China Unicom (Hong Kong) Ltd
Annual Report 2023

Plain-text annual report

Annual Report 2023China Unicom (Hong Kong) LimitedStock Code : 762ANDCHINA UNICOM (HONG KONG) LIMITEDwww.chinaunicom.com.hk75th Floor, The Center, 99 Queen’s Road Central, Hong KongTel : (852) 2126 2018Fax : (852) 2126 2016(cid:18)(cid:44)(cid:47)(cid:69)(cid:4)(cid:3)(cid:104)(cid:69)(cid:47)(cid:18)(cid:75)(cid:68)(cid:3)(cid:904)(cid:44)(cid:75)(cid:69)(cid:39)(cid:3)(cid:60)(cid:75)(cid:69)(cid:39)(cid:905)(cid:3)(cid:62)(cid:47)(cid:68)(cid:47)(cid:100)(cid:28)(cid:24)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:4)(cid:69)(cid:69)(cid:104)(cid:4)(cid:62)(cid:3)(cid:90)(cid:28)(cid:87)(cid:75)(cid:90)(cid:100)(cid:3)(cid:1006)(cid:1004)(cid:1006)(cid:1007)E_ChinaUnicom AR23_Cover_aw.pdf 1 18/04/2024 11:31:26CONNECTIVITY AND COMMUNICATIONS Providing high-speed ubiquitous basic connectivity products, cloud-network integrated premium network services, global intelligent network services as well as platform- and scenario-based intelligent connectivity services Government and enterprise network: Unicom Cloud resources covered >230 cities International network: 660,000 kilometers of international submarine cables No. of mid-band 5G base stations: >1.21 million Broadband network: maintained industry edge in Northern China, while foundational capabilities in Southern China were markedly boosted COMPUTING AND DIGITAL SMART APPLICATIONS Deeply integrating digital technologies to provide information services such as computing, data, application, security, etc. Unicom Cloud revenue increased by 41.6% year-on-year, reaching RMB 51 billion Data services revenue growth: 32% 30,000 5G industry application projects covering 71 major categories of the national economy Cybersecurity revenue growth: 120% MARKET CONVERGENCE Leveraging the advantages of “integrated capabilities and operating services” to tap into both consumer and government-enterprise markets Mobile subscribers increased by 10.60 million, reaching 333 million Broadband subscribers increased by 9.79 million, reaching 113 million Serving >1,000 medical clouds and >800 smart city districts and counties No. of 5G virtual private network service customers: 8,563 (up by 125% year-on-year) CAPABILITY FUSION Using digital technologies to transform and upgrade traditional industries to empower cost reduction and efficiency enhancement No. of patents granted reached 2,287 (up by 37% year-on-year) Technological innovation personnel ratio: 40% Accelerated the deployment in the nascent AI industry, and launched the “Yuanjing” LLM system Digital Village platform covered >250,000 administrative villages 2 Company Profile 3 Shareholding Structure 4 Performance Highlights 6 Major Events 8 Chairman’s Statement 16 Business Overview 20 Financial Overview CONTENTS Forward-looking statements Certain statements contained in this report may be viewed as “forward-looking statements”. Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the Company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. In addition, we do not intend to update these forward-looking statements. Neither the Company nor the directors, employees or agents of the Company assume any liabilities in the event that any of the forward-looking statements does not materialise or turns out to be incorrect. 088 Independent Auditor’s Report 093 Consolidated Statement of Income 094 Consolidated Statement of Comprehensive Income 095 Consolidated Statement of Financial Position 098 Consolidated Statement of Changes in Equity 099 Consolidated Statement of Cash Flows 102 Notes to the Consolidated Financial Statements 202 Financial Summary 204 Corporate Information 205 Corporate Culture 26 Recognition and Awards 28 Directors and Senior Management 40 Corporate Governance Report 68 Report of the Directors 86 Human Resources Development 2 3 COMPANY PROFILE China Unicom (Hong Kong) Limited (the “Company”) was incorporated in Hong Kong on 8 February 2000 and was listed on the New York Stock Exchange# and the Stock Exchange of Hong Kong Limited on 21 June 2000 and 22 June 2000 respectively. On 1 June 2001, the Company was included as a constituent stock of the Hang Seng Index. The Company merged with China Netcom Group Corporation (Hong Kong) Limited on 15 October 2008. China Unicom establishes branches in 31 provinces in China (including autonomous regions and municipalities) and multiple countries and regions overseas. The Company’s telecommunication network and global customer service system covers China and connects to the world. The Company has been one of the “Fortune Global 500” companies for consecutive years, and ranked 267th in “Fortune Global 500” for the year 2023. It was also voted as “Asia’s Most Honored Telecom Company” in 2023 for the eighth consecutive year by Institutional Investor. In order to accelerate becoming a world-class technology service enterprise with global competitiveness, the Company steadily promote the two main businesses of Connectivity and Communications (CC) and Computing and Digital Smart Applications (CDSA). It resolutely carries out national missions and holistically builds comprehensive digital information infrastructure with industry-leading coverage, breadth and depth, so as to build an unobstructed information channel and a new digital base for economic and social development. With the goal of establishing “Cyber Superpower and Digital China”, it grasps the direction of digital, network-based and intelligent transformation. Using technologically leading and highly integrated digital services which are “comprehensive in coverage, fully online and cloudified, green and one-stop”, it helps thousands of industries “migrate to the cloud, and use data for intelligent empowerment”. It resolutely implements innovation-driven development, and focuses on core technologies and key applications. Through integrated innovation, it turns itself into a technological innovation enterprise and achieves a high level of independence in digital technologies, becoming an important part of the national strategic technological power. The Company strives to be the “new engine” that empowers social and economic transformation, fully utilises the advantages of Big Data and communication network technology, and promotes the development of the digital economy and information consumption upgrade, so as to transform the drivers of economic development, enhance customers’ satisfaction and sense of reward in information and communication services, and let the whole society further enjoy the new benefits brought by information and communication development. Note: # The Company’s ADSs were delisted from the New York Stock Exchange on 18 May 2021. Please refer to the Company’s announcement dated 23 July 2021 for details. SHAREHOLDING STRUCTURE CHINA UNITED NETWORK COMMUNICATIONS GROUP COMPANY LIMITED 35.8% 64.2% Strategic investors*, employee restrictive incentive share** and other public shareholders CHINA UNITED NETWORK COMMUNICATIONS LIMITED (Issued shares: approximately 31.8 billion shares) 100% 17.9% 82.1% China Unicom (BVI) Limited 53.5% China Unicom Group Corporation (BVI) Limited 26.4%*** CHINA UNICOM (HONG KONG) LIMITED (Issued shares: approximately 30.6 billion shares) 20.1% Public Shareholders * ** In 2017, approximately 10.9 billion shares of China United Network Communications Limited were acquired by the strategic investors introduced by the mixed ownership reform through non public share issuance and transfer of existing shares. These shares were no longer restricted from sale in November 2020. Pursuant to the phase 2 restrictive share incentive scheme in 2023, China United Network Communications Limited granted restricted shares to the core management talents and professional talents. *** Excluded the interest regarding the pre-emptive right owned by China Unicom Group Corporation (BVI) Limited in 225,722,791 shares of the Company. As at 31 December 2023 Annual Report 2023China Unicom (Hong Kong) Limited4 5 PERFORMANCE HIGHLIGHTS Financial Highlight (RMB billions) 2023 2022 Change YoY Operating Revenue Service Revenue Of which: Connectivity and Communications business revenue1 Computing and Digital Smart Applications business revenue2 EBITDA3 Net Profit4 Basic EPS (RMB) Dividend per share5 (RMB) 372.60 335.17 244.58 75.25 99.81 18.73 0.612 0.3366 354.94 319.35 237.25 66.66 99.17 16.74 0.547 0.274 5.0% 5.0% 3.1% 12.9% 0.6% 11.8% 11.8% 22.8% Note 1: Connectivity and Communications business encompasses mobile connectivity, broadband connectivity, TV connectivity, leased line connectivity, communications services as well as information services. Note 2: Computing and Digital Smart Applications business encompasses Unicom Cloud, data centre, system integration, data services, digital smart applications as well as cybersecurity. Note 3: EBITDA represents profit for the year before finance costs, interest income, share of net profit of associates, share of net profit of joint ventures, other income-net, income tax expenses, depreciation and amortisation. As the telecommunications business is a capital intensive industry, capital expenditure and finance costs may have a significant impact on the net profit of the companies with similar operating results. Therefore, the Company believes that EBITDA may be helpful in analysing the operating results of a telecommunications service operator like the Company. However, it is a non-GAAP financial measure which does not have a standardised meaning and therefore may not be comparable to similar measures presented by other companies. Note 4: Net profit represented profit attributable to equity shareholders of the Company. Note 5: The proposed 2023 final dividend of RMB0.1336 per share is subject to approval by the shareholders at the annual general meeting. Together with the interim dividend of RMB0.203 per share already paid, total dividend for the year is RMB0.3366 per share. UNICOM CLOUD1 REVENUE (RMB BIL) DATA SERVICE REVENUE (RMB BIL) ^41.6% 2023 5.3 2022 4.0 ^32% 2023 51.0 2022 36.1 2021 16.3 DIGITAL SMART APPLICATIONS REVENUE (RMB BIL) 2023 ^17.5% 5.6 2022 4.8 CYBERSECURITY REVENUE (RMB BIL) 2023 1.7 2022 0.8 ^120% 1. Unicom Cloud revenue included revenue of cloud resources, cloud platforms, cloud services, cloud integration, cloud interconnection, cloud security, etc., generated from integrated innovative solutions China Unicom (Hong Kong) LimitedAnnual Report 2023 6 7 MAJOR EVENTS February 2023 China Unicom released NX307, the world’s first May 2023 China Telecom, China Mobile, China Unicom, and universal 5G RedCap commercial module, leading China Broadnet jointly announced the official launch with our innovation and development in the 5G of the world’s first 5G cross-network roaming industry. commercial trial in Xinjiang. April 2023 China Unicom joined hands with partners such as China Unicom obtained HKEX’s approval for the spin-off of SMART Connection Technology. China Unicom assisted in the completion of the Midea Group, Shanghai Automobile City and Huawei nation’s first digital security operation centre in to complete the world’s first commercial application ultra-large cities in Guangzhou. of 5G RedCap terminals in industrial and Internet of Vehicles scenarios. June 2023 By establishing the second batch of 8 industry forces covering 7 major sectors, China Unicom explored industry application scenarios to empower economic and social development on all fronts and accelerate the construction of Digital China. August 2023 China Unicom released the “China Unicom Action Plan for the Construction of the Central Hub of the Integration of Smart Computing, Training and Promotion” to build the first integrated hub node of smart computing, training and promotion in the western region in Ningxia, helping to build the western digital valley and China’s computing power capital”. September 2023 Unicom Cloud version 7.0 continued to upgrade, achieving a breakthrough in cloud-native single- cluster node scale of over ten thousand, and providing customers with secure and reliable cloud services. November 2023 China Unicom Smart Cloud Data Centre cum Unicom Cloud International Station Launching Ceremony was convened in Hong Kong , committed to strengthening the international deployment of computing-network resources, contributing to the high-quality co-building of the “Belt and Road” initiative, constructing a high-quality computing- network hub, and enhancing ecological cooperation. China Unicom (Hong Kong) LimitedAnnual Report 20238 9 OVERALL RESULTS In 2023, the Company made efforts to promote the coordinated development of the two main businesses to achieve effective quality enhancement and reasonable growth in scale. Operating revenue increased steadily to RMB372.6 billion, up 5.0% year-on-year. EBITDA1 reached RMB99.8 billion. The profit attributable to equity shareholders of the Company reached RMB18.7 billion, representing a year-on-year increase of 11.8%, continuing double-digit growth. Return on equity (ROE) reached 5.4%, the best in recent years. The Company insisted on network-business coordination and precise investment. With 5G network coverage nearing completion, the Company’s investment focus is shifting from stable CC business to high-growth CDSA business. CAPEX was RMB73.9 billion in 2023. Network investment saw an inflection point. The Company comprehensively enhanced its value creation ability, with its free cash flow2 growing 8.3% year-on-year to RMB28.5 billion. Its capital structure continued to improve with interest-bearing debts decreasing by 19% to RMB46.4 billion, and its liabilities-to-assets ratio remained within a reasonable range of 46.5%. The Company is committed to sharing the fruits of its long-term development with shareholders while continuing to promote good growth of revenue and profit and maintaining its sustainable development capability. After due consideration of the Company’s robust business development, the Board declared a final dividend of RMB0.1336 per share (pre-tax). Together with the interim dividend of RMB0.203 per share (pre-tax) already paid, the total dividend for the year amounted to RMB0.3366 per share (pre-tax), representing a year-on-year increase of 22.8%, which is significantly higher than the 11.8% growth of basic earnings per share. The cash dividend reached a record high3. CHAIRMAN’S STATEMENT Dear Shareholders, 2023 was a year for China Unicom to achieve significant results in high-quality development. In the past year, the Company steadily promoted the implementation of its strategic system, actively coordinated the current operation and long-term development, and focused on both scale growth and value enhancement. It fully assumed the main responsibilities of Cyber Superpower and Digital China development, and focused on the two main businesses of Connectivity and Communications (CC) and Computing and Digital Smart Applications (CDSA). The Company achieved steady progress in business development, rapidly s t r e n g t h e n e d i t s f u n d a m e n t a l c a p a b i l i t i e s , continuously amplified its distinctive advantages and deepened innovation and reform, laying a more solid foundation for its long-term development. CHEN ZHONGYUE Chairman and Chief Executive Officer China Unicom (Hong Kong) LimitedAnnual Report 202310 WITH EMPHASIS ON BOTH SCALE AND QUALITY, BUSINESS DEVELOPMENT MADE NEW ACHIEVEMENTS China Unicom fully consolidated its foundation in Within that, for mobile connectivity, the Company strengthened coordination among terminals, network and business development. Driven by 5G upgrade, mobile subscribers demonstrated strong growth. The market development, capability and management, and Company continued to strengthen coordinated took advantage of its unique edges to promote development, striking a balance among scale, quality, technological innovation, product innovation, model structure and efficiency. The number of mobile innovation and system innovation with greater subscribers reached 333 million, with a net addition of strength. It improved the circulation of various factors, 10.60 million in 2023. The net addition increased and promoted high-level opening up and cooperation significantly by 90% year-on-year. Subscriber mix both internally and externally, unveiling a new continued to improve, and the penetration rate of 5G paradigm of China Unicom’s high-quality development. package subscribers reached 78%, an increase of 12 In 2023, the Company achieved service revenue of percentage points year-on-year. The Company actively RMB335.2 billion, up by 5.0% year-on-year. seized the development opportunities of universal connectivity. The number of Internet of Things (IoT) Stable growth in Connectivity and Communications connections reached 490 million in 2023, of which “4G provided the foundation for steady operations + 5G” high-speed connections accounted for over 90%, T h e C o m p a n y c o n t i n u e d t o d e e p e n b u s i n e s s injecting fresh impetus into the development of mobile integration, market convergence and capability fusion. connectivity. New integration is gaining momentum. Mobile, fixed-line broadband and leased line businesses saw For broadband connectivity, the Company continued steady growth in both scale and value. Innovative to build its reputation for gigabit service. The number value-added services for individuals and households of fixed-line broadband subscribers reached 113 achieved rapid breakthroughs. In 2023, Connectivity million, with a net addition of 9.79 million year-on- a n d C o m m u n i c a t i o n s ( C C ) b u s i n e s s , w h i c h year. The net addition hit a 10-year high. Subscriber encompasses mobile connectivity, broadband mix improved significantly with the integration connectivity, TV connectivity, leased line connectivity, penetration of broadband subscribers reaching 76%. communications services as well as information The penetration rate of gigabit subscribers reached services, achieved revenue of RMB244.6 billion. It 22%, an increase of 6 percentage points year-on-year. contributed to three quarters of the service revenue of CC and CDSA combined. The Company’s connectivity scale further expanded, with the total number of CC subscribers exceeding one billion4, representing an increase of about 140 million from the end of 2022. China Unicom (Hong Kong) LimitedCHAIRMAN’S STATEMENT11 For information services, the Company strived to build achieved revenue of RMB75.2 billion. It accounted for richer and better innovative products, and deepened a quarter of the service revenue of CC and CDSA the rapid growth of information services for the combined, and contributed to more than half of the individual and household markets, bringing brand new Company’s incremental service revenue. experiences of quality upgrade to customers. The Company continued to bolster the “platform + cloud For Unicom Cloud5, revenue reached RMB51.03 billion network + applications” development model and in 2023, with year-on-year growth of 41.6%. constantly enhanced information applications. Leveraging the differentiated edge of computing Information services revenue exceeded RMB10 billion. power and network integration as well as significantly The number of paying subscribers of Personal Digital richer computing power resources, the Company sold and Smart Living and Unicom Smart Home reached 100 over a million cores of cloud resources, with a year-on- million. year growth rate of 186%. Its cloud resources covered over 230 cities. The Company overcame critical Robust growth of Computing and Digital technological barriers in cloud server operating Smart Applications added to growth momentum for systems, databases and cloud disaster recovery, and innovation and transformation met customers’ need for scenario-based customisation. The new round of technological revolution and It built a series of benchmark cases in the fields of industrial transformation is overwhelming, and the government affairs, healthcare, transportation and prosperity and vitality of the digital economy have education, empowering quality and efficiency opened up new and bigger room for the development enhancement in various industries. The Company of China Unicom. The Company actively embraced the made new efforts in technological innovation and strategic opportunities brought by the resonance of ecological co-construction, further enhanced its Chinese-style modernisation and next-generation proprietary R&D capability, and continued to optimise digital revolution. In 2023, Computing and Digital the “virtualised” and “cloud native” dual-engine Smart Applications (CDSA), which encompasses foundation. It deployed more than 3,300 sets of self- Unicom Cloud, data centre, system integration, data developed operating system CULinux 2.2. services, digital smart applications and cybersecurity, Annual Report 202312 For data service, seizing policy opportunities such as categories of the national economy, serving more than “Digital China” construction and the “Data Factor X” 8,500 5G private network customers. The Company Three-Year Action Plan, the Company focused on has formed a leading edge in key sectors such as strengthening the supply of data products and industrial Internet, digital government, and Internet of capabilities, empowering holistic digital transformation vehicles, etc. Its professional and specialised of the economy and society. Leveraging its centralised capabilities in digital intelligence continued to platform and cutting-edge Big Data capability, the strengthen, with 32 self-developed application Company’s data services accounted for over 50% products generating revenue in excess of RMB100 market share for five consecutive years, outperforming million. It iteratively upgraded the 5G industry private in the industry. It always regarded the integrated network PLUS product matrix, developed Gewu innovation of Big Data and AI technologies as the core Unilink, a cross-industry and cross-profession industrial driving force. Twelve of its data management Internet platform, and launched ten 5G RedCap capabilities were named in the “2023 Data Governance industry terminals. During Mobile World Congress Industry Graph 2.0”, ranking first in terms of quantity. (MWC) 2024, it won three Global Mobile (GLOMO) Its data processing capacity continued to increase, and Awards, leading the high-quality development of 5G the daily amount of data collected doubled year-on- digital and smart applications. year to 1.2 PB. The Company passed the highest DCMM5 certification with the highest score ever. It For cybersecurity, the Company focused on network comprehensively served the digital transformation of security, data security, information security and other government affairs. It built the No. 1 brand in digital key aspects, and strengthened Big Security strategic government and developed 15 provincial government business deployment. Based on the “Mogong” platform, affairs Big Data platforms, while the total number of the Company developed a new model of “platform + smart city service districts and counties exceeded 800. components + services” security operating services. It built China’s first mega-city digital security operation For digital and smart applications, the Company centre for a client, and implemented more than 50 accelerated the in-depth integration of the digital benchmark projects. It promoted open cooperation in economy and the real economy with 5G technology, in the security ecosystem by attracting partners to join order to provide a digital “new engine” for strategic the “Security Hub” and build a large-scale, product-rich emerging industries and future industries. The scale and accessible security cloud market, supporting development of digital and smart applications achieved cybersecurity revenue to achieve a rapid growth of remarkable results, with a cumulative total of 30,000 120%. 5G industry application projects covering 71 major China Unicom (Hong Kong) LimitedCHAIRMAN’S STATEMENT13 BUILDING A SOLID FOUNDATION FOR S U S T A I N A B L E D E V E L O P M E N T B Y CONSOLIDATING CAPABILITIES Network is the foundation of the Company’s existence, and Western Computing strategy, and actively deployed a new computing power network with advanced architecture, security and reliability and excellent service. Through the “5 + 4 + 31 + X” new IDC and innovation is the source of the Company’s deployment, the Company strived to build green, vibrancy. In recent years, the Company has vigorously c e n t r a l i s e d , s e c u r e a n d r e l i a b l e c o m p u t i n g promoted the work orientation of strengthening the infrastructure. The Company proactively responded to fundamentals and basics, and has made efforts to build the transformation and upgrade of AI computing digital information infrastructure as the foundation to power demand, and pushed forward “1+N+X” AI help China’s digital economy flourish. The Company computing planning and deployment. In Eastern actively promoted the research on critical core regions with developed AI computing industry and technologies and the construction of a unique Western regions with abundant resources, it capability system, in order to play a bigger role in undertook tiered deployment and construction. It has technological innovation, industrial control and constructed over 100G high-speed transmission links security support. It provided a solid foundation for the among national hubs, reinforcing the optical transport Company to forge ahead in its new journey and foundation for computing power network. The latency undertake new missions. of the Company’s public IP backbone network maintained its edge in the industry. Network capabilities continued to strengthen with precise investment T h e C o m p a n y a d h e r e d t o n e w d e v e l o p m e n t The Company accelerated the construction of digital philosophy and pushed forward high-quality 5G information infrastructure in order to consolidate the development. 220,000 5G mid-band base stations foundation of its long-term development. The were added and the number of shared 4G base Company had over 1.21 million 5G mid-band base stations exceeded two million. It launched the world’s stations and 680,000 900M base stations. Its mobile first 5G roaming pre-commercial trial in Xinjiang network coverage continued to strengthen. Its province with fellow operators to further improve the broadband network maintained its industry edge in network resources utilisation efficiency in remote Northern China, while its foundational capabilities in areas. It made good progress in promoting the co- S o u t h e r n C h i n a w e r e m a r k e d l y b o o s t e d . F o r build, co-share and co-maintenance of transmission government and enterprise network, it provided “hard lines, pipes and optical cables and other infrastructure. and soft” high-quality private network services, and The Company took practical actions to echo the “dual continuously expanded coverage scale and multi-cloud carbon” policy, saving operating expenses of about connectivity, promoting “cloudification and digital RMB39.0 billion and annual carbon emissions of about empowerment” for thousands of industries. The 11.50 million tonnes in 2023, and saving cumulative Company fully implemented the national Eastern Data capital expenditure of about RMB340.0 billion. Annual Report 202314 Innovation-driven transformation made a deep and steady stride The Company actively forged its core capabilities, SOCIAL RESPONSIBILITY AND CORPORATE GOVERNANCE The Company takes care of national interests, continued to build a strong engine for technological spontaneously contributes to national strategies and innovation, focused on promoting industrial innovation organically integrates its economic responsibility with with technological innovation, and accelerated the social responsibility. In the past year, the Company development of new quality productivity. It made demonstrated its commitment in environmental, social greater efforts on talent cultivation, with the ratio of and corporate governance aspects, and contributed its technological innovation personnel reaching 40%. It part to meet the needs of people for better was granted 2,287 patents during the year, up by 37% information life and the demand for digital, network- year-on-year. The Company enhanced the efficiency of based and intelligent transformation of various c a p i t a l o p e r a t i o n a n d s t r e n g t h e n e d c a p i t a l industries. The Company continued to build a solid, cooperation. It set up joint ventures such as Nebula reliable and secure network, enhance data and Times Technology Co., Ltd. and China Unicom Digital information security capabilities, and bolster its Intelligence Medical Technology Co. Ltd to further collaborative support system, fortifying national improve its capability in offering professional and cybersecurity defence. Fulfilling the “dual carbon” specialised digital services. strategy, the Company actively constructed large data centres which were technologically advanced, green The Company regards AI as an important strategic and low-carbon, secure and reliable. The Company field. It accelerated the deployment in this nascent endeavoured to build an inclusive and accessible digital industry by combining China Unicom’s advantages in society and fully supported rural revitalization. Its computing network infrastructure, diverse business Digital Village platform covered the 255,000 use cases and extensive customer touch points to build administrative villages and served more than 26 a large language model (LLM) application development million villagers. The Company fully demonstrated its paradigm with China Unicom’s characteristics. At the responsibilities. During major events such as recent MWC, the Company launched the “Yuanjing” communications support, rescue and disaster relief, LLM system, which offered multiple parameter reform, etc., it performed its missions and successfully versions according to different functional needs, so as completed communications support tasks during to use LLM to better empower use cases in the real rescue and disaster relief. The Company advanced economy. The Company comprehensively improved quality enhancement as a listed company. It customer service with AI + Big Data, with relevant strengthened communication with the capital market achievements successfully shortlisted in “Wu Wenjun through reverse roadshows and other activities, and Award for Science and Technology in Artificial actively responded to shareholders’ concerns, Intelligence”, an authoritative award in the industry. promoting the mutual improvement of both its intrinsic value and market value. The Company further accelerated deployment in satellite communications, and actively promoted the industrialisation and systemic development of air- ground integrated communications. China Unicom (Hong Kong) LimitedCHAIRMAN’S STATEMENT15 The Company continued to improve its governance The Company will insist on making progress while mechanism, providing solid support for sustainable and maintaining stability, deeply implement the five healthy development. It has received numerous strategies to build a strong enterprise, i.e. via recognitions, including ranking 267th in the Fortune technology, talent, reform, digital and smart Global 500 for the year 2023, ranking 277th in the transformation, and brand. We will deeply implement Forbes Global 2000, being voted as “Asia’s Most nine key action plans in respect of CC, computing Honored Telecom Company” by Institutional Investor network integration, digital and smart applications, for the eighth consecutive year, and being voted as “Best Overall Company in China — Gold” in “Asia’s Best internationalisation, Big Data innovation, AI innovation, digital new infrastructure, high-quality Managed Companies Poll 2023” organised by services and cybersecurity, in order to accelerate FinanceAsia. becoming a world-class technology service enterprise with global competitiveness. OUTLOOK At present, the trend of digitalisation, intelligent Last but not least, on behalf of the Board, I would like t r a n s f o r m a t i o n a n d g r e e n d e v e l o p m e n t i s to express my sincere gratitude to all shareholders, unstoppable. The new round of technological customers and all sectors of society for their long-term revolution and industrial transformation has care and support to the Company, and to all developed rapidly, giving rise to unprecedented new e m p l o y e e s f o r t h e i r c o n t i n u e d e f f o r t s a n d services, new models and new business formats. Under contributions! the new landscape, the strategic, fundamental and leading role of the information and communication industry has become more and more prominent. In 2024, the Company is confident in maintaining stable growth in operating revenue and double-digit growth in profit. CAPEX is expected to be within RMB65.0 Chen Zhongyue billion, in which CDSA investment will be appropriately Chairman and Chief Executive Officer b r o u g h t f o r w a r d a n d i t s d e p l o y m e n t w i l l b e strengthened. Hong Kong, 19 March 2024 Note 1: EBITDA represents profit for the year before finance costs, interest income, share of net profit of associates, share of net profit of joint ventures, other income — net, income tax expenses, depreciation and amortisation. As the telecommunications business is a capital-intensive industry, capital expenditure and finance costs may have a significant impact on the net profit of the companies with similar operating results. Therefore, the Company believes that EBITDA may be helpful in analysing the operating results of a telecommunications service operator like the Company. However, it is a non-GAAP financial measure which does not have a standardised meaning and therefore may not be comparable to similar measures presented by other companies. Note 2: Free cash flow represents operating cash flow less capital expenditure. However, it is a non-GAAP financial measure which does not have a standardised meaning and therefore may not be comparable to similar measures presented by other companies. Note 3: The 2023 final dividend declared will be subject to approval at the Company’s annual general meeting. Note 4: The total number of CC subscribers as at the end of January 2024. Note 5: Unicom Cloud revenue represents revenue generated from cloud resources, cloud platform, cloud services, cloud integration, cloud interconnection, cloud security, etc. by integrating innovative solutions. Annual Report 202316 BUSINESS OVERVIEW In 2023, China Unicom adhered to the principle of serving the people, focused on the primary task of high-quality development. It continuously deepened business integration, market convergence, and the fusion of capabilities and intelligence. The Company’s operation remained stable with progress, and its business revenue maintained rapid growth. The subscriber scale reached a new high in recent years, with 333 million mobile billing subscribers in 2023, and accumulative net addition of 10.60 million. The fixed-line broadband subscriber scale reached 113 million, with accumulative net addition of 9.79 million. China Unicom’s brand influence continued to expand. In a brand-building capabilities benchmark against central state-owned enterprises (CSEs), it ranked fourth among them and first in the telecommunications industry. China Unicom (Hong Kong) Limited17 T h e s t a b i l i s i n g e f f e c t o f C o n n e c t i v i t y a n d established product lines that integrated technology Communications business became more prominent. innovation, cloud networking, terminal devices, and Firstly, the Company accelerated the promotion of data, focusing on customer and market needs. In 2023, new and existing subscribers to 5G, gigabit, and the Company’s cloud computer officially achieved integrated services. In terms of 5G, the Company commercialisation, and the information application continued to promote network-business-access products like video ringtones, Unicom Cloud Drive, and alignment, and accelerated the upgrade to 5G devices smart homes generated revenues over RMB10 billion. for network access and the migration from 3G. Thirdly, the scale of Internet of Things (IoT) business Regarding gigabit services, the Company adhered to maintained steady growth, with a total of 490 million the drivers of 1000 Mbps broadband and FTTR, aiming IoT connections. Among them, the net addition of 5G to enhance customer perception through high-speed connections led the industry. The scale of Cat.1 networks, and carried out initiatives such as achieving connections reached 130 million. The Company’s gigabit benchmarks and enabling gigabit communities. market share in Internet of vehicles continued to stay For integrated services, the Company promoted ahead in the industry. Fourthly, the Company comprehensive integration of scale and value, u p g r a d e d t h e 5 G “ e m p o w e r m e n t e n g i n e ” , improving the overall perception of communication empowering thousands of industries with intelligence services in households, and achieving breakthroughs in and value. The Company developed a total of 30,000 scale and value as a whole. Secondly, the Company commercial 5G application projects, covering 71 major continued to enhance the provision of new digital categories of the national economy. The customer smart living and smart home applications, reshaping scale continued to expand, and the cumulative number voice services and SMS services, and creating new of customers served by the virtual 5G industry private experiences in communication services. The Company networks exceeded 8,500. Annual Report 202318 The development capabilities of Computing and the world’s first 5G RedCap commercial module. The Digital Smart Applications (CDSA) business have been Company’s “Gewu” device management platform is continuously strengthened. Firstly, in terms of capable of supporting tens of millions of concurrent computing power services, Unicom Cloud’s cloud connections, and its advantages in scenario-based resource pool experienced rapid growth and object models have empowered key industry accomplished the deployment of “one resource pool customers in their digital transformation and upgrade, per city”. In key areas such as government clouds and creating benchmark projects in various sectors. CSEs’ cloudification, the Company newly added over Regarding artificial intelligence (AI), China Unicom 100 benchmark projects of private clouds. Secondly, in constructed an independent and innovative AI terms of cloud data centres, China Unicom achieved infrastructure, developing large language models and leading growth within the IDC industry. Thirdly, in CDSA products for fields such as government affairs terms of data services, the Company’s total revenue and the economy. These efforts have comprehensively from Big Data grew rapidly, and its market share empowered the implementation of over 30 scenario maintained industry leading for five consecutive years. applications such as factories and industrial The Company’s data services capabilities passed manufacturing parks. Fifthly, in terms of cyber DCMM level 5 assessment. Its integration of information security, China Unicom relied on the technologies such as blockchain and homomorphic “Mogong” security operation service platform, utilising encryption achieved cross-domain networking and its capabilities in large-scale network situational reduced storage by 30%. The performance of the awareness to develop an operation service model underlying platform has surpassed 20,000 transactions integrating “Terminal-Network-Cloud-Data-Service”. In per second (TPS). Fourthly, in terms of digital smart areas such as digital government and CSEs, China applications, regarding IoT, China Unicom launched Unicom newly added over 50 new model cases. China Unicom (Hong Kong) LimitedBUSINESS OVERVIEW19 The high-quality network capability continuously reached 98%. Secondly, the Company continuously i m p r o v e d . F i r s t l y , C h i n a U n i c o m t o o k f u l l promoted the coverage of gigabit optical networks, responsibility for building Cyber Superpower and with over 260 million broadband ports and the Digital China, accelerating the construction of a proportion of 10GPON ports exceeding 70%. Thirdly, comprehensive intelligent digital infrastructure the Company actively built a multi-level computing characterised by high-speed ubiquitous connectivity, power supply. By combining national Eastern Data and integration across space and ground, cloud-network Western Computing strategy, along with China convergence, intelligence and agility, green and Unicom’s “5+4+31+X” computing resource deployment, low-carbon features, as well as security and the Company improved its multi-level architecture. controllability. The Company continuously promoted China Unicom’s computing centres covered eight major the construction of mobile premium networks, hubs and 31 provinces, with over 400,000 data centre broadband premium networks, and government & cabinets. The resource deployment of a thousand enterprise premium networks, establishing a solid cabinets was completed in 29 provinces, and over 230 CDSA capabilities foundation. The Company focused on cities were covered by backbone cloud pools. The enhancing its core competitiveness, sustainable number of MEC nodes exceeded 600. Fourthly, The development capacity, and value creation ability, Company continuously improved the international driving the network quality to a new level and further network deployment. By the end of 2023, the building a solid network foundation for China Unicom’s international submarine and land cable resource high-quality development. By the end of 2023, there capacity reached 88T, Internet international were over 1.21 million 5G mid-band shared base i n t e r c o n n e c t i o n c a p a c i t y 7 . 6 3 T a n d i n b o u n d stations, 680,000 900MHz low-band base stations, and bandwidth 5.59T. International roaming covered 643 over 2.90 million available 4G base stations. The operators in 264 countries and regions. coverage rate of 5G/4G in administrative villages Annual Report 202320 FINANCIAL OVERVIEW OVERVIEW In 2023, the Company fully implemented the new development philosophies, fully assumed the two main responsibilities of building a Cyber Superpower and Digital China, and focused on the two main businesses of Connectivity and Communications and Computing and Digital Smart Applications, total revenue was RMB372.60 billion in 2023, up by 5.0% year-on-year. Service revenue reached RMB335.17 billion, up by 5.0% year-on-year. The profit attributable to equity shareholders of the Company was RMB18.73 billion, up by 11.8% year-on-year. In 2023, the Company’s net cash flow from operating activities was RMB102.39 billion. Capital expenditure was RMB73.87 billion. Liabilities-to-assets ratio was 46.5% as at 31 December 2023. SERVICE REVENUE (RMB BIL) 335.17 China Unicom (Hong Kong) Limited21 REVENUE In 2023, the Company’s revenue was RMB372.60 billion, up by 5.0% year-on-year, of which, service revenue was RMB335.17 billion, up by 5.0% year-on-year due to continuous optimisation of the revenue mix. The table below sets forth the Company’s service revenue of the two main types of business for the years of 2023 and 2022: (RMB in billions) 2023 2022 Total Mix Total Mix amount proportion amount proportion Connectivity and Communications business revenue 244.58 76.5% 237.25 78.1% Computing and Digital Smart Applications business revenue 75.25 23.5% 66.66 21.9% Connectivity and Communications business revenue In 2023, service revenue from Connectivity and Communications business was RMB244.58 billion, up by 3.1% year-on-year. Computing and Digital Smart Applications business revenue In 2023, service revenue from Computing and Digital Smart Applications business was RMB75.25 billion, up by 12.9% year-on-year. CONNECTIVITY AND COMMUNICATIONS BUSINESS REVENUE (RMB BIL) 244.58 COMPUTING AND DIGITAL SMART APPLICATIONS BUSINESS REVENUE (RMB BIL) 75.25 Annual Report 2023 22 OPERATING COSTS In 2023, total operating costs amounted to RMB357.63 billion, up by 4.4% year-on-year. The table below sets forth the items of the operating costs and the changes in their respective percentage of the revenue for the years of 2023 and 2022: (RMB in billions) Operating costs Include: Interconnection charges Depreciation and amortisation Network, operation and support expenses Employee benefit expenses Include: salaries under employment  contract Costs of telecommunications products sold Selling and marketing expenses Cost of Computing and Digital Smart Applications business1 General and administrative expenses2 Other operating expenses 2023 2022 As a As a Total percentage Total percentage amount of revenue amount of revenue 357.63 11.29 84.85 60.03 62.94 41.28 36.40 35.83 40.08 5.53 20.68 96.0% 3.0% 22.8% 16.1% 16.9% 11.1% 9.8% 9.6% 10.8% 1.5% 5.6% 342.60 10.95 86.83 56.42 60.72 40.85 34.72 34.46 31.79 5.15 21.56 96.5% 3.1% 24.4% 15.9% 17.1% 11.5% 9.8% 9.7% 9.0% 1.5% 6.1% China Unicom (Hong Kong) LimitedFINANCIAL OVERVIEW 23 Interconnection charges The interconnection charges were RMB11.29 billion in 2023, up by 3.2% year-on-year and, as a percentage of revenue, decreased from 3.1% in 2022 to 3.0% in 2023. Depreciation and amortisation Mainly benefiting from the Company’s good control of capital expenditure and network “co-build co-share” in recent years, depreciation and amortisation charges were RMB84.85 billion in 2023, down by 2.3% year-on-year and, as a percentage of revenue, decreased from 24.4% in 2022 to 22.8% in 2023. Network, operation and support expenses As the Company expanded the scale of the basic network and relevant infrastructure, network, operation and support expenses were RMB60.03 billion in 2023, up by 6.4% year-on-year and, as a percentage of revenue, increased from 15.9% in 2022 to 16.1% in 2023. Employee benefit expenses The Company ongoing effort in incentive mechanism reforms, strengthen performance-based compensation and optimised the human resources efficiency, employee benefit expenses were RMB62.94 billion in 2023, up by 3.6% year-on-year and, as a percentage of revenue, decreased from 17.1% in 2022 to 16.9% in 2023. Cost of telecommunications products sold Costs of telecommunications products sold were RMB36.40 billion and revenue from sales of telecommunications products were RMB37.43 billion in 2023. Gross profits on sales of telecommunications products was RMB1.03 billion. Selling and marketing expenses The Company appropriately increased selling and marketing expenses to enhance market attractiveness, selling and marketing expenses were RMB35.83 billion in 2023, up by 4.0% year-on-year and, as a percentage of revenue, decreased from 9.7% in 2022 to 9.6% in 2023. Cost of Computing and Digital Smart Applications business1 The Company seized the growth opportunities of the digital economy and continued to develop the Computing and Digital Smart Applications business, cost of Computing and Digital Smart Applications business were RMB40.08 billion in 2023, up by 26.1% year-on-year and, as a percentage of revenue, increased from 9.0% in 2022 to 10.8% in 2023. General and administrative expenses2 General and administrative expenses were RMB5.53 billion in 2023, up by 7.3% year-on-year and, as a percentage of revenue was basically the same as 1.5%. Other operating expenses Other operating expenses were RMB20.68 billion in 2023, down by 4.1% year-on-year and, as a percentage of revenue, decreased from 6.1% in 2022 to 5.6% in 2023. Annual Report 202324 EARNINGS (RMB in billions) Operating profits Net interest income Share of net profit of associates Share of net profit of joint ventures Other income-net Profit before income tax Income tax expenses Profit for the year Include: the profit attributable to equity shareholders of the Company 2023 2022 Total amount Total amount 14.97 0.12 2.52 1.80 3.53 22.95 4.02 18.92 18.73 12.34 0.66 2.15 1.59 3.85 20.59 3.75 16.84 16.74 Change 21.3% –80.9% 17.0% 13.2% –8.2% 11.5% 7.3% 12.4% 11.8% Profit before income tax In 2023, the Company benefited from continuous enhancement in growth quality and profitability, profit before income tax was RMB22.95 billion, up by 11.5% year-on-year. Income tax expenses In 2023, the Company’s income tax expenses was RMB4.02 billion and the effective tax rate was 17.5%. The profit attributable to equity shareholders of the Company In 2023, the profit attributable to equity shareholders of the Company was RMB18.73 billion, up by 11.8% year-on-year. Basic earnings per share was RMB0.612, up by 11.8% year-on-year. China Unicom (Hong Kong) LimitedFINANCIAL OVERVIEW 25 EBITDA3 In 2023, the Company’s EBITDA was RMB99.81 billion, up by 0.6% year-on-year. EBITDA as a percentage of service revenue was 29.8%, down by 1.3 percentage points year-on-year, and the decline of EBITDA as a percentage of service revenue narrowed by 0.1 percentage point year-on-year. CAPITAL EXPENDITURE AND CASH FLOW In 2023, capital expenditure of the Company totaled RMB73.87 billion. Investments focus on the main responsibilities and businesses; the scale of investment matches the business growth and cash position. In 2023, the Company’s net cash flow from operating activities was RMB102.39 billion. Free cash flow4 was RMB28.52 billion after the deduction of the capital expenditure. BALANCE SHEET The Company’s total assets increased from RMB642.66 billion as at 31 December 2022 to RMB661.05 billion as at 31 December 2023. Total liabilities increased from RMB299.13 billion as at 31 December 2022 to RMB307.15 billion as at 31 December 2023. The liabilities-to-assets ratio was 46.5% as at 31 December 2023, basically the same as last year. The debt-to-capitalisation ratio decreased from 14.3% as at 31 December 2022 to 11.6% as at 31 December 2023. The net debt-to-capitalisation ratio was –0.3% as at 31 December 2023. Note 1: Cost of Computing and Digital Smart Applications business excludes the cost of data centre business. Note 2: General and administrative expenses excludes staff costs and depreciation. Note 3: EBITDA represents profit for the year before finance costs, interest income, shares of net profit of associates, share of net profit of joint ventures, other income-net, income tax expense, depreciation and amortisation. As the telecommunications business is a capital intensive industry, capital expenditure and finance costs may have a significant impact on the net profit of the companies with similar operating results. Therefore, the Company believes that EBITDA may be helpful in analysing the operating results of a telecommunications service operator like the Company. However, it is a non-GAAP financial measure which does not have a standardised meaning and therefore may not be comparable to similar measures presented by other companies. Note 4: Free cash flow represents operating cash flow less capital expenditure. However, it is a non-GAAP financial measure which does not have a standardised meaning and therefore may not be comparable to similar measures presented by other companies. Note 5: Connectivity and Communications business revenue is the sum of relevant amounts in various types of service revenue, including voice usage and monthly fees RMB21.21 billion, broadband and mobile data services RMB154.75 billion, data and internet application services RMB14.39 billion, other value-added services RMB29.19 billion, transmission lines usage and associated services RMB22.67 billion and other services RMB2.37 billion. Computing and Digital Smart Applications business revenue consists of service revenue related to data and internet application services RMB75.25 billion. In addition to the above two business revenue, other business service revenue was RMB15.34 billion. Details of the disaggregation of service revenue, please refer to Note 6 of the consolidated financial statements. Annual Report 202326 27 RECOGNITION AND AWARDS For more information, please visit the Company’s website at www.chinaunicom.com.hk China Unicom (Hong Kong) LimitedAnnual Report 202328 DIRECTORS AND SENIOR MANAGEMENT China Unicom (Hong Kong) Limited29 CHEN ZHONGYUE Chairman and Chief Executive Officer Aged 52, a university graduate with a master's degree in Economics, was appointed in December 2023 as the Chairman and Chief Executive Officer of the Company. Mr. Chen was appointed in February 2021 as an Executive Director of the Company. Mr. Chen served as Deputy General Manager of China Telecom Zhejiang branch, Managing Director of the Public Customers Department of China Telecom, General M a n a g e r o f C h i n a T e l e c o m S h a n x i b r a n c h , V i c e P r e s i d e n t o f C h i n a Telecommunications Corporation, Executive Director and Executive Vice President of China Telecom Corporation Limited, General Manager of China United Network Communications Group Company Limited ("Unicom Group"), the President of China United Network Communications Limited ("A Share Company"), the President of China United Network Communications Corporation Limited ("CUCL"), the President of the Company. Mr. Chen is currently the Chairman of Unicom Group, A Share Company and CUCL. Mr. Chen has extensive experience in management and the telecommunications industry. Annual Report 202330 WANG JUNZHI Executive Director Aged 59, a postgraduate with a master's degree in Engineering, was appointed in December 2021 as an Executive Director of the Company. Mr. Wang served as Deputy Director General and Director General of the Department of Labor Protection of All-China Federation of Trade Unions ("ACFTU"), Chairman of the National Committee of the Trade Union of the Energy and Chemistry Sector of China, Director General of the Department of Labor and Economic Work of ACFTU, Secretary of the Secretariat of ACFTU, a member of the 15th and 16th Executive Committee of ACFTU as well as a member of the 16th Presidium of ACFTU. Mr. Wang is currently a Director of Unicom Group, a Director of A Share Company as well as a Director of CUCL. Mr. Wang has extensive experience in management. China Unicom (Hong Kong) LimitedDIRECTORS AND SENIOR MANAGEMENT31 LIANG BAOJUN Senior Vice President Aged 54, a university graduate with a master's degree in Engineering, was appointed in February 2018 as a Senior Vice President of the Company. Mr. Liang served as Deputy General Manager of Beijing Branch of China Telecom Corporation Limited, as well as General Manager of Henan Branch of China Telecommunications Corporation, General Manager of Corporate Informatisation Department, General Manager of Government and Enterprise Customers Department of China Telecommunications Corporation. Mr. Liang also serves as Vice General Manager and the Chief Network Security Officer of Unicom Group, Senior Vice President of A Share Company as well as Director and Senior Vice President of CUCL. Mr. Liang has extensive experience in management and telecommunications industry. Annual Report 202332 HE BIAO Senior Vice President Aged 52, a university graduate with a doctorate degree of Business Administration, was appointed in June 2020 as a Senior Vice President of the Company. Mr. He served as Deputy General Manager and General Manager of Guangdong Branch of China Unicom as well as Chairman of China Unicom (Guangdong) Industrial Internet Co., Ltd.. Mr. He also serves as a Vice General Manager of Unicom Group, a Senior Vice President of A Share Company as well as a Director and Senior Vice President of CUCL. Mr. He has extensive experience in management and telecommunications industry. China Unicom (Hong Kong) LimitedDIRECTORS AND SENIOR MANAGEMENT33 TANG YONGBO Senior Vice President Aged 50, a postgraduate with a master's degree in Business Administration, was appointed in December 2021 as a Senior Vice President of the Company. Mr. Tang served as Deputy General Manager and General Manager of Hunan Branch of China Unicom, General Manager of Marketing Department of Unicom Group. He was a Deputy to the 13th National People's Congress. Mr. Tang is currently a Non- Executive Director of China Tower Corporation Limited (listed on the Hong Kong Stock Exchange), a Non-Executive Director of China Communications Services Corporation Limited (listed on the Hong Kong Stock Exchange), a Non-Executive Director of HKT Limited (HKT Trust and HKT Limited are listed on the Hong Kong Stock Exchange) and HKT Management Limited (the trustee manager of the HKT Trust), a Non-Executive Director and the Deputy Chairman of the Board of PCCW Limited (listed on the Hong Kong Stock Exchange with an American Depositary Receipts trading on OTC Markets Group Inc.), Vice General Manager of Unicom Group, Senior Vice President of A Share Company, Director and Senior Vice President of CUCL, as well as Director of certain member of the Group. Mr. Tang has extensive experience in management and the telecommunications industry. Annual Report 202334 LI YUZHUO Executive Director and Chief Financial Officer Aged 51, a postgraduate with a master's degree in Business Administration, was appointed in February 2022 as an Executive Director and Chief Financial Officer of the Company. Ms. Li served as Director of the Finance Department of China ENFI Engineering Corporation Limited, Vice President of China ENFI Engineering Corporation, Head of the Capital Department and Secretary of the Board of Directors of China Metallurgical Group Corporation (Metallurgical Corporation of China Limited), and Head of the Capital Operation Department of China Minmetals Corporation. Ms. Li is currently Chief Accountant of Unicom Group, Board Secretary and Financial Controller of A Share Company, the Director and the Chief Financial Officer of CUCL, as well as Director of certain member of the Group. Ms. Li has extensive experience in financial investment and capital operation. China Unicom (Hong Kong) LimitedDIRECTORS AND SENIOR MANAGEMENT35 CAO XINGXIN Senior Vice President Aged 57, a postgraduate with a master's degree in Literature, was appointed in March 2023 as a Senior Vice President of the Company. Mr. Cao served as Deputy Director General of the Bureau of Officials of the CPC Central Committee and State Organs of the Organization Department of the CPC Central Committee (COD), Bureau-level official and Deputy Director of the Office of Civil Servants Administration of COD, Deputy Director General and Bureau-level official at level 1 of the (Third) Bureau of Civil Servants of COD, Deputy Head (Bureau Chief level) of the National Institute for Party Leadership of COD. Mr. Cao is currently Vice General Manager and General Counsel of Unicom Group, Senior Vice President and General Counsel of A Share Company as well as Director, Senior Vice President and General Counsel of CUCL. Mr. Cao has extensive experience in management. Annual Report 202336 CHEUNG WING LAM LINUS Independent Non-Executive Director Aged 75, was appointed in May 2004 as an Independent Non-Executive Director of the Company. Mr. Cheung is an Independent Non-Executive Director of HKR International Limited (listed on the Hong Kong Stock Exchange). Mr. Cheung was a member of the University of Hong Kong Council, Chairman of the University of Hong Kong School of Professional and Continuing Education, Chairman of Asia Television Limited, Deputy Chairman of PCCW Limited, Independent Non-Executive Directors of Taikang Life Insurance Company Limited and Sotheby's, as well as President of the Chartered Institute of Marketing (Hong Kong Region). Prior to the merger of Pacific Century Cyberworks Limited and Hong Kong Telecom Limited, Mr. Cheung was the Chief Executive of Hong Kong Telecom Limited and an Executive Director of Cable & Wireless plc in the United Kingdom. Mr. Cheung worked at Cathay Pacific Airways for 23 years, leaving as Deputy Managing Director. He was appointed an Official Justice of the Peace in 1990 and a Non-official Justice of the Peace in 1992. Mr. Cheung received a bachelor's degree in social sciences and a diploma in management studies from the University of Hong Kong. He is also an Honorary Fellow of the University of Hong Kong and of The Chartered Institute of Marketing in the United Kingdom. China Unicom (Hong Kong) LimitedDIRECTORS AND SENIOR MANAGEMENT37 WONG WAI MING Independent Non-Executive Director Aged 66, was appointed in January 2006 as an Independent Non-Executive Director of the Company. Mr. Wong is Executive Vice President and Chief Financial Officer of Lenovo Group Limited (listed on the Hong Kong Stock Exchange). Mr. Wong was previously an investment banker with over 15 years of experience in investment banking business in Greater China and was a member of the Listing Committee of The Stock Exchange of Hong Kong Limited. Mr. Wong is a chartered accountant and holds a bachelor's degree (with Honors) in management science from the Victoria University of Manchester in the United Kingdom. Annual Report 202338 CHUNG SHUI MING TIMPSON Independent Non-Executive Director Aged 72, was appointed in October 2008 as an Independent Non-Executive Director of the Company. Mr. Chung is the Pro-Chancellor of the City University of Hong Kong. Besides, Mr. Chung is an Independent Non Executive Director of The Miramar Hotel and Investment Company, Limited, China Overseas Grand Oceans Group Limited, China Everbright Limited, China Railway Group Limited, Orient Overseas (International) Limited and Postal Savings Bank of China Co., Limited (all listed on the Hong Kong Stock Exchange). From October 2004 to October 2008, Mr. Chung served as an Independent Non-Executive Director of China Netcom Group Corporation (Hong Kong) Limited. Formerly, he was the Chairman of China Business of Jardine Fleming Holdings Limited and the Deputy Chief Executive Officer of BOC International Limited. He was also the Director-General of Democratic Alliance for the Betterment and Progress of Hong Kong, the Chairman of the Advisory Committee on Arts Development, the Chairman of the Council of the City University of Hong Kong, the Chairman of the Hong Kong Housing Society, a member of the Executive Council of the Hong Kong Special Administrative Region, the Vice Chairman of the Land Fund Advisory Committee of Hong Kong Special Administrative Region Government, a member of the Managing Board of the Kowloon-Canton Railway Corporation, a member of the Hong Kong Housing Authority, a member of the Disaster Relief Fund Advisory Committee, a member of the National Committee of the 10th to 13th Chinese People's Political Consultative Conference, an Independent Non-Executive Director of Henderson Land Development Company Limited, Nine Dragons Paper (Holdings) Limited, China Construction Bank Corporation, Jinmao Hotel and Jinmao (China) Hotel Investments and Management Limited and Glorious Sun Enterprises Limited, an Independent Director of China Everbright Bank Company Limited and China State Construction Eng. Corp. Ltd. and an Outside Director of China Mobile Communications Corporation and China COSCO Shipping Corporation Limited. Mr. Chung holds a bachelor of science degree from the University of Hong Kong and a master's degree in business administration from the Chinese University of Hong Kong. Mr. Chung also received an honorary doctoral degree in Social Science from the City University of Hong Kong in 2010. Mr. Chung is a fellow member of the Hong Kong Institute of Certified Public Accountants. China Unicom (Hong Kong) LimitedDIRECTORS AND SENIOR MANAGEMENT39 LAW FAN CHIU FUN FANNY Independent Non-Executive Director Aged 71, was appointed in November 2012 as an Independent Non-Executive Director of the Company. Mrs. Law is currently a Director of the Fan Family Trust Fund and the Honorary Principal of Ningbo Huizhen Academy. Besides, Mrs. Law is an Independent Non-Executive Director of Nameson Holdings Limited, Minmetals Land Limited, China Taiping Insurance Holdings Company Limited and New World Development Company Limited (all listed on the Hong Kong Stock Exchange). Mrs. Law served as a Member of the Executive Council of the Government of the Hong Kong Special Administrative Region ("HKSAR"), a Deputy of HKSAR to the National People's Congress of the People's Republic of China, Chairman of the Board of Directors of Hong Kong Science and Technology Parks Corporation, an Independent Non-Executive Director of DTXS Silk Road Investment Holdings Company Limited and CLP Holdings Limited and an External Director of China Resources (Holdings) Co., Limited. Prior to her retirement from the civil service in 2007, Mrs. Law was the Commissioner of the Hong Kong Independent Commission Against Corruption. During her 30 years as an Administrative Officer, Mrs. Law has worked in many fields, including medical and health, economic services, housing, land and planning, home affairs, social welfare, civil service, transport and education. Mrs. Law graduated from the University of Hong Kong with an Honours degree in Science, and in 2009 was named an outstanding alumnus of the Science Faculty of the University of Hong Kong. She received a Master degree in Public Administration from Harvard University and was named a Littauer Fellow of Harvard University. She also holds a Master degree in Education from the Chinese University of Hong Kong and is a Fellow of The Hong Kong Institute of Directors. Annual Report 202340 CORPORATE GOVERNANCE REPORT The Board believes that a healthy corporate culture is the core of good corporate governance. China Unicom persistently enhances the development of corporate culture, and insists on strengthen and solidify, preserve and innovate, and integrate and open, deeply implements the strategies to build a strong enterprise, i.e. via technology, talent, reform, digital and smart transformation, and brand, in order to accelerate becoming a world-class technology service enterprise with global competitiveness. China Unicom plays the role of the leading contributor of digital information operation and services and the pioneer of digital technology integration and innovation. It nurtures an excellent corporate culture and consistently promotes the core values of “Customer-oriented, Employee-friendly, Attentive to quality service, Inherently innovative, Proud of endeavours, Adhering to integrity”. It also adheres to the corporate style of “Rigorous, Pragmatic, Skillful, Meticulous, Efficient”. The management philosophy of “Create value for customers, Dually driven by market and innovation, One China Unicom with integrated capabilities and operating services” has been established. The penetration and integration of China Unicom’s corporate culture philosophy into production and operation, integrating the corporate culture into the entire process of production, operation and management, which help enhancing and improving the operational effectiveness and management efficiency while ensuring the ideal corporate culture has been reflected in the company’s strategies, business models and operating practices. China Unicom (Hong Kong) Limited41 The Board is committed to high standards of corporate performing overall corporate governance duties. The governance and recognises that good governance is vital Company has adopted a Corporate Governance Practice for the long-term success and sustainability of the which sets out the key terms of reference of the Board Company’s business. The Board will persistently on corporate governance functions, including, amongst enhance the corporate governance of the Company by others, developing and reviewing the Corporate promoting corporate culture philosophy and core values Governance Policy and corporate governance practices at all levels of the Company. We hope all our executives, of the Company; reviewing and monitoring the training management and employees would implement the and continuous professional development of Directors practice and integrate “integrity and self-discipline, and senior management; reviewing and monitoring the uphold integrity and anti-corruption” into the Company’s policies and practices on compliance with ideological foundation to serve as the basic code of legal and regulatory requirements; developing, conduct for practitioners, while complying with laws and reviewing and monitoring the code of conduct and regulations, operates in compliance with regulations compliance manual applicable to employees and and be honest and self-disciplined. And adhering to the Directors; and reviewing the Company’s compliance ethical concept and code of conduct of honesty, with the Corporate Governance Code and the disclosure trustworthiness and due diligence, and strive to in “Corporate Governance Report”. maximize the interests of customers, shareholders, employees and society. The scope of the relevant basic In 2023, the Company’s continuous efforts in corporate code of conduct covers matters related to legislation, governance gained wide recognition from the capital regulation and ethics, including but not limited to markets and the Company was accredited with a principles of honesty and trustworthiness, conflict of number of awards. The Company was voted as “Asia’s interest, handling of stakeholder relations, information Most Honored Telecom Company” for eight years in a disclosure and confidentiality, protection of company row in “2023 All-Asia Executive Team” ranking organised assets, reporting and punishment. As a company by the authoritative financial magazine, Institutional incorporated in Hong Kong, the Company adopts the Investor. Meanwhile, the Company was also honored Companies Ordinance (Chapter 622 of the Laws of Hong with “Asia’s Best Board (Telecoms)” and “Asia’s Best IR Kong), the Securities and Futures Ordinance of Hong Kong and other related laws and regulations as the basic Team (Telecoms)”. The Company was voted as “Best Overall Company in China — Gold” in “Asia’s Best guidelines for the Company’s corporate governance. As Managed Companies Poll 2023” organised by a company listed in Hong Kong, the current articles of FinanceAsia, an authoritative financial magazine. The association are in compliance with the Rules Governing Company was awarded “Asia’s Best CSR” by Corporate the Listing of Securities on The Stock Exchange of Hong Kong Limited. These rules serve as guidance for the Governance Asia. The Company was accredited with “Platinum Award — Excellence in Environmental, Social, Company to improve the foundation of its corporate and Governance” in “The Asset ESG Corporate Awards governance, and the Company strives to comply with 2023”. The Company was awarded “ESG Leading the relevant requirements of international and local Enterprise” in “ESG Leading Enterprise 2023” by corporate governance best practices. The Company has Bloomberg Businessweek and Deloitte. regularly published statements relating to its risk management and internal control in accordance with Part 2 of the Corporate Governance Code as set out in relevant regulatory requirement to confirm its Appendix C1 of the Rules Governing the Listing of compliance with related risk management and Securities on The Stock Exchange of Hong Kong Limited corporate internal control requirements and other (the “Hong Kong Stock Exchange”) (the “Listing Rules”) regulatory requirements. The Board is responsible for provides for code provisions (the “Code Provisions”) and Annual Report 202342 recommended best practices with respect to (i) corporate purpose, strategy and governance, (ii) board composition and nomination, (iii) directors’ responsibilities, delegation and board proceedings, (iv) audit, internal control and risk management, (v) remuneration and (vi) shareholders engagement. Other than the disclosures made in the section headed “Board of Directors” below, the Company confirms that for the year ended 31 December 2023, it complied with all the Code Provisions. BOARD OF DIRECTORS To serve the best interests of the Company and its shareholders, the Board is responsible for reviewing and approving major corporate matters, including, amongst others, business strategies and budgets, major investments, capital market operations, as well as mergers and acquisitions. The Board is also responsible for monitoring risk management and internal control, reviewing environmental, social and governance strategies, reviewing and approving the announcements periodically published by the Company regarding its business results and operating activities. There is no financial, business, family or other material/relevant relationship(s) between the Board members. In order to achieve a sustainable and balanced development, the Company views Board diversity as a key element for supporting its strategic goals and maintaining sustainable development. The Board membership maintains wide representation. Members of the Board consist of outstanding individuals from different professions. Currently, the Board comprises seven Directors, including three executive Directors and four independent non-executive Directors. Particulars of the Directors are set out on pages 28 to 39 of this annual report. The Company believes that the Board currently comprises experts from diversified professions such as telecommunications, technology, banking, finance, investment and management, and is diversified in terms of gender, age, duration of service, educational background, professional experience, etc., which contributes to the enhanced management standard and more regulated operation of corporate governance of the Company, and results in a more comprehensive and balanced Board structure and decision-making process. The below sets out the analysis of the current composition of the Board: DESIGNATION GENDER 3 Executive Directors 4 Independent Non-Executive Directors 5 Male 2 Female AGE GROUP DURATION OF SERVICE (YEAR) 2 45-54 155-64 4 >65 3 <5 4 >10 China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT43 The roles and responsibilities of the Chairman and the disclosed in this annual report, do not have any business Chief Executive Officer of the Company were performed with or financial interests in the Company, its holding by the same individual for the year ended 31 December company or subsidiaries, and have confirmed their 2023. The Company considers that, as all major independence to the Company upon appointment and decisions are made by the Board and relevant Board annually. The Company considers that all independent Committees after discussion, through supervision by the non-executive Directors are currently independent. Such Board and the independent non-executive Directors mechanisms enable independent views and inputs are together with effective internal control mechanism, the available to the Board in an effective way, and the Board Company has achieved a balance of power and will review the implementation and effectiveness of authority. In addition, the same individual performing such mechanisms on an annual basis. The functions of the roles of the Chairman and the Chief Executive non-executive Directors include, amongst other things, Officer can enhance the Company’s efficiency in attending board meetings, exercising independent decision-making and execution, effectively capturing judgements at meetings, playing a leading role in business opportunities. resolving any potential conflicts of interest, serving on committees by invitation and carefully examining For the year ended 31 December 2023, the Company whether the performance of the Company has reached h a d 4 i n d e p e n d e n t n o n - e x e c u t i v e D i r e c t o r s the planned corporate targets and objectives, and representing over one-third of the Board with 2 monitoring and reporting on matters relating to the independent non-executive Director possessing performance of the Company. With respect to the appropriate professional accounting or related financial nomination and appointment of new directors and management expertise as required under Rule 3.10 of senior management members and the succession the Listing Rules. All independent non-executive planning for Directors, the Nomination Committee Directors of the Company possess good knowledge and would, after considering the Company’s need for new experience in different areas. The Company has directors and/or senior management members, identify established various channels for independent non- a wide range of candidates from within the Company executive Directors to express their views in an open a n d t h e h u m a n r e s o u r c e s m a r k e t a n d m a k e and honest manner and, if necessary, in a confidential recommendations to the Board. The Nomination manner. The independent non-executive Directors have Committee will consider candidates on merit against been making positive contributions to the development objective criteria and with due regard to the benefits of of the Company’s strategies and policies through diversity on the Board, including but not limited to independent, constructive and informed advice. Apart gender, age, cultural and educational background, from the regular Board meeting, the Chairman meets professional experience, skills, knowledge and duration annually with independent non-executive Directors, of service. After having obtained the consent from without the presence of other Directors, which further candidates in relation to the relevant nomination and promotes the exchange of diversified views and based on the Company’s actual needs, the Board would opinions. Independent non-executive Directors have convene a meeting, attendees of which include non- maintained close contact with the management and executive Directors, to consider the qualifications of the actively express constructive opinions on matters candidates. The Directors of the Company (including relating to corporate governance, operation non-executive Directors) are not appointed for a specific management, risk prevention and the capital market at term. However, pursuant to the Company’s articles of board meetings. These views and opinions facilitate the association, one-third of the directors shall retire from Board in making their decisions in the shareholders’ best office by rotation and shall be eligible for re-election at interests. All independent non-executive Directors, each annual general meeting. except for their equity interests and remuneration Annual Report 202344 Every newly appointed Director is provided with a comprehensive, formal and tailored induction on appointment, including but not limited to the “Guidelines on Directors’ Duties” published by the Hong Kong Companies Registry and the “Guidelines for Directors” published by the Hong Kong Institute of Directors. Directors have fiduciary responsibilities to the Company. They must not exercise their powers for improper purposes. They must not use the Company’s opportunities to serve their own interests. Their personal interests are not allowed to conflict with the Company’s interests, and they must not abuse the Company’s assets. The Director would subsequently receive all briefing and professional development necessary to ensure that he/she has proper understanding of the Company’s operations and businesses, full understanding of his/her responsibilities under the statutes, the common law, the Listing Rules, applicable legal and regulatory requirements, and the Company’s business and corporate governance policies. Furthermore, formal letters of appointment setting out the key terms and conditions of the Directors’ appointment will be duly prepared. Directors’ training is an ongoing process. The Company regularly invites various professionals to provide trainings on the latest changes and development of the legal and regulatory requirements as well as the market and/or industrial environment to Directors. In 2023, the Directors as at 31 December 2023 have participated in various training and continuous professional development activities and the summary of which is as follows: Executive Director Chen Zhongyue (Chairman) Wang Junzhi Li Yuzhuo Independent Non-Executive Director Cheung Wing Lam Linus Wong Wai Ming Chung Shui Ming Timpson Law Fan Chiu Fun Fanny Types of training A, B A, B A, B A, B A, B A, B A, B A: attending relevant seminars and/or conferences and/or forums; delivering speeches at relevant seminars and/or conferences and/or forums B: reading or writing relevant newspapers, journals and articles relating to general economy, general business, telecommunications, corporate governance, business ethics or directors’ duties China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT 45 The Company has determined remuneration policy. The dividends, major investments, equity-related capital proposed remuneration package of Directors of the market operations, mergers and acquisitions, major Company will be determined by the Remuneration connected transactions and annual internal control Committee, subject to approval by the Board and in evaluation. The arrangements on delegation of powers compliance with applicable laws, regulations and and responsibilities to management are reviewed by the policies, and taking into account the responsibilities of Board periodically to ensure that they remain such person in the Company, his experience and appropriate to the needs of the Company. performance as well as the prevailing market conditions. The remuneration package for executive The Board convenes meetings regularly and all Directors Directors includes salary and performance-linked annual have adequate opportunity to be present at the bonuses. The remuneration of executive Directors is meetings and to include matters for discussion in the determined by reference to their respective duties and meeting agenda. Notices of regular board meetings are responsibilities in the Company, their respective delivered to the Directors at least 14 days in advance of experience, prevailing market conditions and applicable the meetings. The Company delivers, on a best regulatory requirements while the award of the endeavor basis, all documents for regular board performance-linked annual bonuses is tied to the meetings to the Directors for review at least one week attainment of key performance indicators or targets set prior to the meetings (and ensures that all documents by the Company. The remuneration of non-executive are delivered to the Directors no less than three days Directors is determined by reference to prevailing prior to the regular meetings as required by the Code market conditions and their respective responsibilities Provisions). and workload from serving as non-executive Directors and members of the board committees of the Company. The Company Secretary, being an employee of the The Company also adopted share option scheme for the Company, has day-to-day knowledge of the Company’s purpose of providing long term incentives to eligible affairs and reports to the Chairman of the Board. The participants, including Directors (details of such share Company Secretary keeps close contact with all option scheme are set out in the paragraph headed Directors and ensures that the operation of the Board “Share Scheme of the Company” on pages 70 to 71 of and all board committees is in compliance with the this annual report). The remuneration for each Director procedures as set forth in the Company’s articles of and the remuneration of senior management by band association and the charters of the board committees. are disclosed on pages 144 to 146 of this annual report. Additionally, the Company Secretary is responsible for In addition to the remuneration, the Company has compiling and regularly submitting draft minutes of arranged appropriate insurance coverage in respect of board meetings and committee meetings to the legal action against the Directors. Directors and committee members for their review and comments, and final versions of minutes for their The Board has provided clear guidelines for delegation records, within a reasonable time after the relevant of powers and responsibilities to management. meetings. Each Director may obtain advice from and the However, certain important matters must be decided services of the Company Secretary to ensure that board only by the Board, including, but not limited to, long- procedures, and all applicable rules and regulations, are term objectives and strategies, annual budget, initial followed. announcements on quarterly, interim and final results, Annual Report 202346 Physical board meetings will be held for the selection, annually with independent non-executive Directors, appointment or dismissal of the Company Secretary. To without the presence of other Directors, which further ensure the possession of up-to-date knowledge and promotes the exchange of diversified views and market information to perform her duties, the Company opinions. In order to ensure that all Directors have Secretary attended over 15 hours of professional appropriate knowledge of the matters discussed at the training in 2023. meetings, adequate, accurate, clear, complete and reliable information regarding those matters is provided The Directors may, upon request, obtain independent in advance and in a timely manner, and all Directors professional advice at the expense of the Company. In have the right to inspect documents and information in addition, if any substantial shareholder of the Company relation to matters to be decided by the Board. The or any Directors has significant conflicts of interest in a Directors have frequently visited various branches in matter to be resolved, the Board will convene a board Mainland China to gain better understanding of the meeting in respect of such matter and those Directors Company’s daily operations. In addition, the Company who have conflicts of interest must abstain from voting has arranged relevant trainings for the Directors (which and will not be counted in the quorum of the meeting. include training sessions conducted by professional advisers, such as lawyers and accountants, from time to All Directors are required to devote sufficient time and time) in order to broaden their knowledge in the attention to the affairs of the Company. A culture of relevant areas and to improve their understanding of openness and debate are promoted in the Board and the Company’s business, legal and regulatory the Directors are encouraged to express their views and requirements and the latest operational technologies. concerns. The Company provides monthly operating The Board also conducts annual evaluation of its update to the Directors, so as to ensure the Directors performance. Such efforts have improved the corporate are familiar with the Company’s latest operations. In governance of the Company. addition, through regular board meetings and reports from management, the Directors are able to clearly In 2023, the Board held four board meetings and passed understand the operations, business strategy and latest one written resolution for, amongst other things, development of the Company and the industry. Besides discussion and approval of important matters such as formal board meetings, the Chairman also meets the 2022 annual results, the 2023 annual budget, the China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT47 2023 interim results, the first and the first three quarters results for 2023, sustainability report, reports on risk management and internal control, amendment of the articles of association, and the amendment of the remuneration committee charter, appointment of chairman and chief executive officer, appointment of senior vice president. Set forth below is an overview of the attendance during the year of 2023 by the Board members at various meetings: Meetings Attended/Held During Each Director’s Tenure Audit Remuneration Nomination Board Meeting Committee Committee Committee Shareholders Meeting Meeting Meeting Meeting Executive Directors Chen Zhongyue (Chairman)1 Liu Liehong2 Wang Junzhi Li Yuzhuo Independent Non-Executive Directors Cheung Wing Lam Linus Wong Wai Ming Chung Shui Ming Timpson Law Fan Chiu Fun Fanny 4/4 2/2 3/4 3/4 4/4 3/4 4/4 4/4 N/A N/A N/A N/A 4/4 3/4 4/4 4/4 N/A N/A N/A N/A 1/1 0/1 1/1 N/A N/A 1/1 N/A N/A N/A N/A 1/1 1/1 0/1 1/1 0/1 1/1 1/1 1/1 1/1 1/1 Note 1: On 2 December 2023, Mr. Chen Zhongyue was appointed as the Chairman and Chief Executive Officer of the Company and has ceased to serve concurrently as the President of the Company. Note 2: On 30 July 2023, Mr. Liu Liehong resigned as executive Director of the Company and ceased to serve as the Chairman and Chief Executive Director of the Company. Note 3: Certain Directors (including non-executive Director) did not attend the shareholders meeting and meetings of the Board and Committees due to other business commitments or being overseas. In 2023, the Board performed their fiduciary duties and devoted sufficient time and attention to the affairs of the Company. The Board works effectively and performs its responsibilities efficiently with all key and appropriate issues being discussed and approved in a timely manner. Annual Report 2023 48 The Company has adopted the “Model Code for Audit Committee Composition Securities Transactions by Directors of Listed Issuers” as Currently the Audit Committee comprised Mr. Wong set out in Appendix C3 to the Listing Rules (the “Model Wai Ming, Mr. Cheung Wing Lam Linus, Mr. Chung Shui Code”) to govern securities transactions by directors. Ming Timpson and Mrs. Law Fan Chiu Fun Fanny, all Further to the specific enquiries made by the Company being independent non-executive Directors of the to the Directors, all Directors have confirmed their Company. The Chairman of the Audit Committee is Mr. compliance with the Model Code for the year ended 31 Wong Wai Ming. All members of the Audit Committee December 2023. have satisfied the “independence” requirements in relation to an Audit Committee member under The Directors acknowledge their responsibilities for applicable laws, regulations and rules. The Chairman of preparing the financial statements for the year ended 31 the Audit Committee is an accountant with expertise December 2023, which give a true and fair view of the a n d e x p e r i e n c e i n a c c o u n t i n g a n d f i n a n c i a l financial position of the Company as at the statement of management. Another member of the Audit Committee financial position date and financial performance and is also an accountant with extensive accounting cash flows of the Company for the year ended the professional experience. statement of financial position date, are properly prepared on the going concern basis in accordance with Major Responsibilities relevant statutory requirements and applicable financial The primary responsibilities of the Audit Committee reporting standards. A statement of the independent include: as the key representative body, overseeing the auditors about their reporting responsibilities related to Company’s relationship with the independent auditor, the financial statements is set out in the independent considering and approving the appointment, resignation auditor’s report on pages 88 to 92 of this annual report. and removal of the independent auditor; pre- approval of services and fees to be provided by the independent COMMITTEES UNDER THE BOARD The Company has established three committees of the auditor based on the established pre-approval framework; supervising the independent auditor and Board under the Board, the Audit Committee, the determining the potential impact of non-audit services Remuneration Committee and the Nomination on such auditor’s independence; reviewing quarterly Committee. Each committee has a written charter, and interim financial information as well as annual which is available on the websites of the Company and financial statements; coordinating and discussing with The Stock Exchange of Hong Kong Limited. From time to the independent auditor with respect to any issues time as required by the Listing Rules, the Board also identified and recommendations made during the establishes independent board committee for the audits; reviewing correspondences from t he p u r p o s e o f a d v i s i n g a n d p r o v i d i n g v o t i n g independent auditor to the management and responses recommendations to independent shareholders on of the management; discussing the risk management connected transactions and transactions subject to and internal control system with the management as independent shareholders’ approval entered into by the well as reviewing the reports on the risk management Company and/or its subsidiaries. The committees are and internal control procedures of the Company. The provided with sufficient resources, including, amongst Audit Committee set up a whistle-blowing system to others, obtaining independent professional advice at the receive and handle cases of complaints regarding the expense of the Company, to perform their duties. The Company’s financial reporting, internal control or other committees report their decisions or recommendations matters. The whistle-blowers can use, in confidence and to the Board after meetings. anonymity, to raise concerns about possible China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT49 improprieties in any matter related to the Company the financial statements and ensure the Company’s through whistle- blowing channels. Any complaints on compliance with the relevant requirements of the the aforementioned subject matters can be submitted Listing Rules with respect to audit committee. by post (No. 21 Financial Street, Xicheng District, Beijing, 100033, China) or by phone (86-(010) 88091674). The Remuneration Committee Composition Audit Committee is responsible to and regularly reports Currently the Remuneration Committee comprised Mr. its work to the Board. Work Completed in 2023 Cheung Wing Lam Linus, Mr. Wong Wai Ming and Mr. Chung Shui Ming Timpson, all being independent non- executive Directors of the Company. The Chairman of T h e A u d i t C o m m i t t e e m e e t s t h e B o a r d a n d the Remuneration Committee is Mr. Cheung Wing Lam management as well as independent auditor at least Linus. four times each year, and assists the Board in its review of the financial statements to ensure effective risk Major Responsibilities management and internal control as well as efficient The primary responsibilities of the Remuneration audit. Besides, the Audit Committee meets the Committee include: making recommendations to the independent auditor at least two times each year, Board on the policies and structure for all Directors’ and without the presence of other Directors and senior management’s remuneration and on the management. establishment of a formal and transparent procedure for developing remuneration policy; reviewing and The Audit Committee held four meetings in 2023 for, approving the management’s remuneration proposals amongst other things, discussion and approval of the with reference to the corporate goals and objectives set 2022 annual results, the 2023 interim results, and the by the Board; making recommendations to the Board on first and the first three quarters results for 2023. In the remuneration packages of individual executive addition, the Audit Committee approved in the Directors and senior management (including benefits in meetings the sustainability report, the report of the kind, pension right and compensation payments, work of sustainability, the report on risk management, including any compensation payable for loss or the report on internal audit and internal control, the termination of their office or appointment); making report on continuing connected transaction, the recommendations to the Board on the remuneration of appointment, the audit fees and the audit plans of the non-executive Directors; consulting the Chairman about independent auditor as well as the non-audit services the remuneration proposals for other executive provided by the independent auditor in 2023. Directors; considering salaries paid by comparable companies, time commitment and responsibilities and The Audit Committee has performed its duties employment conditions elsewhere in the Group; effectively, and enabled the Board to better monitor the considering any concrete plan proposed by the financial condition of the Company, supervise the risk management of the Company for the grant of share management and internal control (included but not which has not been granted, and any plan to amend any limited to operational, financial, compliance, existing share scheme of the Company; reviewing and environmental, social and governance) of the Company, approving compensation payable to executive Directors ensure the integrity and reliability of the financial and senior management for any loss or termination of statements of the Company, prevent significant errors in office or appointment to ensure that it is consistent with Annual Report 202350 c o n t r a c t u a l t e r m s ; r e v i e w i n g a n d a p p r o v i n g recommendations on any proposed changes to the compensation arrangements relating to dismissal or Board to complement the corporate strategy of the removal of Directors for misconduct to ensure that they Company; identifying individuals suitably qualified to are consistent with contractual terms; and ensuring that become Board members and making recommendations no Director or any of his/her associates is involved in to the Board; formulating, reviewing and implementing deciding his/her own remuneration. the board diversity policy; assessing the independence Work Completed in 2023 of independent non-executive Directors; making recommendations to the Board on the appointment or The Remuneration Committee meets at least once a re- appointment of Directors and succession planning year. The Remuneration Committee held one meeting in for Directors; providing advice to the Board on 2023 for, amongst other things, discussion and approval candidates of the senior management nominated by the of proposal for appraisal and remuneration of senior CEO and on changes to the senior management of the management, the amendment of remuneration Company. committee charter. Work Completed in 2023 The Remuneration Committee has performed its duties The Nomination Committee meets at least once a year. effectively on reviewing and approving the proposal of The Nomination Committee held one meeting and appraisal of senior management, as well as making passed one written resolutions in 2023 for, amongst recommendations to the Board with regards to the other things, reviewing the structure, size and remuneration packages for senior management. composition of the Board, reviewing the board diversity policy and its implementation, assessment of the Nomination Committee Composition independence of independent non-executive Directors, Currently the Nomination Committee comprised Mr. making recommendations to the Board on the proposed Chung Shui Ming Timpson, Mr. Chen Zhongyue and Mrs. re-election of Directors and the appointment of Law Fan Chiu Fun Fanny. Except for Mr. Chen Zhongyue, executive Directors. who is the Chairman and CEO of the Company, Mr. Chung Shui Ming Timpson and Mrs. Law Fan Chiu Fun The Company has determined nomination policy. With Fanny are independent non-executive Directors of the respect to the nomination and appointment of new Company. The Chairman of the Nomination Committee directors and senior management members and the is Mr. Chung Shui Ming Timpson. succession planning for directors, the Nomination Major Responsibilities Committee would, after considering the Company’s need for new directors and/or senior management The primary responsibilities of the Nomination members, identify a wide range of candidates from Committee include: reviewing the structure, size and within the Company and the human resources market composition (including the skills, knowledge and and make recommendations to the Board. The experience) of the Board at least annually and making Nomination Committee will consider candidates on China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT51 merit against objective criteria and with due regard to and contribution that the selected candidates will bring the benefits of diversity on the Board, including but not to the Board. The Board and the Nomination Committee limited to gender, age, cultural and educational review the board diversity policy as well as its background, professional experience, skills, knowledge implementation and effectiveness every year to ensure and duration of service. After having obtained the that the board diversity policy continues to serve its consent from candidates in relation to the relevant purpose. Currently the Board comprises seven nomination and based on the Company’s actual needs, members, amongst which two members, accounting for the Board would convene a meeting, attendees of which 29% of the whole Board, are female directors. The include non-executive Directors, to consider the Board considers that gender diversity is achieved in qualifications of the candidates. Pursuant to the respect of the Board, and targets to maintain at least the Company’s articles of association, one-third of the current level of female representation. In addition, the Directors shall retire from office by rotation and be gender proportion (Male/Female) of all employees of eligible for re- election at each annual general meeting. the Company is 1.62:1. The female representation in senior management has continuously increased, from The Company has also determined a policy concerning 11.9% in 2019 to 12.3% in 2023. The Company targets to diversity of board members. The Company recognises maintain at least the current level of female and embraces the benefits of having a diverse Board, representation in the workforce (including senior and notes increasing diversity at Board level as an management). The Company is not aware of any essential element in maintaining a competitive mitigating factors or circumstances which make advantage. All Board appointments are made on merit achieving gender diversity across the workforce on a selective basis, in the context of the skills and (including senior management) more challenging or less experience the Board as a whole requires to be relevant. The Company strictly implemented the effective. In reviewing Board composition, the relevant provisions of the Labour Contract Law, adopted Nomination Committee will consider their professional strict inspection and control procedures in recruitment knowledge, skills, experience and the balance of a n d p r o m o t i o n a n d s t r i c t l y p r o h i b i t e d a n y diversity of perspectives which are appropriate to the discrimination against employees in terms of age and Company’s business model and specific needs. In gender. The Company also ensures that the recruitment identifying suitable candidates for appointment to the and selection practices at all levels are appropriately Board, the Nomination Committee will give due regard structured so that a diverse range of candidates are to the benefits of diversity on the Board and base on a considered. The Company cares about female range of diversity perspectives including but not limited employees. It protected the rights and interests of to gender, age, cultural and educational background, female employees and provided targeted and professional experience, skills, knowledge and duration considerate services to them, to retain the female of service. The ultimate decision will be based on merit talents. Annual Report 202352 In addition, pursuant to the Company’s articles of association, shareholder may propose other person for election as a director at general meeting. The proposal will be considered and approved in the general meeting. With regard to the procedure for shareholder to propose a person for election as a director, please visit the Company’s website at https://www.chinaunicom.com.hk/en/esg/cg_report.php. INDEPENDENT AUDITOR Deloitte Touche Tohmatsu is the independent auditor of the Company. Apart from audit services, it also provides other assurance and non-audit services. The audit committees supervised the independent auditor and determined the potential impact of non-audit services on such auditor’s independence, and pre-approved the services and fees to be provided by the independent auditor based on the established pre-approval framework. The remuneration paid/ payable to the independent auditor for provision of services in 2023 is as follows: Items Note (in RMB thousands) 2023 Audit services for financial statements Other special purpose audit and assurance services Non-audit services Notes: (i) (ii) (iii) 44,480 10,714 15,533 (i) Audit services for financial statements in 2023 mainly included the provision of audit service for the Company’s consolidated financial statements, and statutory audit services for the financial statements of its subsidiaries. (ii) Other special purpose audit and assurance services are the audit and assurance services other than the audit services for financial statements. (iii) Non-audit services included other services that can be reasonably provided by the independent auditor. In 2023, the provisions of non-audit services mainly included tax compliance services and other advisory services. RISK MANAGEMENT AND INTERNAL CONTROL The Board is responsible for evaluating and determining the nature and extent of the risks it is willing to take in achieving the Company’s strategic objectives, and ensuring that the Company establishes and maintains appropriate and effective risk management and internal control systems (included but not limited to operational, financial, compliance, environmental, social and governance), promotes the sustainable and healthy development of the Company, and enhances the Company’s operation management level and risk prevention ability. The Board should oversee management in the design, implementation and monitoring of the risk management and internal control systems, and management should provide a confirmation to the Board on the effectiveness of these systems. The Board acknowledges that it is its responsibility for the risk management and internal control systems and reviewing their effectiveness. Risk management and internal control systems have been designed to monitor and facilitate the accomplishment of the Company’s business objectives, safeguard the Company’s assets against loss and misappropriation, ensure maintenance of proper accounting records for the provision of reliable financial information, ensure the Company’s compliance with applicable laws, rules and regulations. Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT 53 Organisation systems The Company set up a group-wide risk management and internal control systems consisting of the Board, the Internal Control and Risk Management Committee, the Integrated Management Department and each relevant professional functional departments. THE BOARD Highest decision making body AUDIT COMMITTEE Supervision body INTERNAL CONTROL AND RISK MANAGEMENT COMMITTEE Highest coordination and deliberation body at company management level COMMITTEES IN RELATED PROFESSIONAL The cross departmental body of risk management in professional fields INTERNAL CONTROL AND RISK MANAGEMENT OFFICE Daily working departments PROFESSIONAL FUNCTIONAL DEPARTMENTS Professional internal control management and execution departments INTERNAL AUDIT DEPARTMENT Integrated risk management and internal control department and supervision and evaluation department INDEPENDENT EXTERNAL AUDITOR External Independent Internal Control evaluation body Branches and Subsidiaries INTERNAL CONTROL AND RISK MANAGEMENT COMMITTEE Coordination and deliberation body at company management level INTERNAL CONTROL AND RISK MANAGEMENT OFFICE Daily working departments COMMITTEES IN RELATED PROFESSIONAL With reference to the needs of CUCL and the Company, the cross departmental bodies of risk management in professional fields have been established PROFESSIONAL FUNCTIONAL DEPARTMENTS INTERNAL AUDIT DEPARTMENT Professional internal control management and execution departments Integrated risk management and internal control department and supervision and evaluation department Annual Report 202354 The Company has an internal audit department with 652 Using the risk evaluation as fundamental with the staff members, with officers stationed at various adoption of Internal Control Integrated Framework provincial branches. The internal audit department issued by the Committee of Sponsoring Organisations of reports directly to the Audit Committee at least twice the Treadway Commission (the “COSO”), the Company annually and is independent of the Company’s daily established and improved internal control systems operation and accounting functions. The internal audit based on the following five fundamental components: department is responsible for overall risk evaluation, special risk evaluation and internal control self-testing 1. Control Environment: Establishes the control etc. It has also formulated targeted risk prevention and environment which fulfill COSO requirements to control measures, conducted risk follow-up inspections provide the appropriate operating environment and has enhanced the risk awareness of the employees, for the effective implementation of internal all of which have played an active role in the Company’s control effective support and safeguard of its operation management and business development. Furthermore, 2. Risk Evaluation: Establishes the Policy on Risk with an emphasis on the effectiveness of internal Evaluation Management and evaluation control with respect to the efficiency of operations, m e c h a n i s m , e v a l u a t e s t h e r i s k s t o t h e accuracy of financial information, and compliance with achievement of its objectives across the rules and regulations, the internal audit department Company and identifies to the new risk due to conducts, amongst others, internal control assessment the changes and internal audit on economic accountability. In addition, the internal audit department also contributes 3. Control Activities: Deploys appropriate policies to strengthening the operation and management, and control procedures over the Company’s improving internal control systems, mitigating business activities, identifies key control operational risks and increasing the economic efficiency procedures and policies of significant control of the Company. activities through evaluation 4. Information and Communication: Identifies relevant information and communication m e t h o d s , e s t a b l i s h e s i n f o r m a t i o n a n d communication mechanisms to aggregate and delivers relevant information 5. Monitoring Activities: Establishes the internal control monitoring mechanism, implements the monitoring procedures and adopted the before, during and extensive monitoring principles, and carries on the proper monitoring to the internal control China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT55 Risk evaluation and management that driven by the demand of Company’s high-quality The Company has established and gradually improved development in managing the Company’s news and its comprehensive closed-loop risk management system public opinions continuously. It actively expands media for the purpose of “integrating management of day-to- cooperation relations and guides positive public day general risks and spontaneous critical risks”, opinions and information, which enhances the achieved the closed-loop management by risk expectations and confidence of all parties for the evaluation, early warning and follow-up inspections to Company’s high-quality development in the capital ensure the effectiveness of operation management. The market. Company evaluated the adequacy and appropriateness on risk and control measures according to the new Risk of high-quality development of computing and business model, management requirement, change of digital smart applications business system, adjustment of duties and findings from internal With the vigorous development of the digital economy, and external inspections. 2023 Risk evaluation result new technologies, new business forms and new models continue to emerge, and the profound transformation brought by the deep integration of the digital and real The followings were the major significant risks which the economies provides a broad space for the Company’s Company encountered and its countermeasures in innovation and transformation, improvement of core 2023: competitiveness and sustainable development. The Company attaches great importance to the R&D of Network and cybersecurity risk innovative products, strengthens the position of Cybersecurity is an important component of national enterprises as the main body of scientific and security. Cybersecurity and informatisation complement technological innovation, and increases the layout of each other, in the sense that security is the premise of strategic emerging industries. It plays the role of development and development is the guarantee of scientific and technological innovation, industrial control security. The Company attaches great importance to and security support, and lead the industrial network and cybersecurity, strictly complies with the transformation and upgrading through technological requirements of national laws and regulations, and innovation. insists on serving the construction of Cyber Superpower and Digital China. We take the maintenance of network Risk of fixed asset investment and cybersecurity as an important mission of Characterised by large investment scale, wide expertise responsibility, and are committed to serving as the and long project management chain, the fixed asset leading contributor of digital information operation and investment of telecom operators effectively controls the services and the pioneer of digital technology investment direction, meets the business needs of the integration and innovation. market, and puts forward higher requirements for Public opinion risk improving construction efficiency and investment efficacy. The Company attaches great importance to With the rapid development of self-media in recent fixed asset investment, deepens its implementation of years, the internet has not only increased the speed of the new digital infrastructure plan, insists on information dissemination, but also made information strengthening and solidifying. We reasonably control the development more diversified and fragmented. Properly investment scale for the purpose of accurate managing public opinions is an important task for the construction, efficient operation and improvement of Company’s reform, development, production and investment efficacy, thus driving the Company towards operation. The Company conscientiously fulfills the high-quality development. mission and tasks of a central state-owned enterprise Annual Report 202356 The scope of the 2023 overall risk evaluation covered internal control assessment etc., so as to provide the the whole Group, which included headquarter, 31 effective support for the development of the provincial companies and its cities-level branch offices sustainable growth of the Company. Internal Control and subsidiaries. Through both the quantitative and and Risk Management Office conducted inspections on qualitative analysis, the Company fully considered the effectiveness on risk management and internal control changes in operating environment, business and implementation in regular or irregular time interval, policies, identified the potential risk to the Company’s improved and enhanced risk management and internal operation, and planned for the risk according to the control designs continuously. Our Internal Audit quantitative result. After reporting to each professional Department has continued to organise our branches and departments and the management, the significant risks subsidiaries to conduct annual internal control self- and the risk level of the year were finally determined. assessment based on the actual conditions of each unit The annual risk management instructions from the and improve the quality of such self- assessment tasks, management were implemented according to the Policy so as to gradually develop a quantitative internal on Risk Management and the Company’s risk assessment regime governed by uniform standards. management requirement. This included the Through the effective rectification of issues identified formulation of relevant risk management strategies, during the audit, assessment of the internal control solution and corresponding departments carried out system and its implementation, improvements made to interim follow-up inspection works. The negative the system and process optimisation, a long-term impacts arising from the risks and risk events were mechanism for closed-loop management in internal controlled as planned and were within an acceptable control has been put in place. According to the internal range. There were no significant control failings or control self-assessment reports from the branches and weaknesses that have been identified during the year. subsidiaries, self- assessment reports from each professional department, current year exceptional Monitoring and Optimisation issues in internal control discovered during internal To ensure the effectiveness of risk management and audit and the Company annual risk management report, internal control designs, the Company carried out risk the Group’s Internal Control and Risk Management evaluation timely and compared the risk points, Office at its headquarter formed the Company’s internal formulated or enhanced corresponding internal control control self-assessment report, which acted as measures according to the change in business and supporting document for the management to issue a management. At the same time, the internal control statement of the effectiveness of internal control. Based manual will be updated timely through the assessment on different disclosure requirements on Company’s and review on applications on internal control workflow internal control assessment report from different listing modification submitted by professional departments, regulatory body, the Company prepared internal control risk evaluation reports and exceptional issues from assessment report respectively. China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT57 As a telecommunications operator, the Company is telecom and online fraud to consolidate corporate subject to the laws and regulations, e.g., relevant responsibility. The Company also devotes significant provisions in the Cybersecurity Law of the People’s resources to network security, data security and other Republic of China, Data Security Law of the People’s security measures to protect its systems and data and in Republic of China, Personal Information Protection Law response to the evolving cybersecurity laws and of the People’s Republic of China and Anti-Telecom and r e g u l a t i o n s . T h e C o m p a n y a l s o e m p l o y s r i s k Online Fraud Law of the People’s Republic of China, management and internal control systems. including, designed to protect critical information infrastructure. among other things, (i) continuously strengthening data Personal privacy, information security, and data security capabilities, such as improving data encryption, protection are increasingly significant issues in China protection of critical information infrastructure and and other jurisdictions in which the Company operate. security of supply chain of the information technology For example, Cybersecurity Law of the People’s Republic products and services; (ii) establishing data protection of China published in 2016 which sets forth the general compliance policies and guidelines, including training on framework regulating network products, equipment and crisis management and compliance of cybersecurity services, as well as the operation and maintenance of laws and regulations; (iv) self-examining potential risks information networks, the protection of personal data, and weakness of data system and updating private and the supervision and administration of cybersecurity policy; (iv) enhancing the real-time monitoring and in China. The Data Security Law of the People’s Republic alarm reporting system and implementing an of China and Personal Information Protection Law of the emergency action plan to allow the Company to act People’s Republic of China published in 2021 further responsively and minimise losses in the event of an regulate data and personal information processing emergency; and (v) continuously improving compliance activities, and protect the legitimate rights and interests efforts through enhanced sharing of relevant knowledge of individuals and organisations from being infringed. internally and externally. The Company is required to The Anti-Telecom and Online Fraud Law of the People’s perform a security assessment when transferring Republic of China published in 2022 which clearly stated personal information and important data overseas if that telecommunications, finance, and network such personal information and important data are institutions are the main anti-fraud entities, and carry collected and generated from the operation in China. out targeted system design for various aspects of Annual Report 202358 Annual review Information Disclosure Controls and Procedural The Board oversees the Company’s risk management Standards and internal control systems on an ongoing basis and In order to further enhance the Company’s system of the Board conducted an annual review of the risk information disclosure, and to ensure the truthfulness, management and internal control systems of the accuracy, completeness and timeliness of its public Company and its subsidiaries for the financial year disclosures (including inside information), the Company ended 31 December 2023, which covered all material has adopted and implemented the Information controls including financial, operational and compliance Disclosure Control Policy. In an effort to standardise the controls. After receiving the reports from the Internal principles for information disclosures, the Company Audit Department, as well as the confirmation from the established the Information Disclosure Review management to the Board on the effectiveness of these Committee under the management and formulated the systems, the Board is of the view that the Company’s procedures in connection with the compilation and risk management and internal control systems is reporting of the Company’s financial and operational effective and adequate. The review also ensure the statistics and other information, as well as the adequacy of resources, staff qualifications and procedures in connection with the preparation and experience, training programmes and budget of the review of the periodic reports. Moreover, the Company Company’s accounting, internal audit, financial established detailed implementation rules with respect reporting function, as well as those relating to the to the contents and requirements of financial data Company’s ESG performance and reporting. verification, in particular, the upward undertakings by the individual responsible officers at the major departments. China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT59 Policy and Work of Anti-corruption foster the establishment of a good reporting order in China Unicom always adheres to the principles of the form of letters and visits, and continuously improve “rigorous tone, rigorous measures and rigorous the standardisation level of work. environment”, promotes the idea of “deter, disable and discourage”, promote anti-corruption and anti- Improving the punishment mechanism: the Company privileged, further consolidating and expanding the further regulated the rules and regulations for results of anti-corruption. disciplinary actions against suspected target of illegal Strengthening the anti-corruption system mechanism for handling corruption cases, and In 2023, the Company continued to strengthen the intensified the seriousness, standardness and timeliness crime monitoring. It strengthened the bridging system and mechanism. We enhanced publicity and of disciplinary actions. enforcement efforts to resolutely curb and prevent corruption. Enhancing the anti-corruption efficacy: the Company issued the Guiding Opinions on Further Strengthening Standardising the acceptance of letters and visits: the and Standardising the Quality Review of Cases, clarified Company issued the Opinions on Several Issues the evaluation standards, and promoted the fight Concerning the Application of the Regulations on Letters against corruption through the application of the rule of and Visits by China Unicom Disciplinary Inspection and law thinking and approach. Supervision Institutions to promote the accurate understanding of core principles and requirements, Strengthening anti-corruption mechanisms Strengthen risk prevention and control: China Unicom continued to improve the integrity risk prevention and control system, identify integrity risk points, and enhance preventive and control measures. Annual Report 202360 Strengthening supervision and restriction: China Unicom In 2023, China Unicom provided anti-corruption delved into the application of an all-dimensional education and training to a total of 2.593 million person- supervision system and strengthened daily supervision time and achieved 100% employee coverage in anti- around key personnel, matters and areas. The Company corruption education activities. detected any signs of irregularities at the earliest to nip the buds. It explored the use of digital means to carry out online real-time supervision and took the initiative POLICY ON PAYMENT OF DIVIDEND The Company is committed to sharing the fruits of its to prevent risks in advance. long-term development with shareholders while continuing to promote good growth of revenue and Deepening warning education: China Unicom produced profit and maintaining its sustainable development special documentaries on warning education, reported capability. The declaration and payment of future and exposed corrupt cases, attended court hearings as dividends will depend upon, among other things, observers in relevant cases and carried out special financial condition, business prospects, future earnings, warning education on typical cases, so as to educate and cash flow, liquidity level and cost of capital. The guide cadres and employees to be law-abiding, maintain Company believes such policy will provide the vigilance, and uphold the bottom line. shareholders with a stable return in the long term along with the growth of the Company. Pursuant to the Deepening the construction of integrity culture in the Companies Ordinance (Chapter 622 of the Laws of Hong new era: The Company issued China Unicom’s Core Kong) and the Company’s articles of association, the Concepts of Integrity Culture and Integrity Code of Company may only pay dividends out of profits available Conduct as a means to promote the integrity culture for distribution. into the teams, departments, frontline units, positions, families and partners. China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT61 Taking into consideration the Company’s robust to provide them with relevant information and data of business development, the Board recommended the the Company. The Company’s management would payment of a final dividend of RMB0.1336 per share for accurately and thoroughly respond to questions raised the year ended 31 December 2023, together with an by analysts, fund managers, investors and journalists. interim dividend of RMB0.203 per share already paid Archived webcast of the investor presentation is also during the year, total dividend for 2023 amounted to available on the Company’s website to ensure wide RMB0.3366 per share. dissemination of information and data. CORPORATE TRANSPARENCY AND INVESTOR RELATIONS In addition to publishing annual reports and interim The Company’s investor relations department is responsible for providing information and services r e q u e s t e d b y i n v e s t o r s , m a i n t a i n i n g t i m e l y reports, the Company discloses major unaudited communications with investors and fund managers, financial information (including revenue, operating including responding to investors’ inquiries and meeting expenses, EBITDA, net profit) an d other key with company-visit investors, as well as gathering performance indicators on a quarterly basis and m a r k e t i n f o r m a t i o n a n d p a s s i n g v i e w s f r o m announces key operational statistics on a monthly basis shareholders to the Directors and management to in order to enhance the Company’s transparency and ensure such views are properly communicated. The improve investors’ understanding of the business Company also arranges from time to time road shows operations of the Company. and actively attends investor conferences arranged by investment banks, through which the Company’s Upon the announcement of interim and annual results management meets and communicates with investors or major transactions, the Company will generally hold to provide them with opportunities to understand more analyst briefings, press conferences, and global accurately the Company’s latest development and conference with investors. During such conferences, the performance in various aspects, including business management of the Company would interact directly operations and management. with analysts, fund managers, investors and journalists Annual Report 202362 In 2023, the Company participated in the following investor conferences: Date Conferences January 2023 January 2023 March 2023 May 2023 June 2023 September 2023 September 2023 November 2023 Credit Suisse 9th Greater China Technology and Internet Conference UBS Greater China Conference 2023 26th Credit Suisse Asian Investment Conference Macquarie DELTAH China Conference 2023 UBS Future-Now APAC Conference 2023 4th Annual Jefferies Asia Forum 30th CITIC CLSA Flagship Investors’ Forum Daiwa Investment Conference Hong Kong 2023 In addition, through announcements, press releases and the Company website (www.chinaunicom.com.hk), the Company disseminates the latest information regarding any significant business development in a timely and accurate manner. In the perspective of investor relations, the Company’s website not only serves as an important channel for the Company to disseminate press releases and corporate information to investors and the capital market, but also plays a significant role in the Company’s valuation and our compliance with regulatory requirements for information disclosure. In 2023, the Company updated the content of its website on an ongoing basis to further enhance the functions of website and level of transparency in information disclosure, striving for achieving international best practices. Our website was honored with the Grand Award by an international institution, “iNova Awards”, this year. China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT 63 Furthermore, the Company has determined a Shareholders’ Communication Policy which has been SHAREHOLDERS’ RIGHTS Annual General Meeting uploaded on the Company’s website, so as to ensure The Board endeavors to maintain an on-going dialogue that the shareholders of the Company are provided with with shareholders, and in particular, to communicate readily, equal and timely access to balanced and with shareholders through annual general meetings. understandable information about the Company, to Notices of annual general meeting are sent to enable shareholders to exercise their rights in an shareholders at least 21 days before the meeting. The informed manner, and to enhance the shareholders’ Directors and representatives of the Board committees and the investment community’s communication with usually attend the meetings and treasure the the Company. The Company maintains as on- going opportunities to communicate with shareholders at such dialogue with shareholders while gathering market meetings. The independent auditor also attends the information and passing views from shareholders to the annual general meeting for the reporting to Directors and management, through the different shareholders every year. At general meetings, the channels as set out in the Shareholders’ Communication chairman of the meeting proposes individual resolutions Policy, including but not limited to corporate in respect of each substantially separate matter. All communications, company’s website, general meetings matters at the Company’s general meetings are resolved and investor conferences. The Board reviewed the by poll and the relevant procedures are explained at the Company’s shareholders and investor engagement and meeting. The Company also appoints external communication activities conducted during the year and scrutineers to ensure that all votes are counted and was satisfied with the implementation and effectiveness recorded appropriately, and publishes the poll results in of the Shareholders’ Communication Policy. a timely manner. The Company’s effort in investor relations is well recognised by the capital market, and accredited with a number of awards. The Company was voted as “Asia’s Best IR Team (Telecoms)” in “2023 All-Asia Executive Team” ranking organised by Institutional Investor. Annual Report 202364 The last annual general meeting of the Company was • to grant a general mandate to issue new shares held on 19 May 2023, at which the following resolutions (over 96%) were passed and percentage of votes cast in favor of the resolutions are set out as follows: • to extend the general mandate to issue new • to receive and consider the financial statements shares (over 96%) and the Reports of the Directors and of the • to approve the proposed amendments to the Independent Auditor for the year ended 31 Articles of Association of the Company and the December 2022 (over 99%) adoption of the new Articles of Association of the Company (over 99%) • to declare a final dividend for the year ended 31 December 2022 (over 99%) The next annual general meeting will be held on 30 May 2024. Please refer to the circular, which sets out the • to re-elect Mr. Chen Zhongyue, Mr. Wong Wai details, that has been dispatched together with this Ming and Mr. Chung Shui Ming Timpson as Annual Report. Directors, and to authorise the Board to fix remuneration of the Directors (over 97%) Putting Forward Resolutions at Annual General Meetings • to re-appoint auditor and authorise the Board to Pursuant to Section 615 of the Companies Ordinance fix their remuneration for the year ending 31 (Chapter 622 of the Laws of Hong Kong), the following December 2023 (over 99%) persons may put forward a resolution at the next annual general meeting of the Company: (a) any number of • to grant a general mandate for share buy-back shareholders, together holding not less than 2.5% of the (over 99%) total voting rights of all shareholders which have, as at the date of the requisition, a right to vote at the next annual general meeting, or (b) not less than 50 shareholders who have a right to vote on the resolution at the annual general meeting to which the requests relate. China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT65 The resolution must be one which may be properly Convening Extraordinary General Meetings moved and is intended to be moved at the next annual Pursuant to Section 566 of the Companies Ordinance general meeting. The requisition must be signed by the (Chapter 622 of the Laws of Hong Kong), shareholder(s) requisitionists and deposited at the registered office of holding not less than 5% of the total voting rights of all the Company at least six weeks or if later, the time at shareholders having a right to vote at general meetings which notice is given of the annual general meeting of the Company as at the date of deposit of the before the annual general meeting, the Company has a requisition, may request the Directors of the Company duty to give notice of such proposed resolution to all to convene an extraordinary general meeting. The shareholders who are entitled to receive notice of the requisition must state the objects of the meeting and next annual general meeting. must be signed by the requisitionists and deposited at the registered office of the Company. In addition, requisitionists may require the Company to circulate to shareholders entitled to receive notice of If the Directors do not, within 21 days from the date of the annual general meeting a statement of not more deposit of the requisition, proceed duly to convene a than 1,000 words with respect to the resolution to be meeting to be held not more than 28 days after the proposed. However, the Company is not required to notice of the meeting, shareholder(s) requisitioning the circulate any statement if the court is satisfied that this meeting, or any of them representing more than half of right is being abused to secure needless publicity for their total voting rights, may themselves convene a defamatory matters. In such event, the requisitionists meeting to be held within three months of such date. may be ordered to pay for the Company’s expenses for application to the court. Meetings convened by the requisitionists must be convened in the same manner, as nearly as possible, as If the requisition signed by the requisitionists does not meetings to be convened by Directors of the Company. require the Company to give shareholders notice of a Any reasonable expenses incurred by the requisitionists resolution, such requisition may be deposited at the will be reimbursed by the Company due to the failure of registered office of the Company not less than one week the Directors duly to convene a meeting. before the next annual general meeting. Annual Report 202366 Putting Forward Resolutions at Extraordinary General amendments to the articles of association of the Meetings Company to, among other things, allow the Company to Shareholders may not put forward resolutions to be hold general meetings as hybrid meetings or electronic considered at any general meetings other than annual meeting where shareholders may attend and participate general meetings. However, shareholders may request by means of electronic facilities in addition to physical an extraordinary general meeting to consider any such attendance. The latest version of the articles of resolution as described in “Convening Extraordinary association of the Company is available on both the General Meetings” above. websites of the Company and the Hong Kong Stock Exchange. Any queries relating to shareholders’ rights on putting forward resolutions at general meetings and convening extraordinary general meetings should be directed to the Company Secretary of the Company. Requisitions CONTINUOUS EVOLUTION OF CORPORATE GOVERNANCE The Company continuously analyses the corporate should be deposited at the Company’s registered office governance development of international advanced and marked for the attention of the Company Secretary. enterprises and the investors’ desires, review and AMENDMENTS TO THE ARTICLES OF ASSOCIATION To provide flexibility to the Company in relation to the enhance corporate governance procedures and practices from time to time so as to meet our shareholders’ expectations, commits to high standards of corporate governance and recognises that good conduct of general meetings, the Company’s governance is vital for the long-term success and shareholders passed a special resolution at the annual sustainability of the Company’s business. general meeting on 19 May 2023 approving certain China Unicom (Hong Kong) LimitedCORPORATE GOVERNANCE REPORT67 ENQUIRY ON THE COMPANY Shareholders may raise any enquiry on the Company at any time through the following channels: China Unicom (Hong Kong) Limited Address: 75th Floor, The Center, 99 Queen’s Road Central, Hong Kong Tel Fax : : (852) 2126 2018 (852) 2126 2016 Website : www.chinaunicom.com.hk Email : ir@chinaunicom.com.hk These contact details are also available in the “Contact Us” section on the Company’s website (www.chinaunicom.com.hk) designated to enable shareholders to send enquiries to the Company on a timely and effective manner. https://www.chinaunicom.com.hk Annual Report 202368 REPORT OF DIRECTORS The board of directors (the “Board”) of China Unicom returns. If approved by shareholders at the forthcoming (Hong Kong) Limited (the “Company”) is pleased to annual general meeting, the 2023 Final Dividend is present its report together with the audited financial expected to be paid in Hong Kong dollars on or about statements of the Company and its subsidiaries (the 26 June 2024 to those members registered in the “Group”) for the year ended 31 December 2023. Company’s register of members as at 7 June 2024 (the “Final Dividend Record Date”). PRINCIPAL ACTIVITIES The principal activity of the Company is investment holding. The principal activities of Company’s FINANCIAL INFORMATION Please refer to the Financial Summary on pages 202 to subsidiaries are the provision of comprehensive 203 for the summary of the operating results, assets and telecommunications services. liabilities of the Group for the five years ended 31 December 2023. RESULTS AND APPROPRIATION The results of the Group for the year ended Please refer to the financial statements on pages 93 to 31 December 2023 are set out on pages 93 to 94 of this 201 for the operating results of the Group for the year annual report. ended 31 December 2023 and the respective financial positions of the Group and the Company as at that date. Taking into consideration the Company’s robust business development, the Board has resolved to recommend at the forthcoming shareholders’ general BUSINESS REVIEW The business review of the Group for the year ended meeting that the payment of a final dividend of 31 December 2023 is set out in the sections headed RMB0.1336 per ordinary share (“2023 Final Dividend”) “Chairman’s Statement” on pages 8 to 15, “Business for the year ended 31 December 2023, totaling Overview” on pages 16 to 19, “Financial Overview” on approximately RMB4,088 million. Together with the pages 20 to 25, “Financial Statements” on pages 93 to 2023 interim dividend payment of RMB0.203 per share 201, “Human Resources Development” on pages 86 to during 2023, the total dividend payment for 2023 87, “Corporate Governance Report” on pages 40 to 67 a m o u n t e d t o R M B 0 . 3 3 6 6 p e r s h a r e , t o t a l i n g and “Report of the Directors” on pages 68 to 85 approximately RMB10,299 million (2022: RMB8,384 respectively of this annual report. All references herein million). Going forward, the Company will continue to to other sections or reports in this annual report form strive for enhancing its profitability and shareholders’ part of this Report of the Directors. China Unicom (Hong Kong) Limited69 LOANS Please refer to Notes 33, 39 and 45.1 to the consolidated financial statements for details of the SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES Please refer to Notes 18, 19 and 20 to the consolidated borrowings of the Group. financial statements for details of the Company’s COMMERCIAL PAPERS Please refer to Note 40 to the consolidated financial statements for details of the commercial papers of the Group. CAPITALISED INTEREST Please refer to Note 15 to the consolidated financial statements for details of the interest capitalised by the Group for the year. subsidiaries, the Group’s associates and joint ventures. CHANGES IN SHAREHOLDERS’ EQUITY Please refer to page 98 of this annual report for the Consolidated Statement of Changes in Equity and page 180 for the Statement of Changes in Equity. EMPLOYEE BENEFIT EXPENSES Please refer to Note 8 to the consolidated financial statements for details of the employee benefit expenses provided to employees of the Group. EQUITY-LINKED AGREEMENTS Other than the share scheme as disclosed in this Report of the Directors, as at 31 December 2023, no PRE-EMPTIVE RIGHTS There are no provisions for pre-emptive rights in the equity-linked agreements were entered into by the articles of association of the Company requiring the Group or subsisted during the year. Company to offer new shares to the existing PROPERTY, PLANT AND EQUIPMENT Please refer to Note 15 to the consolidated financial statements for movements in the property, plant and MAJOR CUSTOMERS AND SUPPLIERS The Group’s sales to its five largest customers for the equipment of the Group for the year. year ended 31 December 2023 did not exceed 30% of shareholders in proportion to their shareholdings. CHARGE ON ASSETS As at 31 December 2023, no property, plant and The Group’s purchases from its largest supplier for the equipment was pledged to banks as loan security y e a r e n d e d 3 1 D e c e m b e r 2 0 2 3 r e p r e s e n t e d the Group’s total turnover for the year. (31 December 2022: Nil). SHARE CAPITAL Please refer to Note 30 to the consolidated financial approximately 28.56% of the Group’s total purchases for the year. The total purchases attributable to the five largest suppliers of the Group for the year ended 31 December 2023 accounted for approximately 58.32% statements for details of the share capital. of the total purchases of the Group for the year. RESERVES Please refer to page 98 and page 180 of this annual None of the Directors nor their respective close associates (as defined in the Rules Governing the Listing report for the movements in the reserves of the Group of Securities on The Stock Exchange of Hong Kong and the Company during the year ended 31 December Limited (the “Listing Rules”)) nor any shareholder of the 2023 respectively. As at 31 December 2023, the Company (which to the knowledge of the Directors distributable reserve of the Company amounted to owns more than 5% of the Company’s share capital) had approximately RMB7,855 million (2022: approximately any interests in the five largest suppliers of the Group RMB6,474 million). for the year ended 31 December 2023. Annual Report 202370 SHARE SCHEME OF THE COMPANY Pursuant to a resolution passed at the annual general meeting held on 16 April 2014, the Company adopted a new share option scheme (the “2014 Share Option (3) the maximum aggregate number of shares in respect of which share options may be granted (the “Scheme Mandate Limit”) shall be calculated in accordance with the following Scheme”). The purpose of the 2014 Share Option formula: Scheme was to recognise the contribution that certain individuals have made to the Company, to attract and retain the best available personnel and to promote the success of the Company. The 2014 Share Option Scheme where: is valid and effective for a period of 10 years N = A – B – C commencing on 22 April 2014 and will expire on 22 April “N” is the maximum aggregate number of 2024. Following the expiry of the 2014 Share Option Scheme, no further share option can be granted under the 2014 Share Option Scheme, but the provisions of the 2014 Share Option Scheme will remain in full force shares in respect of which share options may be granted pursuant to the 2014 Share Option Scheme; and effect to the extent necessary to give effect to the “A” is the maximum aggregate number of exercise of any share options granted prior thereto or otherwise as may be required in accordance with the provisions of the 2014 Share Option Scheme. Under the 2014 Share Option Scheme: (1) share options may be granted to employees including all Directors; (2) any grant of share options to a Connected Person (as defined in the Listing Rules) of the Company must be approved by the independent non-executive Directors of the Company (excluding any independent non-executive Director of the Company in the case such Director is a grantee of the options) and all grants to connected persons shall be subject to compliance with the requirements of the Listing Rules, including where necessary the prior approval of the shareholders; shares in respect of which shares options may be granted pursuant to the 2014 Share Option Scheme and any other share option schemes of the Company, being 10% of the aggregate of the number of shares in issue as at the date of adoption of the 2014 Share Option Scheme; “B” is the maximum aggregate number of shares underlying the share options already granted pursuant to the 2014 Share Option Scheme; and “C” is the maximum aggregate number of shares underlying the options already granted pursuant to any other share option schemes of the Company. China Unicom (Hong Kong) LimitedREPORT OF DIRECTORS71 Shares in respect of share options which have (7) an offer shall be deemed to have been accepted lapsed in accordance with the terms of the 2014 by the eligible participant and to have taken Share Option Scheme and any other share effect when the duplicate notice of grant option schemes of the Company will not be comprising acceptance of the offer duly signed counted for the purpose of determining the by the grantee together with a remittance in maximum aggregate number of shares in respect favour of the Company of HKD1.00 by way of of which options may be granted pursuant to the consideration for the grant thereof is received by 2014 Share Option Scheme; the Company within the time period specified in (4) the option period commences on any day after the offer. the date on which such share option is offered, No share options had been granted since adoption of but may not exceed 10 years from the offer the 2014 Share Option Scheme. As at 1 January 2023 date; (5) the subscription price shall not be less than the higher of: and 31 December 2023, 1,777,437,107 options were available for grant under the Scheme Mandate Limit. As at 31 December 2023, 1,777,437,107 shares were available for issue under the 2014 Share Option Scheme, (a) the closing price of the shares on the representing approximately 5.81% of issued share Hong Kong Stock Exchange on the offer capital of the Company as at the date of this annual date in respect of the share options; and report. (b) the average closing price of the shares on the Hong Kong Stock Exchange for the five trading days immediately preceding the offer date; DIRECTORS’, CHIEF EXECUTIVES’ AND EMPLOYEES’ INTERESTS UNDER THE SHARE SCHEME OF THE COMPANY For the year ended 31 December 2023 and as at 31 December 2023, none of the Directors of the (6) the total number of shares in the Company Company or chief executives or employees of the issued and to be issued upon exercise of the Company had any interests under any share scheme of share options granted to a participant of the the Company. 2014 Share Option Scheme (including both exercised and outstanding share options) in any 12-month period must not exceed 1% of the issued share capital of the Company; and Annual Report 202372 DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES As at 31 December 2023, the interests and short positions of Directors and chief executives of the Company in any shares, underlying shares and debentures of the Company or any of its associated corporations (as defined in Part XV of the Hong Kong Securities and Futures Ordinance (the “SFO”)) as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange of Hong Kong Limited pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix C3 of the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (the “Listing Rules”), were as follows: Long Positions in the Shares and Underlying Shares of the Company Name of Director Capacity Ordinary Percentage of Shares Held Issued Shares Chung Shui Ming Timpson Beneficial owner (Personal) 6,000 0.00% Save as disclosed in the foregoing, as at 31 December 2023, none of the Directors or chief executives of the Company had any interests or short positions in any shares, underlying shares, or debentures of the Company or any of its associated corporations (as defined in Part XV of the SFO) as recorded in the register required to be kept pursuant to Section 352 of the SFO or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code. Furthermore, save as disclosed in the foregoing, during the year ended 31 December 2023, none of the Directors or chief executives (including their spouses and children under the age of 18) of the Company had any interests in or was granted any right to subscribe in any shares, underlying shares, or debentures of the Company or any of its associated corporations, or had exercised any such rights. China Unicom (Hong Kong) LimitedREPORT OF DIRECTORS 73 MATERIAL INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS IN SHARES AND UNDERLYING SHARES OF THE COMPANY As at 31 December 2023, the following persons (other than disclosed under the section headed “Directors’ and Chief Executives’ Interests and Short Positions in Shares, Underlying Shares and Debentures”) had the following interests and short positions in the shares or underlying shares of the Company as recorded in the register required to be kept pursuant to Section 336 of Part XV of the SFO: Long Positions in the Shares and Underlying Shares of the Company Ordinary Shares Held Name of Shareholders Directly Indirectly Percentage of Issued Shares (i) China United Network Communications Group Company Limited (“Unicom Group”)1,2 (ii) China United Network Communications Limited (“A Share Company”)1 — — 24,683,896,309 80.67% 16,376,043,282 53.52% (iii) China Unicom (BVI) Limited 16,376,043,282 — 53.52% (“Unicom BVI”)1 (iv) China Unicom Group Corporation 8,082,130,236 225,722,791 27.15% (BVI) Limited (“Unicom Group BVI”)2,3 Notes: (1) Unicom Group and A Share Company directly or indirectly control one-third or more of the voting rights in the shareholders’ meetings of Unicom BVI, and in accordance with the SFO, the interests of Unicom BVI are deemed to be, and have therefore been included in, the respective interests of Unicom Group and A Share Company. (2) Unicom Group BVI is a wholly-owned subsidiary of Unicom Group. In accordance with the SFO, the interests of Unicom Group BVI are deemed to be, and have therefore been included in, the interests of Unicom Group. (3) Unicom Group BVI holds 8,082,130,236 shares (representing 26.41% of the total issued shares) of the Company directly. In addition, Unicom Group BVI is also interested in 225,722,791 shares (representing 0.74% of the total issued shares) of the Company under the SFO, in which Unicom Group BVI had a pre-emptive right. Apart from the foregoing, as at 31 December 2023, no person had any interest or short position in the shares or underlying shares in the Company as recorded in the register required to be kept under Section 336 of the SFO. Please also refer to Note 30 to the consolidated financial statements for details of the share capital of the Company. Annual Report 2023 74 REPURCHASE, SALE OR REDEMPTION OF LISTED SHARES OF THE COMPANY For the year ended 31 December 2023, neither the Company nor any of its subsidiaries had repurchased, DIRECTORS’ INTEREST IN TRANSACTIONS, ARRANGEMENTS AND CONTRACTS Save for the service agreements between the Company sold or redeemed any of the Company’s listed shares. and the executive Directors subsisted during 2023 or as COMPOSITION OF THE BOARD The following is the list of Directors during the year and up to date of this report. Executive Directors: at 31 December 2023, the Directors or his/her connected entity(ies) did not have any material interest, whether directly or indirectly, in any significant transaction, arrangement or contract entered into by the Company. Chen Zhongyue (Chairman and Chief Executive Officer) None of the Directors for re-election at the forthcoming Liu Liehong (resigned on 30 July 2023) annual general meeting has an unexpired service Wang Junzhi Li Yuzhuo Independent Non-Executive Directors: Cheung Wing Lam Linus Wong Wai Ming Chung Shui Ming Timpson Law Fan Chiu Fun Fanny agreement which is not determinable by the Company within one year without payment of compensation (other than statutory compensation). DIRECTORS’ INTEREST IN COMPETING BUSINESSES Unicom Group and A Share Company are engaged in telecommunications business and other related businesses in China that are similar to and/or compete Pursuant to the articles of association, Ms. Li Yuzhuo with those of the Company. Executive directors of the and Mr. Cheung Wing Lam Linus will retire at the Company also hold executive positions with Unicom forthcoming annual general meeting of the Company Group and A Share Company. Please refer to the section and, being eligible, offer themselves for re-election. headed “Directors and Senior Management” on pages 28 to 39 of this annual report for further details. Please refer to Note 8 to the consolidated financial statements for details of the emoluments of the Apart from the above, there are no competing interests Directors. INDEPENDENCE OF INDEPENDENT NON-EXECUTIVE DIRECTORS The Company has received from each of its independent non-executive Directors the annual confirmation of his of directors which are disclosable under Rule 8.10(2)(b) of the Listing Rules at any time during the year of 2023 up to and including the date of this annual report. DIRECTORS OF SUBSIDIARIES The names of all directors who have served on the independence and the Company considers that all boards of the subsidiaries of the Company during the independent non-executive Directors are currently year ended 31 December 2023 and up to the date of this independent. report of directors are available on the Company’s website (http://www.chinaunicom.com.hk). China Unicom (Hong Kong) LimitedREPORT OF DIRECTORS75 PERMITTED INDEMNITY Pursuant to the Company’s articles of association, subject to the applicable laws and regulations, every Director shall be indemnified out of the assets of the Company against all costs, charges, expenses, losses and CONTINUING CONNECTED TRANSACTIONS On 28 October 2022, CUCL, a wholly-owned subsidiary of the Company, and Unicom Group entered into a comprehensive services agreement (the “2023–2025 liabilities which he/she may sustain or incur in the Comprehensive Services Agreement”) while Finance execution of his/her office or otherwise in relation Company (“Finance Company”), a subsidiary of the thereto. The Company has taken out insurance against the liability and costs associated with defending any proceedings which may be brought against directors of the Group. Company, and Unicom Group entered into a financial services agreement (the “2023–2025 Financial Services Agreement”). Pursuant to the 2023–2025 Comprehensive Services Agreement, CUCL and Unicom Group agreed to provide services to each other or by one to the other, EMPLOYEE AND REMUNERATION POLICY As at 31 December 2023, the Group had approximately including (i) use of telecommunications resources; (ii) property leasing; (iii) value-added telecommunications 241,735 employees, 791 employees and 365 employees services; (iv) materials procurement services; (v) in Mainland China, Hong Kong and other countries, engineering design and construction and IT services; (vi) respectively. Furthermore, the Group had approximately a n c i l l a r y t e l e c o m m u n i c a t i o n s s e r v i c e s ; ( v i i ) 9,882 temporary staff in Mainland China. For the year ended 31 December 2023, employee benefit expenses comprehensive support services and (viii) shared services. Pursuant to 2023–2025 Financial Services were approximately RMB62.94 billion (for the year Agreement, Finance Company agreed to provide ended 31 December 2022: RMB60.73 billion), of which financial services to Unicom Group. The above the salary of the contract employees was approximately continuing connected transactions will be for a term of RMB41.28 billion (for the year ended 31 December three years from 1 January 2023 to 31 December 2025. 2022: RMB40.85 billion). The Group endeavors to maintain its employees’ remuneration in line with the Unicom Group is the ultimate controlling shareholder of market trend and to remain competitive. Employees’ the Company and is therefore a connected person of the remuneration is determined in accordance with the Group’s remuneration and bonus policies based on their Company under the Listing Rules. Details of the continuing connected transactions under the 2023– performance. The Group also provides comprehensive benefit packages and career development opportunities 2025 Comprehensive Services Agreement and the 2023–2025 Financial Services Agreement are as follows: for its employees, including retirement benefits, housing benefits and internal and external training programmes, (1) Use of Telecommunications Resources which are tailored in accordance with individual needs. Unicom Group agrees to provide to CUCL: The Company has adopted share option schemes, under (a) certain international telecommunications which the Company may grant share options to eligible resources (including international employees for subscribing for the Company’s shares. telecommunications channel gateways, international telecommunications s e r v i c e g a t e w a y s , i n t e r n a t i o n a l submarine cable capacity, international land cables and international satellite facilities); and Annual Report 202376 (b) certain other telecommunications relevant industry profit margins in the facilities required by CUCL for its corresponding period for reference. The operations. net usage charges due to Unicom Group f o r t h e p r o v i s i o n o f t h e a b o v e The usage charges of international telecommunications resources and telecommunications resources and other facilities will be settled between CUCL telecommunications facilities are based and Unicom Group on a quarterly basis. o n t h e a n n u a l d e p r e c i a t i o n a n d amortisation charges of such resources For the year ended 31 December 2023, and telecommunications facilities the total charges paid by CUCL to Unicom provided that such charges would not be Group amounted to approximately higher than the market rates. CUCL will RMB210 million. b e r e s p o n s i b l e f o r t h e o n - g o i n g maintenance of such international (2) Property Leasing telecommunications resources. CUCL and CUCL and Unicom Group agree to lease to each Unicom Group will determine and agree other properties and ancillary facilities owned by which party is to provide maintenance CUCL or Unicom Group (including their service for the telecommunications respective branches and subsidiaries). facilities referred to in paragraph (b) above. Unless otherwise agreed by CUCL The rental charges for the leasing of each other and Unicom Group, such maintenance properties and ancillary facilities are based on service charges would be borne by CUCL. market rates. Where there is no market rate or it If Unicom Group is responsible for is not possible to determine the market rate, the maintaining any telecommunications rate will be negotiated and agreed between the facilities referred to in paragraph (b) two parties. Market rates refer to the rates at above, CUCL will pay to Unicom Group which the same or similar type of assets or the relevant maintenance service services are provided by Independent Third charges which will be determined with Parties in the ordinary course of business and reference to market rates, or where under normal commercial terms. Negotiated there is no market rates will be agreed rates refer to the rates based on the reasonable between the parties and determined costs plus the amount of the relevant taxes and b a s e d o n r e a s o n a b l e c o s t s p l u s reasonable profit margin. When determining the r e a s o n a b l e p r o f i t m a r g i n . W h e n pricing standard or reasonable profit margin, to determining the pricing standard or the extent practicable, management of the reasonable profit margin, to the extent Company will take into account the rates of at p r a c t i c a b l e , m a n a g e m e n t o f t h e least two similar and comparable transactions Company will take into account the rates entered into with Independent Third Parties or of at least two similar and comparable the relevant industry profit margin in the t r a n s a c t i o n s e n t e r e d i n t o w i t h corresponding period for reference. The rental Independent Third Parties or the charges are payable quarterly in arrears. China Unicom (Hong Kong) LimitedREPORT OF DIRECTORS77 For the year ended 31 December 2023, the tenders, verification of technical specifications, rental charges paid by CUCL to Unicom Group installation, consulting and agency services. In (relating to those leases of which the lease term addition, Unicom Group will sell materials to i s 1 2 m o n t h s o r l e s s ) a m o u n t e d t o CUCL and resell the equipment purchased from approximately RMB945 million, the total value of the third parties, and will also provide storage right-of-use assets involved in the properties and logistics services in relation to the above leased by CUCL (relating to those leases of which materials procurement. the lease term exceeds 12 months) amounted to approximately RMB116 million, and the rental Charges for the provision of materials charges paid by Unicom Group to CUCL was procurement services are calculated at the rate negligible. of: (3) Value-added Telecommunications Services (a) up to 3% of the contract value of those Unicom Group (or its subsidiaries) agrees to procurement contracts in the case of provide the customers of CUCL with various domestic materials procurement; and types of value-added telecommunications services. (b) up to 1% of the contract value of those procurement contracts in the case of CUCL will settle the revenue generated from the imported materials procurement. value-added telecommunications services with t h e b r a n c h e s o f U n i c o m G r o u p ( o r i t s The charges for the provision of materials by subsidiaries) on the condition that such settlement Unicom Group, and the pricing and/or charging will be based on the average revenue for standard of the commission for various materials independent value-added telecommunications procurement services, and storage and logistics content providers who provide value-added services relevant to the direct material telecommunications content to CUCL in the procurement are based on the market rates. same region. The amount will be settled on a Where there is no market rate or it is not monthly basis. possible to determine the market rate, the rate will be negotiated and agreed between the two For the year ended 31 December 2023, the total parties. Market rates refer to the rates at which amount allocated to Unicom Group in relation to the same or similar type of assets or services is value-added telecommunications services provided by Independent Third Parties in the amounted to approximately RMB73 million. ordinary course of business and under normal (4) Materials Procurement Services commercial terms. Negotiated rates refer to the rates based on the reasonable costs incurred in Unicom Group agrees to provide comprehensive providing the services plus the amount of the procurement services for imported and relevant taxes and reasonable profit margin. domestic telecommunications materials and When determining the pricing standard or other domestic non-telecommunications reasonable profit margin, to the extent materials to CUCL. Unicom Group has also practicable, management of the Company will agreed to provide services on management of take into account the rates of at least two similar Annual Report 202378 and comparable transactions entered into with p r o d u c t s o r s e r v i c e s a r e p r o v i d e d b y Independent Third Parties or the relevant Independent Third Parties in the ordinary course industry profit margin in the corresponding of business and under normal commercial terms. period for reference. The service charges due to When determining the pricing standard, to the Unicom Group will be settled on a monthly extent practicable, management of the basis. Company will take into account the rates of at least two similar and comparable transactions For the year ended 31 December 2023, the total entered into with Independent Third Parties in charges paid by CUCL to Unicom Group the corresponding period for reference. In the amounted to approximately RMB15 million. event the recipient will determine the specific provider of engineering design and construction (5) Engineering Design and Construction and IT and IT services through tender, the provider shall Services be no less qualified and equipped than the Unicom Group agrees to provide engineering Independent Third Parties, and shall participate design, construction and supervision services in the tender procedure on an equal footing with and IT services to CUCL. Engineering design the Independent Third Parties. Under such s e r v i c e s i n c l u d e p l a n n i n g a n d d e s i g n , circumstances, the pricing will be determined by engineering inspection, telecommunications the final rate according to the tender procedure. electronic engineering, telecommunications The service charges will be settled between e q u i p m e n t e n g i n e e r i n g a n d c o r p o r a t e CUCL and Unicom Group as and when the telecommunications engineering. Construction relevant services are provided. s e r v i c e s i n c l u d e s e r v i c e s r e l a t i n g t o t e l e c o m m u n i c a t i o n s e q u i p m e n t , For the year ended 31 December 2023, the total telecommunications routing, power supplies, charges paid by CUCL to Unicom Group telecommunications conduit, and technical amounted to approximately RMB696 million. s u p p o r t s y s t e m s . I T s e r v i c e s i n c l u d e communications technology services (including (6) Ancillary Telecommunications Services construction and installation services, system Unicom Group agrees to provide ancillary integration services, software development, telecommunications services to CUCL. These product sales and agent services, operation and services include certain telecommunications maintenance services, and consultation pre-sale, on-sale and after-sale services such as services). assembling and repairing of certain client telecommunications equipment, sales agency The charges for the provision of engineering services, printing and invoice delivery services, design and construction and IT services are maintenance of telephone booths, customers based on market rates. Market rates refer to the acquisitions and servicing and other customers’ rates at which the same or similar type of services. China Unicom (Hong Kong) LimitedREPORT OF DIRECTORS79 The charges payable for the provision of ancillary services, security services, hotel and conference telecommunications services are determined by services, gardening services, decoration and the market rates between the two parties. renovation services, construction agency, Where there is no market rate or it is not equipment maintenance services, market possible to determine the market rates, the rate development, sanitary services, parking services, will be negotiated and agreed between the two staff trainings, storage services, advertising parties. Market rates refer to the rates at which services, marketing, property management the same or similar type of assets or services are services. provided by Independent Third Parties under normal commercial terms. Negotiated rates CUCL agrees to provide comprehensive services refer to the rates based on the reasonable costs to Unicom Group, including sales services, plus the amount of the relevant taxes and technical support services, research and reasonable profit margin. When determining the development services, communication services pricing standard or reasonable profit margin, to and communications technology services the extent practicable, management of the (including construction and installation services, Company will take into account the rates of at s y s t e m i n t e g r a t i o n s e r v i c e s , s o f t w a r e least two similar and comparable transactions development, product sales and agent services, entered into with Independent Third Parties or operation and maintenance services, and the relevant industry profit margin in the consultation services). corresponding period for reference. The service charges will be settled between CUCL and The service charges are determined by the Unicom Group as and when the relevant services market rates between the two parties. Where are provided. there is no market rate or it is not possible to determine the market rate, the rate will be For the year ended 31 December 2023, the total negotiated and agreed between the two parties. services charges paid by CUCL to Unicom Group Market rates refer to the rates at which the amounted to approximately RMB1,038 million. same or similar type of assets or services are (7) Comprehensive Support Services provided by Independent Third Parties under normal commercial terms. Negotiated rates Unicom Group and CUCL agree to provide refer to the rates based on the reasonable costs comprehensive support services to each other, plus the amount of the relevant taxes and including dining services, facilities leasing reasonable profit margin. When determining the services (excluding those facilities which are pricing standard or reasonable profit margin, to provided under the paragraph headed “Use of the extent practicable, management of the Telecommunications Resources” above), vehicle Company will take into account the rates of at services, health and medical services, labour least two similar and comparable transactions Annual Report 202380 entered into with Independent Third Parties or For the year ended 31 December 2023, the total the relevant industry profit margin in the services charges paid by CUCL to Unicom Group corresponding period for reference. The service amounted to approximately RMB76 million, and charges will be settled between CUCL and the services charges paid by Unicom Group to Unicom Group as and when the relevant services CUCL was negligible. are provided. (9) Financial Services For the year ended 31 December 2023, the total Finance Company agrees to provide financial services charges paid by CUCL to Unicom Group services to Unicom Group, including deposit amounted to approximately RMB1,115 million, services, lending and other credit services, and and the total services charges paid by Unicom other financial services. Other financial services Group to CUCL amounted to approximately include settlement services, entrusted loans, RMB225 million. (8) Shared Services financial and financing consultation, entrusted investment, bond underwriting, consultation, agency business, and other businesses approved Unicom Group and CUCL agree to provide by China Banking and Insurance Regulatory shared services to each other, including, but not Commission or its agency for Finance Company. limited to, the following: (a) CUCL will provide headquarter human resources services to The key pricing policies are follows: Unicom Group; (b) CUCL will provide business support centre services to Unicom Group; (c) Finance Company agrees to provide financial CUCL will provide hosting services related to the services to Unicom Group. The interest rate or services referred to in paragraphs (a) and (b) fee standard will be determined in strict above to Unicom Group; and (d) Unicom Group accordance with the relevant regulations of the will provide premises to CUCL and other shared People’s Bank of China and the China Banking services requested by its headquarters. Unicom and Insurance Regulatory Commission and other Group and CUCL will share the costs related to institutions, as follows: the shared services proportionately in accordance with their respective total assets (a) Deposit Services value, except that the total assets value of the The maximum and minimum deposit overseas subsidiaries and the listed company of interest rates will follow the provisions of Unicom Group will be excluded from the total the People’s Bank of China for deposits asset value of Unicom Group, and the shared of the same period and the same type, costs proportion will be agreed between Unicom and be determined with reference to the Group and CUCL in accordance with the total interest rate for the same period and assets value set out in the financial statements same type of deposit offered to Unicom provided to each other, as adjusted in G r o u p b y t h e m a j o r c o o p e r a t i v e accordance with their respective total assets commercial banks of Unicom Group and/ value on an annual basis. or offered by Finance Company to other c l i e n t s , a n d w i l l b e o n n o r m a l commercial terms. China Unicom (Hong Kong) LimitedREPORT OF DIRECTORS81 (b) Lending and other credit services The service charges will be settled between The lending and other credit services Finance Company and Unicom Group as and interest rates will follow the relevant when the relevant services are provided. provisions of the People’s Bank of China, which will be based on Loan Prime Rate For the financial year ended 31 December 2023, the and be determined with reference to the above continuing connected transactions have not interest rate for the same period and exceeded their respective caps. same type of lending and other credit services offered to the same type of The Company has formulated and strictly implemented corporations by the major cooperative various systems including the Administrative Measures commercial banks of Unicom Group and/ of Connected Transactions of China Unicom to ensure or offered by Finance Company to its that connected transactions are properly entered into in other clients, and will be on normal accordance with pricing mechanisms and the terms of commercial terms. For the year ended the transactions are fair and reasonable and are in the 31 December 2023, the maximum daily interests of the Company and the Shareholders as a lending and other credit services balance whole. (including accrued interests) amounted to approximately RMB4,633 million. The staff from the relevant business departments and the connected persons of the Company will negotiate (c) Other financial services the pricing terms of the continuing connected The rate of financial services will be transactions. These pricing terms will be determined in determined according to the principles of fairness and reasonableness, as well as the fair market price or the standards set accordance with the pricing policy principles set out in the 2023–2025 Comprehensive Services Agreement and the 2023–2025 Financial Services Agreement, which by the state. The fees to be charged by should be fair and reasonable and subject to the review Finance Company for the provision of the of the finance department. financial services to Unicom Group will comply with the relevant prescribed The legal department is responsible for the review of the rates for such services as determined by agreement for connected transactions. The finance the institutions, including the People’s department takes the lead in the daily management and Bank of China or the China Banking and supervision of connected transactions, including liaising Insurance Regulatory Commission, etc. with the relevant business departments for account Where no relevant prescribed rate is reconciliation with connected parties, monitoring the applicable, the fee will be determined implementation of connected transactions together with reference to market rates of similar with business departments on a routine basis and financial services charges and agreed performing supervisory examination. The finance between the parties. For the year ended department regularly reports the status of the 31 December 2023, the total fees paid by implementation of connected transactions to the Audit Unicom Group to Finance Company Committee. The audit department includes review on amounted to approximately RMB1 connected transactions into the scope of annual internal million. control assessment and reports the results to the management. Annual Report 202382 Furthermore, the aforesaid continuing connected (C) were not entered into, in all material respects, in transactions have been reviewed by independent accordance with the relevant agreements non-executive directors of the Company. In accordance g o v e r n i n g t h e c o n t i n u i n g c o n n e c t e d with paragraph 14A.55 of the Listing Rules, the transactions; and independent non-executive directors confirmed that the aforesaid continuing connected transactions were (D) have exceeded their respective annual caps for entered into (a) in the ordinary and usual course of the financial year ended 31 December 2023 set business of the Group; (b) either on normal commercial out in the previous announcements of the terms or better or, if there are not sufficient comparable Company. transactions to judge whether they are on normal commercial terms, on terms no less favourable to the The Company confirms that it has complied with the Group than terms available to or from independent requirements of Chapter 14A of the Listing Rules in third parties; and (c) in accordance with the relevant relation to all connected transactions and continuing agreements governing them on terms that are fair and connected transactions to which any Group member reasonable and in the interests of the shareholders of was a party during 2023. Please refer to Note 45 to the the Company as a whole. consolidated financial statements for a summary of the related party transactions entered into by the members The Company’s independent auditor was engaged to of the Group for the year ended 31 December 2023. report on the Group’s continuing connected Only those connected transactions specified in note 45.1 transactions in accordance with Hong Kong Standard on and 45.2 of the consolidated financial statements Assurance Engagements 3000 “Assurance Engagements constitute continuing connected transactions under Other Than Audits or Reviews of Historical Financial Chapter 14A of the Listing Rules, the details of which Information” and with reference to Practice Note 740 (except for fully exempt continuing connected “Auditor’s Letter on Continuing Connected Transactions transactions) have been disclosed in the paragraph under the Hong Kong Listing Rules” issued by the Hong “Continuing Connected Transactions” in the Report of Kong Institute of Certified Public Accountants. The the Directors above. Other related party transactions do independent auditor has issued an unqualified letter not constitute connected transactions or continuing containing his findings and conclusions in respect of the connected transactions under Chapter 14A of the Listing continuing connected transactions disclosed by the Rules. Group in pages 75 to 81 of this annual report in accordance with paragraph14A.56 of the Listing Rules. With the continuous expansion of operating scale and The independent auditors’ letter has confirmed that the continuous improvement of the centralised capital nothing has come to their attention that cause them to management capabilities of CUCL, a wholly-owned believe that the continuing connected transactions: subsidiary of the Company, and subject to the (A) have not been approved by the Board; subsidiary, Finance Company, the actual amount of the lending and other credit services between Finance satisfaction of the daily operation of CUCL and its (B) were not, in all material respects, in accordance with the pricing policies of the Group as stated in this annual report; China Unicom (Hong Kong) LimitedREPORT OF DIRECTORS83 Company and Unicom Group in 2023 (RMB4,633 The principal activities of Company’s subsidiaries are the million) was close to the cap of the transaction provision of comprehensive telecommunications (RMB4,650 million). In order to further satisfy the capital services. The Company is required to comply with the management needs of CUCL and enhance the capital Cybersecurity Law of the People’s Republic of China, efficiency, on 19 March 2024, the Board approved Telecommunications Regulations of the People’s Finance Company and Unicom Group to enter into the Republic of China, Administrative Regulations on Supplemental Agreement to revise the caps, being the Telecommunications Companies with Foreign daily lending and other credit services balance (including Investments and other related laws and regulations. At accrued interests) for the lending and other credit the same time, oversea subsidiaries of the Company are services to be provided by Finance Company to Unicom Group under the 2023–2025 Financial Services Agreement for each of the two years ending also required to comply with the related laws and regulations where their business operations are located. 31 December 2024 and 2025 to RMB7,500 million, For the year ended 31 December 2023, the Company respectively. Save as disclosed above, all other terms and conditions under the 2023–2025 Financial Services had not been involved in any material litigation, arbitration or administrative proceedings. So far as the Agreement remain unchanged and valid. Company is aware of, no such litigation, arbitration or CORPORATE GOVERNANCE REPORT Report on the Company’s corporate governance is set out in “Corporate Governance Report” on pages 40 to 67. administrative proceedings were pending or threatened as at 31 December 2023. PUBLIC FLOAT Based on publicly available information and so far as Directors are aware, the Company has maintained the MATERIAL LEGAL PROCEEDINGS As a company incorporated in Hong Kong and listed in specified amount of public float as required by the Hong K o n g S t o c k E x c h a n g e d u r i n g t h e y e a r e n d e d Hong Kong, the Company adopts the Companies 31 December 2023 and as at the date of this annual Ordinance of Hong Kong, the Securities and Futures report. Ordinance of Hong Kong, Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Company’s Articles of Association and other related DONATIONS For the year ended 31 December 2023, the Group made laws and regulations as the basic guidelines for the charitable and other donations in an aggregate amount Company’s corporate governance. of approximately RMB1.436 million. Annual Report 202384 CLOSURE OF REGISTER OF MEMBERS For the purpose of ascertaining the shareholders’ rights to attend and vote at the Annual General Meeting (and any adjournment thereof) on 30 May 2024, and entitlement to the 2023 Final Dividend, the register of members of the Company will be closed for registration of transfer of shares. Details of such closures are set out below: (1) For ascertaining the shareholders’ rights to attend and vote at the Annual General Meeting (and any adjournment thereof): Latest time to lodge transfer documents for registration 4:30 p.m. of 22 May 2024 Closure of register of members Record date From 23 May 2024 to 30 May 2024 23 May 2024 (2) For ascertaining the shareholders’ entitlement to the 2023 Final Dividend: Latest time to lodge transfer documents for registration 4:30 p.m. of 6 June 2024 Closure of register of members Final Dividend Record date 7 June 2024 7 June 2024 During the above closure periods, no transfer of shares will be registered. To be eligible to attend and vote at the Annual General Meeting, and to qualify for the 2023 Final Dividend, all transfers, accompanied by the relevant certificates, must be lodged with the Company’s Share Registrar, Hong Kong Registrars Limited, at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, by no later than the aforementioned latest times. WITHHOLDING AND PAYMENT OF ENTERPRISE INCOME TAX FOR NON-RESIDENT ENTERPRISES IN RESPECT OF 2023 FINAL DIVIDEND Pursuant to (i) the “Notice Regarding Matters on Determination of Tax Residence Status of Chinese- controlled Offshore Incorporated Enterprises under Rules of Effective Management” (the “Notice”) issued by the State Taxation Administration of the People’s Republic of China (the “STA”); (ii) the “Enterprise Income Tax Law of the People’s Republic of China” (the “Enterprise Income Tax Law”) and the “Detailed Rules for the Implementation of the Enterprise Income Tax Law of the People’s Republic of China” (the “Implementation Rules”); and (iii) information obtained from the STA, the Company is required to withhold and pay enterprise income tax when it pays the 2023 Final Dividend to its non-resident enterprise shareholders. The enterprise income tax is 10% on the amount of dividend paid to non-resident enterprise shareholders (the “Enterprise Income Tax”), and the withholding and payment obligation lies with the Company. As a result of the foregoing, in respect of any shareholders whose names appear on the Company’s register of members on the Final Dividend Record Date and who are not individuals (including HKSCC Nominees Limited, other custodians, corporate nominees and trustees such as securities companies and banks, and other entities or organisations), the Company will distribute the 2023 Final Dividend payable to them after deducting the amount of Enterprise Income Tax payable on such dividend. Investors who invest in the shares in the Company listed on the Main Board of The Stock Exchange of Hong Kong Limited through the Shanghai Stock Exchange or Shenzhen Stock Exchange (the Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect investors) are investors who hold shares through HKSCC Nominees Limited, and in accordance with the above requirements, the Company will pay to HKSCC Nominees Limited the amount of the 2023 Final Dividend after deducting the amount of Enterprise Income Tax payable on such dividend. China Unicom (Hong Kong) LimitedREPORT OF DIRECTORS85 In respect of any shareholders whose names appear on any claims, arising from any delay in, or inaccurate the Company’s register of members on the Final determination of, the status of the shareholders, or any Dividend Record Date and who are individual disputes over the mechanism of withholding and shareholders, there will be no deduction of Enterprise payment of Enterprise Income Tax. Income Tax from the dividend that such shareholder is entitled to. MANAGEMENT CONTRACTS Other than employment contracts, no contract Shareholders who are not individual shareholders listed concerning the management and administration of the on the Company’s register of members and who (i) are whole or any substantial part of the Company’s business resident enterprises of the People’s Republic of China was entered into or existed during 2023. (the “PRC”) (as defined in the Enterprise Income Tax Law), or (ii) are enterprises deemed to be resident enterprises of the PRC in accordance with the Notice, INDEPENDENT AUDITOR At the close of the 2021 annual general meeting of the and who, in each case, do not desire to have the Company held on 13 May 2021, KPMG and KPMG Company withhold Enterprise Income Tax from their Huazhen LLP retired as independent auditors of the 2023 Final Dividend, should lodge with the Company’s Company upon expiration of their term of office. The Share Registrar, Hong Kong Registrars Limited, at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Hong Kong financial reporting for the year ended 3 1 D e c e m b e r 2 0 2 1 , 3 1 D e c e m b e r 2 0 2 2 a n d Road East, Wan Chai, Hong Kong, at or before 4:30 p.m. 31 December 2023 have been audited by Deloitte of 6 June 2024, and present the documents from such Touche Tohmatsu, which retire and, being eligible, offer shareholder’s governing tax authority within the itself for re-appointment at the 2024 annual general territory of the PRC confirming that the Company is not meeting. A resolution to re-appoint Deloitte Touche required to withhold and pay Enterprise Income Tax in Tohmatsu and to authorise the Directors to fix its respect of the dividend that such shareholder is entitled respective remuneration will be proposed at the 2024 to. annual general meeting. If anyone would like to change the identity of the holders in the register of members, please enquire about the relevant procedures with the nominees or trustees. The Company will withhold for payment of the Enterprise Income Tax for its non-resident enterprise shareholders strictly in accordance with the relevant laws and requirements of the relevant government By Order of the Board agencies and adhere strictly to the information set out in Chen Zhongyue the Company’s register of members on the Final Chairman and Chief Executive Officer Dividend Record Date. The Company assumes no liability whatsoever in respect of and will not entertain Hong Kong, 19 March 2024 Annual Report 202386 HUMAN RESOURCES DEVELOPMENT China Unicom adheres to the people-oriented principle recruited more than 10,000 talents through campus and always pays attention to the mutual growth of its recruitment and social recruitment. The Company employees and the Company. It focuses on the implemented the “New Seedling Scheme” in a unified protection of the rights and interests, comprehensive manner. In 2023, the number of new employees from development and vitality stimulation of the workforce. campus recruitment remained at a high level, which The Company took multiple measures to enhance its were mainly assigned to innovative fields. The training employees’ sense of achievement, happiness and system for young employees was established to security. In 2023, with adherence to talent as its first accelerate their growth and development. resource, it unswervingly implemented the strategy of strengthening the Company with talent, strived to China Unicom adhered to the top-level design and promote the continuous optimisation of the talent conducted a comprehensive analysis and planning of the structure, providing a strong guarantee for the high- leadership and management team in accordance with quality development of the Company through high- the Company’s high-quality development needs for the quality human resources. next five years. The Company solidified the training of job performance capabilities, strengthened overall By implementing the strategy of strengthening the planning of training in various professional areas, carried Company with talent in great depth, China Unicom out large-scale training programs to enhance accelerated the establishment of national strategic professional competency, and continuously optimised talent force for scientific and technological innovation, the structure of management personnel qualities and and focused on supporting the realisation of high-level capabilities. On the basis of giving full play to the scientific and technological self-reliance and self- enthusiasm of management personnel of all ages, the improvement. The Company actively integrated itself into the general trend of “building a world-class talent Company adopted systematic policies to continuously enhance the identification, cultivation, and utilisation center and innovation hub”, it cultivated and attracted outstanding young management talents, consistently outstanding talents on all fronts. The Company focused enhancing the construction of the management on key groups such as high-level scientific and personnel echelon. China Unicom continued to improve technological talents as well as young scientific and the supervision system for management personnel and technological talents, supporting the significant optimisation of strategic talent structure, continuously improving the quality and efficiency of talents, and promoting the construction of a high-level scientific and technological talent team. China Unicom insisted on improving efficiency while controlling the overall q u a n t i t y . T h e C o m p a n y i m p l e m e n t e d t a r g e t management for labour efficiency. In 2023, the labour productivity of the Company continued to improve, and the workforce size maintained stable. In response to the national policy for stabilising employment, the Company China Unicom (Hong Kong) Limited87 strengthened oversight of their performance. The By strengthening the payroll management in full swing, Company continuously refined the appraisal and China Unicom adhered to the principles of equivalence evaluation system, provided education and guidance to between remunerations and outcomes, as well as management personnel to firmly establish the correct incentives and constraints, to reasonably determine the performance perspective. It iteratively and deeply annual payroll budget. Focusing on value creation and promoted the term-based system and contractual efficiency enhancement, the Company upheld the management for management personnel. The Company incremental revenue sharing mechanism, breaking strengthened the performance-oriented approach and through the rigidity of the existing system and rationalised the distribution gap. Furthermore, the promoting continuous improvement in the input and Company promoted upward and downward mobility for output of human resources. The Company invested management personnel and continuously carried out special resources to facilitate technological innovation normalised exit mechanisms to stimulate the vitality of and the creation of specialised and innovative the management team. capabilities. Highlighting the importance of core talents in key positions, the Company established incentive and Focusing on the main responsibilities of “serving the constraint mechanisms that tailored to the unique skills Cyber Superpower and building a Digital China”, and and differential contributions of individual talents. China centring around the main businesses of “Connectivity Unicom was committed to addressing structural and Communications, Computing and Digital Smart contradictions in the distribution field, optimising the Applications”, the Company prioritised the strategic relationship of internal income distribution, and execution training and innovation capabilities reasonably determining the remuneration levels among improvement for professionals and skilled talents. It also different groups. With the implementation of diversified devised the annual key training programs for incentives, the Company flexibly carried out medium management and professional personnel. Based on the and long-term incentive programs, and continued to characteristics of skilled positions, the Company operate the second phase of the restricted share established standards to assess their capabilities, i n c e n t i v e s c h e m e f o r C h i n a U n i t e d N e t w o r k improved curriculum systems, implemented training Communications Limited (“the A Share Company”), e m p o w e r m e n t , a n d c o n d u c t e d c o m p e t e n c y thereby building a community of shared interests and certification. This systematic implementation facilitated risks. independent cultivation for key capabilities. China Unicom continued to carry out digital empowerment for key groups, aiming to enhance their performance capabilities and professional qualities. ANALYSIS OF STAFF COMPOSITION PERSONNEL BY PROFESSION BY AGE BY EDUCATION BACKGROUND 50.30% Marketing 29.60% Technical 12.10% Administrative & Support 8.00% Management 64.74% Between 30-50 years old 18.37% Over 50 years old 16.89% Under 30 years old 67.70% Bachelor degree 22.30% College or below 10.00% Postgraduate or above For further details of Human Resources Development, please refer to the relevant sections of the Company’s detailed Sustainability Report 2023. Please visit the Company’s website at www.chinaunicom.com.hk. Annual Report 202388 INDEP ENDENT AUD IT OR’S RE PORT TO THE MEMBERS OF CHINA UNICOM (HONG KONG) LIMITED (incorporated in Hong Kong with limited liability) OPINION We have audited the consolidated financial statements of China Unicom (Hong Kong) Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 93 to 201, which comprise the consolidated statement of financial position as at 31 December 2023, the consolidated statement of income, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including material accounting policy information and other explanatory information. In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2023, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and have been properly prepared in compliance with the Hong Kong Companies Ordinance. BASIS FOR OPINION We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. China Unicom (Hong Kong) Limited89 Key audit matter Revenue recognition How our audit addressed the key audit matter We identified revenue recognition as a key audit matter because Our procedures in relation to revenue recognition comprising there is an inherent industry risk around the accuracy of revenue both control testing and substantive procedures on a sample recorded by the IT billing systems given the complexity of the basis, included involving our internal IT specialists to assist with: systems and the significance of volumes of data processed by the systems. • Testing the IT environment in which the billing systems reside, including interface controls between different IT Revenues from the provision of telecommunications services are, in applications. general, recognised as performance obligations are satisfied. Fees for telecommunications packages are recognised for each service • Testing the key controls over the calculation of the type in the packages. The data records are captured and the amounts billed to customers and the capturing and revenue transactions are recorded by the IT billing systems. recording of the revenue transactions. Details of the accounting policies for revenue recognition and an • Testing the key controls over the authorisation of the rate analysis of revenues are disclosed in Notes 2.25 and 6, respectively, changes and the input of such rates to the billing to the consolidated financial statements. systems. • Testing the end-to-end reconciliations from data records to the billing systems and to the general ledger. • Testing the accuracy of customer bill calculations and the respective revenue transactions recorded. • Testing revenue transactions by comparing the amounts recognised in general ledger to supporting documents, including customer bills, contracts and billing reports. Annual Report 2023 90 Key audit matter How our audit addressed the key audit matter Impairment of goodwill and long-lived assets We identified the impairment of goodwill and long-lived assets as a Our procedures in relation to the impairment of goodwill and key audit matter because the impairment assessment of the cash- long-lived assets included: generating unit to which those assets belong requires the management to exercise significant judgments relating to the • With the assistance of our internal valuation specialists, estimation of level of revenue, amount of operating costs and assessing the discount rate and assumptions used by the applicable discount rate. management in the value in use model and comparing the discount rate used by the management to externally Details of the accounting policies for impairment of goodwill and derived data and our own assessments of key inputs used long-lived assets and the related accounting estimates are disclosed in deriving the discount rate. in Notes 2.8, 2.13 and 4.2, respectively, to the consolidated financial statements. Details of goodwill impairment assessment are disclosed • With the assistance of our internal valuation specialists, in Note 17 to the consolidated financial statements. comparing the key inputs to the projected cash flows, such as the revenue growth rate and amount of operating costs, with corresponding historical data to evaluate the reasonableness of the management’s projections. • Assessing and challenging the significant judgments and estimates used in the management’s impairment assessment and evaluating the sensitivity analysis performed by the management. OTHER INFORMATION The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. China Unicom (Hong Kong) LimitedINDEPENDENT AUDITOR’S REPORT 91 RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion solely to you, as a body, in accordance with section 405 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Annual Report 202392 • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in the independent auditor’s report is Ip Kan Wah. Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong 19 March 2024 China Unicom (Hong Kong) LimitedINDEPENDENT AUDITOR’S REPORT93 CONSOLIDATED STATEMENT OF IN COM E (All amounts in Renminbi (“RMB”) millions, except per share data) For the year ended 31 December 2023 Year ended 31 December Note 2023 2022 Revenue Interconnection charges Depreciation and amortisation Network, operation and support expenses Employee benefit expenses Costs of telecommunications products sold Other operating expenses Finance costs Interest income Share of net profit of associates Share of net profit of joint ventures Other income — net Profit before income tax Income tax expenses Profit for the year Profit attributable to: Equity shareholders of the Company Non-controlling interests Profit for the year Earnings per share for profit attributable to equity shareholders of the Company during the year: Basic earnings per share (RMB) Diluted earnings per share (RMB) 6 7 8 9 10 11 12 13 14 14 372,597 354,944 (11,294) (84,847) (60,026) (62,939) (36,403) (102,123) (1,981) 2,105 2,519 1,803 3,534 22,945 (4,023) (10,947) (86,829) (56,425) (60,726) (34,720) (92,957) (1,095) 1,747 2,153 1,593 3,850 20,588 (3,751) 18,922 16,837 18,726 196 16,745 92 18,922 16,837 0.61 0.61 0.55 0.55 The notes on pages 102 to 201 are an integral part of these consolidated financial statements. Annual Report 2023 94 CONSOLIDATE D STATEMENT OF COMPREHENSIVE INC OME For the year ended 31 December 2023 (All amounts in RMB millions) Profit for the year Other comprehensive income Items that will not be reclassified to statement of income: Changes in fair value of financial assets measured at fair value through other comprehensive income (“FVOCI”) (non-recycling) Tax effect on changes in fair value of financial assets measured at FVOCI (non-recycling) Changes in fair value of financial assets measured at FVOCI, net of tax (non-recycling) Others Items that may be reclassified subsequently to statement of income: Changes in fair value of financial assets measured at FVOCI, net of tax (recycling) Share of other comprehensive income of associates Currency translation differences Other comprehensive income for the year, net of tax Year ended 31 December 2023 2022 18,922 16,837 195 (4) 191 (5) 186 43 2 88 133 319 (160) (2) (162) (5) (167) (53) 2 408 357 190 Total comprehensive income for the year 19,241 17,027 Total comprehensive income attributable to: Equity shareholders of the Company Non-controlling interests Total comprehensive income for the year 19,038 203 16,940 87 19,241 17,027 The notes on pages 102 to 201 are an integral part of these consolidated financial statements. China Unicom (Hong Kong) Limited 95 CONSOLIDATED STATEMENT OF FIN ANC IAL POSITION At 31 December 2023 (All amounts in RMB millions) As at 31 December Note 2023 2022 ASSETS Non-current assets Property, plant and equipment Right-of-use assets Goodwill Interest in associates Interest in joint ventures Deferred income tax assets Contract assets Contract costs Financial assets measured at fair value Other assets Current assets Inventories Contract assets Accounts receivable Prepayments and other current assets Amounts due from ultimate holding company Amounts due from related parties Amounts due from domestic carriers Financial assets measured at fair value Short-term bank deposits and restricted deposits Cash and cash equivalents Total assets 15 16 17 19 20 13 21 22 23 25 26 21 27 28 45 45 23 24 29 355,995 52,608 2,771 44,188 10,240 817 86 8,493 5,217 22,535 352,433 59,227 2,771 42,469 8,582 469 61 5,857 4,109 20,442 502,950 496,420 2,217 279 38,692 26,208 4,610 588 2,267 24,428 11,079 47,733 1,882 271 26,331 21,155 4,606 465 1,944 19,593 14,699 55,297 158,101 146,243 661,051 642,663 Annual Report 2023 96 At 31 December 2023 (All amounts in RMB millions) EQUITY Equity attributable to equity shareholders of the Company Share capital Reserves Retained profits — Proposed final dividend — Others Non-controlling interests Total equity LIABILITIES Non-current liabilities Long-term bank loans Lease liabilities Deferred income tax liabilities Deferred revenue Amounts due to ultimate holding company Other obligations As at 31 December Note 2023 2022 30 31 32 33 36 13 37 45 38 254,056 (12,912) 4,088 106,242 254,056 (15,234) 3,335 99,462 351,474 341,619 2,424 1,917 353,898 343,536 1,252 30,617 600 9,212 881 939 1,528 36,429 950 7,832 300 1,218 43,501 48,257 China Unicom (Hong Kong) LimitedCONSOLIDATED STATEMENT OF FINANCIAL POSITION 97 As at 31 December Note 2023 2022 39 40 33 36 41 45 45 38 21 681 — 354 12,640 161,279 6,275 3,547 1,033 25,924 2,959 2,493 46,179 288 331 5,025 368 12,495 154,838 5,811 2,197 1,759 18,326 2,125 2,493 44,714 388 263,652 250,870 307,153 299,127 661,051 642,663 (105,551) (104,627) 397,399 391,793 Current liabilities Short-term bank loans Commercial papers Current portion of long-term bank loans Lease liabilities Accounts payable and accrued liabilities Bills payable Taxes payable Amounts due to ultimate holding company Amounts due to related parties Amounts due to domestic carriers Current portion of other obligations Contract liabilities Advances from customers Total liabilities Total equity and liabilities Net current liabilities Total assets less current liabilities The notes on pages 102 to 201 are an integral part of these consolidated financial statements. Approved and authorised for issue by the Board of Directors on 19 March 2024 and signed on behalf of the Board by: Chen Zhongyue Li Yuzhuo Chairman and Chief Executive Officer Executive Director and Chief Financial Officer Annual Report 2023 98 CONSOLIDATE D STATEMENT OF CHA NGES IN EQUITY For the year ended 31 December 2023 (All amounts in RMB millions) Attributable to equity shareholders of the Company Share capital Note General Investment risk revaluation Statutory Other Retained Non- controlling reserve reserve reserves reserves profits Total interests Balance at 1 January 2022 254,056 987 Total comprehensive income for the year Contribution from non-controlling interests Share of associate’s other reserves Appropriation to statutory reserves Dividends relating to 2021 final Dividends relating to 2022 interim Capital contribution relating to share-based payment borne by 32 32 A Share Company (as defined in Note 1) 44 Others — — — — — — — — — — — — — — — — (9,302) (162) — — — — — — — 32,815 (41,728) — — — 1,471 — — — — 357 235 38 — — — 55 — 95,509 16,745 — — (1,471) (2,937) (5,049) 332,337 16,940 235 38 — (2,937) (5,049) — — 55 — 1,096 87 739 — — — — — (5) Total equity 333,433 17,027 974 38 — (2,937) (5,049) 55 (5) Balance at 31 December 2022 254,056 987 (9,464) 34,286 (41,043) 102,797 341,619 1,917 343,536 Total comprehensive income for the year Contribution from non-controlling interests Appropriation to statutory reserves Dividends relating to 2022 final Dividends relating to 2023 interim Capital contribution relating to share-based payment borne by A Share Company Others 32 32 44 — — — — — — — — — — — — — — 187 — — — — — — — — 1,647 — — — — 125 44 — — — 282 37 18,726 — (1,647) (3,335) (6,211) 19,038 44 — (3,335) (6,211) — — 282 37 203 342 — — — — (38) 19,241 386 — (3,335) (6,211) 282 (1) Balance at 31 December 2023 254,056 987 (9,277) 35,933 (40,555) 110,330 351,474 2,424 353,898 The notes on pages 102 to 201 are an integral part of these consolidated financial statements. China Unicom (Hong Kong) Limited 99 CONSOLIDATED STATEMENT OF C ASH FLOWS For the year ended 31 December 2023 (All amounts in RMB millions) Year ended 31 December Note 2023 2022 106,022 103,365 2,105 (1,906) (3,830) 1,747 (1,150) (3,425) Cash flows from operating activities Cash generated from operations Interest received Interest paid Income tax paid Net cash inflow from operating activities 102,391 100,537 Cash flows from investing activities Purchase of property, plant and equipment, right-of-use assets and other assets (a) Proceeds from disposal of property, plant and equipment and other assets Acquisition of financial assets measured at fair value through profit or loss (“FVPL”) Proceeds from disposal of financial assets measured at FVPL Acquisition of debt securities measured at FVOCI (recycling) Proceeds from disposal of debt securities measured at FVOCI (recycling) Proceeds from equity securities measured at FVOCI (non-recycling) (Increase)/decrease in other financial assets measured at amortised cost Dividends received from financial assets measured at FVOCI (non-recycling) Acquisition of interest in associates Acquisition of interest in joint ventures Proceeds from disposal of associates and joint ventures Dividends received from associates Dividends received from joint venture Placement of short-term bank deposits and restricted deposits Release of short-term bank deposits and restricted deposits Lending by Unicom Group Finance Company Limited (“Finance Company”) to a related party Repayment of loans from a related party to Finance Company (79,375) 1,388 (1,230) 1,707 (22,980) 17,397 — (5,424) 159 (776) (5) 400 1,246 150 (11,015) 12,815 (5,700) 5,700 (72,470) 1,710 (1,741) 1,876 (17,630) 26,864 1 700 149 (1) — — 998 150 (9,818) 7,300 (11,800) 17,600 Net cash outflow from investing activities (85,543) (56,112) Annual Report 2023 100 For the year ended 31 December 2023 (All amounts in RMB millions) Cash flows from financing activities Capital contributions from non-controlling interests Proceeds from bank loans and other obligations Proceeds from commercial papers Loans from related parties Repayment of short-term bank loans Repayment of long-term bank loans Repayment of commercial papers Repayment of related party loans Repayment of promissory notes Repayment of corporate bonds Capital element of lease rentals paid Payment of issuing expense for commercial papers Dividends paid to equity shareholders of the Company Net deposits with Finance Company Decrease in statutory reserve deposits placed by Finance Company Repayment of other obligations Year ended 31 December Note 2023 2022 386 711 — 583 (330) (385) (5,000) (913) — — (12,103) — (9,546) 949 1,542 (409) 867 330 5,000 471 (385) (420) (6,800) — (1,000) (2,000) (13,373) (5) (7,986) 621 870 — Net cash outflow from financing activities (24,515) (23,810) Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents, beginning of year Effect of changes in foreign exchange rate (7,667) 55,297 103 20,615 34,280 402 Total cash and cash equivalents, end of year 29 47,733 55,297 Analysis of the balances of cash and cash equivalents: Cash balances Bank balances — 47,733 — 55,297 47,733 55,297 (a) Major non-cash transaction: On 13 December 2022, the Board of Directors of the Company approved China United Network Communications Corporation Limited (“CUCL”) and China Tower Corporation Limited (“Tower Company”) to sign the commercial pricing agreement and the service agreement, which constituted a lease modification under HKFRS 16, “Leases”, the transaction has no impact on the consolidated statement of cash flows for the year ended 31 December 2022. Details of this transaction are set out in Note 16 and Note 45. The notes on pages 102 to 201 are an integral part of these consolidated financial statements. China Unicom (Hong Kong) LimitedCONSOLIDATED STATEMENT OF CASH FLOWS 101 Year ended 31 December 2023 2022 22,945 20,588 84,847 (2,105) 1,956 1,181 6,356 (159) (14) (1) (2) (424) (114) (2,519) (1,803) 282 (18,212) (28) (8,498) (94) 278 (199) (193) (4) (123) (323) 12,124 515 (100) 1,465 1,464 (49) 25 6,714 834 86,829 (1,747) 1,046 1,882 6,918 (149) (72) — — (438) (24) (2,153) (1,593) 55 (13,718) 147 (5,529) (338) (1,083) (1,108) (3,611) 188 (195) 63 14,866 742 266 (990) 980 83 (2,440) 4,037 (137) The reconciliation of profit before income tax to cash generated from operations is as follows: Profit before income tax Adjustments for: Depreciation and amortisation Interest income Finance costs Loss on disposal of property, plant and equipment Impairment losses under expected credit loss (“ECL”) model and write-down of inventories Dividends from financial assets measured at FVOCI (non-recycling) Gains on disposal of financial assets measured at FVPL Gains on disposal of financial assets measured at FVOCI (recycling) Dividends from financial assets at FVPL Investment income from debt securities measured at FVOCI (recycling) Fair value gains on financial assets measured at FVPL Share of net profit of associates Share of net profit of joint ventures Expenses for restricted shares of A Share Company granted to the Group’s employees Changes in working capital: Increase in accounts receivable (Increase)/decrease in contract assets Increase in contract costs Increase in inventories Decrease/(increase) in restricted deposits Increase in other assets Increase in prepayments and other current assets (Increase)/decrease in amounts due from ultimate holding company Increase in amounts due from related parties (Increase)/decrease in amounts due from domestic carriers Increase in accounts payable and accrued liabilities Increase in other taxes payable (Decrease)/increase in advances from customers Increase/(decrease) in contract liabilities Increase in deferred revenue (Decrease)/increase in other obligations Increase/(decrease) in amounts due to ultimate holding company Increase in amounts due to related parties Increase/(decrease) in amounts due to domestic carriers Cash generated from operations 106,022 103,365 The notes on pages 102 to 201 are an integral part of these consolidated financial statements. Annual Report 2023 102 NOT ES TO THE CONSO LIDATED FINANCIAL STATEMENTS For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 1. ORGANISATION AND PRINCIPAL ACTIVITIES China Unicom (Hong Kong) Limited (the “Company”) was incorporated as a limited liability company in the Hong Kong Special Administrative Region (“Hong Kong”), the People’s Republic of China (the “PRC”) on 8 February 2000. The principal activity of the Company is investment holding. The principal activities of the Company’s subsidiaries are the provision of comprehensive telecommunications services. The Company and its subsidiaries are hereinafter referred to as the “Group”. The address of the Company’s registered office is 75th Floor, The Center, 99 Queen’s Road Central, Hong Kong. The shares of the Company were listed on The Stock Exchange of Hong Kong Limited (“SEHK”) on 22 June 2000. The substantial shareholders of the Company are China Unicom (BVI) Limited (“Unicom BVI”) and China Unicom Group Corporation (BVI) Limited (“Unicom Group BVI”). The majority of equity interests in Unicom BVI is owned by China United Network Communications Limited (hereinafter referred to as “A Share Company”), a joint stock company incorporated in the PRC on 31 December 2001, with its A shares listed on the Shanghai Stock Exchange on 9 October 2002. The directors of the Company consider Unicom BVI and China United Network Communications Group Company Limited (a state-owned enterprise established in the PRC, hereinafter referred to as “Unicom Group”) as the immediate holding company and ultimate holding company, respectively. 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Statement of compliance The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), which collective term includes all applicable individual HKFRSs, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the HKICPA. The consolidated financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the SEHK (the “Listing Rules”) and the Hong Kong Companies Ordinance. China Unicom (Hong Kong) Limited103 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.2 Basis of preparation The consolidated financial statements have been prepared under the historical cost basis, except for certain financial instruments that are measured at fair values at the end of each reporting period. The consolidated financial statements prepared by the PRC subsidiaries for PRC statutory reporting purposes are based on Chinese Accounting Standards for Business Enterprises issued by the Ministry of Finance (the “MOF”) of the PRC, which became effective from 1 January 2007 with certain transitional provisions. The Group also prepared consolidated financial statements in accordance with Chinese Accounting Standards for Business Enterprises (“PRC financial statements”). There are certain differences between the Group’s HKFRS financial statements and PRC financial statements. The principal adjustments made to PRC financial statements to conform to HKFRSs include the following: • reversal of the revaluation surplus or deficit and related amortisation charges arising from the revaluation of prepayments for the leasehold land performed by independent valuers for the purpose of reporting to relevant PRC government authorities, and adjustment for corresponding deferred taxation; • • recognition of goodwill associated with the acquisition of certain subsidiaries prior to 2005; and recognition of the dilution gain or loss of interest in equity method investees. (a) Going Concern Assumption As at 31 December 2023, current liabilities of the Group exceeded current assets by approximately RMB105.6 billion (2022: approximately RMB104.6 billion). Considering the current economic conditions and taking into account of the Group’s expected capital expenditure in the foreseeable future, management has comprehensively considered the Group’s available sources of funds as follows: • • The Group’s continuous net cash inflows from operating activities; Approximately RMB201.0 billion of revolving banking facilities of which approximately RMB190.1 billion was unutilised as at 31 December 2023; and • Other available sources of financing from domestic banks and other financial institutions in view of the Group’s good credit history. In addition, the Group believes that it has the ability to raise funds from short, medium and long-term perspectives and maintain reasonable financing costs through appropriate financing portfolio. Based on the above considerations, the Board of Directors is of the opinion that the Group has sufficient funds to meet its working capital commitments, expected capital expenditure and debt obligations. As a result, the consolidated financial statements of the Group for the year ended 31 December 2023 have been prepared on a going concern basis. Annual Report 2023104 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.2 Basis of preparation (Continued) (b) Critical Accounting Estimates and Judgment The preparation of the consolidated financial statements in conformity with HKFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgments made by management in the application of HKFRSs that have significant effect on the consolidated financial statements and major sources of estimation uncertainty are discussed in Note 4. (c) New Accounting Standards and Amendments The HKICPA has issued a number of new and amendments to HKFRSs that are first effective for the current accounting period of the Group: • • • • • HKFRS 17 (including the October 2020 and February 2022 Amendments to HKFRS 17), “Insurance Contracts” Amendments to HKAS 8, “Definition of Accounting Estimates” Amendments to HKAS 12, “Deferred Tax related to Assets and Liabilities arising from a Single Transaction” Amendments to HKAS 12, “International Tax Reform-Pillar Two Model Rules” Amendments to HKAS 1 and HKFRS Practice Statement 2, “Disclosure of Accounting Policies” In addition, the Group applied the agenda decision of the International Financial Reporting Standard Interpretations Committee of the International Accounting Standard Board (the “Committee”), including “Definition of a Lease — Substitution Rights” (IFRS 16, “Leases”), which is relevant to the Group. Given that HKFRSs contain wordings that are almost identical to the equivalent IFRS Standards except for minor differences, the agenda decision of the Committee is equally applicable to the Group. The amendments to HKAS 12, “Deferred Tax related to Assets and Liabilities arising from a Single Transaction” narrow the scope of the recognition exemption of deferred tax liabilities and deferred tax assets in paragraphs 15 and 24 of HKAS 12, “Income Taxes” so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS105 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.2 Basis of preparation (Continued) (c) New Accounting Standards and Amendments (Continued) In accordance with the transition provision: (i) the Group has applied the new accounting policy retrospectively to leasing transactions that occurred on or after 1 January 2022; (ii) the Group also, as at 1 January 2022, recognised a deferred tax asset (to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised) and a deferred tax liability for all deductible and taxable temporary difference associated with right-of-use-assets and lease liabilities. The application of the amendments has had no material impact on the Group’s financial position and performance, except that the Group disclosed the related deferred tax liabilities and deferred tax assets on a gross basis in Note 13 which had no impact on the retained profits at the earliest period presented. Except for the effect mentioned above, the application of the above new and amendments and agenda decisions have had no material effect on the Group’s financial positions and performance for the current and prior periods and/or on the disclosures set out in these consolidated financial statements. (d) Amendments to HKFRSs in issue but not yet effective: The HKICPA has issued a number of amendments to HKFRSs which are not yet effective for the year ended 31 December 2023 and which have not been early adopted in these consolidated financial statements. Effective for accounting periods beginning on or after • • • • • • Amendments to HKAS 1, “Classification of Liabilities as Current or Non-current” and 1 January 2024 related amendments to Hong Kong Interpretation 5 (2020) Amendments to HKAS 1, “Non-current Liabilities with Covenants” 1 January 2024 Amendments to HKFRS 10 and HKAS 28, “Sale or Contribution of Assets between an to be determined Investor and its Associate or Joint Venture” Amendments to HKFRS 16, “Lease Liability in a Sale and Leaseback” Amendments to HKAS 7 and HKFRS 7, “Supplier Finance Arrangements” Amendments to HKAS 21, “Lack of Exchangeability” 1 January 2024 1 January 2024 1 January 2025 The Group has not applied any amendments to HKFRSs that is not yet effective for the current accounting period. The Group is assessing the impact of such amendments to standards, and will adopt the relevant amendments in the subsequent periods as required. So far it has concluded that the adoption of them is unlikely to have a significant impact on the consolidated financial statements. Annual Report 2023 106 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.3 Subsidiaries and non-controlling interests Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered. An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment. The Group adopted the purchase method of accounting to account for business combination of entities and businesses under common control before 2005. Under the purchase method of accounting in force at the date of the acquisition, the cost of an acquisition was measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed were measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired was recorded as goodwill. If the cost of acquisition was less than the fair value of the Group’s share of the identifiable net assets of the subsidiary acquired, the difference was recognised directly in the consolidated statement of income. Under HKFRSs, business combination of entity and business under common control of the Group after 2005 was accounted for using merger accounting in accordance with the Accounting Guideline 5 “Merger accounting for common control combinations” (“AG 5”) issued by the HKICPA in 2005. Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Group elects to measure non-controlling interests at the non-controlling interests’ proportionate share of the subsidiary’s net identifiable assets. Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated statement of income and the consolidated statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the Company. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS107 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.3 Subsidiaries and non-controlling interests (Continued) Loans from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated statement of financial position in accordance with Note 2.20 depending on the nature of the liability. Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised. When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (see Note 2.12) or, when appropriate, the cost on initial recognition of an investment in an associate or a joint venture (see Note 2.4). In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less impairment losses, unless the investment is classified as held for sale. 2.4 Associates, joint ventures and joint arrangement An associate is an entity in which the Group has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions. A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. A joint venture is an arrangement whereby the Group and other parties contractually agree to share control of the arrangement, and have rights to the net assets of the arrangement. An investment in an associate or a joint venture is accounted for in the consolidated financial statements under the equity method, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). Under the equity method, the investment is initially recorded at cost. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. The cost of the investment includes purchase price, other costs directly attributable to the acquisition of the investment, and any direct investment into the associate or joint venture that forms part of the Group’s equity investment. Thereafter, the investment is adjusted for the post acquisition change in the Group’s share of the investee’s net assets and any impairment loss relating to the investment. The Group’s share of the post-acquisition post-tax results of the investees and any impairment losses are recognised in the consolidated statement of income, whereas the Group’s share of the post-acquisition post-tax items of the investees’ other comprehensive income is recognised as other comprehensive income in the consolidated statement of comprehensive income. Annual Report 2023108 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.4 Associates, joint ventures and joint arrangement (Continued) When the Group’s share of losses exceeds its interest in the associate or the joint venture, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the Group’s interest is the carrying amount of the investment under the equity method together with the Group’s long-term interests that in substance form part of the Group’s net investment in the associate or the joint venture (after applying the ECL model to such other long-term interests where applicable). Unrealised profits and losses resulting from transactions between the Group and its associates and joint venture are eliminated to the extent of the Group’s interest in the investee, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss. If an investment in an associate becomes an investment in a joint venture or vice versa, retained interest is not remeasured. Instead, the investment continues to be accounted for under the equity method. In all other cases, when the Group ceases to have significant influence over an associate or joint control over a joint venture, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investee at the date when significant influence or joint control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. A joint operation is a joint arrangement whereby the Group and other parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the joint arrangement. The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with HKFRSs applicable to the particular assets, liabilities, revenues and expenses. To better share the risks and rewards associated with the construction, operation and maintenance of the 5G network infrastructure, the Group entered into a framework agreement with China Telecom Corporation Limited (“China Telecom”) to build, maintain and share one nationwide 5G access network infrastructure (the “Cooperation Agreement”). In accordance with the Cooperation Agreement, each of the Group and China Telecom is responsible for the construction and maintenance of 5G network infrastructure in their respective designated regions, and bears the associated construction, maintenance and operating costs. Both parties have established a joint operation mechanism and key decisions including overall network planning, construction project commencement and completion acceptance and a unified standard on construction and maintenance services across all regions are subject to mutual agreement by both parties. The Group has accounted for the arrangement as a joint operation that is not structured through a separate vehicle, and has recognised its share of assets, liabilities, revenues and expenses in accordance with the terms of the arrangement. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS109 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.5 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (the “CODM”). The CODM, who is responsible for allocating resources and assessing performance of the operating segments regularly, has been identified as the executive directors of the Company that make strategic decisions. 2.6 Foreign currency translation (a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entities operate (the “functional currency”). The consolidated financial statements are presented in RMB, which is the Company’s functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of income. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. When a fair value gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is also recognised in profit or loss. When a fair value gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange component of that gain or loss is also recognised in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. (c) Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of the statement of financial position; • Income and expenses for each statement presenting profit or loss and other comprehensive income are translated at average exchange rates (unless the use of the average rate for a period is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and • All resulting exchange differences are recognised in other comprehensive income and as a separate component of equity into other reserves. On consolidation, exchange differences arising from the translation of the net investment in foreign operations are recognised in other comprehensive income. When a foreign operation is sold, such exchange differences attributable to the equity shareholders of the Company are reclassified to the statement of income as part of the gain or loss on disposal. Annual Report 2023110 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.7 Property, plant and equipment (a) Construction-in-progress Construction-in-progress (“CIP”) mainly represents buildings, plant and equipment under construction and pending installation, and is stated at cost less accumulated impairment losses. Costs include construction and acquisition costs, and interest charges arising from borrowings used to finance the assets during the construction period. No provision for depreciation is made on CIP until such time as the assets are completed and ready for its intended use. When the asset being constructed becomes available for use, the CIP is transferred to the appropriate category of assets. (b) Property, plant and equipment Property, plant and equipment held by the Group are stated at cost less accumulated depreciation and accumulated impairment losses, and are depreciated over their expected useful lives. Property, plant and equipment comprise buildings, telecommunications equipment, leasehold improvements, office furniture, fixtures, motor vehicles and other equipment. The cost of an asset, except for those acquired in exchange for a non-monetary asset or assets, comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use, including costs of testing whether the related assets is functioning properly. If an item of property, plant and equipment is acquired in exchange for another item of non-monetary assets, the cost of such an item of property, plant and equipment is measured at fair value unless (i) the exchange transactions lacks commercial substance or (ii) the fair value of neither the asset received nor the asset given up is reliably measurable. If the acquired item is not measured at fair value, its cost is measured at the carrying amount of the asset given up. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable at the time the costs are incurred that future economic benefits associated with the item will flow to the Group, and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the consolidated statement of income during the financial period in which they are incurred. (c) Depreciation Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their costs less their residual values over their estimated useful lives, as follows: Buildings Telecommunications equipment Office furniture, fixtures, motor vehicles and other equipment Depreciable life Residual rate 10–30 years 5–10 years 5–10 years 3% 0–3% 3% China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 111 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.7 Property, plant and equipment (Continued) (c) Depreciation (Continued) Leasehold improvements are depreciated over the shorter of their estimated useful lives and the lease terms. The assets’ residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each date of the statement of financial position. (d) Gain or loss on disposal of property, plant or equipment Gains or losses on disposal of property, plant or equipment are determined by comparing the net sales proceeds with the carrying amounts, and are recognised in the consolidated statement of income. 2.8 Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiaries at the date of acquisition. Goodwill is tested at least annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gain or loss on the disposal of an entity includes the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to a cash-generating unit (or group of cash-generating units) for the purpose of impairment testing, which are expected to benefit from the synergies of business combination in which the goodwill arose and represent the lowest level at which the goodwill is monitored for internal management purposes and not larger than an operating segment. If the recoverable amount is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the cash-generating unit (or group of cash-generating units). 2.9 Contract costs Contract costs are either the incremental costs of obtaining a contract with a customer or the costs to fulfil a contract with a customer which are not capitalised as inventory (see Note 2.15), property, plant and equipment (see Note 2.7) or intangible assets. Incremental costs of obtaining a contract are those costs that the Group incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained, e.g. an incremental sales commission. Incremental costs of obtaining a contract are capitalised when incurred if the costs are expected to be recovered, unless the expected amortisation period is one year or less from the date of initial recognition of the asset, in which case the costs are expensed when incurred. Other costs of obtaining a contract are expensed when incurred. Annual Report 2023112 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.9 Contract costs (Continued) Costs to fulfil a contract are capitalised if the costs relate directly to an existing contract or to a specifically identifiable anticipated contract, generate or enhance resources that will be used to provide goods or services in the future and are expected to be recovered. Costs that relate directly to an existing contract or to a specifically identifiable anticipated contract may include direct labour, direct materials, allocations of costs, costs that are explicitly chargeable to the customer and other costs that are incurred only because the Group entered into the contract. Other costs of fulfilling a contract, which are not capitalised as inventory, property, plant and equipment or intangible assets, are expensed as incurred. Capitalised contract costs are stated at cost less accumulated amortisation and impairment losses (see Note 2.13). Amortisation of capitalised contract costs is charged to profit or loss on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate. 2.10 Contract assets and contract liabilities A contract asset is recognised when the Group recognises revenue (see Note 2.25) before being unconditionally entitled to the consideration under the payment terms set out in the contract. Contract assets are assessed for ECL in accordance with the policy set out in Note 2.14 and are reclassified to receivables when the right to the consideration has become unconditional (see Note 2.16). A contract liability represents the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. The Group provides subscriber points reward program, the transaction price of providing telecommunications services and the subscriber points reward is allocated based on their standalone selling price. The allocated portion of transaction price for the subscriber points reward is recorded as contract liability when the rewards are granted and recognised as revenue when the points are redeemed or expired. For a single contract with the customer, either a net contract asset or a net contract liability is presented. For multiple contracts, contract assets and contract liabilities of unrelated contracts are not presented on a net basis. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS113 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.11 Other assets Other assets mainly represent (i) computer software; (ii) long-term prepaid services charges for transmission lines and electricity cables. (i) Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives on a straight-line basis. (ii) Long-term prepaid services charges for transmission lines and electricity cables are amortised using a straight-line method over service period. 2.12 Financial assets and financial liabilities The Group classifies its financial assets into two measurement categories: those measured at amortised cost and those measured at fair value. The determination is made at initial recognition and the classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. Financial assets measured at amortised cost Financial assets are classified under this category if they satisfy both of the following conditions: • The assets are held within a business model whose objective is to hold assets in order to collect contractual cash flows on the financial assets, but not for the purpose of realising fair value gains; and • The contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, with interest being the consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time. Cash and cash equivalents, short-term bank deposits and restricted deposits, accounts receivable, certain financial assets included in prepayments and other current assets, amounts due from ultimate holding company, amounts due from related parties, amounts due from domestic carriers and certain other assets are classified under this category. Financial assets under this category are carried at amortised cost using effective interest method less provision for impairment. The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. Interest income is recognised in the consolidated statement of income using the effective interest method and disclosed as interest income. The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. Gains and losses arising from derecognition of financial assets, being the differences between the net sales proceeds and the carrying values, are recognised in the consolidated statement of income. Annual Report 2023114 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.12 Financial assets and financial liabilities (Continued) Financial assets measured at fair value Investments and other financial assets are classified under this category if they do not meet the conditions to be measured at amortised cost. Financial assets under this category are debt and equity investments carried at fair value. Debt investments are classified as FVOCI (recycling), if the contractual cash flows of the investment comprise solely payments of principal and interest and the investment is held within a business model whose objective is achieved by both the collection of contractual cash flows and sale. Changes in fair value are recognised in other comprehensive income, except for the recognition in profit or loss of ECLs, interest income (calculated using the effective interest method) and foreign exchange gains and losses. When the investment is derecognised, the amount accumulated in other comprehensive income is recycled from equity to profit or loss. An investment in equity securities is classified as FVPL unless the equity investment is not held for trading purposes and on initial recognition of the investment, the Group makes an irrevocable election to designate the investment at FVOCI (non-recycling) such that subsequent changes in fair value are recognised in other comprehensive income. Such irrevocable elections are made on an instrument-by-instrument basis at the time of initial recognition, but may only be made if the investment meets the definition of equity from the issuer’s perspective. Where such an election is made, the amount accumulated in other comprehensive income remains in the investment revaluation reserve (non-recycling) until the investment is disposed of. At the time of disposal, the amount accumulated in the investment revaluation reserve (non-recycling) is transferred to retained profits. It is not recycled through profit or loss. Fair value gains or losses of financial assets measured at FVPL and dividends from an investment in equity securities, irrespective of whether classified as at FVPL or FVOCI, are recognised in profit or loss as other income in accordance with the policy set out in Note 2.27. Financial liabilities The Group’s financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVPL. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. Offsetting a financial asset and a financial liability A financial asset and a financial liability are offset as a net amount presented in the consolidated statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the recognised amounts; and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS115 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.13 Impairment of non-financial assets other than goodwill At the end of the reporting period, the Group reviews the carrying amounts of its property, plant and equipment, right-of-use assets, intangible assets with finite useful lives and contract costs to determine whether there is any indication that these assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the relevant asset is estimated in order to determine the extent of the impairment loss (if any). Intangible assets that are not yet available for use are not subject to amortisation and are tested for impairment at each date of the statement of financial position and whenever there is an indication that they may be impaired. For the purpose of assessing impairment, assets are estimated individually, or when it is not possible, grouped at the smallest levels for which there are largely independent identifiable cash inflows of those from other assets or groups of assets (the “cash-generating unit”). Before the Group recognises an impairment loss for assets capitalised as contract costs under HKFRS 15 “Revenue from contracts with customers” (“HKFRS 15”), the Group assesses and recognises any impairment loss on other assets related to the relevant contracts in accordance with applicable standards. Then, impairment loss, if any, for assets capitalised as contract costs is recognised to the extent the carrying amounts exceeds the remaining amount of consideration that the Group expects to receive in exchange for related goods or services less the costs which relate directly to providing those goods or services that have not been recognised as expenses. The assets capitalised as contract costs are then included in the carrying amount of the cash-generating unit to which they belong for the purpose of evaluating impairment of that cash-generating unit. An impairment loss is recognised for the amount by which the asset’s (or the cash-generating unit’s) carrying amount exceeds its recoverable amount. The recoverable amount is the higher of (i) fair value less costs of disposal and (ii) value in use. 2.14 Credit losses from financial instruments and contract assets The Group recognises a loss allowance for ECLs on the following items: — financial assets measured at amortised cost (including cash and cash equivalents, short-term bank deposits and restricted deposits, accounts receivable, certain financial assets included in prepayments and other current assets, amounts due from ultimate holding company, amounts due from related parties, amounts due from domestic carriers and certain other assets); — — contract assets as defined in HKFRS 15 (see Note 2.10); and debt securities measured at FVOCI (recycling). Financial assets measured at fair values, including financial assets measured at FVPL and financial assets measured at FVOCI (non-recycling), are not subject to the ECL assessment. Annual Report 2023116 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.14 Credit losses from financial instruments and contract assets (Continued) Measurement of ECLs ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. In measuring ECLs, the Group takes into account reasonable and supportable information that is available without undue cost or effort. This includes information about past events, current conditions and forecasts of future economic conditions. ECLs are measured on either of the following bases: — — twelve-month ECLs: these are losses that are expected to result from possible default events within the twelve months after the reporting date; and lifetime ECLs: these are losses that are expected to result from all possible default events over the expected lives of the items to which the ECL model applies. Loss allowances for accounts receivable and contract assets are always measured at an amount equal to lifetime ECLs. ECLs on financial assets assessed on collective basis are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the reporting date. For all other financial instruments, the Group recognises a loss allowance equal to twelve months ECLs unless there has been a significant increase in credit risk of the financial instrument since initial recognition, in which case the loss allowance is measured at an amount equal to lifetime ECLs. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS117 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.14 Credit losses from financial instruments and contract assets (Continued) Significant increases in credit risk In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the Group compares the risk of default occurring on the financial instrument assessed at the reporting date with that assessed at the date of initial recognition. The Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition: — — — — failure to make payments of principal or interest on their contractually due dates; an actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if available); an actual or expected significant deterioration in the operating results of the debtor; and existing or forecast changes in the technological, market, economic or legal environment that have a significant adverse effect on the debtor’s ability to meet its obligation to the Group. Depending on the nature of the financial instruments, the assessment of a significant increase in credit risk is performed on either an individual basis or a collective basis. When the assessment is performed on a collective basis, the financial instruments are grouped based on shared credit risk characteristics, such as past due status and credit risk ratings. ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s credit risk since initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss. Except for debt securities measured at FVOCI (recycling), the Group recognises an impairment gain or loss for all other financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, while corresponding adjustment of debt securities measured at FVOCI (recycling) is made to other comprehensive income without reducing its carrying amount. Annual Report 2023118 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.14 Credit losses from financial instruments and contract assets (Continued) Credit-impaired financial assets At each reporting date, the Group assesses whether a financial asset is credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable events: — — — — — significant financial difficulties of the debtor; a breach of contract, such as a default or delinquency in interest or principal payments; the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; it becoming probable that the borrower will enter into bankruptcy or other financial reorganisation; the disappearance of an active market for a security because of financial difficulties of the issuer. Write-off policy The gross carrying amount of a financial asset or contract asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognised in the consolidated statement of income. 2.15 Inventories Inventories, which primarily comprise handsets and accessories, are stated at the lower of cost and net realisable value. Cost is based on the first-in-first-out method and comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Net realisable value for all the inventories is determined on the basis of anticipated sales proceeds less estimated costs necessary to make the sale. Costs necessary to make the sale include incremental costs directly attributable to the sale and other costs necessary to sell inventories. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS119 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.16 Accounts receivable A receivable is recognised when the Group has an unconditional right to receive consideration. A right to receive consideration is unconditional if only the passage of time is required before payment of that consideration is due. If revenue has been recognised before the Group has an unconditional right to receive consideration, the amount is presented as a contract asset (see Note 2.10). Receivables are stated at amortised cost using the effective interest method less allowance for credit losses (see Note 2.14). 2.17 Short-term bank deposits and restricted deposits Short-term bank deposits are cash invested in fixed-term deposits with original maturities ranging from more than three months to one year. Restricted deposits mainly included statutory reserve deposits with the People’s Bank of China (the “PBOC”) placed by Finance Company and customers deposit placed by Unicompay Company Limited for e-payment services. 2.18 Cash and cash equivalents Cash and cash equivalents presented on the consolidated statement of financial position include: (a) cash, which comprises of cash on hand and demand deposits, excluding bank balances that are subject to regulatory restrictions that result in such balances no longer meeting the definition of cash; and (b) cash equivalents, which comprise of short-term (generally with original maturity of three months or less), highly liquid investments that are readily convertible to a known amount of cash and which are subject to an insignificant risk of changes in value. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. For the purposes of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above. 2.19 Government grants Government grants are recognised in the consolidated statement of financial position initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis in the same period in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are recognised as deferred revenue which consequently are effectively recognised in profit or loss over the useful life of the asset. Annual Report 2023120 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.20 Borrowings Borrowings including bank loans and commercial papers are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost, any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of income over the period of the instruments using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the date of the statement of financial position. 2.21 Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new shares are shown in equity as a deduction, net of tax, from the proceeds. Where any group company purchases the Company’s ordinary shares (treasury shares), the consideration paid, including any directly attributable incremental costs (net of tax) is deducted from equity attributable to equity shareholders of the Company and no gain or loss shall be recognised in the consolidated statement of income. 2.22 Employee benefits (a) Retirement benefits The Group participates in defined contribution pension schemes. For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group is required to make contributions to the pension insurance plans at certain percentage of the employees’ payroll. The contributions are recognised as employee benefit expenses when they are due. Prepaid contributions are recognised as an asset to the extent that a reduction in the future payments is available. For the years ended 31 December 2023 and 2022, no forfeited contributions may be used by the Group to reduce the existing level of contributions. (b) Medical insurance The Group’s contributions to basic and supplementary medical insurances are expensed as incurred. The Group has no further payment obligations once the contributions have been paid. (c) Housing benefits One-off cash housing subsidies paid to PRC employees are charged to the consolidated statement of income in the year in which it is determined that the payment of such subsidies is probable and the amounts can be reasonably estimated. The Group’s contributions to the housing fund, special monetary housing benefits and other housing benefits are expensed as incurred. The Group has no further payment obligations once the contributions have been paid. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS121 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.22 Employee benefits (Continued) (d) Supplementary benefits In addition to participating in local governmental defined contribution social insurance, individual subsidiaries of the Group also provide other post retirement supplementary benefits to their employees, including supplementary pension allowance, reimbursement of medical expenses and supplementary medical insurance. These post retirement supplementary benefits are accounted as defined benefit plan. For defined benefit plan, the Group’s obligation for this benefit plan is determined using the projected unit credit method and recognised as liability, with actuarial valuation carried out at the end of each annual reporting period. The actuarial valuation was carried out by Willis Towers Watson (Member of China Association of Actuaries), a qualified independent actuary. Actuarial assumptions mainly include discount rate and future mortality etc. This defined benefit plan does not have any plan assets. The present value of the defined benefit obligation is included in non-current other obligations and salary and welfare payables (current portion). As at 31 December 2023, the amount of the liability was RMB117 million (2022: RMB109 million). The remeasurement of liability is recognised in other comprehensive income, which is not allowed to reverse to profit or loss in subsequent period. (e) Share-based compensation costs The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of the share options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the share options granted at the grant date excluding the impact of any non-market vesting conditions (for example, revenue and profit targets) and is not subsequently remeasured. However, non-market vesting conditions are considered in determining the number of options that are expected to vest. At each date of the statement of financial position, the Group revises its estimates of the number of share options that are expected to vest. The Group recognises the impact of the revision of original estimates, if any, in the consolidated statement of income of the period in which the revision occurs, with a corresponding adjustment to equity. The equity amount is recognised in other reserves until either the option is exercised (when it is included in the amount recognised in share capital for the shares issued) or the option expires (when it is released directly to retained profits). (f) Restricted A-Share Incentive Scheme Restricted shares granted by A Share Company to the employees of the Group is treated as a capital contribution. The fair value of the core employee services received in exchange for the grant of the restricted shares is recognised as an expense over the vesting period, with a corresponding credit to equity. The total amount to be expensed is determined by reference to the fair value of the granted shares measured as of the grant date less the subscription price. At the end of each reporting period, the Group revises its estimates of the number of restricted shares that are expected to be vested. The impact of the revision of the original estimates, if any, is recognised in profit or loss, with a corresponding adjustment to equity. Annual Report 2023122 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.23 Accounts payable Accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Accounts payable are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. 2.24 Provisions Provisions are recognised when the Group has present legal or constructive obligations as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small (if the other recognition criteria are met). Provisions are measured at the present value of the pre-tax amount of expenditures expected to be required to settle the obligation that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. 2.25 Revenue recognition Income is classified by the Group as revenue when it arises from the provision of services and the sale of goods in the ordinary course of the Group’s business. Revenue is recognised when a performance obligation is satisfied (i.e. when control over a product or service is transferred to the customer) at the amount of promised consideration to which the Group is expected to be entitled, excluding those amounts collected on behalf of third parties. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts. A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially the same. For contracts that contain more than one performance obligations, the Group allocates the transaction price to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling price of the distinct good or service underlying each performance obligation is determined at contract inception. It represents the price at which the Group would sell a promised good or service separately to a customer. If a stand-alone selling price is not directly observable, the Group estimates it using appropriate techniques such that the transaction price ultimately allocated to any performance obligation reflects the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods or services to the customer. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS123 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.25 Revenue recognition (Continued) Where the contract contains a financing component which provides a significant financing benefit to the customer for more than twelve months, revenue is measured at the present value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing transaction with the customer, and interest income is accrued separately under the effective interest method. Where the contract contains a financing component which provides a significant financing benefit to the Group, revenue recognised under that contract includes the interest expense accreted on the contract liability under the effective interest method. The Group takes advantage of the practical expedient in HKFRS 15 and does not adjust the consideration for any effects of a significant financing component if the period of financing is twelve months or less. Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following criteria is met: • the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs; • • the Group’s performance creates or enhances an asset that the customer controls as the Group performs; or the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. Further details of the Group’s revenue recognition policies are as follows: • • Voice usage and monthly fees are recognised when the services are rendered; Revenues from the provision of broadband and mobile data services are recognised when the services are provided to customers; • Data and internet application service revenues, which mainly represent revenue from the provision of data storage and application, information communications technology and other internet related services, are recognised during the period of fulfillment of services obligation; • Other value-added services revenues, which mainly represents revenue from the provision of services such as short message, cool ringtone, personalised ring, caller number display and secretarial services to subscribers etc., are recognised when services are rendered; • Interconnection fees, which represent revenue from other domestic and foreign telecommunications operators for the use of the Group’s telecommunications network, are recognised when services are rendered; • Revenue from transmission lines usage and associated services, which mainly represent income from offering transmission lines and customer-end equipment to customers for usage and related services, are recognised upon fulfillment of services obligation over the respective usage and service period; Annual Report 2023124 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.25 Revenue recognition (Continued) • Standalone sales of telecommunications products, which mainly represent handsets and accessories, and telecommunications equipment, are recognised when control has been transferred to the buyers; • The Group offers preferential packages to customers which include bundle sale of mobile handsets and provision of services. The total contract consideration of such preferential packages is allocated to service revenue and sales of handsets based on their standalone selling prices. Revenue relating to the sale of handset is recognised when the title is passed to the customer whereas service revenue is recognised based upon the actual usage of telecommunications services. In general, revenue from rendering of telecommunication services are recognised over-time during the period of fulfillment of services obligation using output method, whereas revenue from sales of handsets and other telecommunications equipment are treated as separate performance obligations, are recognised at a point in time. When another party is involved in providing goods or services to a customer, the Group determines whether the nature of its promise is a performance obligation to provide the specified goods or services itself (i.e. the Group is a principal) or to arrange for those goods or services to be provided by the other party (i.e. the Group is an agent). The Group is a principal if it controls the specified good or service before that good or service is transferred to a customer. The Group is an agent if its performance obligation is to arrange for the provision of the specified good or service by another party. In this case, the Group does not control the specified good or service provided by another party before that good or service is transferred to the customer. When the Group acts as an agent, it recognises revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified goods or services to be provided by the other party. 2.26 Interest income Interest income from deposits in banks or other financial institutions is recognised on a time proportion basis, using the effective interest method. For financial assets measured at amortised cost that are not credit-impaired, the effective interest rate is applied to the gross carrying amount of the asset. For credit impaired financial assets, the effective interest rate is applied to the amortised cost of the asset. 2.27 Dividend income Dividend income is recognised when the right to receive payment is established. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS125 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.28 Lease At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is conveyed where the customer has both the right to direct the use of the identified asset and to obtain substantially all of the economic benefits from that use. (a) As a lessee At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone prices. At the lease commencement date, the Group recognises a right-of-use asset and a lease liability, except for short-term leases of primarily computers and office furniture that have a lease term of 12 months or less and do not contain a purchase option and leases of low-value assets. When the Group enters into a lease in respect of a low-value asset, the Group decides whether to capitalise the lease on a lease-by-lease basis. The lease payments associated with those leases which are not capitalised are recognised as an expense on a systematic basis over the lease term. Where the lease is capitalised, the lease liability is initially recognised at the present value of the lease payments payable over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, using a relevant incremental borrowing rate. After initial recognition, the lease liability is adjusted by interest accretion and lease payments. Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liability and hence are charged to profit or loss in the accounting period in which they are incurred. The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which comprises the initial amount of the lease liability plus any lease payments made at or before the commencement date, and any initial direct costs incurred. Where applicable, the cost of the right-of-use assets also includes an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, discounted to their present value, less any lease incentives received. The right-of-use asset is subsequently stated at cost less accumulated depreciation and impairment losses (see Note 2.13). Right-of-use assets are subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, or there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or there is a change arising from the reassessment of whether the Group will be reasonably certain to exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. Annual Report 2023126 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.28 Lease (Continued) (a) As a lessee (Continued) The lease liability is also remeasured when there is a change in the scope of a lease or the consideration for a lease that is not originally provided for in the lease contract (“lease modification”) that is not accounted for as a separate lease. In this case the lease liability is remeasured based on the revised lease payments and lease term using a revised discount rate at the effective date of the modification. The Group accounts for the remeasurement of lease liabilities by making corresponding adjustments to the relevant right-of-use assets. In the consolidated statement of financial position, the current portion of long-term lease liabilities is determined as the present value of contractual payments that are due to be settled within twelve months after the reporting period. The Group presents right-of-use assets and lease liabilities separately in the consolidated statement of financial position. (b) As a lessor When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to the ownership of an underlying assets to the lessee. If this is not the case, the lease is classified as an operating lease. When a contract contains lease and non-lease components, the Group allocates the consideration in the contract to each component on a relative stand-alone selling price basis. The rental income from operating leases is recognised in profit or loss in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net lease payments receivable. Variable lease payments that do not depend on an index or a rate are recognised as income in the accounting period in which they are earned. When the Group is an intermediate lessor, the sub-leases are classified as a finance lease or as an operating lease with reference to the right-of-use asset arising from the head lease. If the head lease is a short-term lease to which the Group applies the exemption described in Note 2.28(a), then the Group classifies the sub-lease as an operating lease. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS127 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.29 Borrowing costs Borrowing costs are expensed as incurred, except for interest directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use, in which case they are capitalised as part of the cost of that asset. Capitalisation of borrowing costs commences when expenditures for the asset and borrowing costs are being incurred and the activities to prepare the asset for its intended use are in progress. Borrowing costs are capitalised up to the date when substantially all the activities necessary to prepare the project is completed and ready for its intended use. To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation is determined at the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that funds are borrowed generally and used for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate to the expenditures on that asset. The capitalisation rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalised during a period does not exceed the amount of borrowing cost incurred during that period. Other borrowing costs are recognised as expenses when incurred. 2.30 Taxation (a) Current income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted at the date of the statement of financial position in the jurisdictions where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of the amount expected to be paid to the tax authorities. (b) Deferred income tax Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits. Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised. Annual Report 2023128 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.30 Taxation (Continued) (b) Deferred income tax (Continued) The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination) and at the time of the transaction does not give rise to equal taxable and deductible temporary differences, and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future. The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied to the same taxable entity by the same taxation authority. For the purposes of measuring deferred tax for leasing transactions in which the Group recognises the right-of-use assets and the related lease liabilities, the Group first determines whether the tax deductions are attributable to the right-of-use assets or the lease liabilities. For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group applies HKAS 12 requirements to the lease liabilities, and the related assets separately. The Group recognises a deferred tax asset related to lease liabilities to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised and a deferred tax liability for all taxable temporary differences. Current and deferred income tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred income tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. 2.31 Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the period in which the dividends are approved by the Company’s shareholders. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS129 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.32 Research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development activities (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated: • • • • • the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and • the ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally-generated intangible asset is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred. For the year ended 31 December 2023, research and development expenditure recognised as expense in the consolidated statement of income was RMB8,099 million (2022: RMB6,836 million). 2.33 Earnings per Share Basic earnings per share is computed by dividing the profit attributable to equity shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is computed by dividing the profit attributable to equity shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, after adjusting for the effects of the dilutive potential ordinary shares. Annual Report 2023130 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 2. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (Continued) 2.34 Related parties (a) A person, or a close member of that person’s family, is related to the Group if that person: (i) has control or joint control over the Group; (ii) has significant influence over the Group; or (iii) is a member of the key management personnel of the Group or the Group’s parent. (b) An entity is related to the Group if any of the following conditions applies: (i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others); (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member); (iii) Both entities are joint ventures of the same third party; (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity; (v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group; (vi) The entity is controlled or jointly controlled by a person identified in (a); or (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS131 3. FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS 3.1 Financial risk factors The Group’s operating activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk, cash flow and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. Financial risk management is carried out by the Group’s headquarter, following the overall direction determined by the executive directors of the Company. The Group’s headquarter identifies and evaluates financial risks in close co-operation with the Group’s operating units. (a) Market risk (i) Foreign exchange risk The Group’s major operational activities are carried out in Mainland China and a majority of the transactions are denominated in RMB. The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to United States dollars (“US dollars”), Hong Kong dollars (“HK dollars” or “HKD”) and European dollars (“Euro”). Exchange risk mainly exists with respect to the financial assets and financial liabilities denominated in foreign currencies including balances with international carriers, cash and cash equivalents. The Group’s headquarter is responsible for monitoring the amount of monetary assets and liabilities denominated in foreign currencies. From time to time, the Group may consider entering into forward exchange contracts or currency swap contracts to mitigate the foreign exchange risk. During the years of 2023 and 2022, the Group had not entered into any forward exchange contracts or currency swap contracts. The following table details the Group’s exposure at the end of the reporting period to currency risk arising from recognised assets or liabilities denominated in a currency other than the functional currency of the entity to which they relate and have been translated to RMB at the applicable rates quoted by the PBOC as at 31 December 2023 and 2022. Annual Report 2023132 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 3. FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued) 3.1 Financial risk factors (Continued) (a) Market risk (Continued) (i) Foreign exchange risk (Continued) Original currency millions 2023 Exchange rate RMB equivalent millions Original currency millions 2022 Exchange rate RMB equivalent millions 55 698 22 199 — 28 — — 79 2 856 4 33 5 0.91 7.08 7.86 0.05 9.04 5.38 4.85 0.91 7.08 7.86 0.05 9.04 5.38 4.85 50 4,945 176 10 2 149 1 5,333 — 560 16 43 36 177 24 856 38 692 19 19 — 28 — — 112 2 1,396 2 26 7 0.89 6.96 7.42 0.05 8.39 5.18 4.71 0.89 6.96 7.42 0.05 8.39 5.18 4.71 34 4,818 139 1 — 147 2 5,141 — 780 15 73 17 135 33 1,053 227 7.86 1,783 217 7.42 1,613 61 7.08 433 — 6.96 — 8,405 7,807 Cash and cash equivalents: — denominated in HK dollars — denominated in US dollars — denominated in Euro — denominated in Japanese Yen (“JPY”) — denominated in Great Britain Pound (“GBP”) — denominated in Singapore dollars (“SGD”) — denominated in Australian dollars (“AUD”) Sub-total Accounts receivable: — denominated in HK dollars — denominated in US dollars — denominated in Euro — denominated in JPY — denominated in GBP — denominated in SGD — denominated in AUD Sub-total Financial assets measured at FVOCI: — denominated in Euro Capital bonds measured at amortised cost: — denominated in US dollars Total Borrowings: — denominated in US dollars — denominated in Euro 22 1 7.08 7.86 Sub-total Accounts payable: — denominated in HK dollars — denominated in US dollars — denominated in Euro — denominated in JPY — denominated in GBP — denominated in SGD Sub-total Total 1,084 97 6 — — — 0.91 7.08 7.86 0.05 9.04 5.38 153 10 163 982 687 47 — — — 1,716 1,879 25 1 6.96 7.42 400 61 1 — 1 6 0.89 6.96 7.42 0.05 8.39 5.18 171 11 182 357 425 7 — 8 31 828 1,010 China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 133 3. FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued) 3.1 Financial risk factors (Continued) (a) Market risk (Continued) (i) Foreign exchange risk (Continued) The Group did not have and does not believe it will have any difficulties in exchanging its foreign currency cash into RMB at the exchange rates quoted by the PBOC. As at 31 December 2023, if RMB had strengthened/weakened by 10% against foreign currencies, primarily with respect to US dollars, HK dollars, Euro, JPY, GBP, SGD and AUD, while all other variables are held constant, the profit after tax would increase/decrease approximately RMB356 million (2022: approximately RMB389 million) for monetary assets and liabilities denominated in foreign currencies, and other comprehensive income would increase/decrease approximately RMB178 million (2022: approximately RMB161 million) for financial assets measured at FVOCI (non-recycling) denominated in foreign currency. (ii) Price risk The Group is exposed to equity securities price risk because investments held by the Group are classified in the consolidated statement of financial position as financial assets measured at FVOCI (non-recycling) or FVPL. The financial assets measured at FVOCI (non-recycling) comprise primarily equity securities of Telefónica S.A. (“Telefónica”). As at 31 December 2023, if the share price of Telefónica had increased/decreased by 10%, while the exchange rate of RMB against Euro is held constant, other comprehensive income would increase/decrease approximately RMB178 million (2022: approximately RMB161 million). The listed investments measured at FVPL comprise primarily equity securities of certain PRC listed companies. As at 31 December 2023, if the price of the respective listed equity securities had increased/decreased by 10%, profit after tax would increase/decrease approximately RMB8 million (2022: approximately RMB7 million). (iii) Cash flow and fair value interest rate risk The Group’s interest-bearing assets are mainly represented by bank deposits, debt securities measured at FVOCI (recycling), financial assets held under resale agreements and investments in capital bonds. Management does not expect the changes in market deposit interest rates will have significant impact on the financial statements as the deposits are all short-term in nature and the interest involved will not be significant. Annual Report 2023134 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 3. FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued) 3.1 Financial risk factors (Continued) (a) Market risk (Continued) (iii) Cash flow and fair value interest rate risk (Continued) The Group’s interest rate risk mainly arises from interest-bearing borrowings including bank loans, commercial papers, related party loans and lease liabilities. Borrowings issued at floating rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk upon renewal. The Group determines the amount of its fixed rate or floating rate borrowings depending on the prevailing market conditions. During the years of 2023 and 2022, the Group’s borrowings were mainly at fixed rates and were mainly denominated in RMB. Increases in interest rates will increase the cost of new borrowings and the interest expense with respect to the Group’s outstanding floating rate borrowings, and therefore could have a material adverse effect on the Group’s financial performance. Management continuously monitors the interest rate position of the Group and makes decisions with reference to the latest market conditions. From time to time, the Group may enter into interest rate swap agreements to mitigate its exposure to interest rate risks in connection with the floating rate borrowings, although the Group did not consider it was necessary to do so in the years of 2023 and 2022. As at 31 December 2023, the Group had approximately RMB9,044 million (2022: approximately RMB12,598 million) of long-term and short-term borrowings in floating rates and approximately RMB45,127 million (2022: approximately RMB51,562 million) of long-term borrowings and lease liabilities in fixed rates. For the year ended 31 December 2023, if interest rates on the floating rate borrowings had increased/ decreased 50 basic points while all other variables are held constant, profit after tax would decrease/ increase approximately RMB34 million (2022: approximately RMB47 million). (b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents and short-term bank deposits with banks, as well as credit exposures to major corporate customers, individual subscribers and general corporate customers, related parties and other telecommunications operators. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS135 3. FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued) 3.1 Financial risk factors (Continued) (b) Credit risk (Continued) To limit exposure to credit risk relating to cash and cash equivalents and short-term bank deposits, the Group primarily places cash and cash equivalents and short-term bank deposits only with large state-owned financial institutions in the PRC and other banks with acceptable credit ratings. Therefore, the Group expects that there is no significant credit risk and does not expect that there will be any significant losses from non-performance by these counterparties. In addition, the Group has no significant concentrations of credit risk with respect to individual subscribers and corporate customers. The Group has policies to limit the credit exposure on receivables for services and sales of mobile handsets. The Group assesses the credit quality of all its customers and sets credit limits on them by taking into account their financial position, the availability of guarantee from third parties, their credit history and other factors such as current market conditions. The normal credit period granted by the Group to individual subscribers and general corporate customers is 30 days from the date of billing unless they meet certain specified credit assessment criteria. For major corporate customers, the credit period granted by the Group is based on the service contract terms, normally not exceeding 1 year. The utilisation of credit limits and settlement pattern of customers are regularly monitored by the Group. In respect of other receivables, individual credit evaluations are performed on all counterparties requiring credit over a certain amount. These evaluations focus on the counterparties’ past history of making payments when due and current ability to pay, and take into account information specific to the counterparties as well as the economic environment in which the counterparties operates. Credit risk relating to amounts due from related parties and other telecommunications operators is not considered to be significant as these companies are reputable and their receivables are settled on a regular basis. Annual Report 2023136 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 3. FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued) 3.1 Financial risk factors (Continued) (c) Liquidity risk Prudent liquidity risk management includes maintaining sufficient cash and availability of funds including the raising of bank loans and issuance of commercial papers. Due to the dynamic nature of the underlying business, the Group’s headquarter maintains flexibility in funding through having adequate amount of cash and cash equivalents and utilising different sources of financing when necessary. The following tables show the undiscounted cash flows of the financial liabilities and lease liabilities (including interest expense) categorised by time from the end of the period under review to the contractual maturity date. To the extent that interest flows are floating rate, the undiscounted amount is derived based on management’s best estimates at the end of the reporting period: At 31 December 2023 Long-term bank loans Lease liabilities Other obligations Short-term bank loans Accounts payable and accrued liabilities Bills payable Amounts due to ultimate holding company Amounts due to related parties Amounts due to domestic carriers At 31 December 2022 Long-term bank loans Lease liabilities Other obligations Short-term bank loans Commercial papers Accounts payable and accrued liabilities Bills payable Amounts due to ultimate holding company Amounts due to related parties Amounts due to domestic carriers Between Between Less than 1 and 2 and Over Carrying 1 year 2 years 5 years 5 years amounts 374 302 657 12,901 11,273 20,988 2,497 686 161,279 6,275 1,046 25,924 2,959 218 — — — 313 — — 616 — — — 601 — — 497 1,822 101 — — — — — — 1,606 43,257 3,432 681 161,279 6,275 1,914 25,924 2,959 213,941 12,106 22,862 2,420 247,327 388 370 719 12,750 11,055 28,272 692 1,313 2,497 334 5,083 154,838 5,811 1,759 18,326 2,125 256 — — — — — — — 872 — — — — 326 — — 92 — — — — — — — 1,896 48,924 3,711 331 5,025 154,838 5,811 2,059 18,326 2,125 203,911 11,681 30,189 2,097 243,046 Regarding the Group’s use of the going concern basis for the preparation of its financial statements, please refer to Note 2.2(a) for details. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 137 3. FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued) 3.2 Capital risk management The Group’s objectives when managing capital are: • To safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders. To support the Group’s stability and growth. To provide capital for the purpose of strengthening the Group’s risk management capability. • • In order to maintain or adjust the capital structure, the Group reviews and manages its capital structure actively and regularly to ensure optimal capital structure and shareholder returns, taking into account the future capital requirements of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. The Group monitors capital on the basis of the debt-to-capitalisation ratio. This ratio is calculated as interest-bearing debts over interest-bearing debts plus total equity. Interest-bearing debts represent commercial papers, short-term bank loans, long-term bank loans, lease liabilities, amounts due to ultimate holding company and amounts due to related parties, as shown in the consolidated statement of financial position. The interest-bearing debts do not include balance of deposits received by Finance Company of RMB7,746 million, as at 31 December 2023 (2022: RMB6,779 million). Annual Report 2023138 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 3. FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued) 3.2 Capital risk management (Continued) The Group’s debt-to-capitalisation ratios are as follows: Interest-bearing debts: — Short-term bank loans — Long-term bank loans — Commercial papers — Lease liabilities (non-current portion) — Amounts due to related parties — Amounts due to ultimate holding company — Current portion of long-term bank loans — Lease liabilities (current portion) Total equity 31 December 31 December 2023 2022 681 1,252 — 30,617 — 881 354 331 1,528 5,025 36,429 742 471 368 12,640 12,495 46,425 353,898 57,389 343,536 Interest-bearing debts plus total equity 400,323 400,925 Debt-to-capitalisation ratio 11.6% 14.3% 3.3 Fair value estimation Financial assets of the Group mainly include cash and cash equivalents, short-term bank deposits and restricted deposits, accounts receivable, the financial assets included in prepayments and other current assets, amounts due from ultimate holding company, related parties and domestic carriers, financial assets measured at fair value and certain other assets. Financial liabilities of the Group mainly include the financial liabilities included in accounts payable and accrued liabilities, bills payable, short-term bank loans, commercial papers, long-term bank loans, other obligations and amounts due to ultimate holding company, related parties and domestic carriers. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 139 3. FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued) 3.3 Fair value estimation (Continued) (a) Financial assets measured at fair value The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: • Level 1 valuation: unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. • Level 2 valuation: observable inputs which fail to meet Level 1, and not using significant unobservable inputs for which market data are not available. • Level 3 valuation: fair value measured using significant unobservable inputs. The following table presents the Group’s assets that are measured at fair value as at 31 December 2023: Level 1 Level 2 Level 3 Total Recurring fair value measurement: Equity securities measured at FVOCI (non-recycling) Financial assets measured at FVPL Debt securities measured at FVOCI (recycling) Total 1,929 2,443 23,837 28,209 — 53 — 53 113 1,270 — 2,042 3,766 23,837 1,383 29,645 The following table presents the Group’s assets that are measured at fair value as at 31 December 2022: Level 1 Level 2 Level 3 Total Recurring fair value measurement: Equity securities measured at FVOCI (non-recycling) Financial assets measured at FVPL Debt securities measured at FVOCI (recycling) Total 1,733 2,805 17,770 22,308 — 40 — 40 114 1,240 — 1,847 4,085 17,770 1,354 23,702 Annual Report 2023 140 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 3. FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued) 3.3 Fair value estimation (Continued) (a) Financial assets measured at fair value (Continued) The fair value of financial instruments traded in active markets is based on quoted market prices at the date of the statement of financial position. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1 and comprise primarily equity securities of Telefónica, debt securities issued by banks which are classified as financial assets measured at FVOCI and certain equity investments, investments in monetary funds that are classified as financial assets measured at FVPL. During the years ended 31 December 2023 and 2022, there were no transfer between Level 1 and Level 2, or transfer into or out of Level 3. The Group’s policy is to recognise transfers between levels of fair value hierarchy as at the end of the reporting period in which they occur. (b) Fair value of financial instruments carried at other than fair value As at 31 December 2023 and 2022, the carrying amounts, fair values and the level of fair values of the Group’s long-term financial assets and liabilities carried at amortised cost are disclosed below: Carrying amounts Fair value as at as at Carrying amounts Fair value as at as at 31 December 31 December Fair value measurements 31 December 31 December 2023 2023 as at 31 December 2023 categorised into 2022 2022 Level 1 Level 2 Level 3 Capital bonds Non-current portion of long-term bank loans Non-current portion of amounts due to ultimate 433 1,252 433 1,318 holding company 881 837 — — — 433 1,318 837 — — — — 1,528 — 1,571 300 291 The fair values of the non-current portion of long-term bank loans and non-current portion of amounts due to ultimate holding company are based on the expected cash flows of principal and interests payment discounted at market rates ranging from 0.57% to 4.20% (2022: 0.57% to 4.35%) per annum. The fair values of capital bonds is based on the expected cash flows of principal and interests discounted at market rate of 5.35% per annum. Besides, the carrying amounts of the Group’s other financial assets and liabilities carried at amortised cost approximated their fair values as at 31 December 2023 and 2022 due to the nature or short maturity of those instruments. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 141 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates may not be equal to the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. 4.1 Depreciation on property, plant and equipment Depreciation on the Group’s property, plant and equipment is calculated using the straight-line method to allocate cost up to residual values over the estimated useful lives of the assets. The Group reviews the useful lives and residual values periodically to ensure that the method and rates of depreciation are consistent with the expected pattern of realisation of economic benefits from property, plant and equipment. The Group estimates the useful lives and residual values of property, plant and equipment based on historical experience, taking into account anticipated technological changes. If there are significant changes from previously estimated useful lives and residual values, the amount of depreciation expenses may change. 4.2 Impairment of goodwill and long-lived assets The Group tests whether long-lived assets, including property, plant and equipment and right-of-use assets, have suffered from any impairment, in accordance with the accounting policy stated in Note 2.13. For goodwill, the impairment testing is performed annually at the end of each reporting period, in accordance with the accounting policy stated in Note 2.8. The recoverable amount of the cash-generating unit at the lowest level to which those assets belong has been determined based on a value in use calculation. Management estimates value in use based on estimated discounted pre-tax future cash flows of the cash generating unit. If there is any significant change in management’s assumptions, including discount rate, the revenue growth rate or amount of operating costs in the future cash flow projection, the estimated recoverable amount of the cash-generating unit and the Group’s results would be significantly affected. Such impairment losses are recognised in the consolidated statement of income. Accordingly, there will be an impact to the future results if there is a significant change in the recoverable amount of the cash-generating unit. Management uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount. No significant impairment loss on goodwill or long-lived assets was recognised for the years ended 31 December 2023 and 2022. 4.3 Allowance for ECLs For collective assessment, management estimates ECL allowance on accounts receivable and contract assets using a provision matrix based on the Group’s historical credit loss experience, and adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the reporting date. The Group monitored and reviewed the assumptions relating to ECL regularly. For the Group’s detailed assessment of credit risk, please refer to Note 3.1(b). Annual Report 2023142 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 5. SEGMENT INFORMATION The executive directors of the Company have been identified as the CODM. Operating segments are identified on the basis of internal reports that the CODM reviews regularly in allocating resources to segments and in assessing their performances. The CODM makes resources allocation decisions based on internal management functions and assesses the Group’s business performance as one integrated business instead of by separate business lines or geographical regions. Accordingly, the Group has only one operating segment and therefore, no segment information is presented. The Group primarily operates in Mainland China and accordingly, no geographic information is presented. No revenue from a single customer accounted for 10 percent or more of the Group’s revenue in all periods presented. 6. REVENUE Revenue from telecommunications services are subject to value-added tax (“VAT”) at VAT rates applicable to various telecommunications services. The VAT rates for basic telecommunications services and value-added telecommunications services are 9% and 6%, respectively, while VAT rate for sales of telecommunications products is 13%. Basic telecommunications services include business activities for the provision of voice services, and transmission lines usage and associated services etc. Value-added telecommunications services include business activities for the provision of short message service and multimedia message service, broadband and mobile data services, and data and internet application services etc. VAT is excluded from the revenue. Disaggregation of revenue by major services and products: Voice usage and monthly fees Broadband and mobile data services Data and internet application services Other value-added services Interconnection fees Transmission lines usage and associated services Other services Total service revenue Sales of telecommunications products Total Include: Revenue from contracts with customers within the scope of HKFRS 15 Revenue from other sources 2023 2022 21,207 154,748 89,645 29,190 12,878 22,666 4,836 335,170 37,427 21,303 155,918 77,780 26,170 12,947 20,448 4,782 319,348 35,596 372,597 354,944 371,324 1,273 353,835 1,109 China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 143 6. REVENUE (Continued) The Group’s revenue is primarily generated from the provision of voice usage, broadband and mobile data services, data and internet application services, other value-added services, interconnection services, transmission lines usage and associated services and sale of telecommunication products. The Group bills the majority of its customers based on a fixed rate and service volume each month, and then has a right to consideration from the customers. Transaction prices that were allocated to unsatisfied performance obligations as of the end of the reporting period are expected to be recognised within one to five years when services are rendered. The Group has applied the practical expedient in paragraph 121 of HKFRS 15 and therefore the information about remaining performance obligations is not disclosed for contracts that have an original expected duration of one year or less and for those performance obligations which are satisfied as invoiced. 7. NETWORK, OPERATION AND SUPPORT EXPENSES Note 2023 2022 Repairs and maintenance Power and water charges Charges for use of network, premises, equipment and facilities Charges for use of tower assets Others (i), (iii) (ii), (iii) 11,872 14,295 20,306 11,208 2,345 12,216 15,088 15,816 11,070 2,235 60,026 56,425 (i) During the years ended 31 December 2023 and 2022, charges for use of network, premises, equipment and facilities mainly included the non-lease components charges and charges relating to short-term leases, leases of low-value assets and variable lease payments which are recorded in profit or loss as incurred. (ii) During the years ended 31 December 2023 and 2022, charges for use of tower assets included the non-lease components charges (maintenance service, certain ancillary facilities usage and other related support services charges) and variable lease payments which are recorded in profit or loss as incurred. For related party transactions with Tower Company, see Note 45.3. (iii) Expense relating to short-term leases, leases of low-value assets and variable lease payments not included in the measurement of lease liabilities: Expense relating to short-term leases and leases of low value assets Variable lease payments not included in the measurement of lease liabilities* 2023 2,100 8,097 2022 1,771 7,243 * During the years ended 31 December 2023 and 2022, variable lease payments not included in the measurement of lease liabilities mainly included charges for use of tower assets and network, premises, equipment and facilities, which are measured based on revenue or usage and recorded in profit or loss when the event or condition that triggers those payments occurred. Annual Report 2023 144 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 8. EMPLOYEE BENEFIT EXPENSES Salaries and wages Contributions to defined contribution pension schemes Contributions to medical insurance Contributions to housing fund Other housing benefits Share-based compensation Note 2023 2022 45,522 9,067 3,594 4,460 14 282 44,813 8,423 3,239 4,174 22 55 62,939 60,726 44 8.1 Directors’ emoluments The remuneration of each director for the year of 2023 is set out below: Name of director Note (RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000) Salaries and Bonuses paid to pension Contributions Fees allowance and payable schemes Total (a) (b) Chen Zhongyue Liu Liehong Wang Junzhi Li Yuzhuo Cheung Wing Lam Linus Wong Wai Ming Chung Shui Ming Timpson Law Fan Chiu Fun Fanny — — — — 433 442 451 415 568 468 511 444 — — — — 360 210 324 324 — — — — 1,741 1,991 1,218 153 87 153 153 — — — — 546 1,081 765 988 921 433 442 451 415 5,496 China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 145 8. EMPLOYEE BENEFIT EXPENSES (Continued) 8.1 Directors’ emoluments (Continued) The remuneration of each director for the year of 2022 is set out below: Name of director Note (RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000) Salaries and Bonuses paid to pension Contributions Fees allowance and payable* schemes Total Liu Liehong Chen Zhongyue Wang Junzhi Li Yuzhuo Mai Yanzhou Cheung Wing Lam Linus Wong Wai Ming Chung Shui Ming Timpson Law Fan Chiu Fun Fanny (c) (d) — — — — — 414 423 431 397 364 591 240 176 425 — — — — 352 352 316 264 132 — — — — 140 140 140 118 55 — — — — 856 1,083 696 558 612 414 423 431 397 1,665 1,796 1,416 593 5,470 * In addition, according to the “Notice on the Compensation Information Disclosure of the Central Government Controlled Enterprises” (Guozifenpei [2016] No.339) (translated from 《關於做好中央企業負責人薪酬信息披露工作的通知》 (國資分 配[2016]339號)), certain directors were also entitled to deferred bonuses in relation to the years of 2019 to 2021. The deferred bonuses paid to Mr. Liu Liehong, Mr. Chen Zhongyue, Mr. Wang Junzhi and Mr. Mai Yanzhou were RMB74,000, RMB203,500, RMB16,600 and RMB586,000 respectively. Notes: (a) Mr. Chen Zhongyue was appointed as chairman and chief executive officer on 2 December 2023. (b) Mr. Liu Liehong resigned as executive director, chairman and chief executive officer on 30 July 2023. (c) Ms. Li Yuzhuo was appointed as executive director and chief financial officer on 28 February 2022. (d) Mr. Mai Yanzhou was appointed as executive director on 28 February 2022 and resigned as executive director on 30 May 2022. During the years of 2023 and 2022, no share options were granted to the directors. No directors waived the right to receive emoluments during the years ended 31 December 2023 and 2022. During the years of 2023 and 2022, the Company did not incur any payment to any director for loss of office or as an inducement to any director to join the Company. Annual Report 2023 146 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 8. EMPLOYEE BENEFIT EXPENSES (Continued) 8.2 Senior management’s emoluments Of the eight (2022: seven) senior management of the Company for the year ended 31 December 2023, four (2022: four) of them are directors of the Company and their remuneration has been disclosed in Note 8.1. For the remuneration of the remaining four (2022: three) senior management all fall within the band from RMBNil to RMB1,000,000 (2022: two fall within the band from RMBNil to RMB1,000,000 and one falls within the band from RMB1,000,001 to RMB1,500,000). 8.3 Five highest paid individuals Of the five highest paid individuals for the year ended 31 December 2023, five of them are staffs and four fall within the band from RMB2,500,001 to RMB3,000,000, one falls within the band from RMB4,000,001 to RMB4,500,000 (2022: five of them are staffs and one falls within the band from RMB2,000,001 to RMB2,500,000, two fall within the band from RMB2,500,001 to RMB3,000,000, one falls within the band from RMB3,000,001 to RMB3,500,000, and one falls within the band from RMB4,000,001 to RMB4,500,000). The aggregate of the emoluments in respect of the five (2022: five) highest paid individuals are as follows: Salaries and allowances Bonuses paid and payable Contributions to pension schemes 2023 2022 (RMB’000) (RMB’000) 3,929 8,659 1,996 1,579 12,334 993 14,584 14,906 During the years of 2023 and 2022, the Group did not incur any payment to the above five highest paid individuals for loss of office or as an inducement to these individuals to join or upon joining the Group. 9. COSTS OF TELECOMMUNICATIONS PRODUCTS SOLD Handsets and other telecommunication products Others 2023 2022 36,009 394 34,152 568 36,403 34,720 China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 147 10. OTHER OPERATING EXPENSES Note 2023 2022 Impairment losses under ECL, net of reversal Write-down of inventories Commission and other service expenses Advertising and promotion expenses Internet access terminal maintenance expenses Customer retention costs Auditors’ remuneration: — Audit of the financial statements — Other special audit and assurance services — Non-audit services Property management fee Office and administrative expenses Transportation expense Miscellaneous taxes and fees Service technical support expenses Repairs and maintenance expenses Loss on disposal of property, plant and equipment 15 Others 6,141 215 25,680 2,130 2,551 3,340 44 11 16 2,791 1,940 752 1,539 47,076 519 1,181 6,197 6,552 366 24,537 2,717 2,267 3,370 42 6 4 2,704 1,285 786 1,395 39,374 628 1,882 5,042 11. FINANCE COSTS 102,123 92,957 Note 2023 2022 Finance costs: — Interest on corporate bonds, promissory notes and commercial papers — Interest on lease liabilities — Interest on related party loans — Interest on bank loans and others — Less: Amounts capitalised in CIP 15 Total interest expense — Net exchange gain — Others 59 1,717 134 87 (16) 111 802 93 82 (28) 1,981 1,060 (55) 55 (15) 50 1,981 1,095 Annual Report 2023 148 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 12. OTHER INCOME — NET Dividend from financial assets measured at FVOCI (non-recycling) Government grants Additional deduction for VAT Investment income from debt securities measured at FVOCI (recycling) Fair value gains on financial assets measured at FVPL Gains on disposal of financial assets measured at FVPL Others 2023 159 995 1,912 424 114 14 (84) 2022 149 872 2,325 438 24 72 (30) 3,534 3,850 13. TAXATION Hong Kong profits tax has been provided at the rate of 16.5% (2022: 16.5%) on the estimated assessable profits for the year. Taxation on profits outside Hong Kong has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the jurisdictions in which the Group operates. The Company’s subsidiaries operate mainly in the PRC and the applicable statutory enterprise income tax rate is 25% (2022: 25%). Taxation for certain subsidiaries in the PRC was calculated at a preferential tax rate of 15% (2022: 15%). Provision for income tax on the estimated taxable profits for the year — Hong Kong — Mainland China and other jurisdictions Over provision in respect of prior years Deferred taxation Income tax expenses 2023 2022 77 4,630 (8) 36 3,422 (58) 4,699 3,400 (676) 351 4,023 3,751 China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 149 13. TAXATION (Continued) Reconciliation between actual income tax expense and accounting profit at PRC statutory tax rate: Note 2023 2022 Profit before income tax 22,945 20,588 Expected income tax expense at PRC statutory tax rate of 25% 5,736 5,147 Impact of different tax rates outside Mainland China Tax effect of preferential tax rate Additional deduction for qualified research and development costs Tax effect of non-deductible expenses Tax effect of non-taxable income from share of net profit of joint ventures Tax effect of non-taxable income from share of net profit of associates Over provision in respect of prior years (i) (i) Tax effect of unused tax losses not recognised, net of utilisation (ii) (51) (150) (921) 461 (451) (565) (8) (28) (40) (155) (662) 329 (398) (473) (58) 61 Actual tax expense 4,023 3,751 (i) According to the PRC enterprise income tax law and its relevant regulations, entities that are qualified as high and new technology enterprise under the tax law are entitled to a preferential income tax rate of 15% (2022: 15%). Certain subsidiaries of the Group obtained the approval of high and new technology enterprise and were entitled to a preferential income tax rate of 15% (2022: 15%), and certain research and development costs of the Group’s PRC subsidiaries are qualified for 100% (2022: 75% for the first three quarters and 100% for the fourth quarter) additional deduction for tax purpose. (ii) As at 31 December 2023, the Group did not recognise deferred tax assets in respect of tax losses amounting to approximately RMB334 million (2022: approximately RMB446 million), since it is not probable that future taxable profits will be available against which the deferred tax asset can be utilised. The tax losses can be carried forward for five to ten years from the year incurred and hence will be expired by the year of 2024 to 2033. As at 31 December 2023, the Group did not recognise deferred tax assets in respect of fair value changes on financial assets measured at FVOCI (non-recycling) amounting to approximately RMB9,682 million (2022: approximately RMB9,852 million), since it is not probable that the related tax benefit will be realised. Annual Report 2023 150 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 13. TAXATION (Continued) The movement of the net deferred tax assets/(liabilities) is as follows: Net deferred tax assets after offsetting: — Beginning of year — Deferred tax credited to the consolidated statement of income — Deferred tax (charged)/credited to other comprehensive income — Deferred tax credited to reserves — End of year Net deferred tax liabilities after offsetting: — Beginning of year — Deferred tax credited/(charged) to the consolidated statement of income — Deferred tax (charged)/credited to other comprehensive income — End of year 2023 2022 469 315 (7) 40 817 (950) 361 (11) (600) 271 189 9 — 469 (417) (540) 7 (950) The components of the deferred tax assets/(liabilities) recognised in the consolidated statement of financial position and the movements during the year are as follows: Unrecognised revaluation surplus on prepayments for the leasehold land Accruals of Unrealised Accelerated expenses not profit from the depreciation of Deferred tax arising from allowance PRC regulation tax losses for tax purpose Tower Company and equipment assets liabilities Others Total Credit loss determined under Unused yet deductible transactions with property, plant Right-of-use Lease (Note (i)) (Note (ii)) At 1 January 2022 Credited/(charged) to the consolidated statement of income Credited to other comprehensive income At 31 December 2022 Credited/(charged) to the consolidated statement of income Charged to other comprehensive income Credited to reserves 2,623 1,168 — 3,791 952 — — 1,209 (47) — 1,162 (48) — — At 31 December 2023 4,743 1,114 34 (25) — 9 2 — — 11 4,743 1,127 — 5,870 635 — — 250 (65) — (12,868) (4,664) 5,067 3,460 (146) (3,603) — (7,134) — 7,115 — 1,113 16 (351) 16 185 (16,471) (11,798) 12,182 4,589 (481) (65) — — (1,833) 1,583 (1,382) — — — — — — 832 (18) 40 676 (18) 40 6,505 120 (18,304) (10,215) 10,800 5,443 217 China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 151 13. TAXATION (Continued) (i) The prepayments for the leasehold land were revalued for PRC tax purposes as at 31 December 2003 and 2004. However, the resulting revaluations of the prepayments for the leasehold land were not recognised under HKFRSs. Accordingly, deferred tax assets were recorded by the Group under HKFRSs. (ii) According to “Announcement on Enterprise Income Tax Policy for Those Enterprise Involved in the Accelerated Depreciation of Property, Plant and Equipment” (Caishui [2014] No.75) issued by the MOF and the State Administration Taxation (“SAT”) of the PRC, starting from 2014, the Group’s property, plant and equipment that comply with this tax policy are allowed to be depreciated under the accelerated depreciation method, or fully deducted for tax purpose in the year of purchase. Temporary differences arise from the different useful lives under tax basis and accounting basis have been recorded as deferred tax liabilities. 14. EARNINGS PER SHARE Basic earnings per share for the years ended 31 December 2023 and 2022 were computed by dividing the profit attributable to equity shareholders of the Company by the weighted average number of ordinary shares outstanding during the years. Diluted earnings per share for the years ended 31 December 2023 and 2022 were computed by dividing the profit attributable to equity shareholders of the Company by the weighted average number of ordinary shares outstanding during the years, after adjusting for the effects of the dilutive potential ordinary shares. There were no dilutive potential ordinary shares for the years ended 31 December 2023 and 2022. The following table sets forth the computation of basic and diluted earnings per share: 2023 2022 Numerator (in RMB millions): Profit attributable to equity shareholders of the Company used in computing basic/diluted earnings per share 18,726 16,745 Denominator (in millions): Number of ordinary shares outstanding used in computing basic/diluted earnings per share 30,598 30,598 Basic/Diluted earnings per share (in RMB) 0.61 0.55 Annual Report 2023 152 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 15. PROPERTY, PLANT AND EQUIPMENT The movements of property, plant and equipment for the years ended 31 December 2023 and 2022 are as follows: 2023 Office furniture, Tele- fixtures, motor communications vehicles and Leasehold Buildings equipment other equipment improvements CIP Total Cost: Beginning of year Additions Transfer from CIP Transfer to other assets Disposals 79,284 239 1,925 — (465) 827,720 384 59,810 — (45,995) 19,655 353 886 — (945) 3,093 151 330 — (362) 48,580 72,489 (62,951) (7,738) (3) 978,332 73,616 — (7,738) (47,770) End of year 80,983 841,919 19,949 3,212 50,377 996,440 Accumulated depreciation and impairment: Beginning of year Charge for the year Disposals End of year Net book value: End of year (43,973) (2,650) 433 (564,878) (55,818) 43,878 (14,597) (1,301) 903 (2,351) (355) 361 (100) — 3 (625,899) (60,124) 45,578 (46,190) (576,818) (14,995) (2,345) (97) (640,445) Beginning of year 35,311 262,842 34,793 265,101 4,954 5,058 867 742 50,280 355,995 48,480 352,433 China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 153 15. PROPERTY, PLANT AND EQUIPMENT (Continued) 2022 Office furniture, Tele- fixtures, motor communications vehicles and Leasehold Buildings equipment other equipment improvements CIP Total Cost: Beginning of year Additions Transfer from CIP Transfer to other assets Disposals 78,179 23 1,573 — (491) 831,045 553 56,007 — (59,885) 19,825 455 1,323 — (1,948) 3,336 66 257 — (566) 43,411 72,329 (59,160) (7,959) (41) 975,796 73,426 — (7,959) (62,931) End of year 79,284 827,720 19,655 3,093 48,580 978,332 Accumulated depreciation and impairment: Beginning of year Charge for the year Disposals (41,674) (2,707) 408 (561,526) (60,279) 56,927 (15,008) (1,299) 1,710 (2,418) (302) 369 (139) (2) 41 (620,765) (64,589) 59,455 End of year (43,973) (564,878) (14,597) (2,351) (100) (625,899) Net book value: End of year 35,311 262,842 Beginning of year 36,505 269,519 5,058 4,817 742 918 48,480 352,433 43,272 355,031 For the year ended 31 December 2023, interest expense of approximately RMB16 million (2022: approximately RMB28 million) was capitalised in CIP. The capitalised borrowing rate represented the cost of capital for raising the related borrowings and varied from 1.45% to 2.80% for the year ended 31 December 2023 (2022: 2.29% to 2.71%). Mainly as a result of the Group’s ongoing modification of its telecommunications network and following subscribers’ voluntarily cross network migration progress, the Group disposed certain property, plant and equipment with carrying amounts of RMB2,192 million (2022: RMB3,476 million) for consideration of RMB1,011 million (2022: RMB1,594 million) for the year ended 31 December 2023, resulting in a net loss of approximately RMB1,181 million for the year ended 31 December 2023 (2022: approximately RMB1,882 million). In 2022, the Group adjusted the residual value of certain optical cable assets from 3% to 0% due to the increasing removal costs and decreasing recycling value. The change was accounted for as a change in accounting estimate in accordance with HKAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors” effect from 1 December 2022 using the prospective application method. The depreciation and amortisation for the year ended 31 December 2022 increased by approximately RMB2,350 million as a result of the aforesaid changes in accounting estimates. Annual Report 2023 154 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 16. RIGHT-OF-USE ASSETS Cost: Beginning of year Additions Disposals End of year Accumulated depreciation and impairment: Beginning of year Charge for the year Disposals End of year Net book value: End of year 2023 Tele- communications Buildings equipment Land use rights Others Total 18,442 4,355 (3,596) 78,558 3,571 (6,718) 13,998 106 (74) 1,892 579 (183) 112,890 8,611 (10,571) 19,201 75,411 14,030 2,288 110,930 (9,773) (4,012) 3,497 (37,751) (8,244) 4,803 (5,305) (285) 32 (834) (577) 127 (53,663) (13,118) 8,459 (10,288) (41,192) (5,558) (1,284) (58,322) Beginning of year 8,669 40,807 8,913 34,219 8,472 8,693 1,004 52,608 1,058 59,227 China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 155 2022 Tele- communications Buildings equipment Land use rights Others Total 15,840 4,876 (2,274) 44,930 34,478 (850) 13,971 248 (221) 1,337 643 (88) 76,078 40,245 (3,433) 18,442 78,558 13,998 1,892 112,890 (8,104) (3,806) 2,137 (29,691) (8,788) 728 (5,037) (300) 32 (380) (542) 88 (43,212) (13,436) 2,985 (9,773) (37,751) (5,305) (834) (53,663) 16. RIGHT-OF-USE ASSETS (Continued) Cost: Beginning of year Additions Disposals End of year Accumulated depreciation and impairment: Beginning of year Charge for the year Disposals End of year Net book value: End of year Beginning of year 7,736 15,239 8,669 40,807 8,693 8,934 1,058 59,227 957 32,866 Details of total cash outflow for leases and the maturity analysis of lease liabilities are set out in Note 36. On 13 December 2022, the Board of Directors of the Company approved CUCL and Tower Company to sign the commercial pricing agreement and the service agreement, which constituted a lease modification under HKFRS 16, “Leases”. In accordance with HKFRS 16, the lease liabilities are remeasured based on the lease term of the modified lease by discounting the revised lease payments using revised discount rates at the effective date of the modification. Details of this transaction are set out in Note 45. Annual Report 2023 156 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 17. GOODWILL Goodwill arising from the acquisitions of Unicom New Century Telecommunications Co., Ltd. and Unicom New World Telecommunications Co., Ltd. by the Group in 2002 and 2003, respectively, represented the excess of the purchase consideration over the Group’s share of the fair values of the separately identifiable net assets acquired prior to the adoption of AG 5 in 2005. Goodwill is allocated to the Group’s cash-generating unit (the “CGU”). The recoverable amount of the CGU with goodwill is determined based on value in use calculations. These calculations use pre-tax cash flow projections for 5 years based on financial budgets approved by management, and extrapolated using a steady 1% growth rate (2022: 1%), and the applicable discount rate of 11% (2022: 11%). Management determined expected growth rate and operating results based on past performance and its expectations in relation to market developments. The discount rate used is pre-tax and reflects specific risks relating to the CGU. Based on management’s assessment results, there was no impairment of goodwill as at 31 December 2023 and 2022, any reasonably possible change in the assumptions used in the calculation of recoverable amount would not result in impairment losses. 18. INVESTMENTS IN SUBSIDIARIES As at 31 December 2023, the details of the Company’s subsidiaries are as follows: Name CUCL Place and date of incorporation/ establishment and nature of Percentage of equity interests held Particular of issued share capital/ Principal activities and legal entity Direct Indirect paid up capital place of operation The PRC, 21 April 2000, limited liability company 100% — RMB213,044,797,828 Telecommunications operation in the PRC China Unicom Global Limited Hong Kong, 29 May 2015, 100% — HKD2,625,097,491 Investment holding limited company China Unicom (Hong Kong) Hong Kong, 24 May 2000, Operations Limited limited company China Unicom (Americas) USA, 24 May 2002, Operations Limited limited company China Unicom (Europe) The United Kingdom, Operations Limited 8 November 2006, limited company — — — 100% HKD1,510,100,000 Telecommunications service in Hong Kong 100% 5,000 shares, Telecommunications service in the USA USD100 each 100% 4,861,000 shares, Telecommunications operation in the GBP1 each United Kingdom China Unicom (Japan) Japan, 25 January 2007, — 100% 1,000 shares, Telecommunications operation in Japan Operations Corporation limited company JPY366,000 each China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 157 18. INVESTMENTS IN SUBSIDIARIES (Continued) Place and date of incorporation/ establishment and nature of Percentage of equity interests held Particular of issued share capital/ Principal activities and Name legal entity Direct Indirect paid up capital place of operation China Unicom (Singapore) Singapore, 5 August 2009, Operations Pte Limited limited company China Unicom (South Africa) South Africa, 19 November 2012, Operations (Pty) Limited limited liability company China Unicom (MYA) Operations The Republic of the Union of Company Limited Myanmar (“Myanmar”), 7 June 2013, limited liability company China Unicom (Australia) Australia, 27 May 2014, Operations Pty Limited limited liability company China Unicom (Russia) Russia, 28 December 2016, Operations Limited Liability limited liability company Company China Unicom (Brazil) Brazil, 23 June 2016, Telecommunications Limited limited liability company China Unicom (Brazil) Holdings Brazil, 27 October 2017, Ltda. limited liability company China Unicom Operations Thailand, 20 November 2017, (Thailand) Limited limited liability company China Unicom Operations Malaysia, 10 November 2017, (Malaysia) Sdn. Bhd. limited liability company China Unicom Operations Korea Korea, 24 November 2017, Co., Ltd limited liability company — — — — — — — — — — 100% 80,000,000 shares, Telecommunications operation in RMB1 each Singapore 100% 200 shares in total: Telecommunications operation in South 100 shares, ZAR 1 each Africa 100 shares, ZAR 512,063.34 each 100% 2,150,000 shares, Communications technology training in USD1 each Myanmar 100% 17,685,920 shares, Telecommunications operation in AUD 1 each Australia 100% RUB127,453,000 Telecommunications service in Russia 100% R$35,595,387 Telecommunications service in Brazil 100% R$34,605,225 Investment holding 100% 1,040,000 shares, Telecommunications service in Thailand Baht100 each 100% 3,200,000 shares, Telecommunications service in Malaysia MYR1 each 100% 60,000 shares, Telecommunications service in Korea KRW5,000 each Annual Report 2023 158 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 18. INVESTMENTS IN SUBSIDIARIES (Continued) Place and date of incorporation/ establishment and nature of Percentage of equity interests held Particular of issued share capital/ Principal activities and Name legal entity Direct Indirect paid up capital place of operation China Unicom (Vietnam) Vietnam, 19 April 2018, Operations Company Limited limited liability company China Unicom (Cambodia) Cambodia, 11 May 2018, Operations Co. Ltd limited liability company PT China Unicom Indonesia Indonesia, 25 October 2019, Operations limited liability company China Unicom (Philippines) Philippines, 6 November 2019, Operations Inc limited liability company China Unicom (Mexico) Mexico, 29 October 2021, Operations Limited limited liability company Unicom Vsens Telecommunications Company Limited The PRC, 19 August 2008, limited liability company China Unicom Digital The PRC, 30 April 2006, Technology Co,.Ltd limited liability company China Unicom Online The PRC, 29 March 2006, Information Technology limited liability company Company Limited — — — — — — — — 100% VND2,276,000,000 Telecommunications service in Vietnam 100% 560,000 shares, Telecommunications service in Riels4,000 each Cambodia 100% 20,000,000,001 shares, Telecommunications service in Indonesia Rp1 each 100% 103,012 shares, Telecommunications service in Php100 each Philippines 100% Peso88,000,000 Telecommunications service in Mexico 100% RMB610,526,532 Sales of handsets, telecommunications equipment and provision of customer services in the PRC 100% RMB8,993,177,616 Provision of information communications technology services in the PRC 100% RMB400,000,000 Provision of internet and value-added telecommunications services in the PRC Beijing Telecom Planning and The PRC, 25 April 1996, — 100% RMB264,227,115 Provision of consultancy, survey, design Designing Institute Company limited liability company Limited and contract services relating to information projects and construction projects in the telecommunications industry in the PRC China Information Technology The PRC, 11 November 1991, — 75% RMB573,333,335 Provision of consultancy, survey, design Designing & Consulting limited liability company Institute Company Limited and engineering procurement construction services relating to information projects and construction projects in the telecommunications industry in the PRC China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 159 18. INVESTMENTS IN SUBSIDIARIES (Continued) Place and date of incorporation/ establishment and nature of Percentage of equity interests held Particular of issued share capital/ Principal activities and Name legal entity Direct Indirect paid up capital place of operation China Unicom Information The PRC, 17 September 1998, Navigation Company Limited limited liability company Huaxia P&T Project Consultation The PRC, 5 March 1998, and Management Company limited liability company Limited Zhengzhou Kaicheng Industrial The PRC, 21 December 2005, Company Limited limited liability company Unicompay Company Limited The PRC, 11 April 2011, limited liability company Beijing Wo Digital Media The PRC, 21 July 2006, Advertising Co., Ltd limited liability company — — — — — 100% RMB6,825,087,800 Provision of telecommunications customer services in the PRC 100% RMB50,100,000 Provision of project consultation, monitoring and project bidding agency in the PRC 100% RMB2,200,000 Provision of property services in the PRC 100% RMB250,000,000 Provision of e-payment services in the PRC 100% RMB20,000,000 Provision of advertising design, production, agency and publication in the PRC Guangdong Unicom The PRC, 28 May 2013, — 100% RMB30,000,000 Provision of technical Provision of Communication Construction limited liability company Co., Ltd China Unicom Intelligence The PRC, 15 August 2007, — 100% RMB150,000,000 telecommunications network construction, maintenance and technical services in the PRC Provision of technical development and internet technology services in the PRC Security Technology Corporation Limited limited liability company Unicom Cloud Data Company The PRC, 4 June 2013, Limited limited liability company Unicom Innovation Investment The PRC, 29 April 2014, Company Limited limited liability company Xiaowo Technology Co. Ltd The PRC, 24 October 2014, limited liability company — — — 100% RMB4,000,000,000 Provision of technology development, transfer and consulting service in the PRC 100% RMB4,840,000,000 Venture capital investment business in the PRC 100% RMB200,000,000 Provision of internet and value-added telecommunications business in the PRC Annual Report 2023 160 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 18. INVESTMENTS IN SUBSIDIARIES (Continued) Place and date of incorporation/ establishment and nature of Percentage of equity interests held Particular of issued share capital/ Principal activities and Name legal entity Direct Indirect paid up capital place of operation China Unicom Smart Connection The PRC, 7 August 2015, Technology Company Limited limited liability company Unicom Intelligent Network The PRC, 26 September 2018, Ruixing Technology (Beijing) limited liability company Co., Ltd. Finance Company The PRC, 17 June 2016, limited liability company Unicom United Investment The PRC, 28 January 2016, (Beijing) Co., Ltd. limited liability company Lianchuangqianxian (Guizhou) The PRC, 8 October 2016, Technology Service Co., Ltd. limited liability company China Unicom Emerging (Beijing) The PRC, 1 February 2016, Investment Centre (Limited limited partnership Partnership) Unicom Big Data Co., Ltd. The PRC, 24 August 2017, limited liability company Liantong Travel Service (Beijing) The PRC, 30 September 2017, Company Limited limited liability company China Unicom (Guangdong) The PRC, 5 January 2017, Industrial Internet Company limited liability company Limited — — — — — — — — — 68.88% RMB246,796,148 Auto informatisation in the PRC 80% RMB10,000,000 Provision of technology promotion service of intelligent transportation system’s products in the PRC 91% RMB3,000,000,000 Provision of financial services in the PRC 100% RMB200,000 Venture capital investment business in the PRC 60% RMB1,000,000 Venture capital investment business in the PRC 99% RMB68,074,936 Venture capital investment business in the PRC 100% RMB500,000,000 Provision of data processing in the PRC 100% RMB100,000,000 Provision of tourism and information services in the PRC 100% RMB150,000,000 Provision of information system integration business in the PRC China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 161 18. INVESTMENTS IN SUBSIDIARIES (Continued) Place and date of incorporation/ establishment and nature of Percentage of equity interests held Particular of issued share capital/ Principal activities and Name legal entity Direct Indirect paid up capital place of operation China Unicom (Zhejiang) The PRC, 20 June 2017, — 100% RMB61,000,000 Industry Internet Company limited liability company Limited China Unicom (ShanDong) The PRC, 3 March 2017, — 100% RMB100,000,000 Provision of information system integration business in the PRC Provision of information system integration business in the PRC Industrial Internet Company limited liability company Limited China Unicom (Fujian) Industrial The PRC, 23 February 2018, Internet Company Limited limited liability company China Unicom (Shanxi) Industrial The PRC, 21 March 2018, Internet Company Limited limited liability company China Unicom Xiongan Industrial The PRC, 25 April 2018, limited Internet Company Limited liability company China Unicom (Sichuan) The PRC, 29 March 2018, Industrial Internet Company limited liability company Limited — — — — 100% RMB50,000,000 Provision of information system integration business in the PRC 100% RMB100,000,000 Provision of information system integration business in the PRC 100% RMB724,342,600 Provision of information system integration business in the PRC 100% RMB100,000,000 Provision of information system integration business in the PRC China Unicom (Liaoning) The PRC, 28 March 2018, — 100% RMB100,000,000 Industrial Internet Company limited liability company Limited China Unicom (Jiangsu) The PRC, 9 May 2018, — 100% RMB26,200,000 Industrial Internet Company limited liability company Limited Provision of information system integration business in the PRC Provision of information system integration business in the PRC Annual Report 2023 162 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 18. INVESTMENTS IN SUBSIDIARIES (Continued) Place and date of incorporation/ establishment and nature of Percentage of equity interests held Particular of issued share capital/ Principal activities and Name legal entity Direct Indirect paid up capital place of operation China Unicom (Shanghai) The PRC, 13 March 2018, — 100% RMB70,000,000 Industrial Internet Company limited liability company Limited China Unicom (Heilongjiang) The PRC, 14 March 2018, — 100% RMB100,000,000 Provision of information system integration business in the PRC Provision of information system integration business in the PRC Industrial Internet Company limited liability company Limited Henan Industrial Interconnection The PRC, 30 May 2019, & Technology Co, Ltd limited liability company China Unicom Video Technology The PRC, 17 January 2018, Co., Ltd. limited liability company — — 40% RMB90,000,000 Provision of information system integration business in the PRC 100% RMB100,000,000 Provision of technology research and development of TV and mobile video, consultation disposal, promotion and value-added telecommunications services China Unicom Internet of Things The PRC, 16 March 2018, — 100% RMB261,516,702 Provision of internet of things Corporation Limited limited liability company China Unicom High-tech Big The PRC, 29 March 2018, — 51% RMB10,000,000 Data Artificial Intelligence limited liability company Technology (Chengdu) Co., Ltd. China Unicom iRead Science and The PRC, 28 April 2018, — 100% RMB51,000,000 Culture Co., Ltd. limited liability company China Unicom WO Music & The PRC, 8 May 2018, — 100% RMB100,000,000 Culture Co., Ltd. limited liability company technology, consultation and service in the PRC Provision of Big Data Service, cloud computation and infrastructure service in the PRC Provision of internet and value-added telecommunications business in the PRC Provision of internet information technology services in the PRC China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 163 18. INVESTMENTS IN SUBSIDIARIES (Continued) Place and date of incorporation/ establishment and nature of Percentage of equity interests held Particular of issued share capital/ Principal activities and Name legal entity Direct Indirect paid up capital place of operation China Unicom Leasing Co., Ltd. The PRC, 11 April 2018, 25% 75% RMB2,500,000,000 Provision of financing leasing business in limited liability company the PRC Yunjing Culture And Tourism The PRC, 27 February 2019, Technology Co., LTD limited liability company Yundun Intelligent Security The PRC, 11 November 2019, Technology Co., Ltd limited liability company Wobaifu Information Technology The PRC, 17 April 2020, (Tianjin) Co., LTD limited liability company Changchun FAW The PRC, 27 September 2002, Communications Technology limited liability company Co., Ltd. Yichun Digital Economy Industry The PRC, 14 December 2020, Operation Co., Ltd limited liability company — — — — — 80% RMB25,000,000 Provision of tourism and big data business, data analysis, processing and application services in the PRC 51% RMB100,000,000 Provision of software development; technology promotion and development in the PRC 100% RMB10,000,000 Provision of software and information technology service in the PRC 51% RMB86,458,636 Telecommunications business in the PRC 51% RMB22,650,000 Provision of telecommunication, television broadcasting and satellite transmission services in the PRC Lianchuang Weilai (Wuhan) The PRC, 29 July 2020, — 61.64% RMB1,460,000,000 Provision of investment business in the Intelligent Manufacturing limited liability company PRC Industry Investment Partnership (Limited Partnership) Hebei Sign Technology Co., Ltd. The PRC, 22 October 2021, limited liability company China Unicom Spirit Realm Video The PRC, 9 July 2021, (Jiangxi) Technology Company Limited limited liability company — — 70% RMB10,000,000 Provision of other technology promotion service in the PRC 100% RMB3,000,000 Provision of internet and telecommunication value added business in the PRC Annual Report 2023 164 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 18. INVESTMENTS IN SUBSIDIARIES (Continued) Place and date of incorporation/ establishment and nature of Percentage of equity interests held Particular of issued share capital/ Principal activities and Name legal entity Direct Indirect paid up capital place of operation China Unicom Innovation The PRC, 6 June 2014, Investment Company limited liability company (Shanghai), Ltd China Unicom Western The PRC, 6 September 2021, Innovation Institute limited liability company China Unicom Zhiyu (Shanghai) The PRC, 5 June 2018, Information Service and limited liability company Technology Co., Ltd Lian Kuan (Wuhan) Investment The PRC, 24 July 2020, Center (Limited Partnership) limited liability company Lingang Data Intelligence The PRC, December 29 2021 Technology (Shanghai) limited liability company Co., Ltd. — — — — — 70% RMB40,000,000 Provision of pioneer investment business in the PRC 100% RMB50,000,000 Provision of information technology consultation services 70% RMB1,000,000 Provision of business incubator management in the PRC 87.47% RMB8,715,000 Provision of investment business in the PRC 100% RMB1,000,000,000 Provision of internet data and security services; cloud computing services in the PRC China Unicom Intelligence The PRC, 30 May 2022, — 100% RMB600,000,000 Provision of internet data services, 5G Technology Industrial limited liability company Co., Ltd China Unicom (Beijing) Industrial The PRC, 21 November 2022, Internet Co., Ltd limited liability company China Unicom (Jilin) Industrial The PRC, 8 August 2022, Internet Company Limited limited liability company China Unicom (Anhui) Industry The PRC, 13 July 2022, Internet Company Limited limited liability company Unicom (Jiangxi) Industrial The PRC, 16 November 2022, Internet Co., Ltd limited liability company Communications technology services and AI industry application services in the PRC — — — — 100% RMB50,000,000 Provision of information and system integration business in the PRC 100% RMB50,000,000 Provision of information and system integration business in the PRC 100% RMB50,000,000 Provision of information and system integration business in the PRC 100% RMB50,000,000 Provision of information and system integration business in the PRC China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 165 18. INVESTMENTS IN SUBSIDIARIES (Continued) Place and date of incorporation/ establishment and nature of Percentage of equity interests held Particular of issued share capital/ Principal activities and Name legal entity Direct Indirect paid up capital place of operation China Unicom (Hubei) Industrial The PRC, 26 September 2022, Internet Company Limited limited liability company China Unicom (Henan) Industrial The PRC, 22 August 2022, Internet Company Limited limited liability company China Unicom (Hunan) Industrial The PRC, 13 September 2022, Internet Company Limited limited liability company China Unicom (Hainan) The PRC, 19 July 2022, Industrial Internet Company limited liability company Limited Yunjin Intelligence Technology The PRC, 6 June 2022, Corporation Limited limited liability company Chongqing Digital intelligence The PRC, 8 August 2022, Integration Innovation limited liability company Technology Co., LTD — — — — — — 100% RMB50,000,000 Provision of information and system integration business in the PRC 100% RMB50,000,000 Provision of information and system integration business in the PRC 100% RMB50,000,000 Provision of information and system integration business in the PRC 100% RMB50,000,000 Provision of information and system integration business in the PRC 45% RMB42,500,000 Provision of internet data services and technology development in the PRC 70% RMB100,000,000 Provision of technology development and application, integrated innovation and operation in the PRC Unicom (Langfang) Cloud Data The PRC, 31 October 2022, — 100% RMB5,000,000 Provision of type 1 value-added Company Limited limited liability company telecommunications services and internet technology services etc in the PRC Unicom (Zhejiang) Cloud Data The PRC, 25 May 2022, — 100% RMB40,000,000 Provision of big data services and Company Limited limited liability company information technology services in the PRC China Unicom (Tianjin) Industrial The PRC, 12 September 2023, Internet Company Limited limited liability company China Unicom (Inner Mongolia) The PRC, 21 September 2023, Industrial Internet Company limited liability company Limited — — 100% RMB50,000,000 Provision of information and system integration business in the PRC 100% RMB50,000,000 Provision of information and system integration business in the PRC Annual Report 2023 166 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 18. INVESTMENTS IN SUBSIDIARIES (Continued) Place and date of incorporation/ establishment and nature of Percentage of equity interests held Particular of issued share capital/ Principal activities and Name legal entity Direct Indirect paid up capital place of operation China Unicom (Guangxi) The PRC, 13 November 2023, — 100% RMB50,000,000 Industrial Internet Company limited liability company Limited China Unicom (Chongqing) The PRC, 12 September 2023, — 100% RMB50,000,000 Industrial Internet Company limited liability company Limited China Unicom (Guizhou) The PRC, 23 October 2023, — 100% RMB50,000,000 Industrial Internet Company limited liability company Limited China Unicom (Shaanxi) The PRC, 19 September 2023, — 100% RMB50,000,000 Industrial Internet Company limited liability company Limited Provision of information and system integration business in the PRC Provision of information and system integration business in the PRC Provision of information and system integration business in the PRC Provision of information and system integration business in the PRC China Unicom (Gansu) Industrial The PRC, 22 September 2023, Internet Company Limited limited liability company China Unicom (Ningxia) The PRC, 3 November 2023, Industrial Internet Company limited liability company Limited — — 100% RMB50,000,000 Provision of information and system integration business in the PRC 100% RMB50,000,000 Provision of information and system integration business in the PRC China Unicom (Xinjiang) The PRC, 8 November 2023, — 100% RMB50,000,000 Industrial Internet Company limited liability company Limited Provision of information and system integration business in the PRC China Unicom Digital The PRC, 10 December 2023, — 46.63% RMB125,093,498 Provision of technology service, Intelligence Medical Technology Co., LTD limited liability company development, consultation, communication, transfer and promotion in the PRC Nebula Times Technology The PRC, 26 April 2023, — 48% RMB135,000,000 Provision of internet connection and Co.,Ltd. limited liability company relevant services in the PRC For subsidiaries which the Group’s ownership is less than 50%, the Group has a majority of the voting rights to direct the relevant activities of these subsidiaries pursuant to articles of association. None of the subsidiaries had issued any debt securities during the year ended 31 December 2023 (2022: none except for CUCL, which has issued commercial papers, in which the Group has no interest). Details of the issued debt securities are disclosed in Note 40. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 167 2023 2022 44,188 42,469 19. INTEREST IN ASSOCIATES Share of net assets The following list contains the particulars of a material associate as at 31 December 2023: Place of Proportion of Form of business incorporation and ownership interest Name structure business held by a subsidiary Paid up capital Principal activities Tower Company Incorporated The PRC 20.65% RMB176,008,471,024 Construction, maintenance and operation of communications towers in the PRC (Note 45.3) The above associate is accounted for using the equity method in the consolidated financial statements. Summarised financial information of the material associate, adjusted for any differences in accounting policies, and reconciled to the carrying amount in the consolidated financial statements, are disclosed below: Current assets Non-current assets Current liabilities Non-current liabilities Equity Revenue Profit for the year Total comprehensive income for the year Reconciled to the Group’s interest in the associate: Net assets of the associate The Group’s effective interest Adjustment for the remaining balance of the deferred gain from the transactions with Tower Company Tower Company 2023 2022 78,083 247,924 (63,934) (64,379) (197,694) 94,009 9,750 9,756 49,706 255,854 (65,158) (46,811) (193,591) 92,170 8,787 8,787 197,694 20.65% 193,591 20.65% 40,824 39,977 (479) (740) Carrying amount in the consolidated financial statements 40,345 39,237 Annual Report 2023 168 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 19. INTEREST IN ASSOCIATES (Continued) The fair values of the interests in Tower Company is based on quoted market prices (level 1: quoted price (unadjusted) in active markets) at the financial position date without any deduction for transaction costs and disclosed as follows: As at 31 December 2023 As at 31 December 2022 Carrying amount Fair value Carrying amount Fair value Interest in listed associate — Tower Company 40,345 27,009 39,237 27,273 Aggregate information of associates that are not individually material: The Group’s share of profit The Group’s share of other comprehensive income The Group’s share of total comprehensive income 2023 2022 115 — 115 (5) 2 (3) Aggregate carrying amount of the Group’s interest in these associates 3,843 3,232 20. INTEREST IN JOINT VENTURES Share of net assets 2023 2022 10,240 8,582 The following list contains the particulars of a material joint venture, which is an unlisted corporate entity and has no available quoted market price as at 31 December 2023: Name structure and business held by a subsidiary Paid up capital Principal activities Form of business Place of incorporation ownership interest Proportion of Merchants Union Consumer Finance Incorporated The PRC 50% RMB10,000,000,000 Consumer finance consulting in the Company Limited (“MUCFC”) PRC China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 169 20. INTEREST IN JOINT VENTURES (Continued) Summarised financial information of the material joint venture, adjusted for any differences in accounting policies, and reconciled to the carrying amount in the consolidated financial statements, are disclosed below: Assets Liabilities Equity Revenue Profit for the year Total comprehensive income for the year Included in above income: Interest income Interest expense Income tax expense Reconciled to the Group’s interests in the joint venture: Net assets of the joint venture The Group’s effective interest MUCFC 2023 2022 176,421 (156,054) (20,367) 164,346 (147,279) (17,067) 19,602 3,600 3,600 24,943 (4,408) (533) 20,367 50% 17,501 3,329 3,329 22,079 (4,175) (500) 17,067 50% Carrying amount in the consolidated financial statements 10,184 8,533 Aggregate information of joint ventures that are not individually material: The Group’s share of profit The Group’s share of other comprehensive income The Group’s share of total comprehensive income Aggregate carrying amount of the Group’s interest in these joint ventures 2023 2022 3 — 3 56 (70) — (70) 49 Annual Report 2023 170 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 21. CONTRACT ASSETS AND CONTRACT LIABILITIES (a) Contract assets Contract assets from bundle sales of mobile handsets and provision of service, net of allowance Others Sub-total Less: Current portion 2023 2022 201 164 365 (279) 86 263 69 332 (271) 61 The Group offers preferential packages to the customers which include the bundle sales of mobile handsets and provision of service. The total contract consideration of such preferential packages is allocated to service revenue and sales of handsets based on their standalone selling prices. The revenue relating to the sale of the handsets is recognised when the customers obtain the control of the handsets and the consideration allocated to the sales of mobile handsets is gradually received during the contract period when the customers pay the monthly package fee. (b) Contract liabilities Advances received from customers for future services Others Note (i) 2023 2022 44,913 1,266 43,437 1,277 46,179 44,714 (i) Contract liabilities primarily relate to the considerations received from customers before the Group satisfying performance obligations. It would be recognised as revenue upon the rendering of services. Almost all of the contract liability balance as at 31 December 2022 was recognised as revenue for the year ended 31 December 2023. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 171 22. CONTRACT COSTS Direct incremental costs of broadband and internet protocol television (“IPTV”) service Sales commissions Note 2023 2022 (i) (ii) 8,368 125 8,493 5,557 300 5,857 (i) Direct incremental costs for activating broadband and IPTV subscribers mainly include the costs of installing broadband and IPTV terminals at customer’s homes for the provision of broadband and IPTV services, and are amortised over the expected service period. The amount of capitalised direct incremental costs for activating broadband and IPTV subscribers recognised in profit or loss during the year was RMB5,855 million (2022: RMB3,659 million). There was no significant impairment in relation to the capitalised costs as at 31 December 2023 (2022: Nil). (ii) Sales commissions are paid to agents whose selling activities resulted in new customers entering into contracts with the Group. The amount of capitalised sales commissions recognised in profit or loss during the year was RMB175 million (2022: RMB450 million). There was no significant impairment in relation to capitalised costs as at 31 December 2023 (2022: Nil). 23. FINANCIAL ASSETS MEASURED AT FAIR VALUE Non-current portion: Equity securities measured at FVOCI (non-recycling) Financial assets measured at FVPL Debt securities measured at FVOCI (recycling) Current portion: Financial assets measured at FVPL Debt securities measured at FVOCI (recycling) Note 2023 2022 (i) (ii) (iii) (ii) (iii) 2,042 1,158 2,017 5,217 1,847 1,130 1,132 4,109 2,608 21,820 2,955 16,638 24,428 19,593 29,645 23,702 Annual Report 2023 172 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 23. FINANCIAL ASSETS MEASURED AT FAIR VALUE (Continued) (i) Equity securities measured at FVOCI (non-recycling) Listed in the PRC Listed outside the PRC Unlisted Note 42 2023 146 1,783 113 2,042 2022 120 1,613 114 1,847 (ii) Financial assets measured at FVPL represent certain equity investments, investments in monetary funds and wealth management products. (iii) Debt securities measured at FVOCI (recycling) represent certain debt investments issued by banks and the investments are held within a business model whose objective is achieved by both the collection of contractual cash flows and sale. 24. SHORT-TERM BANK DEPOSITS AND RESTRICTED DEPOSITS Short-term bank deposits Restricted deposits 25. OTHER ASSETS Intangible assets Prepaid services charges for transmission lines and electricity cables and other services VAT recoverable Capital bonds Others 2023 8,102 2,977 2022 9,921 4,778 11,079 14,699 Note 2023 2022 (i) (ii) 18,265 16,469 1,601 405 433 1,831 2,049 186 — 1,738 22,535 20,442 China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 173 25. OTHER ASSETS (Continued) Intangible assets (i) Cost: At 1 January 2022 Additions Transfer from CIP Disposals Computer software 32,965 393 4,109 (1,920) Others Total 3,795 158 3,475 (263) 36,760 551 7,584 (2,183) At 31 December 2022 35,547 7,165 42,712 Additions Transfer from CIP Disposals 65 2,998 (2,716) 176 4,399 (302) 241 7,397 (3,018) At 31 December 2023 35,894 11,438 47,332 Accumulated amortisation and impairment: At 1 January 2022 Amortisation charge for the year Disposals (20,977) (3,631) 1,886 (2,416) (1,335) 230 (23,393) (4,966) 2,116 At 31 December 2022 (22,722) (3,521) (26,243) Amortisation charge for the year Disposals (3,753) 2,432 (1,754) 251 (5,507) 2,683 At 31 December 2023 (24,043) (5,024) (29,067) Net book value: At 31 December 2023 11,851 6,414 18,265 At 31 December 2022 12,825 3,644 16,469 (ii) VAT recoverable includes input VAT and prepaid VAT which is expected to be deducted beyond one year. VAT recoverable which is expected to be deducted within one year are included in “prepayments and other current assets”. See Note 28(i). Annual Report 2023 174 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 26. INVENTORIES Handsets and other telecommunication products Others 27. ACCOUNTS RECEIVABLE Accounts receivable Less: Credit loss allowance 2023 1,386 831 2,217 2022 1,450 432 1,882 2023 2022 57,349 (18,657) 40,769 (14,438) 38,692 26,331 The gross carrying amount of accounts receivable from contracts with customers amounted to RMB57,234 million as at 31 December 2023 (2022: RMB40,670 million). The aging analysis of accounts receivable, based on the billing date and net of credit loss allowance, is as follows: Within one month More than one month but not more than three months More than three months but not more than one year More than one year 2023 2022 12,429 7,524 15,024 3,715 10,609 5,135 9,070 1,517 38,692 26,331 The normal credit period granted by the Group to individual subscribers and general corporate customers is thirty days from the date of billing unless they meet certain specified credit assessment criteria. For major corporate customers, the credit period granted by the Group is based on the service contract terms, normally not exceeding one year. There is no significant concentration of credit risk with respect to customers receivables, as the Group has a large number of customers. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 175 27. ACCOUNTS RECEIVABLE (Continued) The Group measures loss allowances for accounts receivable at an amount equal to lifetime ECLs, which is calculated using a provision matrix for those assessed on collective basis. As the Group’s historical credit loss experience indicate that there are different loss patterns for different customer types, the loss allowance based on past due status is distinguished between the Group’s different customer types. The following table provides information about the Group’s exposure to credit risk and ECLs for accounts receivable as at 31 December 2023: For individual subscribers and general corporate customers Current (not past due) 1–90 days past due 91–180 days past due More than 180 days past due For major corporate customers Current (not past due) Within 1 year past due 1–2 years past due 2–3 years past due More than 3 years past due Expected Gross carrying Loss loss rate amount allowance 7% 42% 90% 100% 2,691 1,229 742 2,587 (189) (518) (667) (2,587) 7,249 (3,961) Expected Gross carrying Loss loss rate amount allowance 2% 17% 58% 89% 100% 10,346 26,171 8,111 2,409 3,063 (226) (4,572) (4,685) (2,150) (3,063) 50,100 (14,696) Annual Report 2023 176 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 27. ACCOUNTS RECEIVABLE (Continued) The following table provides information about the Group’s exposure to credit risk and ECLs for accounts receivable as at 31 December 2022: For individual subscribers and general corporate customers Current (not past due) 1–90 days past due 91–180 days past due More than 180 days past due For major corporate customers Current (not past due) Within 1 year past due 1–2 years past due 2–3 years past due More than 3 years past due Expected Gross carrying Loss loss rate amount allowance 7% 41% 90% 100% 3,018 1,406 729 2,333 (211) (583) (656) (2,333) 7,486 (3,783) Expected Gross carrying Loss loss rate amount allowance 3% 21% 65% 100% 100% 8,108 16,666 4,347 1,674 2,488 (221) (3,436) (2,836) (1,674) (2,488) 33,283 (10,655) Expected loss rates are based on actual loss experience over past years. These rates are adjusted to reflect differences between economic conditions during the period over which the historic data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables. The movement in the credit loss allowance in respect of accounts receivable during the year, is as follows: Balance, beginning of year Allowance for the year Written-off during the year Balance, end of year 2023 2022 14,438 5,826 (1,607) 10,170 5,519 (1,251) 18,657 14,438 China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 177 27. ACCOUNTS RECEIVABLE (Continued) The creation and release of credit loss allowance for receivables have been recognised in the consolidated statement of income. Amounts charged to the allowance account are generally written-off when there is reliable evidence to indicate no expectation of recovering the receivable. The maximum exposure to credit risk as of the date of the statement of financial position is the carrying value of accounts receivable mentioned above. 28. PREPAYMENTS AND OTHER CURRENT ASSETS The nature of prepayments and other current assets are as follows: Prepaid services charges for transmission lines and electricity cables and other services Prepaid power and water charges Deposits and prepayments VAT recoverable Prepaid enterprise income tax Financial assets held under resale agreements Others Note 2023 2022 (i) (ii) 3,247 638 3,615 10,111 35 5,005 3,557 3,962 778 4,628 8,285 70 — 3,432 26,208 21,155 (i) VAT recoverable includes the input VAT and prepaid VAT that is expected to be deducted within one year. (ii) Financial assets held under resale agreements are transactions where Finance Company acquires financial assets which will be resold at a predetermined price at a future date under resale agreements. Prepayments and other current assets are expected to be recovered or recognised as expenses within one year. As at 31 December 2023 and 2022, there was no significant impairment for the prepayments and other current assets. 29. CASH AND CASH EQUIVALENTS AND OTHER CASH FLOW INFORMATION (a) Cash and cash equivalents Cash at bank and in hand 2023 2022 47,733 55,297 Cash and cash equivalents refer to all cash on hand and demand deposits, short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents include demand deposits and short term deposits with original maturity of three months for the purpose of meeting the Group’s short term cash commitments, which carry interest at market rates ranging from 0.01% to 1.50% (2022: 0.01% to 1.50%). Annual Report 2023 178 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 29. CASH AND CASH EQUIVALENTS AND OTHER CASH FLOW INFORMATION (Continued) (b) Reconciliation of liabilities arising from financing activities The table below details changes in the Group’s liabilities from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flow as cash flows from financing activities. Short-term Long-term Commercial Lease Other bank loans bank loans papers liabilities borrowings Total (Note 39) (Note 33) (Note 40) (Note 36) At 1 January 2023 331 1,896 5,025 48,924 8,847 65,023 Changes from financing cash flows: Proceeds from bank loans and other obligations Loans from related parties Repayment of short-term bank loans Repayment of commercial papers Repayment of other obligations Repayment of long-term bank loans Repayment of related party loans Capital element of lease rentals paid Net deposits with Finance Company Total changes from financing cash flows Exchange adjustments Other changes: Increase in lease liabilities from entering into new leases/lease modifications during the year Decrease due to termination of lease contracts Others Total other changes 680 — (330) — — — — — — 350 — — — — — 31 — — — — (385) — — — — — — (5,000) — — — — — — — — — — — — (12,103) — — 583 — — (409) — (913) — 949 711 583 (330) (5,000) (409) (385) (913) (12,103) 949 (354) (5,000) (12,103) 210 (16,897) — — — — — — — 64 64 — — (25) 8,505 (2,069) — (25) 6,436 — — 176 176 8,505 (2,069) 215 6,651 At 31 December 2023 681 1,606 — 43,257 9,233 54,777 China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 179 29. CASH AND CASH EQUIVALENTS AND OTHER CASH FLOW INFORMATION (Continued) (b) Reconciliation of liabilities arising from financing activities (Continued) Short-term Long-term Commercial Promissory Corporate Lease Other bank loans bank loans papers notes bonds liabilities borrowings Total (Note 39) (Note 33) (Note 40) (Note 34) (Note 35) (Note 36) At 1 January 2022 385 2,207 6,875 1,004 2,039 22,559 7,755 42,824 Changes from financing cash flows: Proceeds from short-term bank loans Proceeds from commercial papers Loans from a related party Repayment of short-term bank loans Repayment of commercial papers Repayment of promissory notes Repayment of corporate bonds Repayment of long-term bank loans Payment of issuing expense for commercial papers Capital element of lease rentals paid Net deposits with Finance Company 330 — — (385) — — — — — — — — — — — — — — (420) — — — — 5,000 — — (6,800) — — — (5) — — — — — — — (1,000) — — — — — — — — — — — (2,000) — — — — — — — — — — — — — (13,373) — — — 471 — — — — — — — 621 330 5,000 471 (385) (6,800) (1,000) (2,000) (420) (5) (13,373) 621 Total changes from financing cash flows (55) (420) (1,805) (1,000) (2,000) (13,373) 1,092 (17,561) Exchange adjustments — — — — — — — — Other changes: Increase in lease liabilities from entering into new leases/lease modifications during the year Decrease due to termination of lease contracts Others Total other changes — — 1 1 — — 109 109 — — (45) (45) At 31 December 2022 331 1,896 5,025 — — (4) (4) — — — (39) 39,997 (259) — (39) 39,738 — — — — 39,997 (259) 22 39,760 — 48,924 8,847 65,023 Annual Report 2023 180 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 30. SHARE CAPITAL Issued and fully paid: Number of shares millions Share capital At 1 January 2022, at 31 December 2022 and at 31 December 2023 30,598 254,056 31. RESERVES (a) Movement in components of equity The Company Investment Share revaluation Other Retained capital reserve reserve profits Balance at 1 January 2022 254,056 Total comprehensive income for the year Dividends relating to 2021 final Dividends relating to 2022 interim — — — (9,372) (173) — — 572 — — — 14,168 9,265 (2,937) (5,049) Total equity 259,424 9,092 (2,937) (5,049) Balance at 31 December 2022 254,056 (9,545) 572 15,447 260,530 Total comprehensive income for the year Dividends relating to 2022 final Dividends relating to 2023 interim — — — 170 — — — — — 10,757 (3,335) (6,211) 10,927 (3,335) (6,211) Balance at 31 December 2023 254,056 (9,375) 572 16,658 261,911 (b) Nature and purpose (i) Statutory reserves CUCL is registered as a foreign investment enterprise in the PRC. In accordance with the Articles of Association, it is required to provide for statutory reserves, which are appropriated from profit after tax but before dividend distribution. CUCL is required to allocate at least 10% of its profit after tax determined under the PRC Company Law to the statutory reserve fund until the cumulative amounts reach 50% of the registered capital. The statutory reserve can only be used, upon approval obtained from the relevant authority, to offset accumulated losses or increase capital. Accordingly, CUCL appropriated approximately RMB1,647 million (2022: approximately RMB1,471 million) to the statutory reserve fund for the year ended 31 December 2023. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 181 31. RESERVES (Continued) (b) Nature and purpose (Continued) (i) Statutory reserves (Continued) Appropriation to the staff bonus and welfare fund is made at the discretion of the Board of Directors. The staff bonus and welfare fund can only be used for special bonuses or the collective welfare of the employees and cannot be distributed as cash dividends. Under HKFRSs, the appropriations to the staff bonus and welfare fund are charged to the consolidated statement of income as expenses incurred since any assets acquired through this fund belong to the employees. For the years ended 31 December 2023 and 2022, no appropriation to staff bonus and welfare fund has been made by CUCL. According to the PRC tax approval document issued by the MOF and the SAT of the PRC, the upfront connection fees were not subject to the PRC enterprise income tax and an amount equal to the upfront connection fees recognised in the retained profits shall be transferred from retained profits to the statutory reserve. As at 31 December 2011, an accumulated appropriation of approximately RMB12,289 million was made to the statutory reserve and no more upfront connection fees are recognised afterwards. (ii) General risk reserve CUCL and Unicom Group established the Finance Company to provide certain financial services. Pursuant to “Requirements on Impairment Allowance for Financial Institutions” (Caijin [2012] No. 20) issued by the MOF which is effective on 1 July 2012 (the “Document”), the Finance Company establishes a general risk reserve within the shareholders’ equity, through appropriation of retained profits, to address unidentified potential losses relating to risk assets. The general risk reserve balance should not be less than 1.5% of the ending balance of risk assets, as defined in the Document. (iii) Investment revaluation reserve The investment revaluation reserve represents the changes in fair value of financial assets measured at FVOCI (non-recycling), net of tax, until the financial assets are derecognised. (iv) Other reserves Other reserve mainly represents the difference between the consideration and the net assets value for business combination of entities and businesses under common control, the effect of CUCL’s capitalisation of retained profits, and capital contribution relating to share-based payment borne by A Share Company. Annual Report 2023182 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 32. DIVIDENDS At the annual general meeting held on 12 May 2022, the shareholders of the Company approved the payment of a final dividend of RMB0.096 per ordinary share for the year ended 31 December 2021, totaling approximately RMB2,937 million which has been reflected as a reduction of retained profits for the year ended 31 December 2022. At the annual general meeting held on 19 May 2023, the shareholders of the Company approved the payment of a final dividend of RMB0.109 per ordinary share for the year ended 31 December 2022, totaling approximately RMB3,335 million which has been reflected as a reduction of retained profits for the year ended 31 December 2023. At a meeting held on 9 August 2023, the Board of Directors of the Company declared the payment of 2023 interim dividend of RMB0.203 per ordinary share to the shareholders totalling approximately RMB6,211 million. At a meeting held on 19 March 2024, the Board of Directors of the Company proposed the payment of a final dividend of RMB0.1336 per ordinary share to the shareholders for the year ended 31 December 2023 totaling approximately RMB4,088 million. The proposed dividend has not been reflected as a dividend payable in the consolidated financial statements as at 31 December 2023, but will be reflected in the consolidated financial statements for the year ending 31 December 2024. Declared and paid interim dividend: RMB0.203 (2022: RMB0.165) per ordinary share by the Company Proposed final dividend: RMB0.1336 (2022: RMB0.109) per ordinary share by the Company 2023 2022 6,211 4,088 10,299 5,049 3,335 8,384 Pursuant to the PRC enterprise income tax law, a 10% withholding income tax is levied on dividends declared on or after 1 January 2008 by foreign investment enterprises to their foreign enterprise shareholders unless the enterprise investor is deemed as a PRC Tax Resident Enterprise (“TRE”). On 11 November 2010, the Company obtained an approval from the State Taxation Administration of the PRC, pursuant to which the Company qualifies as a PRC TRE from 1 January 2008. Therefore, as at 31 December 2023, the Company’s subsidiaries in the PRC did not accrue for withholding tax on dividends distributed to the Company and there has been no deferred tax liability accrued in the Group’s consolidated financial statements for the undistributed profits of the Company’s subsidiaries in the PRC. For the Company’s non-PRC TRE shareholders (including HKSCC Nominees Limited), the Company would distribute dividends after deducting the amount of enterprise income tax payable by these non-PRC TRE shareholders thereon and reclassify the related dividend payable to withholding tax payable upon the declaration of such dividends. The requirement to withhold tax does not apply to the Company’s shareholders appearing as individuals in its share register. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 183 33. LONG-TERM BANK LOANS Interest rates and final maturity 2023 2022 RMB denominated Fixed interest rates ranging from 1.08% to 2.40% bank loans (2022: 1.08% to 1.20%) per annum with maturity through 2036 (2022: maturity through 2036) 1,443 1,714 US dollars denominated Fixed interest rate is Nil (2022: Nil to 1.55%) bank loans per annum with maturity through 2039 (2022: maturity through 2039) 153 171 Euro denominated Fixed interest rates ranging from 1.10% to 1.50% bank loans (2022: 1.10% to 2.50%) per annum with maturity through 2034 (2022: maturity through 2034) 10 11 Sub-total Less: Current portion 1,606 (354) 1,896 (368) 1,252 1,528 As at 31 December 2023, long-term bank loans of approximately RMB33 million (2022: approximately RMB42 million) were guaranteed by third parties. The repayment schedule of the long-term bank loans is as follows: Balances due: — No later than one year — More than one year and no later than two years — More than two years and no later than five years — More than five years Less: Portion classified as current liabilities 2023 2022 354 287 628 337 1,606 (354) 368 354 691 483 1,896 (368) 1,252 1,528 Annual Report 2023 184 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 34. PROMISSORY NOTES On 18 November 2019, CUCL issued tranche one of 2019 promissory notes in an amount of RMB1 billion, with a maturity period of 3 years from the date of issue and which carries interest at 3.39% per annum, and was fully repaid in November 2022. 35. CORPORATE BONDS On 19 June 2019, CUCL issued RMB2 billion 3-year corporate bonds, bearing interest at 3.67% per annum, and was fully repaid in June 2022. 36. LEASE LIABILITIES At 31 December 2023 and 2022, the lease liabilities were repayable as follows: 2023 2022 Present value Total Present value Total of the minimum of the minimum minimum lease lease minimum lease lease payments payments payments payments Within 1 year 12,640 12,901 12,495 12,750 After 1 year but within 2 years After 2 years but within 5 years After 5 years 10,635 18,740 1,242 11,273 20,988 1,822 10,437 25,026 966 11,055 28,272 1,313 30,617 34,083 36,429 40,640 Total lease liabilities 43,257 46,984 48,924 53,390 Less: total future interest expenses Present value of lease liabilities (3,727) 43,257 (4,466) 48,924 The total cash outflow for leases incurred by the Group for the year ended 31 December 2023 was RMB23,622 million (2022: RMB23,048 million). China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 37. DEFERRED REVENUE Deferred revenue mainly represents the unamortised portion of government grants. Balance at beginning of the year Additions for the year — government grants — others Sub-total Reductions for the year — recognition of government grants in profit or loss — others Sub-total Balance at end of the year 38. OTHER OBLIGATIONS One-off cash housing subsidies Others Sub-total Less: Current portion Note (a) (b) 185 2023 2022 7,832 6,951 1,715 1,395 3,110 (1,042) (688) 1,278 1,170 2,448 (925) (642) (1,730) (1,567) 9,212 7,832 2023 2,493 939 3,432 2022 2,493 1,218 3,711 (2,493) (2,493) 939 1,218 Annual Report 2023 186 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 38. OTHER OBLIGATIONS (Continued) (a) One-off cash housing subsidies Certain staff quarters, prior to 1998, were sold to certain of the Group’s employees at preferential prices, subject to a number of eligibility requirements. In 1998, the State Council issued a circular which stipulated that the sale of quarters to employees at preferential prices should be terminated. In 2000, the State Council issued a further circular stating that cash subsidies should be made to certain eligible employees following the withdrawal of the allocation of staff quarters. However, the specific timetable and procedures for the implementation of these policies were to be determined by individual provincial or municipal governments based on the particular situation of the provinces or municipality. Based on the relevant detailed local government regulations promulgated, certain entities within the Group adopted cash housing subsidy plans. In accordance with these plans, for those eligible employees who had not been allocated with quarters or who had not been allocated with quarters up to the prescribed standards before the discounted sales of quarters were terminated, the Group determined to pay them one-off cash housing subsidies based on their years of service, positions and other criteria. Based on the available information, the Group estimated the required provision for these cash housing subsidies amounted to RMB4,142 million, which was charged to the consolidated statement of income for the year ended 31 December 2000 (the year in which the State Council circular in respect of cash subsidies was issued). In January 2009, through the absorption of China Netcom (Group) Company Limited (“CNC China”) by CUCL and the absorption of China Network Communications Group Corporation (“Netcom Group”) by Unicom Group, the rights and obligations formerly undertaken by CNC China and Netcom Group were taken over by CUCL and Unicom Group separately. As at 31 December 2023, the Group’s unpaid one-off cash housing subsidies amounted to approximately RMB2,493 million (31 December 2022: RMB2,493 million). If the actual payments required for these one-off housing subsidies differ from the amount provided, Unicom Group will bear any additional payments required. If the actual payments are lower than the amount provided, the difference will be paid to Unicom Group. (b) Others mainly include the balance of contributions from other investors of a subsidiary established by the Group (limited life entities) which were classified as financial liabilities by the Group. 39. SHORT-TERM BANK LOANS Interest rates and final maturity 2023 2022 RMB denominated Fixed interest rates ranging from 1.45%–1.65% bank loans (2022: 1.65%–2.00%) per annum with maturity through 2024 (2022: maturity through 2023) 681 331 As at 31 December 2023 and 2022, all short-term bank loans were unsecured. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 187 40. COMMERCIAL PAPERS On 23 June 2021, CUCL issued tranche one of 2021 super short term commercial papers in an amount of RMB2 billion, with a maturity period of 270 days from the date of issue and which carries interest at 2.80% per annum, and was fully repaid in March 2022. On 27 July 2021, CUCL issued tranche two of 2021 super short term commercial papers in an amount of RMB3 billion, with a maturity period of 180 days from the date of issue and which carries interest at 2.23% per annum, and was fully repaid in January 2022. On 27 July 2021, CUCL issued tranche three of 2021 super short term commercial papers in an amount of RMB1.8 billion, with a maturity period of 180 days from the date of issue and which carries interest at 2.23% per annum, and was fully repaid in January 2022. On 2 September 2022, CUCL issued tranche one of 2022 short term commercial papers in an amount of RMB5 billion, with a maturity period of 365 days from the date of issue and which carries interest at 1.73% per annum, and was fully repaid in September 2023. 41. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Payables to contractors and equipment suppliers Payables to telecommunications products suppliers Customer/contractor deposits Repair and maintenance expense payables Salary and welfare payables Amounts due to technical support services and other service providers/content providers VAT received from customer in advance Accrued expenses Others 2023 2022 94,259 1,887 5,012 9,320 8,917 9,499 2,380 19,101 10,904 85,475 3,966 4,975 6,808 12,379 8,402 2,311 20,177 10,345 161,279 154,838 The aging analysis of accounts payable and accrued liabilities based on the billing date is as follows: Less than six months Six months to one year More than one year 2023 2022 137,565 7,803 15,911 131,253 8,018 15,567 161,279 154,838 Annual Report 2023 188 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 42. MUTUAL INVESTMENT OF THE COMPANY AND TELEFÓNICA IN EACH OTHER On 6 September 2009, the Company announced that in order to strengthen the cooperation between the Company and Telefónica, the parties entered into a strategic alliance agreement and a subscription agreement, pursuant to which each party conditionally agreed to invest an equivalent of US dollars 1 billion in each other through an acquisition of each other’s shares. On 23 January 2011, the Company entered into an agreement to enhance the strategic alliance with Telefónica that: (a) Telefónica would purchase ordinary shares of the Company for a consideration of US dollars 500 million through acquisition from third parties; and (b) the Company would acquire from Telefónica 21,827,499 ordinary shares of Telefónica held in treasury (“Telefónica Treasury Shares”) for an aggregate purchase price of Euro374,559,882.84. On 25 January 2011, the Company completed the purchase of Telefónica Treasury Shares in accordance with the strategic agreement. During 2011, Telefónica completed its investment of US dollars 500 million in the Company. On 14 May 2012, Telefónica declared a dividend. The Company chose to implement it by means of a scrip dividend and received 1,646,269 ordinary shares of approximately RMB146 million. As at 31 December 2023, the related financial assets measured at FVOCI amounted to approximately RMB1,783 million (31 December 2022: approximately RMB1,613 million). For the year ended 31 December 2023, the increase in fair value of the financial assets measured at FVOCI was approximately RMB170 million (2022: decrease of approximately RMB173 million), has been recorded in the consolidated statement of comprehensive income. 43. EQUITY-SETTLED SHARE OPTION SCHEMES On 16 April 2014, the Company adopted a new share option scheme (the “2014 Share Option Scheme”). The 2014 Share Option Scheme is valid and effective for a period of 10 years commencing on 22 April 2014 and will expire on 22 April 2024. Under the 2014 Share Option Scheme, the share options may be granted to employees including all directors; any grant of share options to a Connected Person (as defined in the Listing Rules) of the Company must be approved by the independent non-executive directors of the Company (excluding any independent non-executive director of the Company in the case such director is a grantee of the options) and all grants to connected persons shall be subject to compliance with the requirements of the Listing Rules, including where necessary the prior approval of the shareholders. As at 31 December 2023, 1,777,437,107 options were available for issue under the 2014 Share Option Scheme. Pursuant to the 2014 Share Option Scheme, the consideration payable by a participant for the grant of share options will be HK dollars 1.00. The exercise price payable by a participant upon the exercise of an option will be determined by the Board of Directors at their discretion at the date of grant, except that such price may not be set below a minimum price which is the higher of: (i) The closing price of the shares on the SEHK on the offer date in respect of the share options; and (ii) The average closing price of the shares on the SEHK for the five trading days immediately preceding the offer date. The option period commences on any day after the date on which such share option is offered, but may not exceed 10 years from the offer date. No share options had been granted since adoption of the 2014 Share Option Scheme. No options are outstanding as at 31 December 2023 and 2022. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS189 44. RESTRICTED A-SHARE INCENTIVE SCHEME The Phase I Restricted A-Share Incentive Scheme Pursuant to the share incentive scheme (Phase I) of A Share Company (the “Phase I Restricted A-Share Incentive Scheme”), not more than 848 million restricted shares of A Share Company (the “Phase I Restricted Shares”) were approved for granting to the core employees of the Group, the first batch granted Phase I Restricted Shares of 793,861,000 and second batch granted Phase I Restricted Shares of 13,156,000 were subscribed by the participants, including certain core employees of the Company’s subsidiaries on 21 March 2018 and 1 February 2019 (the “Grant Dates”), respectively, with a subscription price of RMB3.79 per share. The fair value of the Phase I Restricted Shares granted under the respective Grant Dates is RMB2.34 and RMB1.57 per share, respectively, as determined based on the difference between the market price of A Share Company of RMB6.13 per share and RMB5.36 per share at the respective Grant Dates, and the subscription price of RMB3.79 per share. The Phase I Restricted Shares are subject to various lock-up periods (the “Lock-Up Period I”) of approximately 2 years, 3 years and 4 years, respectively, immediately from the Grant Dates. During the Lock-Up Period I, these shares are not transferrable, nor subject to any guarantee or indemnity. The Phase I Restricted Shares shall be unlocked (or repurchased and cancelled by A Share Company) separately in three tranches in proportion of 40%, 30% and 30% of the total number of the Phase I Restricted Shares granted upon the expiry of each of the Lock-Up Period I. Subject to fulfilment of all service and performance conditions under the Phase I Restricted A-Share Incentive Scheme which include the achievement of certain revenue and profit targets of A Share Company, the participants’ individual performance appraisal, etc. (collectively referred to as “vesting conditions”), the restriction over the Phase I Restricted Shares will be removed after the expiry of the corresponding Lock-Up Period I for each tranche and the participants will be fully entitled to these incentive shares. If the vesting conditions are not fulfilled and hence the Phase I Restricted Shares cannot be unlocked, A Share Company shall repurchase the Phase I Restricted Shares based on the respective subscription price from the participants. Pursuant to the Phase I Restricted A-Share Incentive Scheme, the third Lock-Up Period I of approximately 4 years for the second batch have expired during the current year. With the fulfilment of the vesting conditions, the Phase I Restricted Shares of 3,240,375 (2022: 206,767,725) in aggregate were approved for unlocking after the Lock-Up Period I by the Board of Directors of A Share Company. During the year ended 31 December 2023, the Phase I Restricted Shares of 443,925 (2022: 25,296,975) were forfeited. The Phase II Restricted A-Share Incentive Scheme Pursuant to the share incentive scheme (Phase II) of A Share Company (the “Phase II Restricted A-Share Incentive Scheme”), approximately 838 million restricted shares of A Share Company (the “Phase II Restricted Shares”) were approved for granting to the core employees of the Group, the granted Phase II Restricted Shares of 838,340,000 were subscribed by the participants, including certain core employees of the Company’s subsidiaries on 1 November 2022 (the “Grant Date”), with a subscription price of RMB2.48 per share. The fair value of the Phase II Restricted Shares granted under the Grant Date is RMB0.93 per share, as determined based on the difference between the market price of A Share Company of RMB3.41 per share at the Grant Date, and the subscription price of RMB2.48 per share. Annual Report 2023190 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 44. RESTRICTED A-SHARE INCENTIVE SCHEME (Continued) The Phase II Restricted A-Share Incentive Scheme (Continued) The Phase II Restricted Shares are subject to various lock-up periods (the “Lock-Up Period II”) of approximately 2 years, 3 years and 4 years, respectively, immediately from the Grant Date. During the Lock-Up Period II, these shares are not transferrable, nor subject to any guarantee or indemnity. The Phase II Restricted Shares shall be unlocked (or repurchased and cancelled by A Share Company) separately in three tranches in proportion of 40%, 30% and 30% of the total number of the Phase II Restricted Shares granted upon the expiry of each of the Lock-Up Period II. Subject to fulfilment of all service and performance conditions under the Phase II Restricted A-Share Incentive Scheme which include the achievement of certain revenue and profit targets of A Share Company, the participants’ individual performance appraisal, etc., the restriction over the Phase II Restricted Shares will be removed after the expiry of the corresponding Lock-Up Period II for each tranche and the participants will be fully entitled to these incentive shares. If the vesting conditions are not fulfilled and hence the Phase II Restricted Shares cannot be unlocked, A Share Company shall repurchase the Phase II Restricted Shares based on the lower of the subscription price from the participants and the market price at the time of repurchase. For the year ended 31 December 2023, the Group recognised share-based payment expenses and other reserves of RMB282 million under the Phase I and Phase II Restricted A-Share Incentive Schemes (2022: RMB55 million). 45. MATERIAL RELATED PARTY TRANSACTIONS Unicom Group is a state-owned enterprise directly controlled by the PRC government. The PRC government is the Company’s ultimate controlling party. Neither Unicom Group nor the PRC government publishes financial statements available for public use. The PRC government controls a significant portion of the productive assets and entities in the PRC. The Group provides telecommunications services as part of its retail transactions, thus, is likely to have extensive transactions with the employees of other state-owned enterprises, including their key management personnel and their close family members. These transactions are carried out on commercial terms that are consistently applied to all customers. Management considers certain state-owned enterprises have material transactions with the Group in its ordinary course of business, which include but not limited to 1) rendering and receiving telecommunications services, including interconnection revenue/charges; 2) sharing certain telecommunications network infrastructure; 3) purchasing of goods, including use of public utilities; and 4) placing of bank deposits and borrowing money. The Group’s telecommunications network depends, in large part, on interconnection with the network and on transmission lines service provided by other domestic carriers. These transactions are mainly carried out on terms comparable to those conducted with third parties or standards promulgated by relevant government authorities and have been reflected in the financial statements. Amounts due from domestic carriers are all derived from contracts with customers. Management believes that meaningful information relating to related party transactions has been disclosed below. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS191 45. MATERIAL RELATED PARTY TRANSACTIONS (Continued) 45.1 Connected transactions with Unicom Group and its subsidiaries other than the Group (“Unicom Group and its subsidiaries”) (a) Recurring transactions The following is a summary of significant recurring transactions carried out by the Group with Unicom Group and its subsidiaries. In the directors’ opinion, these transactions were carried out in the ordinary course of business. The following transactions with Unicom Group and its subsidiaries constitute continuing connected transactions under the Listing Rules. The Company has complied with the relevant disclosure requirements under Chapter 14A of the Listing Rules. Further details of these continuing connected transactions are disclosed under the paragraph “Continuing Connected Transactions” in the Report of Directors. Note 2023 2022 Transactions with Unicom Group and its subsidiaries: Charges for value-added telecommunications services (i), (ii) Rental charges for short-term property leasing and related services Charges for use of telecommunications resources and related services Charges for engineering design and construction and IT services Charges for shared services Charges for materials procurement services Charges for ancillary telecommunications services Charges for comprehensive support services Income from comprehensive support services Lending by Finance Company to Unicom Group and its subsidiaries Repayment of loans lending by Finance Company to Unicom Group and its subsidiaries Fee and interest income from lending services Income from other financial services Net deposits with Finance Company Interest expenses on the deposits in Finance Company Interest expenses on unsecured entrusted loans Lending from Unicom Group and its subsidiaries Repayment of loans lending from Unicom Group and its subsidiaries (i), (iii) (i), (iv) (i), (v) (i), (vi) (i), (vii) (i), (viii) (i), (ix) (i), (ix) (i), (xi) (i), (xi) (i), (xi) (i), (xi) (i), (xi) (i), (xi) (xii) (xii) (xii) 12 945 209 175 76 3 150 836 194 5,700 5,700 126 1 912 105 43 583 913 25 1,052 231 184 79 16 10 626 98 11,800 17,600 322 1 631 73 32 471 — Annual Report 2023 192 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 45. MATERIAL RELATED PARTY TRANSACTIONS (Continued) 45.1 Connected transactions with Unicom Group and its subsidiaries other than the Group (“Unicom Group and its subsidiaries”) (Continued) (a) Recurring transactions (Continued) (i) On 21 October 2019, CUCL and Unicom Group entered into the “2020–2022 Comprehensive Services Agreement” to renew certain continuing connected transactions. “2020–2022 Comprehensive Services Agreement” has a term of three years commencing on 1 January 2020 and expired on 31 December 2022. On 28 October 2022, CUCL and Unicom Group entered into the “2023–2025 Comprehensive Services Agreement”, and Finance Company and Unicom Group entered into the “2023–2025 Financial Services Agreement”. Pursuant to the “2023–2025 Comprehensive Services Agreement”, CUCL and Unicom Group agreed to provide services to each other or by one to the other, including (i) use of telecommunications resources; (ii) property leasing; (iii) value-added telecommunications services; (iv) materials procurement services; (v) engineering design and construction and IT services; (vi) ancillary telecommunications services; (vii) comprehensive support services and (viii) shared services. Pursuant to the “2023–2025 Financial Services Agreement”, Finance Company agreed to provide financial services to Unicom Group. (ii) UNISK (Beijing) Information Technology Corporation Limited (“UNISK”) agreed to provide the mobile subscribers of CUCL with various types of value-added services through its cellular communications network and data platform. The Group retains a portion of the revenue generated from the value-added services provided to the Group’s subscribers (and actually received by the Group) and allocates a portion of such fees to UNISK for settlement, on the condition that such proportion allocated to UNISK does not exceed the average proportion allocated to independent value-added telecommunications content providers who provide value-added telecommunications content to the Group in the same region. The percentage of revenue to be allocated to UNISK by the Group varies depending on the types of value-added service provided to the Group. (iii) CUCL and Unicom Group agreed to mutually lease properties and ancillary facilities from each other. Rentals are based on the lower of the market rates and the depreciation costs and taxes. In addition to the above amount, the Group recognised a total addition of right-of-use asset of RMB116 million resulting from the properties leased (lease term exceeds 12 months) in 2023. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS193 45. MATERIAL RELATED PARTY TRANSACTIONS (Continued) 45.1 Connected transactions with Unicom Group and its subsidiaries other than the Group (“Unicom Group and its subsidiaries”) (Continued) (a) Recurring transactions (Continued) (iv) CUCL was agreed to use certain international telecommunications resources (including international telecommunications channel gateways, international telecommunications service gateways, international submarine cable capacity, international land cables and international satellite facilities) and certain other telecommunications facilities of Unicom Group for its operations. The charges for the use of international telecommunications resources and other telecommunications facilities are based on the annual depreciation and amortisation charges of such resources and facilities provided that such charges would not be higher than market rates. For maintenance service to the telecommunications facilities aforementioned, unless otherwise agreed by CUCL and Unicom Group, such maintenance service charges would be borne by CUCL and determined with reference to market rates or a cost-plus basis if there are no market rates. (v) Unicom Group agreed to provide engineering design, construction and supervision services and IT services to CUCL. The charges payable by CUCL for the above services are determined with reference to the market price and are settled when the relevant services are provided. (vi) Unicom Group and CUCL agreed to provide shared services to each other and would share the costs related to the shared services proportionately in accordance with their respective total assets value with certain adjustments. For the years ended 31 December 2023 and 2022, the services charges paid by Unicom Group to CUCL was negligible. (vii) Unicom Group agreed to provide comprehensive procurement services for imported and domestic telecommunications materials and other domestic non-telecommunications materials to CUCL. Unicom Group has also agreed to provide services on management of tenders, verification of technical specifications, installation, consulting and agency services. In addition, Unicom Group will sell materials to CUCL and resell the equipment purchased from the third parties, and will also provide storage and logistics services in relation to the above materials procurement. The charges payable by CUCL to Unicom Group are based on contract values, market rates, government guidance price or cost-plus basis where applicable. (viii) Unicom Group agreed to provide ancillary telecommunications services to CUCL. These services include certain telecommunications pre-sale, on-sale and after-sale services such as assembling and repairing of certain telecommunications equipment, sales agency services, printing and invoice delivery services, maintenance of telephone booths, customers acquisitions and servicing and other customers’ service. The charges are based on market rates, government guidance price or cost-plus basis and are settled as and when the relevant services are provided. Annual Report 2023194 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 45. MATERIAL RELATED PARTY TRANSACTIONS (Continued) 45.1 Connected transactions with Unicom Group and its subsidiaries other than the Group (“Unicom Group and its subsidiaries”) (Continued) (a) Recurring transactions (Continued) (ix) Unicom Group and CUCL agreed to provide comprehensive support services to each other, including dining services, facilities leasing services, vehicle services, health and medical services, labour services, security services, hotel and conference services, gardening services, decoration and renovation services, construction agency, equipment maintenance services, market development, sanitary services, parking services, staff trainings, storage services, advertising services, marketing, property management services. CUCL agreed to provide comprehensive services to Unicom Group, including sales services, technical support services, research and development services, communication services and communications technology services (including construction and installation services, system integration services, software development, product sales and agent services, operation and maintenance services, and consultation services). The charges are based on market rates, government guidance price or cost-plus basis and are settled as and when the relevant services are provided. (x) Unicom Group is the registered proprietor of the “Unicom” trademark in English and the trademark bearing the “Unicom” logo, which are registered at the PRC State Trademark Bureau. Pursuant to an exclusive PRC trademark licence agreement between Unicom Group and the Group, the Group has been granted the right to use these trademarks on a royalty free and renewal basis. (xi) Finance Company has agreed to provide financial services to Unicom Group and its subsidiaries, including deposit services, lending and other credit services, and other financial services. For the deposit services from Finance Company to Unicom Group and its subsidiaries, the maximum and minimum deposit interest rates will follow the provisions of the PBOC for deposits of the same period and the same type, and be determined with reference to the interest rate for the same period and same type of deposit offered to Unicom Group by the major cooperative commercial banks of Unicom Group and/or offered by Finance Company to other client, and will be on normal commercial terms. For the lending services from Finance Company to Unicom Group and its subsidiaries, the interest rate will follow the relevant provisions of the PBOC, which will be based on Loan Prime Rate and be determined with reference to the interest rate for the same period and same type of lending and other credit services offered to the same type of corporations by the major cooperative commercial bank of Unicom Group and/ or offered by Finance Company to its other clients, and will be on normal commercial terms. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS195 45. MATERIAL RELATED PARTY TRANSACTIONS (continued) 45.1 Connected transactions with Unicom Group and its subsidiaries other than the Group (“Unicom Group and its subsidiaries”) (continued) (a) Recurring transactions (Continued) (xii) These transactions are related to the unsecured entrusted loans and related interest expenses from Unicom Group and its subsidiaries (see note 45.1 (c)). These transactions are conducted on normal commercial terms or better and are fully exempted from compliance with the reporting, announcement, independent shareholders’ approval and/or annual review requirements under Rules 14A.90 of the Listing Rules. (b) Amounts due from Unicom Group and its subsidiaries Amount due from Unicom Group as at 31 December 2023 included loans from Finance Company to Unicom Group of RMB4,600 million in total with respective floating interest rate of Loan Prime Rate (“LPR”) published by the National Interbank Funding Center (“NIFC”) (2022: RMB4,600 million in total with respective floating interest rate of LPR published by the NIFC). (c) Amounts due to Unicom Group and its subsidiaries Amount due to Unicom Group and its subsidiaries as at 31 December 2023 included a balance of deposits received by Finance Company from Unicom Group and its subsidiaries of RMB7,650 million (31 December 2022: RMB6,721 million) with interest rates ranging from 0.42% to 2.75% per annum for saving and deposits of different terms. Amount due to Unicom Group and its subsidiaries as at 31 December 2023 included unsecured entrusted loans from Unicom Group of RMB706 million (31 December 2022: RMB300 million) with a maturity period of 3 years and interest rate at 2.25% per annum and unsecured entrusted loans from Unicom Group of RMB175 million (31 December 2022: RMB171 million, which was fully repaid in 2023) with a maturity period of 2 years and interest rate at 2.25% per annum. Unsecured entrusted loan from A Share Company of RMB742 million as at 31 December 2022 with a maturity period of 5 years and interest rate at 4.28% per annum was fully repaid in 2023. Annual Report 2023196 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 45. MATERIAL RELATED PARTY TRANSACTIONS (Continued) 45.2 Transactions with associates and joint ventures of Unicom Group and its subsidiaries The Group has entered into transactions with associates and joint ventures of Unicom Group and its subsidiaries based on terms comparable to terms of transactions entered with other entities. In the directors’ opinion, these transactions were carried out in the ordinary course of business. The following transactions with associates and joint ventures of Unicom Group and its subsidiaries constitute continuing connected transactions under the Listing Rules, unless otherwise stated. The Company has complied with the relevant disclosure requirements under Chapter 14A of the Listing Rules. Further details of these continuing connected transactions are disclosed under the paragraph “Continuing Connected Transactions” in the Report of Directors. Transactions with associates and joint ventures of Unicom Group and its subsidiaries: Charges for value-added telecommunications services Rental charges for short-term property leasing and related services Charges for use of telecommunications resources and related services Charges for engineering design and construction and IT services Charges for materials procurement services Charges for ancillary telecommunications services Charges for comprehensive support services Income from comprehensive support services 2023 2022 61 — 1 521 12 888 279 31 105 4 3 2,250 121 3,016 1,012 23 In addition to the above amounts, the Group has also entered into related party transactions with associates of Unicom Group which do not meet the definition of connected person and connected transactions under Chapter 14A of the Listing Rules in 2023. These transactions include: charges for value-added telecommunications services amounting to RMB180 million, charges for engineering design and construction and IT services amounting to RMB2,568 million, charges for ancillary telecommunications services amounting to RMB2,322 million and charges for comprehensive support services amounting to RMB1,036 million. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 197 45. MATERIAL RELATED PARTY TRANSACTIONS (Continued) 45.3 Material transactions with associates and joint ventures of the Group The following is a summary of material transactions entered into by the Group with the associates and joint ventures of the Group. In the directors’ opinion, these transactions were carried out in the ordinary course of business. Transactions with associates and joint ventures of the Group: Revenue from engineering design and construction services Related costs for use of tower assets Additions of right-of-use assets Revenue from value-added telecommunications services Charges for value-added telecommunications services Charges for materials procurement services Net deposits with Finance Company Interest expenses on the deposits in Finance Company Notes 2023 2022 (i) (ii) (ii) 431 20,078 3,254 523 657 12 35 1 271 19,278 33,773 292 503 18 (10) 1 (i) Engineering design and construction services The Group provided engineering design and construction services to Tower Company. (ii) Lease of the tower assets and other related services On 8 July 2016, CUCL and Tower Company entered into a framework agreement to confirm the pricing and related arrangements in relation to the usage of certain telecommunications towers and related assets (the “Agreement”). The Agreement finalised terms including assets categories, pricing basis for usage charges, and relevant service period etc. Provincial service agreements and detailed lease confirmation for specified towers have been signed subsequently. On 31 January 2018, after further arm’s length negotiations and discussions, CUCL and Tower Company agreed on certain supplementary provisions based on the Agreement dated 8 July 2016, which mainly relate to a reduction in cost-plus margin of Tower Company which forms the benchmark for pricing and an increase in co-tenancy discount rates offered to the Group regarding towers under co-sharing arrangements. The new terms applicable to the leased tower portfolio as confirmed by both parties are effective from 1 January 2018 for a period of five years. On 13 December 2022, the Board of Directors of the Company approved CUCL and Tower Company to sign the commercial pricing agreement and the service agreement, and the material terms of the commercial pricing agreement and the service agreement have been agreed and finalised, in which CUCL leases assets and receives services provided by Tower Company, including tower products, indoor distribution system products, transmission products and service products. The agreements further reduced the products pricing and increased the co-tenancy discount rates offered to the Group. The term of each of the commercial pricing agreement and the service agreement is five years, effective from 1 January 2023 to 31 December 2027. Annual Report 2023 198 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 45. MATERIAL RELATED PARTY TRANSACTIONS (Continued) 45.3 Material transactions with associates and joint ventures of the Group (Continued) (ii) Lease of the tower assets and other related services (Continued) Based on HKFRS 16, the Group recognised additions of right-of-use assets in 2023 amounting to RMB3,254 million (2022:RMB33,773 million). Related costs for use of tower assets include the depreciation of right-of-use assets of RMB7,470 million (2022: RMB7,840 million), interest expense of RMB1,273 million (2022: RMB368 million), and variable lease payments and other related service charges of RMB11,335 million (2022: RMB11,070 million) in the consolidated statement of income for the year ended 31 December 2023. The outstanding balances with the associates and joint ventures of the Group are summarised as follows: Amounts due from related parties Amounts due to related parties (iii) Amounts due to Tower Company 31 December 31 December Note 2023 (iii) 272 14,307 2022 221 8,826 The related accounts payable and bills payable balance (exclude lease liabilities) to Tower Company included in the balance of amounts due to related parties as at 31 December 2023 was RMB13,794 million (31 December 2022: RMB8,522 million). Except as mentioned in Note 45.3(ii), amounts due from/to Tower Company are unsecured, interest-free, repayable on demand/on contract terms with Tower Company as described above. 46. CONTINGENCIES AND COMMITMENTS 46.1 Capital commitments As at 31 December 2023 and 2022, the Group had capital commitments, mainly in relation to the construction of telecommunications network, as follows: 2023 2022 Land and Land and buildings Equipment Total buildings Equipment Total Authorised and contracted for Authorised but not contracted for 3,467 7,109 38,508 28,320 41,975 35,429 3,405 7,119 30,193 36,327 33,598 43,446 10,576 66,828 77,404 10,524 66,520 77,044 46.2 Contingent liabilities As at 31 December 2023, the Group had no material contingent liabilities and no material financial guarantees issued. China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 199 As at 31 December 2023 2022 2 237,426 — 10 1,783 2 237,426 12,230 28 1,613 239,221 251,299 157 9,624 234 12,347 371 22,733 156 8,774 27 — 321 9,278 261,954 260,577 254,056 (8,803) 4,088 12,570 254,056 (8,973) 3,335 12,112 261,911 260,530 47. COMPANY-LEVEL STATEMENT OF FINANCIAL POSITION ASSETS Non-current assets Equipment Investments in subsidiaries Loan to a subsidiary Right-of-use assets Financial assets measured at fair value Current assets Amounts due from subsidiaries Dividend receivable Prepayments and other current assets Loan to a subsidiary Cash and cash equivalents Total assets EQUITY Share capital Reserves Retained profits — Proposed final dividend — Others Total equity Annual Report 2023 200 For the year ended 31 December 2023 (All amounts in RMB millions unless otherwise stated) 47. COMPANY-LEVEL STATEMENT OF FINANCIAL POSITION (Continued) LIABILITIES Non-current liabilities Lease liabilities Other non-current liabilities Current liabilities Lease liabilities Accounts payable and accrued liabilities Other current liabilities Total liabilities Total equity and liabilities Net current assets As at 31 December 2023 2022 — 4 4 9 19 11 39 43 18 4 22 9 16 — 25 47 261,954 260,577 22,694 9,253 Total assets less current liabilities 261,915 260,552 The Company’s statement of financial position was approved and authorised for issue by the Board of Directors on 19 March 2024 and signed on behalf of the Board of Directors by: Chen Zhongyue Li Yuzhuo Chairman and Chief Executive Officer Executive Director and Chief Financial Officer China Unicom (Hong Kong) LimitedNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 201 48. NON-ADJUSTING EVENT AFTER THE REPORTING PERIOD Proposed final dividend After the date of the statement of financial position, the Board of Directors proposed a final dividend for the year of 2023. For details, please refer to Note 32. 49. APPROVAL OF FINANCIAL STATEMENTS The consolidated financial statements were approved by the Board of Directors on 19 March 2024. Annual Report 2023202 FINANCIAL SUMMARY For the five-year ended 31 December 2023 (All amounts in RMB millions, except per share data) Selected financial summary for 2019 to 2023, including selected consolidated statement of income data and consolidated statement of financial position data for 2019, 2020, 2021, 2022 and 2023 were prepared in accordance with HKFRSs. RESULTS Selected Statement of Income Data 2023 2022 2021 2020 2019 Revenue 372,597 354,944 327,854 303,838 290,515 Interconnection charges Depreciation and amortisation Network, operation and support expenses Employee benefit expenses Costs of telecommunications products sold Other operating expenses Finance costs Interest income Share of net profit of associates Share of net profit of joint ventures Other income — net Profit before income tax Income tax expenses (11,294) (84,847) (60,026) (62,939) (36,403) (102,123) (1,981) 2,105 2,519 1,803 3,534 22,945 (4,023) (10,947) (86,829) (56,425) (60,726) (34,720) (92,957) (1,095) 1,747 2,153 1,593 3,850 20,588 (3,751) (11,557) (85,652) (53,087) (58,944) (30,683) (77,263) (1,385) 1,215 1,862 1,448 4,119 17,927 (3,420) (10,574) (83,017) (46,286) (55,740) (26,862) (70,237) (1,747) 1,366 1,588 787 2,911 16,027 (3,450) (11,513) (83,080) (43,236) (50,516) (26,412) (64,480) (2,123) 1,272 1,359 646 1,735 14,167 (2,795) Profit for the year 18,922 16,837 14,507 12,577 11,372 Profit attributable to: Equity shareholders of the Company Non-controlling interests 18,726 196 16,745 92 14,368 139 12,493 84 11,330 42 Profit for the year 18,922 16,837 14,507 12,577 11,372 Earnings per share for profit attributable to equity shareholders of the Company: Basic earnings per share (RMB) Diluted earnings per share (RMB) 0.61 0.61 0.55 0.55 0.47 0.47 0.41 0.41 0.37 0.37 China Unicom (Hong Kong) Limited 203 RESULTS (Continued) Selected Statement of Financial Position Data 2023 2022 2021 2020 2019 Property, plant and equipment Right-of-use assets Financial assets measured at fair value Cash and cash equivalents Other current asset Other non-current asset 355,995 52,608 29,645 47,733 85,940 89,130 352,433 355,031 364,187 367,401 59,227 23,702 55,297 71,353 80,651 32,866 32,726 34,280 62,937 73,236 37,960 27,682 23,085 61,362 66,340 43,073 4,093 34,945 48,448 64,539 Total assets 661,051 642,663 591,076 580,616 562,499 Short-term bank loans Commercial papers Long-term bank loans Lease liabilities Other current liabilities Other non-current liabilities 681 — 1,606 43,257 249,977 11,632 331 5,025 1,896 48,924 232,651 10,300 385 6,875 2,207 22,559 216,409 9,208 740 7,000 2,900 27,961 202,367 12,128 5,564 8,995 3,306 32,325 179,404 12,150 Total liabilities 307,153 299,127 257,643 253,096 241,744 Total equity 353,898 343,536 333,433 327,520 320,755 Annual Report 2023 204 COR PORATE INFO R MATION BOARD OF DIRECTORS (As At 19 March 2024) Executive Directors REGISTERED OFFICE 75th Floor, Chen Zhongyue Executive Director, Chairman and Chief Executive Officer The Center, 99 Queen’s Road Central, Wang Junzhi Executive Director Li Yuzhuo Executive Director and Chief Financial Officer Hong Kong Tel: (852) 2126 2018 Independent Non-Executive Directors Cheung Wing Lam Linus Wong Wai Ming Chung Shui Ming Timpson Law Fan Chiu Fun Fanny Audit Committee Wong Wai Ming (Chairman) Cheung Wing Lam Linus Chung Shui Ming Timpson Law Fan Chiu Fun Fanny Remuneration Committee Cheung Wing Lam Linus (Chairman) Wong Wai Ming Chung Shui Ming Timpson Nomination Committee Chung Shui Ming Timpson (Chairman) Chen Zhongyue Law Fan Chiu Fun Fanny COMPANY SECRETARY Chan Ngar Wai AUDITOR Deloitte Touche Tohmatsu Registered Public Interest Entity Auditors LEGAL ADVISORS Freshfields Bruckhaus Deringer MAJOR SUBSIDIARY China United Network Communications Corporation Limited No. 21 Financial Street, Xicheng District, Beijing 100033, P.R.C. SHARE REGISTRAR Hong Kong Registrars Limited Shops 1712–1716, 17th Floor, Hopewell Centre 183 Queen’s Road East, Wanchai, Hong Kong Tel: (852) 2862 8555 Fax: (852) 2865 0990 Website: www.computershare.com/hk/contact PUBLICATIONS Financial reports, announcements, press releases and other investor information on the Company are available to access electronically via the Company’s website. STOCK CODE Hong Kong Stock Exchange: 762 COMPANY WEBSITE www.chinaunicom.com.hk China Unicom (Hong Kong) LimitedCORPORATE CULTURE OUR VISION A world-class technology service enterprise with global competitiveness OUR MISSION The leading contributor of digital information operation and services The pioneer of digital technology integration and innovation OUR CORE VALUES Customer-oriented Employee-friendly Attentive to quality service Inherently innovative Proud of endeavours Adhering to integrity CORPORATE STYLE Rigorous, Pragmatic, Skillful, Meticulous, Efficient OPERATION AND MANAGEMENT PHILOSOPHIES Create value for customers Driven by both market and innovation One China Unicom with integrated capabilities and operating services Annual Report 2023China Unicom (Hong Kong) LimitedStock Code : 762ANDCHINA UNICOM (HONG KONG) LIMITEDwww.chinaunicom.com.hk75th Floor, The Center, 99 Queen’s Road Central, Hong KongTel : (852) 2126 2018Fax : (852) 2126 2016(cid:18)(cid:44)(cid:47)(cid:69)(cid:4)(cid:3)(cid:104)(cid:69)(cid:47)(cid:18)(cid:75)(cid:68)(cid:3)(cid:904)(cid:44)(cid:75)(cid:69)(cid:39)(cid:3)(cid:60)(cid:75)(cid:69)(cid:39)(cid:905)(cid:3)(cid:62)(cid:47)(cid:68)(cid:47)(cid:100)(cid:28)(cid:24)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:4)(cid:69)(cid:69)(cid:104)(cid:4)(cid:62)(cid:3)(cid:90)(cid:28)(cid:87)(cid:75)(cid:90)(cid:100)(cid:3)(cid:1006)(cid:1004)(cid:1006)(cid:1007)E_ChinaUnicom AR23_Cover_aw.pdf 1 18/04/2024 11:31:26

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