill) (i) Backlog – Brand and trademark – – Brand and trademark – – Brand and trademark – – Brand and trademark – – Brand and trademark – – Customers relationship – IT business – Customers relationship – Cloud services – Customer relationship – Broadband wireless ( – their estimated useful lives are as follows: lives. The major intangible assets with finite useful lives are amortised from the date of acquisition and lives as set out above. the date of change and in accordance with the policy for amortisation of intangible assets with finite not, the change in the useful life assessment from indefinite to finite is accounted for prospectively from and circumstances continue to support the indefinite useful life assessment for that asset. If they do that the useful life of an intangible asset is indefinite is reviewed annually to determine whether events Intangible assets are not amortised while their useful lives are assessed to be indefinite. Any conclusion Both the period and method of amortisation are reviewed annually. Customer relationship – International telecommunications services ( – Customer relationship – FTNS business – basis or diminishing balance method or unit of production method over the assets Amortisation of intangible assets with finite useful lives is charged to profit or loss on a straight-line the estimated useful life is finite) and impairment losses (see note 1(k)). Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (where “ “ “ “ “ WTT ICG Y5Zone IDD0030 HKBN ” ” for Cloud services for IT business ” & ” for Wi-Fi business ” , “ “ WTT IDD1666 ” for FTNS business ” , “ “ Wi-Fi IDD007 ” ) connectivity business ” & “ IDD1507 ” for IDD business “ IDD ” ) business ’ estimated useful 14 – 18 years 11 – 14 years 11 – 20 years 7 – 18 years 1.5 years 11 years 11 years 20 years 18 years 14 years 7 years 147

HKBN Ltd. Annual Report 2019 148 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements j Leasedassets (j) (iii) Sale and leasebacktransactions (iii) Operatingleasecharges (ii) Classificationofassets leasedtotheGroup (i) legal form of a lease. evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the of time in return for a payment or a series of payments. Such a determination is made based on an determines that the arrangement conveys a right to use a specific asset or assets for an agreed period An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group charged to profit or loss on a straight-line basis over the lease periods. are determined based on the prevailing market prices. Payments made under operating leases are or loss as gain on disposal, if the sales prices and lease back arrangements for these transactions as operating leases. Any excess of sales proceeds over the carrying amount is recognised in profit all of the risks and rewards of ownership of assets being transferred to the lessor are accounted for as they are negotiated as a package. Sale and leaseback arrangements that result in substantially same asset back to the Group. The lease payments and the sale price are usually interdependent A sale and leaseback transaction involves the sale of an asset by the Group and the leasing of the the period of the lease term. The cost of acquiring land held under an operating lease is amortised on a straight-line basis over loss in the accounting period in which they are incurred. integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or be derived from the leased asset. Lease incentives received are recognised in profit or loss as an lease term, except where an alternative basis is more representative of the pattern of benefits to leases are charged to profit or loss in equal instalments over the accounting periods covered by the Where the Group has the use of assets held under operating leases, payments made under the land held for own use under an operating lease, the fair value of which cannot be measured – leases with the following exceptions: transfer substantially all the risks and rewards of ownership to the Group are classified as operating and rewards of ownership are classified as being held under finance leases. Leases which do not Assets that are held by Group under leases which transfer to the Group substantially all the risks first entered into by the Group, or taken over from the previous leasee. an operating lease. For these purposes, the inception of the lease is the time that the lease was accounted for as being held under a finance lease, unless the building is also clearly held under separately from the fair value of a building situated thereon at the inception of the lease, is Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (k) Credit lossesandimpairmentofassets (k) i Creditlossesfromfinancial instrumentsandcontractassets (i) A Policy applicable from 1 September 2018 (A) conditions and forecasts of future economic conditions. is available without undue cost or effort. This includes information about past events, current In measuring ECLs, the Group takes into account reasonable and supportable information that which the Group is exposed to credit risk. The maximum period considered when estimating ECLs is the maximum contractual period over variable-rate financial assets: current effective interest rate. – trade receivables, other receivables, deposits and prepayments and contract assets: – of discounting is material: The expected cash shortfalls are discounted using the following discount rates where the effect the Groupinaccordancewithcontractandcashflowsthatexpectstoreceive). present value of all expected cash shortfalls (i.e. the difference between the cash flows due to ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the Measurement of ECLs (m)). receivables, deposits and prepayments) and contract assets as defined in HKFRS 15 (see note 1 measured at amortised cost (including cash and cash equivalents, trade receivables and other The Group recognises a loss allowance for expected credit losses (ECLs) on financial assets effective interest rate determined at initial recognition or an approximation thereof; and 149

HKBN Ltd. Annual Report 2019 150 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (k) Credit lossesandimpairmentofassets(continued) (k) i Creditlossesfromfinancial instrumentsandcontractassets(continued) (i) A Policy applicable from 1 September 2018 (continued) (A) cost or effort. including historical experience and forward-looking information that is available without undue considers both quantitative and qualitative information that is reasonable and supportable, such as realising security (if any is held); or (ii) the financial asset is 90 days past due. The Group unlikely topayitscreditobligationstheGroupinfull,without recoursebytheGrouptoactions this reassessment, the Group considers that a default event occurs when (i) the borrower is assessed at the reporting date with that assessed at the date of initial recognition. In making initial recognition, the Group compares the risk of default occurring on the financial instrument In assessing whether the credit risk of a financial instrument has increased significantly since Significant increases in credit risk ECLs. initial recognition, in which case the loss allowance is measured at an amount equal to lifetime ECLs unless there has been a significant increase in credit risk of the financial instrument since For all other financial instruments, the Group recognises a loss allowance equal to 12-month the reporting date. the debtors and an assessment of both the current and forecast general economic conditions at based on the Group equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix Loss allowances for trade receivables and contract assets are always measured at an amount lifetime ECLs: these are losses that are expected to result from all possible default events – 12-month ECLs: these are losses that are expected to result from possible default events – ECLs are measured on either of the following bases: over the expected lives of the items to which the ECL model applies. within the 12 months after the reporting date; and ’ s historical credit loss experience, adjusted for factors that are specific to Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (k) Credit lossesandimpairmentofassets(continued) (k) i Creditlossesfromfinancial instrumentsandcontractassets(continued) (i) A Policy applicable from 1 September 2018 (continued) (A) existing or forecast changes in the technological, market, economic or legal environment – an actual or expected significant deterioration in the operating results of the debtor; and – anactualorexpectedsignificantdeteriorationinafinancialinstrument – failure to make payments of principal or interest on their contractually due dates; – has increased significantly since initial recognition: In particular, the following information is taken into account when assessing whether credit risk Significant increases in credit risk (continued) allowance account. financial instruments with a corresponding adjustment to their carrying amount through a loss impairment gain or loss in profit or loss. The Group recognises an impairment gain or loss for all credit risk since initial recognition. Any change in the ECL amount is recognised as an ECLs are remeasured at each reporting date to reflect changes in the financial instrument shared credit risk characteristics, such as past due status and credit risk ratings. assessment is performed on a collective basis, the financial instruments are grouped based on increase in credit risk is performed on either an individual basis or a collective basis. When the Depending on the nature of the financial instruments, the assessment of a significant that have a significant adverse effect on the debtor credit rating (if available); Group. ’ s ability to meet its obligation to the ’ s external or internal s externalorinternal ’ s 151

HKBN Ltd. Annual Report 2019 152 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (k) Credit lossesandimpairmentofassets(continued) (k) i Creditlossesfromfinancial instrumentsandcontractassets(continued) (i) B Policy applicable prior to 1 September 2018 (B) Policy applicable from 1 September 2018 (continued) (A) significant financial difficulties of the debtor; – there was objective evidence of impairment. Objective evidence of impairment included: prepayments). Under the financial assets not classified as at FVPL (e.g. trade receivables, other receivables, deposits and Prior to 1 September 2018 an of impairment in profit or loss in the period in which the recovery occurs. Subsequent recoveries of an asset that was previously written off are recognised as a reversal could generate sufficient cash flows to repay the amounts subject to the write-off. when the Group determines that the debtor does not have assets or sources of income that or in full) to the extent that there is no realistic prospect of recovery. This is generally the case The gross carrying amount of a financial asset or contract asset is written off (either partially Write-off policy significant changes in the technological, market, economic or legal environment that have – it becoming probable that the borrower will enter into bankruptcy or other financial – a breach of contract, such as a default or delinquency in interest or principal payments; – significant financial difficulties of the debtor; – Evidence that a financial asset is credit-impaired includes the following observable events: the estimated future cash flows of the financial asset have occurred. financial asset is credit-impaired when one or more events that have a detrimental impact on At each reporting date, the Group assesses whether a financial asset is credit-impaired. A less loss allowance) of the financial asset. case interest income is calculated based on the amortised cost (i.e. the gross carrying amount carrying amount of the financial asset unless the financial asset is credit-impaired, in which Interest income recognised in accordance with note 1 (v)(vi) is calculated based on the gross Basis of calculation of interest income an adverse effect on the debtor. reorganisation; or “ incurred loss “ incurred loss ” model, an impairment loss was recognised only when ” model was used to measure impairment losses on Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (k) Credit lossesandimpairmentofassets(continued) (k) i Creditlossesfromfinancial instrumentsandcontractassets(continued) (i) B Policy applicable prior to 1 September 2018 (continued) (B) For trade receivables and other financial assets carried at amortised cost, impairment loss – If any such evidence existed, an impairment loss was determined and recognised as follows: a significant or prolonged decline in the fair value of an investment in an equity instrument – significant changes in the technological, market, economic or legal environment that have – it becoming probable that the debtor will enter bankruptcy or other financial reorganisation; – a breach of contract, such as a default or delinquency in interest or principal payments; – or loss. subsequent recoveries of amounts previously written off directly were recognised in profit were reversed against the allowance account. Other changes in the allowance account and directly. Subsequent recoveries of amounts previously charged to the allowance account considered irrecoverable was written off against the gross carrying amount of those assets allowance account. When the Group was satisfied that recovery was remote, the amount considered doubtful but not remote, associated impairment losses were recorded using an When the recovery of a trade debtor or other financial assets carried at amortised cost was in prior years. exceeding that which would have been determined had no impairment loss been recognised of estimated future cash flows, discounted at the financial asset was measured as the difference between the asset below its cost. an adverse effect on the debtor; and was only recognised to the extent that it did not result in the asset the impairment loss was reversed through profit or loss. A reversal of an impairment loss could be linked objectively to an event occurring after the impairment loss was recognised, If in a subsequent period the amount of an impairment loss decreased and the decrease experience for assets with credit risk characteristics similar to the collective group. assets which were assessed for impairment collectively were based on historical loss status, and had not been individually assessed as impaired. Future cash flows for financial where these financial assets shared similar risk characteristics, such as similar past due rate, where the effect of discounting was material. This assessment was made collectively ’ s carrying amount and the present value ’ s original effective interest ’ s carrying amount 153

HKBN Ltd. Annual Report 2019 154 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (k) Credit lossesandimpairmentofassets(continued) (k) i) Creditlossesfromfinancialguaranteesissued (ii) which is determined by reference to fees charged in an arm A Policy applicable from 1 September 2018 (A) profit or loss over the term of the guarantee as income from financial guarantees issued. Subsequent to initial recognition, the amount initially recognised as deferred income is amortised in recognised in profit or loss on initial recognition of any deferred income. category of asset. Where no such consideration is received or receivable, an immediate expense is guarantee, the consideration is recognised in accordance with the Group information can be made. Where consideration is received or receivable for the issuance of the would have charged, had the guarantees not been available, where reliable estimates of such charged by lenders when the guarantee is made available with the estimated rates that lenders when such information is obtainable, or to interest rate differentials, by comparing the actual rates Financial guarantees issued are initially recognised within instrument. because a specified debtor fails to make payment when due in accordance with the terms of a debt payments to reimburse the beneficiary of the guarantee (the Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified risks specific to the cash flows. or any other party. The amount is then discounted using the current risk-free rate adjusted for amount that the Group expects to receive from the holder of the guarantee, the specified debtor on the expected payments to reimburse the holder for a credit loss that it incurs less any in accordance with the terms of the instrument that is guaranteed, an ECL is estimated based As the Group is required to make payments only in the event of a default by the specified debtor significant increase in credit risk as described in note 1(k)(i) apply. case a lifetime ECL is measured. The same definition of default and the same assessment of specified debtor will default has increased significantly since the guarantee is issued, in which since the issuance of the guarantee. A 12-month ECL is measured unless the risk that the To determine ECLs, the Group considers changes in the risk of default of the specified debtor recognised, less accumulated amortisation). carried in a provision when ECLs on the financial guarantees are determined to be higher than the amount The Groupmonitorstheriskthatspecifieddebtorwilldefaultoncontractandrecognises “ trade and other payables ” in respect of the guarantees (i.e. the amount initially “ ’ trade and other payables s length transaction for similar services, “ holder ” ) for a loss the holder incurs ’ s policies applicable to that ” at fair value, Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (k) Credit lossesandimpairmentofassets(continued) (k) (iii) Impairment ofothernon-currentassets (iii) Creditlossesfromfinancialguaranteesissued(continued) (ii) B Policy applicable prior to 1 September 2018 (B) investments in subsidiaries in the Company – goodwill; and – customer acquisition and retention costs; – intangible assets; – property, plant and equipment; – impairment loss previously recognised no longer exists or may have decreased: identify indications that the following assets may be impaired or, except in the case of goodwill, an Internal and external sources of information are reviewed at the end of each reporting period to If any such indication exists, the asset Calculation of recoverable amount – impairment. useful lives, the recoverable amount is estimated annually whether or not there is any indication of intangible assets that are not yet available for use and intangible assets that have indefinite other payables amount of the claim on the Group was expected to exceed the amount carried in that (i) the holder of the guarantee would call upon the Group under the guarantee and (ii) the Prior to 1 September 2018, a provision would be recognised if and when it became probable cash-generating unit). determined for the smallest group of assets that generates cash inflows independently (i.e. a cash inflows largely independent of those from other assets, the recoverable amount is time value of money and the risks specific to the asset. Where an asset does not generate present value using a pre-tax discount rate that reflects current market assessments of the value in use. In assessing value in use, the estimated future cash flows are discounted to their The recoverable amount of an asset is the greater of its fair value less costs of disposal and ” in respect of the guarantee. ’ s recoverable amount is estimated. In addition, for goodwill, ’ s statement of financial position. “ trade and 155

HKBN Ltd. Annual Report 2019 156 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements l Inventoriesandothercontractcosts (l) Credit lossesandimpairmentofassets(continued) (k) (i) Inventories Interim financialreportingandimpairment (iv) Impairment ofothernon-currentassets(continued) (iii) financial reporting financial relates. had the impairment been assessed only at the end of the financial year to which the interim period subsequent period. This is the case even if no loss, or a smaller loss, would have been recognised Impairment losses recognised in an interim period in respect of goodwill are not reversed in a at the end of the financial year (see notes 1(k)(i) and (ii)). period, the Group applies the same impairment testing, recognition, and reversal criteria as it would Reversals of impairment losses – Recognition of impairment losses – estimated costs necessary to make the sale. Net realisable value is the estimated selling price in the ordinary course of business less the other costs incurred in bringing the inventories to their present location and condition. Cost is calculated using the first in, first out cost formula and comprises all costs of purchase and Inventories are carried at the lower of cost and net realisable value. the Group is required to prepare an interim financial report in compliance with HKAS 34, Under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, losses are credited to profit or loss in the year in which the reversals are recognised. determined had no impairment loss been recognised in prior years. Reversals of impairment A reversal of an impairment loss is limited to the asset loss in respect of goodwill is not reversed. favourable change in the estimates used to determine the recoverable amount. An impairment In respect of assets other than goodwill, an impairment loss is reversed if there has been a disposal (if measurable) or value in use (if determinable). that the carrying value of an asset will not be reduced below its individual fair value less costs of carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the recognised in respect of cash-generating units are allocated first to reduce the carrying amount cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the , in respect of the first six months of the financial year. At the end of the interim ’ s carrying amount that would have been Interim Interim Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements l Inventoriesandothercontractcosts(continued) (l) i) Othercontractcosts (ii) Inventories(continued) (i) as an expense in the period in which the reversal occurs. any write-down of inventories is recognised as a reduction in the amount of inventories recognised recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of The amount of any write-down of inventories to net realisable value and all losses of inventories are the period in which the related revenue is recognised. When inventories are sold, the carrying amount of those inventories is recognised as an expense in asset relates is recognised. The accounting policy for revenue recognition is set out in note 1(v). Amortisation of capitalised contract costs is charged to profit or loss when the revenue to which the providing those goods or services that have not yet been recognised as expenses. exchange forthegoodsorservicestowhichassetrelates, less(ii)anycoststhatrelatedirectlyto asset exceeds the net of (i) remaining amount of consideration that the Group expects to receive in Impairment losses are recognised to the extent that the carrying amount of the contract cost Capitalised contract costs are stated at cost less accumulated amortisation and impairment losses. property, plant and equipment or intangible assets, are expensed as incurred. sub-contractors). Other costs of fulfilling a contract, which are not capitalised as inventory, other costs that are incurred only because the Group entered into the contract (for example, payments to direct materials, allocations of costs, costs that are explicitly chargeable to the customer and other to an existing contract or to a specifically identifiable anticipated contract may include direct labour, provide goods or services in the future; and are expected to be recovered. Costs that relate directly specifically identifiable anticipated contract; generate or enhance resources that will be used to Costs to fulfil a contract are capitalised if the costs relate directly to an existing contract or to a costs are expected to be recovered. Other costs of obtaining a contract are expensed when incurred. incurred if the costs relate to revenue which will be recognised in a future reporting period and the incremental sales commission. Incremental costs of obtaining a contract are capitalised when with a customer that it would not have incurred if the contract had not been obtained e.g. an Incremental costs of obtaining a contract are those costs that the Group incurs to obtain a contract other property, plant and equipment (see note 1(h)) or intangible assets (see note 1(i)). the costs to fulfil a contract with a customer which are not capitalised as inventory (see note 1(l)(i)), Other contract costs are either the incremental costs of obtaining a contract with a customer or 157

HKBN Ltd. Annual Report 2019 158 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (o) Interest-bearing borrowings (o) Trade andotherreceivables (n) (m) Contract assetsandcontract liabilities 2018 as shown in note 16 (see note 1(c)(ii)). “ the related work was performed were included under customer were included under method. Interest expense is recognised in accordance with the Group initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest Interest-bearing borrowings are measured initially at fair value less transaction costs. Subsequent to losses (see note 1(k)(i)). Receivables are stated at amortised cost using the effective interest method less allowance for credit receive consideration, the amount is presented as a contract asset (see note 1(m)). consideration is due. If revenue has been recognised before the Group has an unconditional right to to receive consideration is unconditional if only the passage of time is required before payment of that A receivable is recognised when the Group has an unconditional right to receive consideration. A right – long-term portion prepayments In the comparative period, contract balances were included under Policy priorto1September2018 accrued under the effective interest method (see note 1(v)). When the contract includes a significant financing component, the contract balance includes interest presented on a net basis. presented. For multiple contracts, contract assets and contract liabilities of unrelated contracts are not For a single contract with the customer, either a net contract asset or a net contract liability is cases, a corresponding receivable would also be recognised (see note 1(n)). unconditional right to receive consideration before the Group recognises the related revenue. In such the related revenue (see note 1(v)). A contract liability would also be recognised if the Group has an A contract liability is recognised when the customer pays consideration before the Group recognises receivables when the right to the consideration has become unconditional (see note 1(n)). assets are assessed for ECLs in accordance with the policy set out in note 1(k)(i) and are reclassified to unconditionally entitled to the consideration under the payment terms set out in the contract. Contract A contract asset is recognised when the Group recognises revenue (see note 1(v)) before being costs (see note 1(y)). deferred services revenue – long-term portion ” (asassets)or ” (as a liability) on a contract-by-contract basis. Progress billings not yet paid by the “ deferred servicesrevenue–currentportion “ other receivables, deposits and prepayments ” . These balances have been reclassified on 1 September “ deferred services revenue – current portion “ other receivables, deposits and ’ s accounting policy for borrowing ” and ” . Amounts received before “ deferred services revenue deferred servicesrevenue ” and Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (s) Talent benefits (s) Cashandcashequivalents (r) Obligations undergrantingofrights (q) Trade andotherpayables (p) (iii) Retirement benefitcosts (iii) Profitsharingandbonusplans (ii) ShorttermTalentbenefits (i) assessed for ECLs in accordance with the policy set out in note 1(k)(i). equivalents for the purpose of the consolidated cash flow statement. Cash and cash equivalents are integral part of the Group three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an amounts of cash and which are subject to an insignificant risk of changes in value, having been within financial institutions, and short-term, highly liquid investments that are readily convertible into known Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other The obligations under granting of rights to use the Group cost. amortised cost unless the effect of discounting would be immaterial, in which case they are stated at measured in accordance with note 1(k)(ii), trade and other payables are subsequently stated at Trade and other payables are initially recognised at fair value. Except for financial guarantee liabilities Rights to use of telecommunications services – the period which the rights are granted, as follows: parcel of a business combination are recognised initially at fair value. The obligations are amortised over basic salaries and charged to profit or loss. The Group Group The assets of the scheme are held in an independently administered fund that is separated from the forfeited by those Talents who leave the scheme prior to vesting fully in the contributions. Talents. Contributions to the schemes by the Group are calculated as a percentage of Talents The Group contributes to defined contribution retirement schemes which are available to certain obligation can be made. or constructive obligation as a result of services rendered by Talents and a reliable estimate of the Provisions for profit sharing and bonus plans are recognised when the Group has a present legal effect would be material, these amounts are stated at their present values. the associated services are rendered by Talents. Where payment or settlement is deferred and the Salaries, paid annual leave and the cost of non-monetary benefits are accrued in the year in which ’ s assets. ’ s cash management are also included as a component of cash and cash ’ s services on a free of charge basis as part and ’ s contributions are reduced by contributions 10 years ’

159

HKBN Ltd. Annual Report 2019 160 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (s) Talent benefits(continued) (s) (iv) Share-based payments (iv) c Share-based payments among group entities (c) b Cash-settled share-based payments (b) a Equity-settled share-based payments (a) In the Company in the fair value of the liability are recognised as Talent costs in profit or loss. liability is remeasured at the end of each reporting period and at settlement date. Any changes is spread over the vesting period, taking into account the probability that the RSUs will vest. The before becoming unconditionally entitled to payment, the total estimated fair value of the RSUs with a corresponding increase in liabilities. Where the Talents have to meet vesting conditions and based on the price of the equity instruments of the Company, is recognised as a Talent cost The fair value of the amount payable to Talents of the Group in the People recognised in share premium for the shares vested). is recognised in the capital reserve until the RSUs are vested (when it is included in the amount due to not achieving vesting conditions that relate to the service condition. The equity amount that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only date, the amount recognised as an expense is adjusted to reflect the actual number of RSUs recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting to the profit or loss for the year of the review, unless the original Talent expenses qualify for resulting adjustment to the cumulative fair value recognised in prior years is charged/credited During the vesting period, the number of RSUs that is expected to vest is reviewed. Any account the probability that the RSUs will vest. RSUs, the total estimated fair value of the RSUs is spread over the vesting period, taking into the Talents have to meet vesting conditions before becoming unconditionally entitled to the model, taking into account the terms and conditions upon which the RSUs were granted. Where capital reserve within equity. The fair value is measured at grant date using the binomial lattice under the Co-Ownership Plan II is recognised as a Talent cost with a corresponding increase in a subsidiaries. asset and a corresponding adjustment (credit) to the carrying amount of the investments in the the reimbursement by the subsidiaries of this capital contribution by recognising a recharge subsidiaries with an increase in its investments in the subsidiaries. The Company recognises of the RSUs granted by the Company to the subsidiaries as a capital contribution to the (the The fair value of Restricted Share Units ( “ PRC ” ) in respect of RSUs under the Co-Ownership Plan II, which are to be settled in cash ’ s statement of financial position, the Company recognises the fair value “ RSUs ” ) granted to Talents of the Group in Hong Kong ’ s Republic of China Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements t Incometax (t) enacted at the end of the reporting period. Deferred tax assets and liabilities are not discounted. settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively The amount of deferred tax recognised is measured based on the expected manner of realisation or probable that they will reverse in the future. differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is the case of taxable differences, the Group controls the timing of the reversal and it is probable that the combination), and temporary differences relating to investments in subsidiaries to the extent that, in liabilities that affect neither accounting nor taxable profit (provided they are not part of a business differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or The limited exceptions to recognition of deferred tax assets and liabilities are those temporary tax loss or credit can be utilised. authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the losses and credits, that is, those differences are taken into account if they relate to the same taxation taxable temporary differences support the recognition of deferred tax assets arising from unused tax can be carried back or forward. The same criteria are adopted when determining whether existing deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset taxable entity, and are expected to reverse either in the same period as the expected reversal of the temporary differences, provided those differences relate to the same taxation authority and the same from deductible temporary differences include those that will arise from the reversal of existing taxable are recognised. Future taxable profits that may support the recognition of deferred tax assets arising that it is probable that future taxable profits will be available against which the asset can be utilised, Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent credits. purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax being the differences between the carrying amounts of assets and liabilities for financial reporting Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, previous years. substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or equity, respectively. in which case the relevant amounts of tax are recognised in other comprehensive income or directly in to the extent that they relate to items recognised in other comprehensive income or directly in equity, Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. 161

HKBN Ltd. Annual Report 2019 162 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (u) Provisions, contingentliabilitiesandonerouscontracts (u) Incometax(continued) (t) i) Provisionsandcontingentliabilities (ii) Contingentliabilitiesassumedinbusinesscombinations (i) in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same – in the case of current tax assets and liabilities, the Company or the Group intends either to settle on – set off current tax assets against current tax liabilities and the following additional conditions are met: tax assets against deferred tax liabilities, if the Company or the Group has the legally enforceable right to each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred Current tax balances and deferred tax balances, and movements therein, are presented separately from pay the related dividends is recognised. Additional income taxes that arise from the distribution of dividends are recognised when the liability to probable that sufficient taxable profits will be available. allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes reduced to the extent that it is no longer probable that sufficient taxable profits will be available to The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is the expenditure expected to settle the obligation. be made. Where the time value of money is material, provisions are stated at the present value of an outflow of economic benefits will be required to settle the obligation and a reliable estimate can Company has a legal or constructive obligation arising as a result of a past event, it is probable that Provisions are recognised for other liabilities of uncertain timing or amount when the Group or the that would be determined in accordance with note 1(u)(ii). the amount initially recognised, less accumulated amortisation where appropriate, and the amount After their initial recognition at fair value, such contingent liabilities are recognised at the higher of of acquisition are initially recognised at fair value, provided the fair value can be reliably measured. Contingent liabilities assumed in a business combination which are present obligations at the date different taxable entities, which, in each future period in which significant amounts of deferred – the same taxable entity; or – taxation authority on either: a net basis, or to realise the asset and settle the liability simultaneously; or assets and settle the current tax liabilities on a net basis or realise and settle simultaneously. tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (v) Revenue andotherincome (v) Provisions, contingentliabilitiesandonerouscontracts(continued) (u) services or the use by others of the Group Income is classified by the Group as revenue when it arises from the sale of goods, the provision of Provisionsandcontingentliabilities(continued) (ii) Further details of the Group component if the period of financing is 12 months or less. 63 of HKFRS 15 and does not adjust the consideration for any effects of a significant financing under the effective interest method. The Group takes advantage of the practical expedient in paragraph revenue recognised under that contract includes the interest expense accreted on the contract liability contract contains a financing component which provides a significant financing benefit to the Group, customer, and interest income is accrued separately under the effective interest method. Where the discounted using the discount rate that would be reflected in a separate financing transaction with the customer for more than 12 months, revenue is measured at the present value of the amount receivable, Where the contract contains a financing component which provides a significant financing benefit to the value added tax or other sales taxes and is after deduction of any trade discounts. expected to be entitled, excluding those amounts collected on behalf of third parties. Revenue excludes lessee has the right to use the asset, at the amount of promised consideration to which the Group is Revenue is recognised when control over a product or service is transferred to the customer, or the business. liabilities unless the probability of outflow of economic benefits is remote. by the occurrence or non-occurrence of one or more future events are also disclosed as contingent outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of Where it is not probable that an outflow of economic benefits will be required, or the amount cannot ’ s revenue and other income recognition policies are as follows: ’ s assets under leases in the ordinary course of the Group ’ s 163

HKBN Ltd. Annual Report 2019 164 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (v) Revenue andotherincome(continued) (v) (iv) Rental incomefromoperating leases (iv) Revenue fromsystemintegrationservices (iii) Productrevenue (ii) Revenuefortheprovision ofinternationaltelecommunicationsandfixed (i) recognised on a similar basis in the comparative period. Revenue from international telecommunications and fixed telecommunications services was as revenue over the related service period. provision of services is deferred and included under contract liabilities and subsequently recognised rateably over the term of the service subscription agreement. Amount received in advance for the of the services rendered. Tariff-free period granted to customers are recognised in profit or loss fees for telecommunications services that have been provided and based on the relative fair value Revenue is recognised over time on the basis of units of traffic/data processed and/or contracted Contingent rentals are recognised as income in the accounting period in which they are earned. are recognised in profit or loss as an integral part of the aggregate net lease payments receivable. of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted over the periods covered by the lease term, except where an alternative basis is more representative Rental income receivable under operating leases is recognised in profit or loss in equal instalments set out in note 1(u)(ii). the consideration under the contract, then a provision is recognised in accordance with the policy If at any time the costs to complete the contract are estimated to exceed the remaining amount of to be included in the transaction price. that it is highly probable that a significant reversal will not occur, using the expected value method, recoverable. Accumulated experience is used to estimate the variable consideration to the extent revenue is recognised only to the extent that it is probable the contract costs incurred will be contract costs for the contract. When the outcome of a contract cannot be estimated reliably, measured by reference to the percentage of contract costs incurred to date to estimated total Revenue from a fixed price contract is recognised using the percentage of completion method, Revenue for sale of goods was recognised on a similar basis in the comparative period. selling price basis. allocated between all the goods and services promised under the contract on a relative stand-alone revenue recognised is an appropriate proportion of the total transaction price under the contract, are a partial fulfilment of a contract covering other goods and/or services, then the amount of Revenue is recognised when the customer takes possession of and accepts the goods. If the goods telecommunications networkservice Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (y) Borrowing costs (y) Translation offoreigncurrencies (x) (w) Research anddevelopmentcosts Revenue andotherincome(continued) (v) they are incurred. capitalised as part of the cost of that asset. Other borrowing costs are expensed in the period in which asset which necessarily takes a substantial period of time to get ready for its intended use or sale are Borrowing costs that are directly attributable to the acquisition, construction or production of an The Group profit or loss as incurred. Research and development costs of new services and enhancements to existing services are charged to Interest income (vi) (v) Dividends recognised. that foreign operation is reclassified from equity to profit or loss when the profit or loss on disposal is On disposal of a foreign operation, the cumulative amount of the exchange differences relating to equity in the exchange reserve. exchange differences are recognised in other comprehensive income and accumulated separately in Hong Kong dollars at the closing foreign exchange rates at the end of the reporting period. The resulting position items, including goodwill and fair value adjustments arising from acquisition, are translated into approximating the foreign exchange rates ruling at the dates of the transactions. Statement of financial The results of foreign operations are translated into Hong Kong dollars at the exchange rates foreign exchange rates ruling at the dates the fair value was measured. and liabilities denominated in foreign currencies that are stated at fair value are translated using the are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency reporting period. Exchange gains and losses are recognised in profit or loss. denominated in foreign currencies are translated at the foreign exchange rates ruling at the end of the translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities payment is established. Dividend income from unlisted investments is recognised when the shareholder Interest income is recognised as it accrues using the effective interest method. ’ s functional currency is Hong Kong dollars. Foreign currency transactions during the year are ’ s right to receive 165

HKBN Ltd. Annual Report 2019 166 HKBN Ltd. Annual Report 2019 Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (aa) Related parties (z) Offsetting offinancial assetsandfinancialliabilities be influenced by, that person in their dealings with the entity. Close members of the family of a person are those family members who may be expected to influence, or An entity is related to the Group if any of the following conditions applies: (b) an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. financial position where there is a legally enforceable right to set off the recognised amount and there is Financial assets and financial liabilities are offset and the net amount is reported in the statement of A person, or a close member of that person (a) (viii) The entity, or any member of a group of which it is a part, provides key management personnel A person identified in (a)(i) has significant influence over the entity or is a member of the key (vii) The entity is controlled or jointly controlled by a person identified in (a). (vi) The entity is a post-employment benefit plan for the benefit of employees of either the Group or (v) One entity is a joint venture of a third entity and the other entity is an associate of the third (iv) Both entities are joint ventures of the same third party. (iii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a (ii) The entity and the Group are members of the same group (which means that each parent, (i) is a member of the key management personnel of the Group. (iii) has significant influence over the Group; or (ii) has control or joint control over the Group; (i) services to the Group. management personnel of the entity (or of a parent of the entity). an entity related to the Group. entity. member of a group of which the other entity is a member). subsidiary and fellow subsidiary is related to the others). ’ s family, is related to the Group if that person: 2 Revenue Significantaccountingpolicies(continued) 1 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements system integration services and product sales. telecommunications services and mobile services to residential and enterprise customers in Hong Kong, Revenue represents revenue from fixed telecommunications network services, international system integration services and product sales. telecommunications services and mobile services to residential and enterprise customers in Hong Kong, The principal activities of the Group are provision of fixed telecommunications network services, international (ab) Sget reporting Segment The Group segments whicharenotindividuallymaterialmaybeaggregatediftheyshareamajorityofthesecriteria. distribute the products or provide the services, and the nature of the regulatory environment. Operating and services, the nature of production processes, the type or class of customers, the methods used to segments have similar economic characteristics and are similar in respect of the nature of products Individually material operating segments are not aggregated for financial reporting purposes unless the various lines of business and geographical locations. management for the purposes of allocating resources to, and assessing the performance of, the Group are identified from the financial information provided regularly to the Group Operating segments, and the amounts of each segment item reported in the financial statements, derived from its activities in Hong Kong. No geographic information is shown as the revenue and profit from operations of the Group are primarily information is presented. segment under the requirements of HKFRS 8, telecommunications network services. Therefore, management considers there is only one operating as a whole, as all of the Group ’ s management assesses the performance and allocates the resources of the Group ’ s activities are considered to be primarily the operation of fixed Operating Segments Operating . In this regard, no segment ’ s most senior executive ’ s 167

HKBN Ltd. Annual Report 2019 168 HKBN Ltd. Annual Report 2019 Revenue(continued) 2 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (ii) Revenue expectedtoberecognisedinthefuturearisingfromcontractswith (ii) Disaggregationofrevenue (i) for products or services that had an original expected duration of one year or less. the Group will be entitled to when it satisfies the remaining performance obligations under the contracts products or services such that the above information does not include information about revenue that The Group has applied the practical expedient in paragraph 121 of HKFRS 15 to its contracts for months. the service is performed or as the work is completed, which is expected to occur over the next 12 to 180 by the customers with the Group. The Group will recognise the expected revenue in future when or as revenue expected to be recognised in the future from contracts for products or services entered into performance obligations under the Group As at 31 August 2019, the aggregated amount of the transaction price allocated to the remaining The Group Product revenue Enterprise revenue Residential revenue Disaggregated by major categories: Product revenue Fees from provision of telecommunications services Other services International telecommunications services Fixed telecommunications network services Disaggregated by major products or service lines: follows: Disaggregation of revenue from contracts with customer by major products and services lines is as revenue from the provision of telecommunications services is substantially recognised over time. During the years ended 31 August 2019 and 2018, product revenue is recognised at a point-in-time and customers inexistenceatthereportingdate exceeded 10% of the Group ’ s customer base is diversified and no individual customer with whom transactions have ’ s revenue. ’ s existing contracts is $2,999,416,000. This amount represents 2,324,329 2,472,707 4,797,036 3,535,948 5,107,637 5,107,637 310,601 310,601 627,912 633,176 $ 2019 ’ 000 1,379,183 2,278,241 3,657,424 2,823,270 3,948,952 3,948,952 291,528 291,528 420,954 413,200 $ 2018 ’ 000 Profitbeforetaxation 3 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements Group, including directors. Talent costs include all compensation and benefits paid to and accrued for all individuals employed by the Talentcosts (c) Othernetincome (a) Profit before taxation is arrived at after charging/(crediting): b Otheroperatingexpenses (b) es Talent costs capitalised as property, plant and equipment Less: Contributions to defined contribution retirement plan Salaries, wages and other benefits Change in fair value of contingent consideration (note 31) Amortisation of obligations under granting of rights (note 26) Net foreign exchange (gain)/loss Interest income Equity-settled share-based payment expenses (note 23(a)) Impairment losses on trade receivables (note 31(a)) Transaction costs in connection with business combination Amortisation of intangible assets Talent costs (note 3(c)) Loss/(gain) on disposal of property, plant and equipment, net Depreciation (note 11) Amortisation of customer acquisition and retention costs Advertising and marketing expenses Other income Cash-settled share-based payment expenses (note 23(b)) Others proposed business combination Transaction costs in connection with customer acquisition and retention costs marketing expenses and amortisation of Talent costs included in advertising and

1,212,976 2,734,600 1,137,395 (474,739) 693,104 276,355 693,104 534,758 240,793 373,137 478,104 (29,926) (45,133) (14,877) 71,685 52,759 75,608 (9,024) (3,484) (4,083) $ 1,542 3,099 9,863 2019 ’ 119 000 797 2,116,987 (440,439) 489,816 962,179 893,939 122,207 489,816 425,258 605,149 415,279 (22,315) (31,924) (12,192) 58,329 39,693 18,031 (9,024) (1,641) $ 8,621 1,290 1,757 2018 ’ (203) 105 000 437 – 169

HKBN Ltd. Annual Report 2019 170 HKBN Ltd. Annual Report 2019 Profitbeforetaxation(continued) 3 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements e Otheritems (e) Financecosts (d) –audit services minimum lease payments Operating lease charges in respect of land and buildings: Amortisation of intangible assets (note 10) Interest on interest-rate swaps, net Interest on senior notes Interest on bank loans Auditor facilities and computer equipment: minimum lease payments Operating lease charges in respect of telecommunications –other services –tax services –review services Fair value loss/(gain) on interest-rate swaps Originating fee for banking facility expired (note 20) Research and development costs Cost of inventories ’ s remuneration 259,271 347,962 103,424 134,909 343,699 288,782 92,783 12,088 28,076 $ 5,665 8,850 3,850 2019 ’ 000 210 635 – 117,288 172,576 119,711 264,681 272,946 (58,531) 60,436 49,275 25,045 $ 2,975 6,833 4,620 2018 ’ 000 190 325 – Incometaxintheconsolidatedincomestatement 4 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (a) Taxation intheconsolidatedincomestatementrepresents: (a) (b) Reconciliation betweentaxexpenseandaccountingprofitatapplicable (b) Actual tax expense Tax effect of non-taxable income Tax effect of non-deductible expenses applicable to profits in the tax jurisdictions concerned Notional tax on profit before taxation, calculated at the rates Profit before taxation for the year. PRC. The Corporate Income Tax rate applicable to the subsidiaries located in the PRC is 25% (2018: 25%) Income tax expense for the current taxation outside Hong Kong is mainly related to the income tax in the assessable profits for the year. The provision for Hong Kong Profits Tax for 2019 is calculated at 16.5% (2018: 16.5%) of the estimated Over-provision in respect of prior years Provision for the year Current tax–HongKongProfitsTax Provision for the year Current tax–OutsideHongKong rates: Tax effect of unused tax losses not recognised utilised during the year Tax effect of tax losses not recognised in prior years Origination and reversal of temporary differences (note 25) Deferred tax Others 309,362 146,864 (20,506) (57,790) 94,835 94,835 57,569 52,543 $ $ 5,812 2,719 3,259 2019 2019 ’ ’ (749) 000 000 (51) 489,268 104,960 (17,346) (17,620) 92,371 92,371 28,337 82,349 (2,976) $ $ 5,060 1,461 2018 2018 ’ ’ 000 000 546 (29) 171

HKBN Ltd. Annual Report 2019 172 HKBN Ltd. Annual Report 2019 Directors 5 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements Mr. Yee Kwan Quinn LAW Mr. Stanley CHOW Mr. Chu Kwong YEUNG Executive directors Directors Mr. Bradley Jay HORWITZ Independent non-executivedirectors (appointed on 30 April 2019) Mr. Teck Chien KONG (appointed on 30 April 2019) Mr. Zubin Jamshed IRANI Ms. Deborah Keiko ORIDA Non-executive directors Mr. Ni Quiaque LAI 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation are as follows: Mr. Chu Kwong YEUNG Executive directors Ms. Deborah Keiko ORIDA Non-executive director Mr. Bradley Jay HORWITZ Independent non-executivedirectors Mr. Ni Quiaque LAI Mr. Stanley CHOW Mr. Yee Kwan Quinn LAW ’ emolumentsdisclosedpursuanttosection383(1)oftheHongKongCompaniesOrdinanceandPart ’ emoluments Directors Directors $ $ ,2 54726216321,471 1,663 2,692 15,487 1,629 ,6 5852601532,8 ,3 22,512 1,330 21,182 1,593 2,600 15,825 1,164 ’ ’ fees fees 543 543 0 $ 000 543 0 $ 000 388 388 388 – – – – – – – – ’ ’

and benefits and benefits allowances allowances Salaries, Salaries, in kind in kind ,4 1,076 1,616 6,649 8,838 ,4 1,560 9,542 ,8 1,040 6,283 ’ ’ 0 $ 000 0 $ 000 – – – – – – – – – – Discretionary Discretionary bonuses bonuses ’ ’ 0 $ 000 0 $ 000 – – – – – – – – – – otiuin Sub-total contributions otiuin Sub-total contributions Retirement Retirement 2019 2018 scheme scheme ’ ’ 0 $ 000 0 $ 000 6 8,390 11,452 665 998 5 12,058 956 3 7,960 637 – – – – – – – – – – ’ ’ 543 543 0 $ 000 0 $ 000 543 388 388 388 – – – – Share-based Share-based payments payments (note (i)) (note (i)) ’ ’ 0 $ 000 0 $ 000 5 21,921 450 8 8,573 11,719 183 267 3 8,497 537 9 12,851 793 – – – – – – – – – – Total Total ’ ’ 000 543 543 000 543 388 388 388 – – – – Individualswithhighestemoluments 6 Directors 5 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (i) These represent the estimated value of RSUs granted to the directors under the Company the under directors the to granted RSUs of value estimated the represent These (i) Notes: $3,500,001 – $4,000,000 bands: The emoluments of the three (2018: three) individuals with the highest emoluments are within the following Salaries and other emoluments are as follows: disclosed in note 5. The aggregate of the emoluments in respect of the other three (2018: three) individuals Of the five individuals with the highest emoluments, two (2018: two) are directors whose emoluments are waived or agreed to waive any remuneration during the year ended 31 August 2019 (2018: Nil). Group or as a compensation for loss of office (2018: Nil). There was no arrangement under which a director or any of the highest paid individual set out in note 6 below as an inducement to join or upon joining the During the year ended 31 August 2019, there were no amounts paid or payable by the Group to the directors $4,000,001 – $4,500,000 Retirement scheme contributions Share-based payments Discretionary bonuses $4,500,001 – $5,000,000 $5,500,001 – $6,500,000 $5,000,001 – $5,500,000 $6,500,001 – $7,500,000 Plan transactions as set out in note 1(s)(iv). The details of these benefits in kind, including the principal terms and number number and terms principal the including kind, in benefits these of details The 1(s)(iv). note in out set as transactions of RSUs granted, are disclosed in note 23. note in disclosed are granted, RSUs of ” ). The value of these RSUs is measured according to the Group the to according measured is RSUs these of value The ). ’ emoluments(continued) ’ s accounting policies for share-based payment payment share-based for policies accounting s individuals Number of 16,314 10,566 ’ s Co-Ownership Plan II ( II Plan Co-Ownership s $ 4,708 2019 2019 ’ 867 173 000 – – – 1 3 1 1

individuals Number of 15,240 11,118 $ 2,503 2018 2018 ’ 845 774 000 “ the the – – – 3 1 1 1 173

HKBN Ltd. Annual Report 2019 174 HKBN Ltd. Annual Report 2019 Retirementbenefitcosts 8 Earningspershare 7 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements the Talents are required to contribute 5% of their monthly salaries, while the Group retirement scheme, which is available to some of its Talents in Hong Kong. Under the ORSO Scheme, contributions. contributions forfeited by those Talents who leave the ORSO Scheme prior to vesting fully in the Group reduced scale after completion of 3 to 9 years Talents are entitled to 100% of the employer calculated at 10% and 5% of the monthly salaries of senior Talents and other Talents respectively. The The Group contributes to an Occupational Retirement Scheme (the (b) Diluted earningspershare (b) Basic earningspershare (a) Weighted average number of ordinary shares (diluted) Add: effect of the Co-Ownership Plan II shares held for the Co-Ownership Plan II Weighted average number of ordinary shares less held for the Co-Ownership Plan II Weighted average number of ordinary shares less shares Add: effect of the Co-Ownership Plan II RSUs vested Less: shares held for the Co-Ownership Plan II Issued ordinary shares at 1 September Add: effect of the Vendor Loan Notes effect of the Company of ordinary shares in issue less shares held for the Co-Ownership Plan II after adjusting for the dilutive shareholders of the Company $214,527,000 (2018: $396,897,000) and the weighted average number The calculation of diluted earnings per share is based on the profit attributable to ordinary equity shares (2018: 1,002,116,000 ordinary shares) which is calculated as follows: of ordinary shares in issue less shares held for the Co-Ownership Plan II, of 1,106,828,000 ordinary shareholders of the Company of $214,527,000 (2018: $396,897,000) and the weighted average number The calculation of basic earnings per share is based on the profit attributable to ordinary equity Add: effect of issue of new shares (note 28(c)) ’ s Co-Ownership Plan II and Vendor Loan Notes, calculated as follows: ’ s contributions after 10 years of completed service, or at a ’ service. Contributions to the ORSO Scheme are reduced by “ ORSO Scheme

1,163,482 1,106,828 1,106,828 1,005,666 103,095 ” 56,385 ), a defined contribution ’ s contributions are (5,666) 3,733 2019 2019 ’ ’ 269 000 000

1,003,301 1,002,116 1,002,116 1,005,666 (5,666) ’ 1,185 2,116 s 2018 2018 ’ ’ 000 000 – – 9 Goodwill Retirementbenefitcosts(continued) 8 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements of contributions and $Nil was available at 31 August 2019 (2018: $Nil) to reduce future year year, forfeitedcontributionstotaling$438,000(2018:$1,113,000)wereusedtoreducethecurrentyear contribution to the extent of contributions that would have been made under the ORSO Scheme. During the both the Group and senior Talents, on top of the MPF Scheme mandatory contributions, make a voluntary make payments in respect of retirement benefits of these Talents. decreased to 14% effective from 1 January 2015 to 31 December 2019. The Group has no other obligation to rate of 20% of a standard salary base as determined by the local social security bureau, the rate has been scheme organised by the local social security bureau for each Talent of the subsidiary in the PRC at the Pursuant to the relevant regulations in the PRC, the Group contributes to a defined contribution retirement the MPF Scheme. Senior Talents may also elect to join a Mutual Voluntary Plan (the 5% of each individual onwards are required to join the MPF Scheme. Both the Group and the Talents are required to contribute Kong could elect to join the MPF Scheme, while all new Talents joining the Group in Hong Kong from then Mandatory Provident Fund Scheme Ordinance in December 2000. The existing Talents of the Group in Hong At 31 August 2018, as restated At 31 August 2019 Carrying amount: At 1 September 2017, 31 August 2018, 1 September 2018 and 31 August 2019 Accumulated impairmentlosses: At 31 August 2019 Acquisition of subsidiaries (note 30) At 31 August 2018 and 1 September 2018, as restated Acquisition of subsidiaries, as restated (note 30) At 1 September 2016, 31 August 2017 and 1 September 2017 Cost: contribution. Employer and commenced from 1 June 2014, the maximum amount has been increased to $1,500, as a mandatory A mandatory provident fund scheme (the ’ s relevant income with a maximum amount of $1,250 per month before 1 June 2014, ’ s mandatory contributions are 100% vested in the Talents as soon as they are paid to “ MPF Scheme ” ) has been established under the Hong Kong “ Mutual Plan ’ s contributions. ” 1,801,393 8,788,319 8,788,319 6,986,926 1,801,393 1,771,969 ) in which 29,424 $ ’ s level s level ’ 000 – 175

HKBN Ltd. Annual Report 2019 176 HKBN Ltd. Annual Report 2019 Goodwill(continued) 9 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements based on the past performance and management the fixed telecommunications network services (including Wi-Fi connectivity services), which is determined The key assumption used in the value-in-use calculation is the average annual growth rate of revenue of 2%). The estimated growth rates used are comparable to the growth rate for the industry. with the useful lives of the assets employed, are extrapolated using a long-term growth rate of 2% (2018: (2018: 8%)andapre-taxdiscountrateof12%10%).Cashflowsbeyondthefive-yearperiod,matching Cash flows for the five-year period are estimated based on an average annual growth rate of revenue of 6% use cash flow projections based on financial budgets approved by management covering a five-year period. The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations Telecommunications network services segment Goodwill is allocated to the Group Impairment testsforcash-generatingunitscontaininggoodwill amount. segment. Any adverse change in the key assumptions could reduce the recoverable amount below carrying rate used is pre-tax and reflects specific risks relating to the fixed telecommunications network services ’ s cash-generating unit ( ’ s expectation for market development. The discount “ CGU ” ) identified as follows: 8,788,319 $ 2019 ’ 000

1,801,393 (Restated) $ 2018 ’ 000 (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements 10 Intangible assets

Customer relationship Brand and trademark Other For FTNS For IDD For Wi-Fi For Cloud For IT For FTNS For IDD For Wi-Fi For Cloud For IT intangible business business business business business business business business business business Backlogassets Total $’000’000 $ ’000 $ ’000 $ ’000 $ ’000 $ ’000 $ ’000 $ ’000 $ ’000 $ ’000 $ ’000 $ ’000 $

Cost: At 1 September 2017 1,190,597 164,000 9,296 –– 471,000 8,000 7,721 –––399,778 2,250,392 Acquisition of subsidiaries, as restated (note 30) –––1,229 ––––12,228 –––13,457

At 31 August 2018, as restated1,190,597 164,000 9,296 1,229– 471,000 8,000 7,721 12,228–– 399,778 2,263,849 Acquisition of subsidiaries (note 30) 1,695,432 –––486,543 990,205 40,819 –– 106,041 213,977 – 3,533,017

At 31 August 2019 2,886,029 164,000 9,296 1,229 486,543 1,461,205 48,819 7,721 12,228 106,041 213,977 399,778 5,796,866

Accumulated amortisation: At 1 September 2017 401,954 61,498 2,408 –– 123,638 3,003 1,801 –––43,383 637,685 Charge for the year 85,043 11,714 516 248– 23,550 572 386 178–– 50,369 172,576

At 31 August 2018 486,997 73,212 2,924 248– 147,188 3,575 2,187 178–– 93,752 810,261

At 1 September 2018 486,997 73,212 2,924 248– 147,188 3,575 2,187 178–– 93,752 810,261 Charge for the year 117,291 11,714 516 176 9,254 79,748 3,474 386 1,007 6,018 46,771 71,607 347,962

At 31 August 2019 604,288 84,926 3,440 424 9,254 226,936 7,049 2,573 1,185 6,018 46,771 165,359 1,158,223

Net book value: At 31 August 2019 2,281,741 79,074 5,856 805 477,289 1,234,269 41,770 5,148 11,043 100,023 167,206 234,419 4,638,643

At 31 August 2018, as restated703,600 90,788 6,372 981– 323,812 4,425 5,534 12,050–– 306,026 1,453,588 177

HKBN Ltd. Annual Report 2019 178 HKBN Ltd. Annual Report 2019 10 Intangible assets(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements Other intangible assets include contractual right to receive future benefits and licences. appraised by independent valuers. The fair value of the intangible assets at the dates of completion of the business combinations were Backlog of FTNS business – Brand and trademark of IT business – Customer relationship of IT business – Brand and trademark of Cloud business – Customer relationship of Cloud business – Brand and trademark of Wi-Fi business – Customer relationship of Wi-Fi business – Brand and trademark of FTNS and IDD business, including – Customer relationship of FTNS and IDD business – May 2012, 4 January 2013, 31 March 2016, 30 May 2018 and 30 April 2019 include: The identifiable intangible assets recognised by the Group upon the business combinations completed on 30 “ IDD007 ” , “ IDD1507 ” “ HKBN ” , “ WTT ” , “ IDD1666 ” , “ IDD0030 ” , 11 Property, plantandequipment (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements At 1 September 2017 Accumulated depreciation: At 31 August 2019 At 1 September 2018 At 31 August 2018 At 1 September 2017 Cost: Disposals Additions (note 30) Acquisition of subsidiaries At 31 August 2018 At 31 August 2019 Net bookvalue: At 31 August 2019 At 1 September 2018 At 31 August 2018 Written back on disposals Charge for the year Exchange adjustments Exchange adjustments Exchange adjustments Additions (note 30) Acquisition of subsidiaries Charge for the year Exchange adjustments Disposals Written back on disposals 2963192,3 2,500 7,306 26,734 100,616 3,119 5,628 42,906 384,374 5,628 52,449 79,282 79,282 36,148 36,148 4,981 52,449 52,449 66,898 36,148 52,412 6411,5 2714,038 42,721 3,203 3,203 15,952 33,496 46,411 33,496 4,127 4,127 46,125 46,125 $ Cable ,2 2014,8 2,425 3,268 45,786 57,895 32,021 368,422 6,324 6,038 ,1 1,008 3,219 ’ 0 $ 000 8 1851,0 1,008 13,602 11,825 286 37 – – – – – – – – – – – Leasehold buildings land and 4,2 1111,065 21,101 348,226 ’ 000 – – – – – – – – – – – improvements Leasehold 14,442 (5,118) (1,779) (1,779) (3,649) $ 6,147 8,765 ’ (224) (796) (279) (728) 0 $ 000 – and fittings Furniture, fixtures ’ (126) (138) 000 877 767 735 (16) (48) (93) (85) (17) (88) 22 Telecommunications, office equipment computer and ,9,0 8 2,163,785 488 1,792,905 ,0,1 ,5 ,4,9 2,4 4,563,631 222,041 4,341,590 2,552 3,903,415 ,1,9 ,6 ,6,0 2,7 7,194,873 1,721,431 229,371 1,516 6,965,502 1,644,656 4,663 6,416,094 4,409,324 3,567 4,409,324 3,567 4,232,250 4,232,250 4,011,221 3,567 3,847,215 ,0,2 ,7 2,293,950 2,631,242 7,330 1,171 2,206,223 2,623,912 2,111 2,512,679 2,115,374 2,396 2,115,374 2,396 2,026,027 2,026,027 0,1 ,7 1,0 2,7 646,079 229,371 416,708 1,972 407,712 1,1 8 425,258 880 410,619 416,026 9,9 1 2,2 ,3 534,758 7,330 527,428 712 499,995 1,1)(,6)(22,027) (1,364) (15,419) (28,826) (30,535) 1,7)(9)(17,113) (997) (12,379) (1,354) $ ’ (422) (669) (964) 0 $ 000 213 vehicles Motor ’ 0 $ 000 – – – – – – – – 431,240 (30,621) (32,331) (2,288) (1,041) (1,777) Sub- total ’ (694) 0 $ 000 235 Investment rprisTotal properties ’ 0 $ 000 – – – – – – – – – – – – – – – – – – – 2,163,785 1,721,431 4,409,324 4,409,324 4,011,221 2,293,950 2,115,374 2,115,374 425,258 431,240 (22,027) (30,621) (32,331) (17,113) (2,288) (1,041) (1,777) ’ (694) 000 235 179

HKBN Ltd. Annual Report 2019 180 HKBN Ltd. Annual Report 2019 12 Investments insubsidiaries 11 Property, plantandequipment(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements an asset and no revenue or deferred revenue have been recognised in the financial statements of the Group. accordingly, the network capacity of the Contract Parties under the agreements have not been recognised as of a similar nature and value, the exchange is not recognised as a transaction which generates revenue, and Parties inthesameperiod.ThedirectorsofGroupconsiderthatsincearrangementsinvolveexchange exchange, the Contract Parties would provide the Group the right to use the network capacity of the Contract in which the Group would provide its network capacity to the Contract Parties in certain period, and in – Leasehold land and building carried at cost Representing: – Investment properties carried at cost Concord Ideas Ltd. COLCON Limited COL LIMITED Broadband Wireless Access Limited Advance Tech Developments Limited Name ofcompany otherwise stated. The following is a list of principal subsidiaries of the Group. The class of shares held is ordinary unless At 31 August 2019 and 2018, the Group has certain agreements with third parties (the – short-term leases In Hong Kong The analysis of net book values of properties of the Group is as follows: – medium-term leases – long-term leases establishment incorporation/ Islands ( British Virgin Hong Kong 40,000 shares Hong Kong Hong Kong Place of “ BVI BVI ” ) up sharecapital issued andpaid Particulars of 1 share 1 share US$10 US$1 Percentage of interest held ownership

100 100 100 100 100 Investment holding in Hong Kong 590,463 590,463 368,422 222,041 556,840 31,116 $ 2,507 Provision of data processing/ 2019 ’ 000 “ Contract Parties and placeofoperation data centre services in

Principal activities Hong Kong 32,021 32,021 32,021 12,938 16,511 Inactive Inactive Inactive $ 2,572 2018 ’ ” 000 ) – 12 Investments insubsidiaries(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements HKBN Enterprise Solutions Limited as WTT HK Limited) ( HKBN Enterprise Solutions HK Limited eBusiness Limited) Limited (formerly known as WTT HKBN Enterprise Solutions eBusiness Technology Limited* Guangzhou HK Enterprises Information EC TELECOM LIMITED ec Plus Limited COSMO TRUE LIMITED Name ofcompany Services Co. Ltd.* Guangzhou City Telecom Customer Excel Profit Management Limited Hong Kong DYNAMIC FUTURE INVESTMENTS LIMITED CREDIBILITY HOLDINGS LIMITED Service Limited Company* Guangzhou Cangxun Electron Technology Gorgeous Investments Limited Crown Master Enterprises Limited “ HKBNESHKL ” ) (formerly known 1 establishment incorporation/ Hong Kong Hong Kong Hong Kong ogKn 2 shares Hong Kong Hong Kong Hong Kong Hong Kong Place of PRC PRC PRC BVI BVI BVI # # # up sharecapital issued andpaid 1,752,079,583 Particulars of US$200,000 10,000,000 $8,000,000 $1,000,000 1 share 1 share 1 share 1 share 1 share shares shares US$1 US$1 US$1 Percentage of interest held ownership 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Investment holding in Hong Kong Provision of telecommunication Provision of telecommunication Provision of telecommunication Provision of telecommunication integration services in the PRC support services in the PRC Provision of administrative and placeofoperation Provision of eBusiness services in Hong Kong services in Hong Kong services in Hong Kong services in Hong Kong Property investment Provision of system Principal activities services in the PRC Property holding in Hong Kong Inactive Inactive Inactive Inactive 181

HKBN Ltd. Annual Report 2019 182 HKBN Ltd. Annual Report 2019 12 Investments insubsidiaries(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements I Consulting Group Limited ( HKBN International Limited LIMITED NEW FORCE CUSTOMER SERVICES NetPro Services Limited 400,000 shares Hong Kong Mirapoint Asia Limited Metropolitan Light (HK) Company Limited Service Limited Company* Jiuxin (Guangzhou) Electron Technology ( Hong Kong Broadband Network Limited (formerly known as WTT Net Limited) HKBN Enterprise Solutions Net Limited Name ofcompany erpltnLgtCmayLmtdCayman Islands Metropolitan Light Company Limited HKBN Group Limited ( WTT Services Limited) Services Limited (formerly known as HKBN Enterprise Solutions Outsourcing “ HKBN ” ) “ HKBNGL “ ICG ” ” ) ) 2 establishment incorporation/ ogKn 383,049 shares Hong Kong ogKn 2 shares Hong Kong Hong Kong Hong Kong ogKn 100 shares Hong Kong ogKn 2 shares Hong Kong Hong Kong Place of PRC BVI V US$5,294 BVI # up sharecapital issued andpaid Particulars of $1,300,000 US$1,000 1 share 1 share 1 share US$1 Percentage of interest held ownership 100 100 100 100 100 100 100 100 100 100 100 100 Investment holding in Hong Kong Investment holding in Hong Kong Provision of telecommunication related products in Hong Kong Investment holding in the PRC Investment holding in the PRC telecommunications services telecommunications network Provision of cloud solutions services and international License holding in Taiwan Distribution of email and Provision of outsourcing and placeofoperation services in Hong Kong services in Hong Kong Principal activities services in the PRC in Hong Kong and Provision of fixed product sales Inactive Inactive 12 Investments insubsidiaries(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements WTT (Macau) Limited LIMITED NEW IMPACT CUSTOMER SERVICES Name ofcompany ONETEL.NET LIMITED ONE.TEL LIMITED Wise Millennium Assets Limited WTT Mobility Limited^ WTT Global Limited^ WTT Development Ltd ( Region Best Profits Limited PIHK Network Limited WTT Cayman Corp ( Wharf Col (Shanghai) Ltd.* SKY LEADER LIMITED UTMOST POWER LIMITED Super Advance Technology Limited THE I CONSULTING LIMITED “ WTTC 5 “ WTTD ” ) 3 ” ) 4 + Cayman Islands Cayman Islands establishment incorporation/ ogKn 2 shares Hong Kong ogKn 1,000 shares Hong Kong 10,000 shares Hong Kong ogKn 10,000 shares Hong Kong ogKn 10,000 shares Hong Kong Hong Kong ogKn 2 shares Hong Kong Hong Kong Hong Kong Place of aa MOP$25,000 Macau PRC BVI BVI BVI # up sharecapital issued andpaid Particulars of US$700,000 42,829,601 US$0.01 1 share 1 share shares US$1 US$1 US$1 US$1 Percentage of interest held ownership 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Investment holding in Hong Kong Investment holding in Hong Kong Provision of telecommunication Provision of telecommunication Provision of telecommunication Provision of telecommunication data centre services in the PRC Investment holding in the PRC Provision of data processing/ and placeofoperation services in Hong Kong services in Hong Kong services in Hong Kong services in Hong Kong Principal activities Property holding Dormant Inactive Inactive Inactive Inactive Inactive Inactive 183

HKBN Ltd. Annual Report 2019 184 HKBN Ltd. Annual Report 2019 12 Investments insubsidiaries(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements 5 The company has been dissolved with effect from 11 September 2019. September 11 from effect with dissolved been has company The 5 4 The company has changed its company name to HKBN Enterprise Solutions Development Ltd with effect from 2 2 from effect with Ltd Development Solutions Enterprise HKBN to name company its changed has company The 4 3 The company has changed its company name to HKBN Enterprise Solutions Cayman Corp with effect from 2 2 from effect with Corp Cayman Solutions Enterprise HKBN to name company its changed has company The 3 2 The company has changed its company name to HKBN Enterprise Solutions Could Services Limited with effect from from effect with Limited Services Could Solutions Enterprise HKBN to name company its changed has company The 2 # + * 1 The company has been dissolved with effect from 27 August 2019. August 27 from effect with dissolved been has company The 1 ^ Under the de-registration process. de-registration the Under ^ Services Co.* WTTO (Jiangmen) Information Processing Name ofcompany Y5Zone Limited Company Limited* WTTO Information Processing Service The English names are translated for reference only. The official names of these entities are in Chinese. in are entities these of names official The only. reference for translated are names English The Under the striking-off process. striking-off the Under Wholly-owned foreign enterprise registered under the PRC law. PRC the under registered enterprise foreign Wholly-owned September 2019. September September 2019. September 30 September 2019. September 30 establishment incorporation/ ogKn 2 shares Hong Kong Place of PRC PRC # # up sharecapital issued andpaid Particulars of $1,240,000 $1,000,000 Percentage of interest held ownership 100 100 100 Provision of Wi-Fi connectivity Provision of outsourcing Provision of outsourcing and placeofoperation Principal activities services in the PRC services in the PRC in Hong Kong 13 Interest injointventures (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (a) Details oftheGroup (a) TGgo Company Limited ( Nova FinTech Limited ( ( HomePlus (Hong Kong) Limited ( BROADBANDgo Company Limited Name ofjointventure arrangements. Accordingly, these investments have been accounted for as joint ventures. parties contractually agree to share control of the arrangements, and have rights to the net assets of the are not available. In the opinion of the directors, these are arrangements whereby the Group and other BROADBANDgo, TGgo, Home Plus and Nova are unlisted corporate entities whose quoted market prices follows: using theequitymethodinconsolidatedfinancialstatements,areas “ “ HomePlus BROADBANDgo ” ) ” ) “ Nova “ TGgo ” Limited liability ) ” Limited liability ) ’ s interestinthejointventures,whichareaccountedfor Limited liability Limited liability structure business company company company company Form of establishment incorporation/ ogKn 160,000 shares Hong Kong ogKn 100 shares Hong Kong ogKn 100,000 shares Hong Kong 100 shares Hong Kong Place of issued andpaid Particulars of up capital by asubsidiary of ownership interest held Percentage 37.5 40 50 60 technology services telecommunication cloud computing broadband and Wi-Fi services activities and in Hong Kong in Hong Kong in Hong Kong in Hong Kong Provision of Provision of Provision of Provision of operation retail and Principal financial place of services services 185

HKBN Ltd. Annual Report 2019 186 HKBN Ltd. Annual Report 2019 15 Inventories andcustomeracquisitionretentioncosts 14 Other non-currentassets 13 Interest injointventures(Continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (a) Inventories equipment. The amounts are neither past due nor impaired. Other non-current assets mainly comprise prepayments and deposits for purchase of property, plant and Aggregate informationofjointventuresthatarenotindividuallymaterial: (b) inventories sold (see note 3(e)). of inventories recognised as an expense and included in profit or loss represents carrying amount of Inventories in the consolidated statement of financial position comprise finished goods. The amount ventures in the consolidated financial statements Aggregate carrying amount of individually immaterial joint Aggregate amounts of the Group – Loss for the year – Other comprehensive income – Total comprehensive income ’ s share of those joint ventures ’ $ 9,429 2019 ’ (276) (276) 000 –

$ 8,095 2018 ’ (693) (693) 000 – 15 Inventories andcustomeracquisitionretentioncosts(Continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (b) Customer acquisitionandretentioncosts (b) the year. There was no impairment in relation to the customer acquisition and retention costs capitalised during contracts is recognised. expenses At 31 August 2018 At 31 August 2019 Carrying amount: At 31 August 2019 Charge for the year At 1 September, 31 August 2018 and 1 September 2018 Accumulated amortisation: At 31 August 2019 Additions Acquisitions of subsidiaries (note 30) At 1 September 2018 Customer acquisition costs and customer retention costs are recognised as part of resources of the Group that will be used in satisfying performance obligations in the future. customer which the contract periods are over 12 months at the reporting date to generate or enhance months at the reporting date and (ii) customer retention costs incurred in fulfilling a contract with a contracts for the provision of telecommunications services which the contract periods are over 12 acquisition costs paid to talents or agents whose selling activities resulted in customers entering into Customer acquisition and retention costs capitalised as at 31 August 2019 relate to the (i) customer Changes in accounting policies (note 1 (c)(ii)) At 1 September 2017 and 31 August 2018 Cost: ” in the consolidated income statement in the period in which revenue from the related “ other operating 598,030 240,793 240,793 838,823 231,902 173,166 433,755 433,755 $ $ ’ ’ 000 000 – – – 187

HKBN Ltd. Annual Report 2019 188 HKBN Ltd. Annual Report 2019 16 Contract assetsandcontractliabilities (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (a) Contract assets (a) (iii) Upon the adoption of HKFRS 15, amounts previously included under under included previously amounts 15, HKFRS of adoption the Upon (iii) (ii) Upon the adoption of HKFRS 9, no opening adjustment was made as at 1 September 2018 in respect of of respect in 2018 September 1 at as made was adjustment opening no 9, HKFRS of adoption the Upon (ii) (i) The Group has initially applied HKFRS 9 and HKFRS 15 using the cumulative effect method and adjusted the the adjusted and method effect cumulative the using 15 HKFRS and 9 HKFRS applied initially has Group The (i) Notes: deposits and prepayments Non-current portion Represented by: HKFRS 15, which are included in customers within the scope of Receivables from contracts with (ii), (iii) services Arising from system integration with telecommunication services Arising from product revenue bundled telecommunications services Arising from international International telecommunications services – Typical payment terms which impact on the amount of contract assets recognised are as follows: Current portion “ Trade receivables, other receivables, and reconciliation works, were reclassified to contract assets (see note 1(c)(ii)). note (see assets contract to reclassified were works, reconciliation and transferring certain promised services, achieving certain milestones or satisfactory completion of verification verification of completion satisfactory or milestones certain achieving services, promised certain transferring recognising additional ECLs on contract assets. contract on ECLs additional recognising opening balances as at 1 September 2018. September 1 at as balances opening prepayments from both parties as well as the issuance of invoice. consideration is generally unconditional upon the completion of verification and reconciliation work the Group will issue an invoice to the telecommunications operator. The Group party against their own records. Once the verification and reconciliation work have been completed, both parties are required to verify and reconcile the transactions details received from counter would usually last for over three months. Such contracts involve large amount of transactions and commitments on either transaction amount or unit of traffic to be processed and contract term The Group and certain telecommunications operators enter into contracts with minimum The Group provides international telecommunications services to telecommunications operators. ” (see note 17) for which the Group the which for 17) note (see ” (ii), (iii) (ii), (iii) Notes ’ s entitlement to the consideration was conditional on on conditional was consideration the to entitlement s 31 August 557,439 246,457 246,457 139,506 241,717 15,546 91,405 $ 4,740 2019 ’ 000 “ Other receivables, deposits and and deposits receivables, Other etme 31 August 1 September 247,210 150,949 150,949 124,379 150,949 26,570 $ 2018 ’ 000 ’ s right to the – – $ 2018 ’ 000 – – – – – – – 16 Contract assetsandcontractliabilities(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (b) Contract liabilities (b) Contract assets(continued) (a) (i) The Group has initially applied HKFRS 15 using the cumulative effect method and adjusted the opening balance balance opening the adjusted and method effect cumulative the using 15 HKFRS applied initially has Group The (i) Notes: – Billing in advance of performance Other telecommunications services – Billing in advance of performance arrangement (ii) Upon the adoption of HKFRS 15, amounts previously included under under included previously amounts 15, HKFRS of adoption the Upon (ii) – Current portion – Non-current portion Represented by: Indefeasible right of use ( customer. This consideration is recognised as contract liabilities upon receipt. The Group received 100% of the contract value when they sign the IRU arrangement contract with IRU arrangements Typical payment terms which impact on the amount of contract liabilities recognised are as follows: System integration services – Sales of equipment and mobile handsets bundled with services – All of the current contract assets are expected to be recovered within one year. reclassified to contract liabilities (see note 1 (c)(ii)). 1 note (see liabilities contract to reclassified as at 1 September 2018. September 1 at as System integration services is one of the services to enterprise customers. The Group when the Group received to date, a contract asset is recognised. The contract assets are transferred to receivables payment schedule. If the performance obligations fulfilled by the Group exceed the total payments of services. In this situation, the customer pays to the Group in accordance with the predetermined The Groupofferspackagestothecustomerwhichincludebundlesalesofproductsandprovision recognised on the project exceeds the amount of the payment made by customer. the project period once milestones are reached. This gives rise to contract assets when the revenue based system integration services include payment schedules which require stage payments over ’ s rights to the contract consideration become unconditional. “ IRU ” ) Notes (ii)

31 August 315,282 407,453 407,453 219,763 187,690 92,171 $ 2019 ’ 000 “ deferred services revenue services deferred etme 31 August 1 September 178,024 178,024 178,024 98,653 79,371 $ 2018 ’ 000 – ” ’ were were s project $ 2018 ’ 000 – – – – – – 189

HKBN Ltd. Annual Report 2019 190 HKBN Ltd. Annual Report 2019 16 Contract assetsandcontractliabilities(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (b) Contract liabilities(continued) (b) were included under expected toberecognisedasincomeaftermorethanoneyearis$187,690,000(2018:$79,731,000which The amount of billings in advance of performance and upfront installation fees received in advance Balance at 31 August 2019 the provision of other telecommunications services Increase in contract liabilities as a result of billings in advance of Decrease in contract liabilities as a result of billings in advance of IRU arrangements that was included in the contract liabilities at the beginning of the period Decrease in contract liabilities as a result of recognising revenue during the year Acquisition of subsidiary Balance at 1 September 2018 Movements incontractliabilities The Group Other telecommunicationsservices–Billinginadvanceofperformance on the services are provided. payments from customers forthe services. This gives rises to contract liabilities until revenue recognised ’ s telecommunication services normally include payment schedules which require advance “ deferred services revenue ” ). (3,744,156) 3,742,013 407,453 235,720 178,024 (4,148) $ ’ 000 17 Trade receivables,otherdepositsandprepayments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (ii) Upon the adoption of HKFRS 15, certain amounts from customers for international telecommunications services, services, telecommunications international for customers from amounts certain 15, HKFRS of adoption the Upon (ii) (i) Upon the adoption of HKFRS 9, no opening adjustment as at 1 September 2018 was made in respect of recognising recognising of respect in made was 2018 September 1 at as adjustment opening no 9, HKFRS of adoption the Upon (i) Notes: $2,073,000). The amount of the interest-rate swap included in other receivables, deposits and prepayment is $ Nil (2018: one year. other receivables, deposits and prepayments are expected to be recovered or recognised as expense within recognised as expense after more than one year is $23,528,000 (2018: $18,002,000). All of the remaining the Group The majority of the Group Within 30 days 31 to 60 days 61 to 90 days Over 90 days net of loss allowance, is as follows: As of the end of the reporting period, the ageing analysis of trade receivables, based on the invoice date and Ageing analysis The amount of the Group Other receivables, deposits and prepayments Trade debtors, net of loss allowances contract assets and disclosed in note 16(a) (see note 1(c)(i)). note (see 16(a) note in disclosed and assets contract product revenue bundled with telecommunication services and system integration services were reclassified to to reclassified were services integration system and services telecommunication with bundled revenue product additional ECLs on trade debtors (see note 1(c)(i)). note (see debtors trade on ECLs additional ’ s credit policy are set out in note 31(a). ’ s other receivables, deposits and prepayments expected to be recovered or ’ s trade receivables is due within 30 days from the date of billing. Further details on Notes (ii) (i)

1Ags 1September 31 August 9,3 388,907 798,333 5,3 247,210 557,439 4,9 141,697 240,894 $ 2019 ’ 000

557,439 217,558 113,655 166,588 59,638 $ $ 2018 2019 ’ ’ 000 000 31 August 539,856 247,210 117,261 247,210 292,646 52,844 25,968 51,137 $ $ 2018 2018 ’ ’ 000 000 191

HKBN Ltd. Annual Report 2019 192 HKBN Ltd. Annual Report 2019 18 Cash andcashequivalents (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (b) Reconciliation ofprofitbeforetaxationtocashgeneratedfromoperations: (b) Cash andcashequivalentscomprise: (a) Note: The Group has initially applied HKFRS 15 and HKFRS 9 at 1 September 2018. Under the transition methods methods transition the Under 2018. September 1 at 9 HKFRS and 15 HKFRS applied initially has Group The Note: Profit before taxation Cash at bank and in hand Cash generated from operations Amortisation of intangible assets Adjustments for: Interest income Amortisation of obligations under granting of rights Depreciation Change in fair value of contingent consideration plant and equipment, net Loss/(gain) on disposal of property, Finance costs and retention costs Amortisation of customer acquisition Foreign exchange gain Share of losses of joint ventures Equity-settled share-based payment expenses (Increase)/decrease in other non-current assets Changes in working capital: Decrease/(increase) in inventories Increase in customer acquisition and retention costs deposits and prepayments Increase in other receivables, Increase in trade receivables Increase in deferred services revenue Decrease in contract liabilities Increase in contract assets from joint ventures (Increase)/decrease in amounts due Increase in trade payables Increase in deposits received and accrued charges (Decrease)/increase in other payables Decrease in amount due to joint ventures chosen, comparative information is not restated. See note 1(c). note See restated. not is information comparative chosen, 13(b) Note 3(b) 3(b) 3(d) 3(b) 3(a) 3(a) 3(a) 3(c) 10

662,816 1,469,569 (231,901) 309,362 534,758 347,962 259,271 240,793 151,168 $ (45,334) (24,938) (55,727) 2019 12,962 ’ (4,083) (9,024) (4,134) (1,187) (2,922) (6,292) (6,549) 000 $ 1,542 3,099 2019 ’ 000 119 276 398 (50) – 1,192,771 373,293 489,268 425,258 172,576 117,288 (20,880) (38,507) (21,855) 10,405 37,610 15,739 (1,641) (9,024) (3,649) $ $ (Note) 8,621 6,720 3,215 2018 2018 ’ ’ (203) 000 000 437 693 700 – – – – – 18 Cash andcashequivalents(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (c) Reconciliation ofliabilitiesarisingfromfinancingactivities: (c) Interest paid loans paid Transaction costs for bank Repayment of bank loans net of transaction costs Proceeds from bank loans, flows: Changes fromfinancingcash Changes infairvalue Interest expenses Other changes: Finance cost paid (note 30) Acquisition of subsidiaries At 1September2018 activities. were, orfuturecashflowswillbe,classifiedintheGroup and non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows The table below details changes in the Group cash flows Total changes from financing * Accruedborrowingcostsare includedin (*) At 31August2019 consolidated statement offinancialposition.

Interest-rate receivables payables) (included (Note 17 or other in other 1,2)3,873,716 (12,024) 2,7)4,447,597 (20,874) and 19) 12,088 (8,850) $ 8,850 swap “ ’ 0 $ 000 Other payablesandaccruedchanges –currentportion 444423519178,2 9,704,680 81,226 5,169,137 4,454,253 64 – – – – – ’ s liabilities from financing activities, including both cash Bank loans (Note 20) (400,000) 974,365 ,5 5,944 6,656 ’ ’ (484) s consolidated cash flow statement as financing s consolidatedcashflowstatementasfinancing 0 $ 000 – – – –

,6,9 2,4 5,290,537 127,344 5,163,193 (Note 21) Senior notes ’ 0 $ 000 – – – – – – – –

borrowing 2151 (280,401) (271,551) 2151 4,155,172 (271,551) Accrued 2,3 234,283 225,433 costs ’ 0 $ 000 (*) – – – – – –

” inthe 3,861,692 (400,000) 974,365 12,088 12,600 Total ’ (484) 000

193

HKBN Ltd. Annual Report 2019 194 HKBN Ltd. Annual Report 2019 18 Cash andcashequivalents(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (c) Reconciliation ofliabilitiesarisingfromfinancingactivities:(continued) (c) loans paid Transaction costs for bank Interest paid (note 30) Acquisition of subsidiaries facility expired Origination fee for banking Repayment of bank loans flows: Changes fromfinancingcash At 1September2017 Changes infairvalue cash flows Total changes from financing Interest expenses Other changes: At 31August2018 * Accruedborrowingcostsareincludedin (*) consolidated statementoffinancialposition. Interest-rate receivables payables) (included (Note 17 or other in other and 19) (58,531) 1,2)3,873,716 (12,024) 6573,831,332 46,507 9643,701,938 39,674 683 (96,743) (6,833) $ ,3 119,711 6,833 swap “ ’ 0 $ 000 Other payablesandaccruedchanges–currentportion – – – – Bank loans (Note 20) (29,859) 49,275 (2,792) 2,792 ’ 0 $ 000 – (Note 21) Senior notes ’ 0 $ 000 – – – – – – – – – – borrowing Accrued costs ’ 0 $ 000 (*) – – – – – – – – – – ” inthe 3,877,839 3,741,612 3,861,692 (103,576) 126,544 (29,859) (58,531) 49,275 (2,792) 2,792 Total ’ 000 19 Trade payables,otherpayablesandaccruedcharges (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements therefore, it is accounted for as held for trading and measured at fair value through profit or loss. net of a floating rate interest at 3-month Hong Kong Inter-bank Offered Rate ( Under these arrangements, the Group pays a fixed rate interest on the notional amount on a quarterly basis, notional amount of $2,635,000,000 and with a maturity date on 29 May 2020. floating interest rate after the maturity of the current interest-rate swap. The new interest-rate swap has a In 2017, the Group entered into a new interest-rate swap with effective date on 31 August 2019, to hedge the maturity date on 23 August 2018, to hedge the floating interest rate arisen from the bank loans (see note 20). In 2015, the Group entered into an interest-rate swap with an notional amount of $2,635,000,000 and with a Within 30 days Trade payables These interest-rate swaps do not qualify for hedge accounting under HKFRS 9, These swaps are recognised initially at fair value and remeasured at the end of each reporting period. period. 31 to 60 days – Current portion Other payables and accrued charges – Long-term portion follows: As of the end of the reporting period, the ageing analysis of trade payables, based on the invoice date, is as The amountoftheinterest-rateswapincludedinotherpayablesandaccruedchargesis$64,000(2018:$Nil). more than one year and are classified as non-current liabilities. other payables and accrued charges of $143,600,000 (2018: $201,266,000) are expected to be settled after All trade payables, other payables and accrued charges are expected to be settled within one year, except Over 90 days 61 to 90 days

“ HIBOR Financial instruments Financial 1,416,893 365,976 124,247 365,976 907,317 143,600 159,212 46,783 35,734 $ $ ” 2019 2019 ’ ’ ) in the corresponding 000 000 138,918 801,557 138,918 461,373 201,266 46,123 31,038 51,971 , and $ $ 9,786 2018 2018 ’ ’ 000 000 195

HKBN Ltd. Annual Report 2019 196 HKBN Ltd. Annual Report 2019 20 Bank loans 20 Bank (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (a) The analysisofthecarryingamountbankloansisasfollows: (a) (b) As at31August2019,thebankloanswererepayableasfollows: (b) i On 21 November 2016, the Group has term and revolving credit facilities agreement of (i) Within 1 year on demand Bank loans(unsecured) Long-term bank loans Non-current liabilities After 1 year but within 2 years After 2 years but within 5 years 25 May 2023. HKBNGL, HKBN, WTTD, WTTC, HKBNESHKL and COL Limited, and repayable in full upon maturity on Loan is unsecured and covered by a cross guarantee arrangement issued by the Company, MLCL, 3(d)) in the consolidated income statement for the year ended 31 August 2018. The New Bank and the unamortised transaction costs of $49,275,000 were recognised as finance costs (see note Upon renewal, the original term and revolving credit facilities agreement were deemed extinguished HIBOR plus a margin of 1.05% per annum payable quarterly. November 2021 to 23 May 2023 ( At 25 May 2018, the expiry date of the term and revolving credit facilities was extended from 28 principal amount of $3,900,000,000 at HIBOR plus a margin of 1.35% per annum payable quarterly. $4,100,000,000 in aggregate with various international banks and drawn down a bank loan with a “ The New Bank Loan ” ). The New Bank Loan is interest-bearing at 4,454,253 4,454,253 4,454,253 $ $ 2019 2019 ’ ’ 000 000 – – 3,873,716 3,873,716 3,873,716 $ $ 2018 2018 ’ ’ 000 000 – – 22 Amounts duefrom/(to)jointventures notes 21 Senior 20 Bank loans(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements The senior notes are guaranteed by the Group On 28 May 2019, MLCL assumed the obligations of the Predecessor Issuer. The effective interest rate for the senior notes for the year ended 31 August 2019 is 5.9% per annum. interest and fees payable, using the effective interest method. the redemption value being recognised in profit or loss over the period of the senior notes, together with any senior notes were stated at amortised cost with any difference between the amount initially recognised and recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, the semi-annually on 21 May and 21 November in each year commencing on 21 May 2018. The senior notes were were denominated and settled in the United States Dollar, and bore coupon at 5.5% per annum payable value of US$670,000,000 (equivalent to $5,232,091,000) that will mature on 21 November 2022. The notes demand. The amounts due from/(to) joint ventures are unsecured, interest free and recoverable/(repayable) on On 21 November 2017, WTT Investment Ltd (the As at31August2019,thebankloanswererepayableasfollows:(continued) (b) i) On 10 October 2018, HKBN entered into a facility agreement with Hang Seng Bank Limited for (ii) and the amortised cost of the bank loans is $4,454,253,000 (2018: $3,873,716,000). The effective interest rate of the bank loans as of 31 August 2019 is 3.25% per annum (2018: 3.21%) the amortised cost of the bank loan at the end of the previous reporting period. To calculate the effective interest in each reporting period, the effective interest rate is applied to amount initially recognised and interest payable using the effective interest method. to initial recognition, the bank loans are stated at amortised cost with any difference between the The bank loans are recognised initially at fair value less attributable transactions costs. Subsequent upon maturity on 10 October 2023. guarantee arrangement issued by the Company, MLCL, HKBNGL and HKBN, and repayable in full The facility was fully utilised on 11 October 2018. The loan is unsecured and covered by a cross a five-year term loan of $580,000,000 that bears interest at HIBOR plus a margin per annum. ’ s subsidiaries. “ Predecessor Issuer ” ) issued senior notes with a nominal 197

HKBN Ltd. Annual Report 2019 198 HKBN Ltd. Annual Report 2019 23 Share-based transactions 23 Share-based (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (a) Equity-settled share-basedtransactions (a) the Company motivate skilled and experienced Talents of the Group. The RSUs are the contingent rights to receive to directors and Talents of the Group in Hong Kong. The purpose of the Plan is to attract, retain and On 21 February 2015, the Company adopted the Co-Ownership Plan II (the 2021 and 2022 based on the respective vesting periods. the remaining expenses related to the RSUs are to be recognised in the years ending 31 August 2020, Talent costs in the consolidated income statement (see note 3(c)) for the year ended 31 August 2019 and Equity-settled share-based payment expenses of $3,099,000 (2018: $8,621,000) were recognised as $8.21. under the Plan. The directors estimated the weighted average fair value of each RSU of grant date to be On 26 February 2019, 31,000 RSUs were granted to Talents of the Group in Hong Kong by the Company $8.90 under the Plan. The directors estimated the weighted average fair value of each RSU of grant date to be On 30 January 2019, 329,000 RSUs were granted to Talents of the Group in Hong Kong by the Company $7.20. under the Plan. The directors estimated the weighted average fair value of each RSU at grant date to be On 20 July 2017, 253,000 RSUs were granted to Talents of the Group in Hong Kong by the Company be $8.35. under the Plan. The directors estimated the weighted average fair value of each RSU at the grant date to On 24 January 2017, 258,000 RSUs were granted to Talents of the Group in Hong Kong by the Company grant date to be $8.10. the Company under the Plan. The directors estimated the weighted average fair value of each RSU at the On 20 June 2016, 2,082,000 RSUs were granted to directors and Talents of the Group in Hong Kong by be $10.28. under the Plan. The directors estimated the weighted average fair value of each RSU at the grant date to On 20November2015,158,000RSUsweregrantedtoTalentsoftheGroupinHongKongbyCompany the weighted average fair value of each RSU at the grant dates to be $8.50. Talents of the Group in Hong Kong by the Company under the Plan respectively. The directors estimated On 29 June 2015 and 18 August 2015, 2,723,000 RSUs and 133,000 RSUs were granted to directors and trustee until their release to the beneficiaries upon the vesting of the RSUs. subject to certain terms, conditions and undertakings. The shares are held on trust by the appointed ’ s shares at the relevant matching ratio in respect of any shares purchased by the Talents, “ Plan ” ) and granted RSUs 23 Share-based transactions(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (a) Equity-settled share-basedtransactions(continued) (a) i The major terms and conditions of the grants are as follows: (i) (v) The RSUs granted have a vesting period of three years as follows: as years three of period vesting a have granted RSUs The (v) (iv) The RSUs granted have a vesting period of three years as follows: as years three of period vesting a have granted RSUs The (iv) (iii) The RSUs granted have a vesting period of three years as follows: as years three of period vesting a have granted RSUs The (iii) (ii) The RSUs granted have a vesting period of three years as follows: as years three of period vesting a have granted RSUs The (ii) Notes: Total RSUs granted –on 29 June 2015 RSUs granted to directors: –on 29 June 2015 RSUs granted to Talents: –on 20 June 2016 –on 20 June 2016 –on 20 November 2015 –on 18 August 2015 –on 26 February 2019 –on 30 January 2019 –on 20 July 2017 –on 24 January 2017 (i) The RSUs granted have a vesting period of three years as follows: as years three of period vesting a have granted RSUs The (i) – 50% of RSUs shall vest on 24 January 2020. January 24 on vest shall RSUs of 50% – – 25% of RSUs shall vest on 24 January 2019; and 2019; January 24 on vest shall RSUs of 25% – – 25% of RSUs shall vest on 24 January 2018; January 24 on vest shall RSUs of 25% – – 50% of RSUs shall vest on 20 June 2019. June 20 on vest shall RSUs of 50% – – 25% of RSUs shall vest on 20 June 2018; and 2018; June 20 on vest shall RSUs of 25% – – 25% of RSUs shall vest on 20 June 2017; June 20 on vest shall RSUs of 25% – – 50% of RSUs shall vest on 20 November 2018. November 20 on vest shall RSUs of 50% – – 25% of RSUs shall vest on 20 November 2017; and 2017; November 20 on vest shall RSUs of 25% – – 25% of RSUs shall vest on 20 November 2016; November 20 on vest shall RSUs of 25% – – 50% of RSUs shall vest on 18 August 2018. August 18 on vest shall RSUs of 50% – – 50% of RSUs shall vest on 29 June 2018. June 29 on vest shall RSUs of 50% – – 25% of RSUs shall vest on 18 August 2017; and 2017; August 18 on vest shall RSUs of 25% – – 25% of RSUs shall vest on 29 June 2017; and 2017; June 29 on vest shall RSUs of 25% – – 25% of RSUs shall vest on 18 August 2016; August 18 on vest shall RSUs of 25% – – 25% of RSUs shall vest on 29 June 2016; June 29 on vest shall RSUs of 25% – instruments Number of 5,967 2,326 1,753 ’ 000 397 329 158 133 329 253 258 31 Vesting conditions notes (viii) and (ix) notes (vii) and (ix) notes (iv) and (ix) notes (vi) and (ix) notes (ii) and (ix) notes (ii) and (ix) notes (v) and (ix) notes (v) and (ix) notes (i) and (ix) notes (i) and (ix) 199

HKBN Ltd. Annual Report 2019 200 HKBN Ltd. Annual Report 2019 23 Share-based transactions(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (a) Equity-settled share-basedtransactions(continued) (a) i) The movement of the RSUs is as follows: (ii) (ix) Directors and Talents who leave the Group prior to full vesting would forfeit their right to any unvested RSUs. unvested any to right their forfeit would vesting full to prior Group the leave who Talents and Directors (ix) (viii) The RSUs granted have a vesting period of three years as follows: as years three of period vesting a have granted RSUs The (viii) (vi) The RSUs granted have a vesting period of three years as follows: as years three of period vesting a have granted RSUs The (vi) (vii) The RSUs granted have a vesting period of three years as follows: as years three of period vesting a have granted RSUs The (vii) Granted during the year Outstanding at the beginning of the year associated with the RSUs granted. the grant date fair value measurement of the services received. There were no market conditions RSUs were granted under a service condition. This condition has not been taken into account in would be accrued and paid to the RSUs plan participants upon vested. fair value of the RSUs. The dividends paid from the Company The expected dividends during the vesting period have been taken into account when measuring the binomial lattice model. value of RSUs granted. The estimate of the fair value of the RSUs granted is measured based on a The fair value of services received in return for RSUs granted is measured by reference to the fair Outstanding at the end of the year Forfeited during the year Vested during the year – 50% of RSUs shall vest on 26 February 2022. February 26 on vest shall RSUs of 50% – – 25% of RSUs shall vest on 26 February 2021; and 2021; February 26 on vest shall RSUs of 25% – – 25% of RSUs shall vest on 26 February 2020; February 26 on vest shall RSUs of 25% – – 50% of RSUs shall vest on 20 July 2020. July 20 on vest shall RSUs of 50% – – 25% of RSUs shall vest on 20 July 2019; and 2019; July 20 on vest shall RSUs of 25% – – 25% of RSUs shall vest on 20 July 2018; July 20 on vest shall RSUs of 25% – – 50% of RSUs shall vest on 30 January 2022. January 30 on vest shall RSUs of 50% – – 25% of RSUs shall vest on 30 January 2021; and 2021; January 30 on vest shall RSUs of 25% – – 25% of RSUs shall vest on 30 January 2020; January 30 on vest shall RSUs of 25% – ’ s ordinary shares underlying the RSUs Number ofRSUs 1,200 2019 ’ (122) (922) 000 361 517 (1,751) 3,136 1,200 2018 ’ (185) 000 – 24 Current taxationintheconsolidatedstatementoffinancialposition 23 Share-based transactions(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements Provision for tax outside Hong Kong Provision for Hong Kong Profits Tax for the year Current taxationintheconsolidatedstatementoffinancialpositionrepresents: Cash-settled share-basedtransaction (b) Balance of Profits Tax provision relating to prior years fair value of the liability are recognised as Talent costs in profit or loss. The liabilityisremeasuredattheendofeachreportingperiodandsettlementdate.Anychangesin and 2022 based on the respective vesting periods. remaining expenses related to the RSUs are to be recognised in the years ending 31 August 2020, 2021 costs in the consolidated income statement (see note 3(c)) for the year ended 31 August 2019 and the Cash-settled share-based payment expenses of $797,000 (2018: $1,290,000) were recognised as Talent share-based payment in accordance with the accounting policy set out in note 1(s)(iv)(b). The amount payable to the Talents in respect of those RSUs is accounted for under cash-settled to be $9.38. settled in cash. The directors estimated the weighted average fair value of each RSU at 31 August 2019 On 26 February 2019, 95,000 RSUs were granted to Talents of the Group in the PRC which are to be to be $10.40 (2018: $8.48). settled in cash. The directors estimated the weighted average fair value of each RSU at 31 August 2019 On 24 January 2017, 142,000 RSUs were granted to Talents of the Group in the PRC which are to be 158,480 155,786 146,864 $ 2,694 8,922 2019 ’ 000 109,410 107,592 104,960 $ 1,818 2,632 2018 ’ 000 201

HKBN Ltd. Annual Report 2019 202 HKBN Ltd. Annual Report 2019 25 Deferred taxintheconsolidatedstatementoffinancialposition (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (b) Deferred taxassetsnotrecognised (b) (a) Deferred taxliabilitiesandassetsrecognised: (a) Deferred tax arising from: arising tax Deferred future. it has been determined that it is probable that these profits will not be distributed in the foreseeable distribution of these retained profits as the Company controls the dividend policy of the subsidiaries and of the undistributed profits have not been recognised in respect of the tax that would be payable on the (equivalent to $120,914,000)). Deferred tax liabilities amounted to 10% (or 5% if tax treaty is available) subsidiaries amounted to RMB119,364,000 (equivalent to $130,894,000) (2018: RMB105,527,000 At 31 August 2019, temporary differences relating to the undistributed profits of the Group relevant tax jurisdiction and entity. The tax losses did not expire under current tax legislation. probable that future taxable profits against which the losses can be utilised will be available in the tax assets in respect of cumulative tax losses of $2,686,931,000 (2018: $2,808,203,000) as it was not In accordance with the accounting policy set out in note 1(t), the Group had not recognised deferred At 31 August 2019 of HKFRS 15 Impact on initial application as restated At 31 August 2018, profit or loss Credited/(charged) to as restated (note 30) Acquisition of subsidiaries, At 1 September 2017 position and the movements during the year are as follows: The components of deferred tax (liabilities)/assets recognised in the consolidated statement of financial At 1 September 2018 profit or loss Credited/(charged) to (note 30) Acquisition of subsidiaries

Depreciation depreciation in excessof allowances the related 3018 7667 ,9 6,8)12,635 (61,486) 4,095 (726,697) (360,158) 5,584 (189,347) (224,511) 2495 2721 7,073 (207,291) (224,905) 2451 1937 ,8 (65,499) 5,584 (189,347) (224,511) 1019 (582,949) (140,109) $ ,6 559(,8)4,013 (1,489) 45,599 4,462 ’ 000 9 014(1,489) 20,164 394 – –

Amortisation of intangible assets (2,220) $ ’ 000 –

of obligations Amortisation granting of rights under $ ’ 000 – – –

Contract (65,499) $ Costs ’ 000 – – – – –

Credit loss loac Others allowance $ 7,545 5,090 ’ 000 – – – – – –

149 17,620 (1,449) $ ,0 (423,618) 1,505 ’ 000 7 (1,131,440) 171 1 57,790 115 6(408,218) 56 6(473,717) 56 – – – ’ s PRC

(715,513) (65,499) (2,220) $ Total ’ 000 27 Contingent consideration 27 Contingent 26 Obligations undergrantingofrights (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements The amortisation of the obligations is charged to profit or loss on a straight-line basis over 10 years. obligations in connection with the granting of such rights at fair value at the date of business combination. services from the Group for a term of 10 years from 30 May 2012 to 30 May 2022. The Group recognised the i On 31 March 2016, the Group acquired the entire issued share capital of Concord Ideas Ltd. and Simple (i) Network Limited ( As part and parcel of the business combination on 30 May 2012, the Group granted Hong Kong Television Non-current portion At the end of the year At the beginning of the year Less: Current portion Amortisation for the year (note 3(a)) contingent consideration has been fully settled during the year. related parties based on 50% of settled invoices up to $50,000,000 in aggregate. The Concord Acquisition World Development Company Limited and Chow Tai Fook Enterprises Limited and their subsidiaries and of cash rebates to New World Telephone Holdings Limited for services provided by the Group to New flow valuation method. The expected payment was determined by considering the forecast amount Ideas Ltd.andSimpleClickInvestmentsLimitedwasmeasuredatfairvalueacquisitiondate( Click Investments Limited and the contingent consideration in respect of the acquisition of Concord Acquisition ” ). The fair value of the contingent consideration was determined by the discounted cash “ HKTV ” ) the telecommunication business rights to use of certain telecommunication

15,795 24,819 33,843 (9,024) (9,024) $ 2019 ’ 000 “ Concord Concord 24,819 33,843 42,867 (9,024) (9,024) $ 2018 ’ 000 203

HKBN Ltd. Annual Report 2019 204 HKBN Ltd. Annual Report 2019 27 Contingent consideration(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements ii The contingent consideration payable is classified as a financial liability and its fair value is re-measured (iii) i) On 30 May 2018, the Group acquired the entire issued share capital of I Consulting Group Limited and its (ii) (restated): 5.0%). present valueusingthecorrespondingdiscountrateof considerationofICGAcquisition5.0%(2018 The fair value as at 31 August 2019 is determined considering the expected payment and discounted to profit or loss during the year ended 31 August 2019. respectively. During the year, change in fair value of $1,542,000 (2018: $437,000) was recognised in to $1,371,000 (2018 (restated): $11,471,000) and $28,278,000 (2018 (restated): $28,236,000), The contingent consideration payable within one year and over one year from 31 August 2019 amounted at the end of each reporting period. Any changes in fair value are recognised in profit or loss. $28,236,000). the fair value of the contingent consideration as at 31 August 2019 to be $29,649,000 (2018 (restated): the period from 31 May 2018 to 31 March 2023 up to $200,000,000 in aggregate. The directors estimated method. The expected payment was determined by considering the adjusted fund flow of ICG Group for The fair value of the contingent consideration was determined by the discounted cash flow valuation consideration of $4,587,000, respectively. of $3,511,000, intangible assets of $1,289,000, deferred tax liabilities of $213,000 and contingent provisional at 31 August 2018 in respect of ICG Group were finalised giving rise to a decrease in goodwill During the year ended 31 August 2019, the fair values of the acquired assets and liabilities disclosed as finalisation of the post-acquisition review of the fair values of the acquired net assets. Group Limited and its subsidiary ( As at 31 August 2018, the fair values of acquired assets, liabilities and goodwill for of I Consulting in the business combination as set out in note 30(b). measured at fair value at acquisition date and was account for as part of the consideration transferred subsidiary ( “ ICG Acquisition ” ) and the contingent consideration in respect of the acquisition of ICG was “ ICG Group ” ) have been determined on a provisional basis, pending ’

28 Capital, reservesanddividends (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (a) Movements incomponentsofequity (a) Distribution to holders of Vendor Loan Notes Equity-settled share-based transactions of the current year of the Company in respect Dividend declared to equity shareholders of the previous year of the Company in respect Dividend approved to equity shareholders Equity-settled share-based transactions income for the year Profit and total comprehensive the current year Dividend declared in respect of Issue of Vendor Loan Notes the previous year Dividend approved in respect of Balance at31August2019 Issue of ordinary shares ended31August2019: Changes inequityfortheyear September2018 Balance at31August2018and1 income for the year Profit and total comprehensive ended31August2018: Changes inequityfortheyear Balance at1September2017 The Company in the Company consolidated equity is set out in the consolidated statement of changes in equity. Details of the changes The reconciliation between the opening and closing balances of each component of the Group out below: ’ s individual components of equity between the beginning and the end of the year are set 28(b)(ii) 28(b)(ii) 28(b)(i) 28(b)(i) 23(a) 23(a) 28(c) Note 29 capital Share $ ’ 0 $ 000 3 ,9,3 ,4,0 892151757,722,423 1,541,745 38,912 2,349,204 3,792,430 132 101 105,880 101 14,295,264 31 – – – – – – – – – – premium (445,944) (105,880) (56,890) Share ’ 0 $ 000 – – – – – – – – Loan Notes 2,349,204 Vendor ’ 0 $ 000 – – – – – – – – – – – – reserve Capital 583107411,133,405 1,097,491 35,813 71293531,126,676 993,503 27,192 3,099 8,621 ’ 0 $ 000 – – – – – – – – – Retained 3170 (301,700) (301,700) 2143 (261,473) (261,473) 1543 (231,303) (125,423) 4,5 745,954 745,954 9,8 490,884 490,884 rft Total profits ’ 0 $ 000 – – – – – – ’ s 2,349,204 4,295,295 (445,944) (56,980) 3,099 8,621 ’ 000 205

HKBN Ltd. Annual Report 2019 206 HKBN Ltd. Annual Report 2019 28 Capital, reservesanddividends(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (b) Dividends i) DividendpayabletoequityshareholdersoftheCompanyattributableprevious (ii) Dividendpayabletoequity shareholdersoftheCompanyattributabletoyear (i) (2018: 30 cents per ordinary share) period of 36 cents per ordinary share Final dividend proposed after the end of the reporting share (2018: 23 cents per ordinary share) approved and paid during the year, of 30 cents per ordinary Final dividend in respect of the previous financial year, liability at the end of the reporting period. The final dividend proposed after the end of the reporting period has not been recognised as a share (2018: 26 cents per ordinary share) Interim dividend declared and paid of 34 cents per ordinary financial year,approvedandpaidduringtheyear

472,176 301,700 445,944 918,120 $ $ 2019 2019 ’ ’ 000 000 301,700 231,303 261,473 563,173 $ $ 2018 2018 ’ ’ 000 000 28 Capital, reservesanddividends(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (c) Share capital (c) (d) Nature andpurposeofreserves (d) Note: On 30 April 2019, the Group completed the acquisition of 100% equity interest of WTT Group (note 30). Part Part 30). (note Group WTT of interest equity 100% of acquisition the completed Group the 2019, April 30 On Note: (iii) Other reserve (iii) Capitalreserve (ii) Sharepremium (i) to the Company entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard The holders of ordinary shares are entitled to receive dividends as declared from time to time and are At 31 August 2019 Issue of new shares (note) At 1 September 2017, 31 August 2018, 1 September 2018 Ordinary shares,issuedandfullypaid: 1 September 2018 and 31 August 2019 At 1 September 2017, 31 August 2018, Authorised: premium of MLCL was recorded in the other reserve. of the Share Transfer, the excess amount between the consideration and share capital and share Company in consideration for an issue of the Company share ( As part of the group reorganisation, the entire issued share capital of MLCL was transferred to the accounting policy adopted for share-based payments in note 1(s)(iv)(a). directors and Talents of the Group in Hong Kong that has been recognised in accordance with the The capital reserve represents the portion of the grant date fair value of RSUs granted to the business. the Company will be in a position to pay off its debts as they fall due in the ordinary course of the provided that immediately following the date on which the dividend is proposed to be distributed, in the share premium account of the Company are distributable to shareholders of the Company (2013 Revision) of the Cayman Islands. Under the Companies Law of the Cayman Islands, the funds The application of the share premium account is governed by Section 34(2) of the Companies Law on the quoted price of the shares on that date, was amounted to $4,295,295,000. to amounted was date, that on shares the of price quoted the on Company. The shares were issued on 30 April 2019 and the aggregate fair value of the shares issued, based based issued, shares the of value fair aggregate the and 2019 April 30 on issued were shares The Company. of the consideration was settled by the allotment and issue of 305,932,690 shares of $0.0001 each of the the of each $0.0001 of shares 305,932,690 of issue and allotment the by settled was consideration the of ’ s residual assets. “ Share Transfer 1,311,599,000 1,005,666,000 3,800,000,000 No. ofshares 305,933,000 ” ). Upon completion $ ’ 000 132 101 380 31 207

HKBN Ltd. Annual Report 2019 208 HKBN Ltd. Annual Report 2019 28 Capital, reservesanddividends(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (e) Capital management (e) Nature andpurposeofreserves(continued) (d) during the years presented. Neither the Company nor any of its subsidiaries were subject to externally imposed capital requirements Gearing ratio Total equity Gross debt Senior notes Bank loans (principal amount) The Group Exchange reserve (iv) The gearing ratio at 31 August 2019 and 2018 was as follows: outstanding borrowings. ratio is calculated as gross debt divided by total equity. Gross debt comprises the principal amount of The Group monitors its capital structure on the basis of a gearing ratio. For this purpose, gearing structure in light of changes in economic conditions. advantages and security afforded by a sound capital position, and makes adjustments to the capital between the higher shareholder returns that might be possible with higher levels of borrowings and the The Group actively and regularly reviews and manages its capital structure to maintain a balance at a reasonable cost. stakeholders, bypricingservicescommensuratelywiththelevelofriskandsecuringaccesstofinance as a going concern, so that it can continue to provide returns for shareholders and benefits for other financial statements of operations outside Hong Kong. The exchange reserve comprises all foreign exchange differences arising from the translation of the ’ s primary objectives when managing capital are to safeguard the Group Note 21 20 7,456,561 9,712,091 5,232,091 4,480,000 $ 130% 2019 ’ 000 ’ s ability to continue 1,036,912 3,900,000 3,900,000 376% $ 2018 ’ 000 – 30 Business combinationandacquisitionofasubsidiary 29 Vendor LoanNotes (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements . Businesscombinationduringtheyearended31August2019 a. financial position. Loan Notes are classified as equity instruments and recorded in equity in the consolidated statement of an amount equal to any dividends made by the Company on an as-converted basis. Therefore, the Vendor Vendor Loan Notes has no maturity date and the holders of the Vendor Loan Notes have the right to receive conversion price of $11.60 per share pursuant to the terms and conditions of the Vendor Loan Notes. The convertible noteswhichmaybeconvertedintonewordinarysharestoissuedbytheCompanyatinitial as part of the consideration of the WTT Acquisition (see note 30). The Vendor Loan Notes are zero coupon On 30 April 2019, the Company issued the Vendor Loan Notes with a nominal amount of $1,940,937,656 Note (b): The Vendor Loan Notes may be converted into new ordinary shares to be issued by the Company at initial initial at Company the by issued be to shares ordinary new into converted be may Notes Loan Vendor The (b): Note Note (a): The fair value of the ordinary shares of the Company issued as consideration is determined by reference to to reference by determined is consideration as issued Company the of shares ordinary the of value fair The (a): Note businesses. The WTT Acquisition was completed on 30 April 2019. fixed line infrastructure in Hong Kong, and over 20 years HKBNESHKL is an enterprise-focused fixed telecommunication services operator with significant Acquisition was settled by (i) allotment and issuance of 305,932,690 of the Company Goodwill on the WTT Acquisition Add: Fair value of net liabilities acquired Aggregate consideration Issuance of the Vendor Loan Notes (note (b)) Allotment and issuance of new ordinary shares of the Company (note (a)) Consideration transferred: namely HKBN Enterprise Solutions HK Limited ( communications market primarily in Hong Kong through its wholly-owned subsidiary in Hong Kong, WTT Group is principally engaged in the provision of telecommunication services to business issuance of the Vendor Loan Notes in the principal amount of $1,940,937,656. “ Holding Corp, a company incorporated in the Cayman Islands, and its subsidiaries (together referred as Pursuant to the merger agreement dated 7 August 2018, MLCL, acquired 100% equity interests in WTT WTT Group shares of the Company at the date of completion of the WTT Acquisition. WTT the of completion of date the at Company the of shares Notes has been determined by reference to the quoted market price of $14.04 per each of the ordinary ordinary the of each per $14.04 of price market quoted the to reference by determined been has Notes convertible to 167,322,212 ordinary shares of the Company. Therefore, the fair value of the Vendor Loan Loan Vendor the of value fair the Therefore, Company. the of shares ordinary 167,322,212 to convertible date of completion of the WTT Acquisition based on the initial conversion price, the Vendor Loan Notes are are Notes Loan Vendor the price, conversion initial the on based Acquisition WTT the of completion of date conversion price of $11.60 per share pursuant to the terms and conditions of the Vendor Loan Notes. At the the At Notes. Loan Vendor the of conditions and terms the to pursuant share per $11.60 of price conversion of the WTT Acquisition. WTT the of the quoted market price of $14.04 per each of the ordinary shares of the Company at the date of completion completion of date the at Company the of shares ordinary the of each per $14.04 of price market quoted the ” ) from TPG Wireman and Twin Holding (the “ HKBNESHKL “ WTT Acquisition ’ track record of serving local and international ” ) (formerly known as WTT HK Limited). ” ). The consideration of the WTT ’ s shares and (ii) 6,986,926 6,644,499 2,349,204 4,295,295 342,427 $ ’ 000 209

HKBN Ltd. Annual Report 2019 210 HKBN Ltd. Annual Report 2019 30 Business combinationandacquisitionofasubsidiary(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements . Businesscombinationduringtheyearended31August2019(continued) a. the year ended 31 August 2019 Net cash inflow in respect of the WTT Acquisition during Cash and cash equivalents acquired Cash consideration paid Total consideration Goodwill (note 9) Fair value of net liabilities acquired Senior notes (note 18(c)) Provision for reinstatement costs Deferred tax liabilities (note 25) Contract liabilities – non-current portion Tax payable Deposits received Contract liabilities – current portion Other payables and accrued charges – current portion Trade payables Cash and cash equivalents Contract assets Other receivables, deposits and prepayments Trade receivables Inventory Other non-current assets Customer acquisition and retention costs (note 15) Property, plant and equipment (note 11) Intangible assets (note 10) The WTT Acquisition had the following effect on the Group effective competitor in Hong Kong. None of the goodwill is expected to be deductible for tax purposes. efficiencies from the combined company that will make the combined business a more efficient and The goodwill reflects synergies expected from leveraging network of the WTT Group and expected completion date of the WTT Acquisition: ’ s assets and liabilities on 30 April 2019, the (5,163,193) 6,644,499 6,986,926 1,834,490 3,533,017 (355,172) (355,172) (342,427) (714,499) (136,528) (494,994) 355,172 306,675 173,166 (36,402) (99,192) (13,835) (75,890) 70,571 88,625 23,668 (2,703) $ 9,425 ’ 000 – 30 Business combinationandacquisitionofasubsidiary(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements . Businesscombinationduringtheyearended31August2018 b. Businesscombinationduringtheyearended31August2019(continued) a. During the year ended 31 August 2019, the accounting for the ICG Acquisition was completed. values of the identifiable net assets and goodwill were determined provisionally. During the year ended 31 August 2018, the valuations have not been completed and the respective fair has been included in the purchase price of ICG. contingent consideration is estimated at approximately $29,649,000 (2018 (restated): $28,236,000) and businesses of ICG achieve certain financial milestones within a specified period. The fair value of this may have to make additional payments totaling up to approximately to $200,000,000 in cash if the The Group made an initial payment for acquisition totaling approximately $10,000,000 in cash and Hong Kong. subsidiary ( On 30 May 2018, the Group acquired the entire shares of I Consulting Group Limited ( business combination that occurred during the year had been as of 1 September 2018. amounts of revenue and profit or loss after taxation of WTT Group as if the acquisition date for the 2018 to the date of the WTT Acquisition. As a result, it is impracticable for the Group to disclose the No separate sets of financial information for WTT Group were prepared for the period from 1 September 31 August 2019. consolidated income statement were contributed by WTT Group from the date of the WTT Acquisition to The revenue and loss after taxation of $708,411,000 and $15,358,000 respectively included in the Revenue andprofitcontribution operating expenses in the consolidated income statement for the years ended 31 August 2019 and 2018. Acquisition-related costs of approximately $75,608,000 and $16,181,000 were included in other Acquisition-related costs “ ICG Acquisition ” ). ICG is primarily engaged in the provision of telecommunication services in “ ICG “ ) and its 211

HKBN Ltd. Annual Report 2019 212 HKBN Ltd. Annual Report 2019 30 Business combinationandacquisitionofasubsidiary(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements . Businesscombinationduring theyearended31August2018(continued) b. statements as of and for the year ended 31 August 2018, the following items were restated: restatement was not material. The respective profit or loss impact from the acquisition date to 31 August 2018 arising from the above Goodwill Compared with the provisional purchase price allocation disclosed in the Group the year ended 31 August 2018 Net cash outflow in respect of the acquisition during Cash and cash equivalents acquired Cash consideration paid Total consideration Contingent consideration (note 27) Cash consideration Total consideration Goodwill (note 9) Fair value of net assets acquired Deferred tax liabilities (note 25) Bank loans (note 18(c)) Other payables, accrued charges, deposits received and deferred services revenue Trade payables Cash and cash equivalents Tax recoverable Other receivables, deposits and prepayments Trade receivables Property, plant and equipment (note 11) Intangible assets (note 10) the purchase price allocation are as follows: The fair values of the assets and liabilities of ICG recognised at the acquisition date upon completion of Intangible assets Contingent consideration Deferred tax liabilities As originally 3,2)(28,236) (32,823) 29529,424 32,935 47613,457 14,746 stated 243 (2,220) (2,433) $ ’ 000 As restated ’ s consolidated financial $ ’ 000 (Restated) Change 10,000 38,236 28,236 10,000 38,236 29,424 13,457 (2,220) (2,792) (2,649) (3,649) (3,511) (1,289) $ $ 9,501 8,812 2,173 3,536 4,587 ’ ’ (499) 000 000 499 222 235 213 30 Business combinationandacquisitionofasubsidiary(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements . Acquisition ofasubsidiaryduringtheyearended31August2019 c. Businesscombinationduring theyearended31August2018(continued) b. liabilities assumed at CTL Acquisition date. The following table summarises the consideration paid for CTL, the fair values of assets acquired and accordingly, the transaction has been accounted as the acquisition of assets. The major assets of CTL are property, plant and equipment which are leased by the Group, and save future rental expenses and avoid the need for relocation. The CTL Acquisition would help the Group to secure the location site of its own network centres, which of $329,219,000 ( Limited ( Net cash outflow in respect of CTL Acquisition for the year ended 31 August 2019 Deposits paid as at 31 August 2018 Total consideration An analysis of net cash outflow in respect of CTL Acquisition is as follows: Total identifiable net assets Deferred tax liabilities (note 25) Other payables and accruals Trade receivables Prepayments, deposits and other receivables Property, plant and equipment (note 11) Identifiable assets acquired and liabilities assumed: Cash consideration On 26 September 2018 ( occurred during the year had been as of 1 September 2017. revenue and profit after taxation of ICG as if the acquisition date for the business combination that to the date of the acquisition. As a result, it is impracticable for the Group to disclose the amount of No separate sets of financial information for ICG was prepared for the period from 1 September 2017 2018. consolidated financial statements were contributed by ICG from the date of acquisition to 31 August The revenue and loss after taxation of $10,518,000 and $3,229,000 respectively included in the None of the goodwill recognised is expected to be deductible for tax purpose. expected to be achieved from integrating ICG into the Group The goodwill is attributable mainly to the skills and technical talent of ICG “ CTL ” ) which is principally engaged in property investment in Hong Kong at a cash consideration “ CTL Acquisition “ CTL Acquisition date ” ). ” ), HKBNGL acquired the entire interest of Cosmo True ’ s existing telecommunication business. ’ s work force and the synergies 296,390 329,219 329,219 329,295 329,219 (32,829) (1,014) $ ’ (132) 000 631 439 213

HKBN Ltd. Annual Report 2019 214 HKBN Ltd. Annual Report 2019 31 Financial riskmanagementandfairvaluesoffinancialinstruments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements The Group business. (a) Credit risk (a) Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group Group to manage these risks are described below. in respect of these financial guarantees at the end of the reporting period is disclosed in note 33. any other guarantees which would expose the Group to credit risk. The maximum exposure to credit risk Except for the financial guarantees given by the Group as set out in note 33, the Group does not provide Group considers to have low credit risk. because the counterparties are banks and financial institutions with sound credit rating, for which the contract assets. The Group The Group Trade receivablesandcontractassets a financial loss to the Group. The Group Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in These evaluations focus onthecustomer Individual credit evaluations are performed on all customers requiring credit over a certain amount. customer bases. loss allowance based on past due status is not further distinguished between the Group experience does not indicate significantly different loss patterns for different customer segments, the to lifetime ECLs, which is calculated using a provision matrix. As the Group The Group measures loss allowances for trade receivables and contract assets at an amount equal from customers. outstanding balances before any further credit is granted. Normally, the Group does not obtain collateral billing. Subscribers with receivables that are more than 3 months past due are requested to settle all environment in which the customer operates. Trade receivables are due within 30 days from the date of to pay, and take into account information specific to the customer as well as pertaining to the economic Group customer. Concentrations of credit risk with trade receivables and contract assets are limited due to ’ ’ s exposure to these risks and the financial risk management policies and practices used by the s customer being large and unrelated. ’ s exposure to credit risk is influenced mainly by the individual characteristics of each ’ s exposure to credit risk arising from cash and cash equivalents is limited ’ s credit risk is primarily attributable to trade receivables and ’ s past history ofmaking payments when due and current ability ’ s historical credit loss ’ s different ’ s 31 Financial riskmanagementandfairvaluesoffinancialinstruments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (continued) (a) Credit risk(continued) (a) Comparative information under HKAS 39 HKAS under information Comparative quality and the balances were still considered fully recoverable. allowance was necessary in respect of these balances as there had been no significant change in credit a good track record with the Group. Based on past experience, management believed that no impairment Receivables thatwerepastdue butnotimpairedrelatedtoanumberofindependentcustomers thathad Over 60 days past due 31 to 60 days past due Less than 30 days past due Neither past due nor impaired not considered to be impaired was as follows: receivables of$24,939,000wasdeterminedtobeimpaired.Theaginganalysistradedebtorsthatwere of impairment (see note 1(k)(i) – policy applicable prior to 1 September 2018). At 31 August 2018, trade Prior to 1 September 2018, an impairment loss was recognised only when there was objective evidence the receivables. been collected, current conditions and the Group to reflect differences between economic conditions during the period over which the historic data has Expected loss rates are based on actual loss experience over the past 2 years. These rates are adjusted Current (not past due) receivables and contract assets as at 31 August 2019: The following table provides information about the group Trade receivablesandcontractassets(continued) Less than 30 days past due 31 to 60 days past due Over 60 days past due ’ s view of economic conditions over the expected lives of ’ s exposure to credit risk and ECLs for trade Expected loss rate 2067,740 12.0 86232366,705 233,293 28.6 . 470,014 1.3 . 121,492 6.5 % carrying 9,3 88,643 892,539 amount Gross $ ’ 000 allowance 117,261 247,210 129,949 51,137 25,968 52,844 $ $ 5,999 7,837 8,102 2018 Loss ’ ’ 000 000 215

HKBN Ltd. Annual Report 2019 216 HKBN Ltd. Annual Report 2019 31 Financial riskmanagementandfairvaluesoffinancialinstruments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (continued) (b) Liquidity risk (b) Credit risk(continued) (a) Note: Upon the adoption of HKFRS 9, no opening adjustment as at 1 September 2018 was made in respect of of respect in made was 2018 September 1 at as adjustment opening no 9, HKFRS of adoption the Upon Note: Through acquisition of subsidiaries Amounts written off during the year Impairment losses recognised during the year payments computed using contractual rates) and the earliest date the Group is required to pay. Group The following table shows the remaining contractual maturities at the end of the reporting period of the requirements in the short and longer term. securities and adequate committed lines of funding from major financial institutions to meet its liquidity covenants, to ensure that it maintains sufficient reserves of cash and readily realisable marketable to regularly monitor its current and expected liquidity requirements and its compliance with lending and the raising of loans and other borrowings to cover expected cash demands. The Group The Group has a cash management policy, which includes the short term investment of cash surpluses Balance at 31 August Balance at 31 August under HKAS 39 and 1 September year is as follows: Movement in the loss allowance account in respect of trade receivables and contract assets during the Trade receivablesandcontractassets(continued) upon the initial application of HKFRS 9 (note) ’ s financial liabilities, which are based on contractual undiscounted cash flows (including interest recognising additional ECLs on trade receivables and contract assets (see note 1(c)(i)). note (see assets contract and receivables trade on ECLs additional recognising

(34,030) 44,975 24,939 52,759 88,643 $ 2019 ’ 000 ’ s policy is (35,234) 20,480 39,693 24,939 $ 2018 ’ 000 – 31 Financial riskmanagementandfairvaluesoffinancialinstruments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (continued) (b) Liquidity risk(continued) (b) Senior notes Bank loans Bank loans Contingent consideration Amounts due to joint ventures Deposits received Other payables and accrued charges Contract liabilities Contingent consideration, as restated Amounts due to joint ventures Deposits received Other payables and accrued charges Trade payables Trade payables on demand on demand Contractual undiscountedcashoutflow Contractual undiscounted cash outflow ,2,8 053441,7,4 11,560,578 13,076,141 10,553,454 2,522,687 1 yearor 1 year or 0,6 ,2,6 ,3,3 5,169,137 4,454,253 6,132,130 5,006,823 5,326,265 4,867,621 805,865 139,202 1,6 8,9 0,5 407,453 1,050,917 1,050,917 407,453 143,600 187,690 907,317 219,763 365,976 1,0 ,3,5 ,5,5 3,873,716 4,455,359 4,338,052 117,307 0,1 ,6,5 ,7,6 4,794,323 5,375,966 4,567,554 808,412 6,7 0,6 6,3 662,639 662,639 201,266 461,373 138,918 10,750 72,443 1412,3 97739,707 39,707 28,236 11,471 10,000 69,343 Within Within $ $ ,7 8282,4 29,649 29,649 28,278 1,371 ’ ’ 0 $ 000 0 $ 000 than 1year than 1 year More More ’ ’ 0 $ 000 0 $ 000 – – – – – – 2019 2018 6,7 365,976 365,976 3,1 138,918 138,918 07010,750 72,443 10,750 72,443 00010,000 69,343 10,000 69,343 Total Total ’ ’ 0 $ 000 0 $ 000 amount at amount at 31 August 31 August (Restated) Carrying Carrying ’ ’ 000 000 217

HKBN Ltd. Annual Report 2019 218 HKBN Ltd. Annual Report 2019 31 Financial riskmanagementandfairvaluesoffinancialinstruments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (continued) (c) Interest raterisk (c) i) Interest-bearingfinancialinstruments (ii) (i) Hedging The Group of interest-bearing borrowings of the Group are disclosed in note 20 to the financial statements. interest-bearing financialinstrumentsaresetoutin(ii)below.Theinterestratesandtermsofrepayment instruments with variable interest rates expose the Group to cash flow interest rate risk. The Group appropriate mix of fixed and floating rate exposure consistent with the Group charges (see note 19). amount is recognised as derivative financial instrument and included in other payables and accrued swaps entered into by the Group at 31 August 2019 was $64,000 (2018: Asset of $12,024,000). The $2,635,000,000) which were not designated as cash flow hedging instrument. The net fair value of 2019, the Group had interest-rate swaps with a notional contract amount of $2,635,000,000 (2018: Derivative financial instrument – interest-rate swap Fixed rate borrowings as a percentage of total borrowings Total borrowings Bank loans Variable rateinstruments Senior notes Fixed rateinstruments reporting period. The following table details the interest-bearing financial instruments of the Group at the end of the An interest-rate swap, denominated in Hong Kong dollars ( ’ s interest rate risk arises primarily from bank loans and interest-rate swap. Financial “ HKD ” ), has been entered into achieve an 9,623,454 4,454,253 5,169,137 4,454,317 $ 2019 ’ 54% ’ s policy. At 31 August 000 64 3,861,692 3,873,716 3,861,692 (12,024) $ 2018 ’ ’ s 000 – – 31 Financial riskmanagementandfairvaluesoffinancialinstruments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (continued) (d) Currency risk (d) Interest raterisk(continued) (c) or selling foreign currencies at spot rates where necessary to address short-term imbalances. currency risk exposure, the Group ensures that the net exposure is kept to an acceptable level of buying the HKD and the Renminbi ( The Group is also exposed to a certain amount of foreign exchange risk based on fluctuations between the two currencies. USD1.00 since 1983, management does not expect significant foreign exchange gains or losses between the exchange rate of the HKD to the USD has remained close to the current pegged rate of HKD7.80 = All the Group Sensitivity analysis (iii) change in interest rate. after tax and retained profits is estimated as an annualised impact on interest expenses of such a instruments held by the Group at the end of the reporting period, the impact on the Group In respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative the Group which expose the Group to fair value interest rate risk at the end of the reporting period. end of the reporting period and had been applied to re-measure those financial instruments held by retained profits that would arise assuming that the change in interest rates had occurred at the The sensitivity analysis above indicates the instantaneous change in the Group interest rates. $6,411,000). Other components of consolidated equity would not be affected by the changes in decreased the Group 50 basis points) in interest rates, with all other variables held constant, would have increased/ At 31 August 2019, it is estimated that a general increase/decrease of 50 basis points (2018: ’ s monetary assets and liabilities are primarily denominated in either HKD or USD. Given ’ s profit after tax and retained profits by approximately $12,528,000 (2018: “ RMB ” ) arising from its operations in the PRC. In order to limit this foreign ’ s profit after tax and ’ s profit 219

HKBN Ltd. Annual Report 2019 220 HKBN Ltd. Annual Report 2019 31 Financial riskmanagementandfairvaluesoffinancialinstruments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (continued) (d) Currency risk(continued) (d) i Exposuretocurrency risk (i) i) Sensitivityanalysis (ii) The following table details the Group recognised assets and liabilities Net exposure arising from Cash and cash equivalents Trade receivables RMB The Group are shown in HKD, translated using the spot rate at the year end date. currency of the entity to which they relate. For presentation purposes, the amounts of the exposure arising from recognised assets or liabilities denominated in a currency other than the functional Senior notes Other payables and accrued charges Trade payables into the Group differences that would result from the translation of the financial statements of foreign operations translation at the year end for a 10% change in foreign currency rates. The analysis excludes a currency other than the functional currencies of the lender or the borrower, and adjusts their including inter-company payables and receivables within the Group which are denominated in The sensitivity analysis includes only outstanding foreign currency denominated monetary items table details the Group unaffected by any changes in movement in value of the USD against other currencies. The following the HKD. It is assumed that the pegged rate between the HKD and the USD would be materially ’ s foreign currency risk is mainly concentrated on the fluctuation of the RMB against ’ s presentation currency. (decrease) exchange in foreign Increase/ ’ s sensitivity to a 10% increase or decrease in the HKD against the RMB. 1) ,7 9,771 9,771 (10)% rates 0 971 (9,771) (9,771) 10% on profit after tax ’ s exposure at the end of the reporting period to currency risk 2019 Impact $ ’ 0 $ 000 52976 (116,597) (5,299,746) (5,272,900) 1269 (443) (152,679) 115,739 3,4)(116,569) (31,244) 41,338 $ ’ S RMB USD Impact on 0 $ 000 retained 2019 profits ’ 000 (decrease) exchange Increase/ in foreign ’ 000 415 1) ,0 8,709 8,709 (10)% – – rates 0 879 (8,709) (8,709) 10% 5,5)(274) (59,850) 1,4)(105,136) (19,941) 767(104,249) 27,677 7981,161 57,988 49,480 on profit after tax $ 2018 Impact ’ S RMB USD 0 $ 000 $ ’ 0 $ 000 – 2018 Impact on retained profits ’ ’ 000 000 – – 31 Financial riskmanagementandfairvaluesoffinancialinstruments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (continued) (e) Fair valuemeasurement (e) Currency risk(continued) (d) i Financialassetsandliabilitiesmeasuredatfairvalue (i) Sensitivityanalysis(continued) (ii) Fair value hierarchy value Fair as defined in HKFRS 13, end of the reporting period on a recurring basis, categorised into the three-level fair value hierarchy instantaneous effects on each of the Group entities Results of the analysis as presented in the above table represent an aggregation of the The following table presents the fair value of the Group the financial statements of operations outside Hong Kong into the Group lender or the borrower. The analysis excludes differences that would result from the translation of within the Group which are denominated in a currency other than the functional currencies of the currency risk at the end of the reporting period, including inter-company payables and receivables re-measure those financial instruments held by the Group which expose the Group to foreign The sensitivity analysis assumes that the change in foreign exchange rates had been applied to reporting period for presentation purposes. respective functional currencies, translated into HKD at the exchange rate ruling at the end of the The analysis is performed on the same basis for 2018. Level 3 valuations: Fair values measured using significant unobservable inputs – Level 2 valuations: Fair values measured using Level 2 inputs i.e. observable inputs which fail to – Level 1 valuations: Fair values measured using only Level 1 inputs i.e. unadjusted quoted prices – valuation technique as follows: classified is determined with reference to the observability and significance of the inputs used in the which market data are not available meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for in active markets for identical assets or liabilities at the measurement date Fair value measurement value Fair . The level into which a fair value measurement is ’ profit after tax and equity measured in the ’ s financial instruments measured at the ’ s presentation currency. 221

HKBN Ltd. Annual Report 2019 222 HKBN Ltd. Annual Report 2019 31 Financial riskmanagementandfairvaluesoffinancialinstruments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (continued) (e) Fair valuemeasurement(continued) (e) i Financialassetsandliabilities measuredatfairvalue(continued) (i) Financial liabilities: Financial (continued) hierarchy value Fair Financial liabilities: Financial assets: Financial Contingent consideration Interest-rate swap Derivative financial instrument: transfers into or out of Level 3 (year ended 31 August 2018: $Nil). The Group During the year ended 31 August 2019, there were no transfers between Level 1 and Level 2, or as restated Contingent consideration, Interest-rate swap Derivative financial instrument: Recurring fairvaluemeasurement Recurring fairvaluemeasurement occur. transfers between levels of fair value hierarchy as at the end of the reporting period in which they

Fair valueat Fair value at 31 August 31 August (Restated) 29,649 39,707 12,024 $ $ 2019 2018 ’ ’ 0 $ 000 0 $ 000 64

31 August 2018 (restated) categorised into 31 August2019categorisedinto ee ee Level3 Level2 Level 1 ee ee Level 3 Level 2 Level 1 Fair valuemeasurementsasat Fair value measurements as at ’ ’ 0 $ 000 0 $ 000 – – – –

’ s policy is to recognise 12,024 ’ ’ 0 $ 000 0 $ 000 64 – –

29,649 39,707 ’ ’ 000 000 – – 31 Financial riskmanagementandfairvaluesoffinancialinstruments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (continued) (e) Fair valuemeasurement(continued) (e) i) Financialassetsandliabilitiescarriedat otherthanfairvalue (ii) Financialassetsandliabilities measuredatfairvalue(continued) (i) Information about Level 3 fair value measurement value fair 3 Level about Information measurement value fair 2 Level in used inputs and techniques Valuation The carrying amounts of the Group Total contingentconsideration Contingent consideration – long-term portion Contingent consideration – current portion At the end of the year At the beginning of the year Contingent consideration The movement during the year in the balance of Level 3 fair value measurement is as follows: of 5% (2018 (restated): 5%), respectively. considering the expected payment, discounted to present value using a risk-adjusted discount rate The fair value of the contingent consideration relating to the ICG Acquisition are determined the current creditworthiness of the swap counterparty. terminate the swap at the end of the reporting period, taking into account current interest rates and The fair value of interest-rate swap is the estimated amount that the Group would receive or pay to Business combination and acquisition of a subsidiary Change in fair value during the year Settlement of contingent consideration for the year materially different from their fair values as at 31 August 2019 and 2018. ’ s financial instruments carried at cost or amortised cost are not (note 30) (note (11,600) 29,649 28,278 29,649 39,707 $ 1,371 1,542 2019 ’ 000 – (Restated) (19,324) 11,471 39,707 28,236 39,707 30,358 28,236 $ 2018 ’ 000 437 223

HKBN Ltd. Annual Report 2019 224 HKBN Ltd. Annual Report 2019 31 Financial riskmanagementandfairvaluesoffinancialinstruments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (continued) f Offsettingfinancialassetsandliabilities (f) Trade receivables Trade payables Trade receivables statement of financial position. these counterparties are settled on a net basis and result in offsetting the assets and liabilities in the The Group enters into netting arrangements with its carriers. The outstanding transactions with Trade payables financial assets/ financial assets/ Gross amounts Gross amounts of recognised of recognised (liabilities) (liabilities) (642,497) (453,725) 833,960 562,017 $ $ ’ ’ 000 000 financial position financial position financial assets/ financial assets/ Gross amounts Gross amounts of recognised of recognised consolidated statement of consolidated statement of offset inthe offset in the 2019 2018 (liabilities) (liabilities) (276,521) (314,807) 276,521 314,807 $ $ ’ ’ 000 000 presented inthe presented in the consolidated Net amounts Net amounts consolidated of financial of financial of financial of financial (liabilities) statement statement (liabilities) (365,976) (138,918) position 557,439 247,210 position assets/ assets/ $ $ ’ ’ 000 000 32 Commitments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (b) Commitment underoperatingleases (b) Capital commitments (a) i At 31 August 2019, the Group (i) – For an acquisition – Purchase of property, plant and equipment Contracted but not provided for At 31 August 2019, the Group had the following capital commitments: – Redemption of senior notes After 5 years operating leases are receivable as follows: After 1 year but within 5 years Within 1 year Leases inrespectoftelecommunicationsfacilities which arereceivable: ’ s total future minimum lease payments under non-cancellable 114,447 294,775 388,196 742,677 797,418 190,546 552,131 $ $ 2019 2019 ’ ’ 000 000 – 103,607 622,660 249,956 326,270 296,390 73,707 72,642 $ $ 2018 2018 ’ ’ 000 000 – 225

HKBN Ltd. Annual Report 2019 226 HKBN Ltd. Annual Report 2019 33 Contingent liabilities 33 Contingent (continued) 32 Commitments (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements Legal contingencies (2018: $Nil). issued as their fair value cannot be reliably measured and their transaction price was $Nil during the year under any guarantees. The Group has not recognised any deferred income in respect of the guarantees At 31 August 2019, the directors did not consider it is probable that a claim will be made against the Group Bank guarantee in lieu of payment of utility deposits Commitment underoperatingleases(continued) (b) effect on the financial position or operating results of the Group. be determined at present, management believes that any resulting liabilities will not have a material adverse ordinary courseofbusiness.While theoutcomesofsuchcontingencies,lawsuitsorother proceedingscannot The Group is a defendant in certain lawsuits as well as the named party in other proceedings arising in the i) At 31 August 2019, the Group (ii) rentals. are usually increased annually to reflect market rentals. None of these leases include contingent fifteen years, with an option to renew the lease when all terms are renegotiated. Lease payments equipment under operating lease. The leases typically run for an initial period of six months to The Group leases a number of land and buildings and telecommunications facilities and computer Within 1 year computerequipmentwhicharepayable: Leases inrespectoftelecommunicationsfacilitiesand After 5 years After 1 year but within 5 years Within 1 year Leases inrespectoflandandbuildingswhicharepayable: After 5 years After 1 year but within 5 years operating leases are payable as follows: ’ s total future minimum lease payments under non-cancellable 129,254 185,589 106,887 421,730 110,041 97,820 12,221 $ $ 7,913 2019 2019 ’ ’ 000 000 – 114,335 104,616 62,281 52,054 97,987 $ $ 7,105 6,629 2018 2018 ’ ’ 000 000 – – 34 Material relatedpartytransactions (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (b) Key managementpersonnelremuneration (a) entered into the following material related party transactions: In addition to the transactions and balances disclosed elsewhere in these financial statements, the Group In connection with the acquisition of the telecommunication business by MLCL from HKTV, completed Total remuneration is included in Post-employment benefits Short-term employee benefits follows: the Company as disclosed in note 5 and certain of the highest paid employees as disclosed in note 6, as Remuneration for key management personnel of the Group, including amounts paid to the directors of capacity of the Group on 30 May 2012, the Group granted indefeasible rights of use in favour of HKTV allowing it to use certain Equity compensation benefits the Group. Accordingly, no provision was made by the Group in this connection. obligations under the granting of indefeasible rights of use to HKTV are expected to be insignificant to cost, for a period of 10 years from 30 May 2012. The incremental costs associated with fulfilling the addition, the Group agreed to provide certain telecommunication services to HKTV, at no additional ’ s network for a term of 20 years from 30 May 2012, on a free of charge basis. In “ Talent costs ” (see note 3(c)). 43,800 40,108 $ 3,001 2019 ’ 000 691 37,287 32,532 $ 2,631 2,124 2018 ’ 000 227

HKBN Ltd. Annual Report 2019 228 HKBN Ltd. Annual Report 2019 35 Company-level statementoffinancialposition (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements Investments in subsidiaries Non-current assets Other non-current assets Amounts due to subsidiaries Other payables and accrued charges Current liabilities Amounts due from subsidiaries Other receivables, deposits and prepayments Current assets Cash and cash equivalents ) Ni QuiaqueLAI) Chu KwongYEUNG) ) Approved and authorised for issue by the board of directors on 24 October 2019. Reserves Share capital CAPITAL ANDRESERVES NET ASSETS Net currentassets/(liabilities) TOTAL EQUITY

28(a) Note ) Directors 6,656,613 1,164,119 1,164,002 6,654,102 7,722,291 7,722,423 6,558,304 7,722,423 98,309 94,230 $ 4,079 1,977 2019 ’ 000 117 534 132 1,163,553 1,163,205 1,133,304 1,133,405 1,133,405 (30,148) 37,390 34,468 $ 7,242 2,922 6,504 2018 ’ 000 348 539 199 101 36 Non-adjusting eventsafterthereportingperiod (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements senior notes remained outstanding. The redemption was completed using the Group conditional redemption, US$603,000,000 (equivalent to $4,745,610,000) in aggregate principal amount of the at a redemption price of 103% plus accrued and unpaid interest. Immediately upon the completion of the On 16 September 2019, MLCL completed a conditional redemption of 10% of the senior notes due 2022 annual report as a result of the above event. transaction was not yet completed on the date of this report and no adjustments have been made to this owned subsidiaries of HKBNGL and indirect wholly-owned subsidiaries of the Company. The proposed precedent(s) as set out in the Share Purchase Agreement, the Target Companies will become direct wholly- by HKBNGL of its obligations under the Share Purchase Agreement. Upon satisfaction of the condition owned subsidiary of the Company, has agreed to guarantee to JTH the proper and punctual performance and punctual performance by JTH of its obligations under the Share Purchase Agreement. MLCL, a wholly- closing adjustments). Jardine Technology Holdings Limited has agreed to guarantee to HKBNGL the proper a consideration of US$50,000,000 (equivalent to $393,500,000) in cash (subject to certain closing and post- plus a margin per annum on the utilised amount. $1,000,000,000 uncommitted revolving loan facility from a bank in Hong Kong that bears interest at HIBOR On 25 September 2019, HKBN, an indirect wholly-owned subsidiary of the Company, obtained a Adura HongKongLimitedandCyberSecurityServicesPteLtd(collectively,the conditionally agreed to sell, the entire issued share capital of Jardine OneSolution Holdings (C.I.) Limited, pursuant to which, among other things, HKBNGL has conditionally agreed to purchase, and JTH has ( On 23 August 2019, HKBNGL, an indirect wholly-owned subsidiary of the Company, and JTH (BVI) Limited “ JTH ” ), amongst others, entered into the share purchase agreement (the “ Share Purchase Agreement ’ s internal resources. “ Target Companies ” ), ” ) for 229

HKBN Ltd. Annual Report 2019 230 HKBN Ltd. Annual Report 2019 37 Accounting judgementandestimates (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements c Usefullivesofproperty,plantand equipmentandintangibleassets(otherthangoodwill) (c) (b) Depreciation Lossallowanceforcreditlosses (a) Other key sources of estimation uncertainty are as follows: Note 31 contains information about the assumptions and their risk factors relating to financial instruments. Sources ofestimationuncertainty previous estimates. changes. The depreciation expense for future periods is adjusted if there are significant changes from or shortens the useful lives and/or makes impairment provisions according to the results of the review. results, negative industry or economic trends and rapid advancement in technology. The Group extends any unexpected adverse changes in circumstances or events, including declines in projected operating reviews to assess the appropriateness of the estimated useful lives. Such review takes into account technology changes, business developments and the Group The useful lives are estimated at the time of purchase of these assets after considering future reporting period. (other than goodwill) in order to ascertain the amount of depreciation and amortisation charges for each Group is required to estimate the useful lives of property, plant and equipment and intangible assets The Group has significant property, plant and equipment and intangible assets (other than goodwill). The Group depreciation expense to be recorded during any reporting period. The useful lives are based on the Group reviews the estimated useful lives of the assets annually in order to determine the amount of estimated residual value, if any, using the straight-line method over their estimated useful lives. The Depreciation is calculated to write off the cost of items of property, plant and equipment, less their required. rates. If the financial condition of the customers were to deteriorate, additional impairment may be the trade and other receivables which takes into account the historical write-off experience and recovery The Group maintains impairment loss for doubtful debts based upon evaluation of the recoverability of ’ s historical experience with similar assets and taking into account anticipated technological ’ s strategies. The Group performs annual 37 Accounting judgementandestimates(continued) (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements f Incometax (f) Impairmentofgoodwill (e) Fairvalueofassetsacquiredandliabilitiesassumeduponacquisition (d) Sources ofestimationuncertainty(continued) would affect the fair value of assets acquired and liabilities assumed. and might materially differ from the actual results. Any change in such judgements and assumptions qualified valuer. Such valuations were based on certain assumptions, which were subject to uncertainty assets acquired and liabilities assumed were based on valuation report from independent professional reconsidered periodically to take into account all changes in tax legislation and practices. transactions and tax provisions are set up accordingly. The tax treatment of such transactions is transactions and interpretation of tax rules. The Group carefully evaluates tax implications of Determining income tax provisions involves judgement on the future tax treatment of certain result of the impairment reviews. and changes to key assumptions can significantly affect these cash flow projections and therefore the expectations. Judgement is required to determine key assumptions adopted in the cash flow projections Management prepared the financial budgets reflecting actual performance and market development can be realised for the estimated terminal value. growth rates and selection of discount rates, to reflect the risks-involved and the earnings multiple that budget and the estimated terminal value. Key assumptions include the expected operating margin, estimates involved for the preparation of cash flow projections for the period covered by the approved value-in-use. These calculations require the use of estimates. There are a number of assumptions and The recoverable amount of an asset or a cash-generating unit has been determined based on its accounting policy set out in note 1(k)(iii). The Group tests annually whether goodwill has suffered any impairment in accordance with the acquired and liabilities assumed involves management to their estimated fair values on the date of acquisition. The determination of the values of assets In connection with acquisition of subsidiaries, the assets acquired and liabilities assumed were adjusted ’ s judgements and assumptions. The values of 231

HKBN Ltd. Annual Report 2019 232 HKBN Ltd. Annual Report 2019 38 Possible impactofamendments,newstandardsandinterpretations (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements recognised on a systematic basis over the lease term. months or less) and to leases of low-value assets, in which case the rental expenses would continue to be lessee can elect not to apply this accounting model to short-term leases (i.e. where the lease term is 12 incurred under operating leases on a systematic basis over the lease term. As a practical expedient, the and the depreciation of the right-of-use asset, instead of the current policy of recognising rental expenses liability, the lessee will recognise interest expense accrued on the outstanding balance of the lease liability, issued butnotyeteffectivefortheyearended31August2019 Amendments to HKAS 28, Annual Improvements to HKFRSs 2015-2017 Cycle HK(IFRIC) 23, Group. not been adopted in these financial statements. These include the following which may be relevant to the standards and interpretations which are not yet effective for the year ended 31 August 2019 and which have Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments, new payments and will recognise a corresponding the lessee will recognise and measure a lease liability at the present value of the minimum future lease leases in a similar way to current finance lease accounting, i.e. at the commencement date of the lease finance leases and operating leases. Instead, subject to practical expedients, lessees will account for all obligations under a lease. However, once HKFRS 16 is adopted, lessees will no longer distinguish between HKFRS 16 is not expected to impact significantly on the way that lessors account for their rights and enters into some leases as the lessor and others as the lessee. accounts for the lease arrangements differently, depending on the classification of the lease. The Group As disclosed in note 1(j), currently the Group classifies leases into finance leases and operating leases and HKFRS 16, and further impacts may be identified before the standard is initially applied in the Group differ as the assessment completed to date is based on the information currently available to the Group, substantially completed for HKFRS 16, the actual impact upon the initial adoption of this standard may statements. Further details of the expected impacts are discussed below. While the assessment has been identified some aspects of the HKFRS 16 which may have a significant impact on the consolidated financial standards and interpretations is expected to be in the period of initial application. So far the Group has The Group is in the process of making an assessment of what the impact of these amendments, new HKFRS 16, elections, including the transition options, until the standard is initially applied in that financial report. report for the six months ending 29 February 2020. The Group may also change its accounting policy Leases Uncertainty over income tax treatments tax income over Uncertainty Leases Long-term interest in associates and joint ventures joint and associates in interest Long-term “ right-of-use ” asset. After initial recognition of this asset and beginning onorafter accounting periods ’ s interim financial 1 January 2019 1 January 2019 1 January 2019 1 January 2019 Effective for 38 Possible impactofamendments,newstandardsandinterpretations (Expressed inHongKongdollarsunlessotherwiseindicated) Notes totheFinancialStatements (continued) issued butnotyeteffectivefortheyearended31August2019 HKFRS 16 will primarily affect the Group HKFRS 16, statement from 2019 onwards. changes in accounting policies as described above could have a material impact on the Group adjustments to be made upon the initial adoption of HKFRS 16 will not be material. However, the expected Other than the recognition of lease liabilities and right-of-use assets, the Group expects that the transition after taking account the effects of discounting, as at 1 September 2019. and the corresponding right-of-use assets will be adjusted to $360,136,000 and $318,406,000 respectively, date or in more than 5 years. Upon the initial adoption of HKFRS 16, the opening balances of lease liabilities equipment respectively, the majority of which is payable either between 1 and 5 years after the reporting $421,730,000 and$110,041,000for(i)landbuildings(ii)telecommunicationsfacilitiescomputer 2019 the Group September 2019 and will not restate the comparative information. As disclosed in note 32(b), at 31 August recognise the cumulative effect of initial application as an adjustment to the opening balance of equity at 1 The Group plans to elect to use the modified retrospective approach for the adoption of HKFRS 16 and will leases of low-value assets. plans to elect the practical expedient for not applying the new accounting model to short-term leases and 16 only to contracts that are entered into on or after the date of initial application. In addition, the Group arrangements are, or contain, leases. The Group will therefore apply the new definition of a lease in HKFRS the Group plans to use the practical expedient to grandfather the previous assessment of which existing HKFRS 16 is effective for annual periods beginning on or after 1 September 2019. As allowed by HKFRS 16, recognition in the statement of profit or loss over the period of the lease. is expected to lead to an increase in both assets and liabilities and to impact on the timing of the expense equipment which are currently classified as operating leases. The application of the new accounting model Leases ’ s future minimum lease payments under non-cancellable operating leases amount to (continued) ’ s accounting as a lessee of leases for properties, plant and ’ s financial 233

HKBN Ltd. Annual Report 2019 234 HKBN Ltd. Annual Report 2019 Share of losses of joint ventures Share of profits/(losses) of associates Finance costs Profit from operations Revenue Results ended 31 August 2019. The following table summarises the consolidated results, assets and liabilities of the Group for the five years (Expressed inHongKongdollars) Five yearsummary Profit fortheyear Income tax Profit beforetaxation

5,107,637 (259,271) 568,909 214,527 309,362 (94,835) $ 2019 ’ (276) 000 – ,4,5 ,3,1 ,8,0 2,341,113 2,784,007 3,232,310 3,948,952 1728 2070 1181 (260,023) (141,891) (210,740) (117,288) 0,4 6,9 7,4 449,980 476,645 465,396 607,249 9,9 7,1 4,7 104,268 244,679 189,850 171,110 334,554 396,897 257,154 489,268 9,7)(604 8,7)(85,582) (89,875) (86,044) (92,371) $ 0821 062015 2016 2017 2018 ’ 63 90 15 (107) (185) (920) (693) 0 $ 000 Years ended31August – ,1 (15) 3,418 ’ 0 $ 000 ’ 0 $ 000 ’ 000 – Net current assets Other non-current assets Interest in joint ventures Interest in associates Contract assets Customer acquisition and retention costs Investment properties Senior notes – long-term portion Contingent consideration Property, plant and equipment Bank loans Provision for reinstatement costs Deferred tax liabilities rights – long-term portion Obligations under granting of – long-term portion Deferred services revenue Intangible assets Contract liabilities-long-term portion charges – long-term portion Other payables and accrued Reserves (Expressed inHongKongdollars) Five yearsummary(continued) Goodwill Assets andliabilities Total assetslesscurrentliabilities Note; The financial figures for the year ended 31 August 2018 have been restated due to the completion of the purchase price price purchase the of completion the to due restated been have 2018 August 31 ended year the for figures financial The Note; TOTAL EQUITY Share capital Capital andreserves NET ASSETS the consolidated financial statements. financial consolidated the allocation of certain business combinations took place the year ended 31 August 2018, as disclosed in note 1(b)(i) to to 1(b)(i) note in disclosed as 2018, August 31 ended year the place took combinations business certain of allocation

18,636,900 (5,169,137) (4,454,253) (1,131,440) 4,341,590 4,638,643 7,456,429 8,788,319 7,456,561 7,456,561 (187,690) (143,600) 598,030 222,041 (28,278) (50,146) (15,795) 32,105 $ 2,003 9,429 4,740 2019 ’ 000 132 – – 38376 38132 37127 (3,018,889) (3,721,297) (3,831,332) (3,873,716) ,9,5 ,8,9 ,1,9 1,969,803 2,419,890 2,289,790 2,293,950 ,5,8 ,1,0 ,5,0 1,330,501 1,550,209 1,612,707 1,453,588 ,3,1 ,2,8 ,6,5 1,514,086 1,363,257 1,128,787 1,036,811 ,0,9 ,7,6 ,7,6 1,594,110 1,771,969 1,771,969 1,801,393 ,6,8 ,2,6 ,7,6 5,062,474 5,778,962 5,823,065 5,668,181 ,3,1 ,2,8 ,6,5 1,514,187 1,363,358 1,128,888 1,036,912 1,514,187 1,363,358 1,128,888 1,036,912 (Restated) 4828 4368 4090 (438,916) (450,980) (423,618) (408,218) 2126 2378 9,0)(13,413) (99,008) (293,748) (201,266) 2,3)(,6)(27,885) (2,869) (28,236) 1,4)(605 1,4)(11,334) (17,644) (16,015) (51,891) (15,643) (42,867) (13,844) (33,843) (55,923) (24,819) (92,752) (79,371) 625115,211 46,205 4902,0 96819,503 19,618 24,600 64,950 $ ,9 ,8 ,0 9,893 9,708 8,788 8,095 (note) 0821 062015 2016 2017 2018 ’ 0 $ 000 0 0 0 101 101 101 101 – – – – – – As at31August ’ 0 $ 000 – – – – – – 7,473 ’ 0 $ 000 5138,664 95 – – – – – ’ 000 – – – – – – – 235

HKBN Ltd. Annual Report 2019 236 HKBN Ltd. Annual Report 2019 Hong Kong New Territories 18 Kin Hong Street, Kwai Chung 12th Floor, Trans Asia Centre Business inHongKong Head OfficeandPrincipalPlaceof Cayman Islands Grand Cayman KY1-1104 Ugland House P.O. Box 309 Registered Office Mr. Yue Kit Andrew WONG Mr. Ni Quiaque LAI Authorised Representatives Mr. Yue Kit Andrew WONG Company Secretary 6 5 4 3 2 Mr. Yee Kwan Quinn LAW, SBS, JP Mr. Stanley CHOW Directors Independent Non-executive Mr. Teck Chien KONG Mr. Zubin Jamshed IRANI Ms. Deborah Keiko ORIDA Non-executive Directors Mr. Ni Quiaque LAI Mr. Chu Kwong YEUNG Executive Directors Mr. Bradley Jay HORWITZ Non-executive Director Chairman andIndependent Corporate Information Other Information 1 Member of Remuneration Committee Chairman of Remuneration Committee Member of Nomination Committee Chairman of Nomination Committee Member of Audit Committee Chairman of Audit Committee 2,4,5 4 3,6 2,6 2,4 4 1,4,6 Certified Public Accountants Public Certified Hong Kong Central 10 Chater Road Cayman Islands Grand Cayman KY1-1102 Cricket Square Boundary Hall P.O. Box 1093 Maples FundServices(Cayman)Limited and TransferOffice Cayman PrincipalShareRegistrar 8th Floor, Prince KPMG Auditor 1310 Stock Code www.hkbnltd.net Company Hong Kong 4-4A Des Voeux Road Central 3rd Floor, Standard Chartered Bank Building Limited Standard CharteredBank(HongKong) Hong Kong 3 Garden Road, Central 50th Floor, Champion Tower Citibank, N.A.,HongKongBranch Principal Bankers 183 Queen Rooms 1712-1716, 17th Floor, Hopewell Centre Services Limited Computershare HongKongInvestor and TransferOffice Hong KongBranchShareRegistrar Hong Kong Wanchai ’ s Road East ’ s Website ’ s Building References toHKEXESGReportingGuide Other Information KPIs General Disclosure Aspect A2: Use of Resources KPIs General Disclosure Aspect A1: Emissions A. Environmental General Disclosures Aspects and A2.5 Total packaging material used for finished • A2.4 Description of whether there is any issue • A2.3 Description of energy use efficiency initiatives • A2.2 Water consumption in total and intensity (e.g. • A2.1 Direct and/or indirect energy consumption by • energy, water and other raw materials. Policies on the efficient use of resources, including A1.6 Description of how hazardous and non- • A1.5 Description of measures to mitigate emissions • A1.4 Total non-hazardous waste produced (in • A1.3 Total hazardous waste produced (in tonnes) • A1.2 Greenhouse gas emissions in total (in tonnes) • A1.1 The types of emissions and respective • non-hazardous waste. into water and land, and generation of hazardous and relating toairandgreenhousegasemissions,discharges compliance with relevant laws and regulations that (b) the policies; and (a) Information on: Descriptions reference to per unit produced products (in tonnes) and, if applicable, with efficiency initiatives and results achieved in sourcing water that is fit for purpose, water and results achieved per unit of production volume, per facility) facility) and intensity (e.g. per unit of production volume, per type (e.g. electricity, gas or oil) in total (kWh in and results achieved hazardous wastes are handled, reduction initiatives and results achieved unit of production volume, per facility) tonnes) and, where appropriate, intensity (e.g. per production volume, per facility) and, where appropriate, intensity (e.g. per unit of production volume, per facility) and, where appropriate, intensity (e.g. per unit of emissions data have a significant impact on the issuer ‘ 000s) • Environment • Environment • Environment • Environment • Environment Directors, Environment Our Strategy, Report of the • Environment • Environment • Environment • Environment • Environment • Environment Directors, Environment Our Strategy, Report of the Related chapters/Notes 237

HKBN Ltd. Annual Report 2019 238 HKBN Ltd. Annual Report 2019 References toHKEXESGReportingGuide KPIs General Disclosure Aspect B3: Development and Training KPIs General Disclosure Aspect B2: Health and Safety KPIs General Disclosure Aspect B1: Employment B. Social KPIs General Disclosure Aspect A3: The Environment and Natural Resources General Disclosures Aspects and B3.2 The average training hours completed per • B3.1 The percentage of employees trained by gender • activities. for discharging duties at work. Description of training Policies on improving employees B2.3 Description of occupational health and safety • B2.2 Lost days due to work injury • B2.1 Number and rate of work-related fatalities • protecting employees from occupational hazards. relating to providing a safe working environment and compliance with relevant laws and regulations that (b) the policies; and (a) Information on: B1.2 Employee turnover rate by gender, age group • B1.1 Total workforce by gender, employment type, • benefits and welfare. opportunity, diversity, anti-discrimination, and other and promotion, working hours, rest periods, equal relating to compensation and dismissal, recruitment compliance with relevant laws and regulations that (b) the policies; and (a) Information on: A3.1 Description of the significant impacts of • the environment and natural resources. Policies on minimising the issuer Descriptions employee by gender and employee category and employee category monitored measures adopted, how they are implemented and have a significant impact on the issuer and geographical region age group and geographical region have a significant impact on the issuer and the actions taken to manage them activities on the environment and natural resources ’ ’ knowledge and skills s significant impact on This data is currently being • This data is currently being • Governance Report Our Strategy, Talents, Corporate • Talents • Talents • Talents Directors, Talents Our Strategy, Report of the This data is currently being • Report of the Directors, • Governance Report Directors, Talents, Corporate Our Strategy, Report of the • Environment Directors, Environment Our Strategy, Report of the Related chapters/Notes disclosed once available consolidated, and will be disclosed once available consolidated, and will be disclosed once available consolidated, and will be Governance Report Talents, Corporate References toHKEXESGReportingGuide General Disclosure Aspect B6: Product Responsibility KPIs General Disclosure Aspect B5: Supply Chain Management KPIs General Disclosure Aspect B4: Labour Standards General Disclosures Aspects and provided and methods of redress. and privacy matters relating to products and services relating to health and safety, advertising, labelling compliance with relevant laws and regulations that (b) the policies; and (a) Information on: B5.2 Description of practices relating to engaging • B5.1 Number of suppliers by geographical region • the supply chain. Policies on managing environmental and social risks of B4.2 Description of steps taken to eliminate child • B4.1 Description of measures to review employment • relating to preventing child and forced labour. compliance with relevant laws and regulations that (b) the policies; and (a) Information on: Descriptions have a significant impact on the issuer and monitored are being implemented, how they are implemented suppliers, number of suppliers where the practices and forced labour practices when discovered practices to avoid child and forced labour have a significant impact on the issuer Governance Report Directors, Customer, Corporate Our Strategy, Report of the Not material to HKBN • Directors, Suppliers Our Strategy, Report of the Not material to HKBN • Governance Report Directors, Talents, Corporate Our Strategy, Report of the Related chapters/Notes This data is currently being • Not material to HKBN • disclosed once available consolidated, and will be report data is not covered in this business and therefore such report data is not covered in this business and therefore such report data is not covered in this business and therefore such ’ ’ ’ s s s 239

HKBN Ltd. Annual Report 2019 240 HKBN Ltd. Annual Report 2019 References toHKEXESGReportingGuide KPIs General Disclosure Aspect B8: Community Investment KPIs General Disclosure Aspect B7: Anti-corruption KPIs General Disclosures Aspects and B8.2 Resources contributed to the focus areas • B8.1 Focus areas of contribution • communities and to ensure its activities take into consideration the needs of the communities where the issuer operates Policies on community engagement to understand the B7.2 Description of preventive measures and • B7.1 Number of concluded legal cases regarding • laundering. relating to bribery, extortion, fraud and money compliance with relevant laws and regulations that (b) the policies; and (a) Information on: B6.5 Description of consumer data protection and • B6.4 Description of quality assurance process and • B6.3 Description of practices relating to observing • B6.2 Number of products and service related • B6.1 Percentage of total products sold or shipped • Descriptions implemented and monitored whistleblowing procedures, how they are outcomes of the cases its employees during the reporting period and the corrupt practices brought against the issuer or have a significant impact on the issuer monitored privacy policies, how they are implemented and recall procedures and protecting intellectual property rights complaints received and how they are dealt with subject to recalls for safety and health reasons ’ interests. • Community Our Strategy, Community • Our Strategy, Community Corporate Governance • Corporate Governance • Corporate Governance Report Report of the Directors, • This information is currently • Report of the Directors, • This data is currently being • This data is currently being • Related chapters/Notes Report Report Governance Report Customer, Corporate disclosed once available being collected, and will be Report Corporate Governance disclosed once available consolidated, and will be disclosed once available consolidated, and will be Design and Production by: Toppan Merrill Limited Website: www.toppanmerrill.com