#1Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. HKT HKT Trust (a trust constituted on November 7, 2011 under the laws of Hong Kong and managed by HKT Management Limited) and HKT Limited (incorporated in the Cayman Islands with limited liability) (Stock Code: 6823) ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED DECEMBER 31, 2021 The directors of HKT Management Limited (the “Trustee-Manager”, in its capacity as the trustee-manager of the HKT Trust) and HKT Limited (the “Company” or “HKT”) are pleased to announce the audited consolidated results of the HKT Trust and of the Company together with the Company's subsidiaries (collectively the "Group") for the year ended December 31, 2021. Total revenue increased by 5% to HK$33,961 million, reflecting continued strong demand for fixed broadband services, the broader 5G adoption by both consumers and enterprises and robust handset sales Total EBITDA increased by 2% to HK$12,733 million; increased by 5% if adjusted for impact of Employment Support Scheme (“ESS”) in 2020 Adjusted Funds Flow increased by 2.4% to HK$5,513 million Reflecting the breadth and scale of our diversified business portfolio, resilient demand for our core services while improvements on operational efficiencies continued Profit before income tax, excluding other gains/losses, net, was stable at HK$5,827 million Profit attributable to holders of Share Stapled Units amounted to HK$4,808 million; basic earnings per Share Stapled Unit was 63.49 HK cents Final distribution per Share Stapled Unit is 42.07 HK cents, resulting in a total distribution of 72.77 HK cents representing the full payout of Adjusted Funds Flow per Share Stapled Unit for the year 1#2MANAGEMENT REVIEW We are pleased to announce that HKT recorded solid results and a steady rise in adjusted funds flow for the year ended December 31, 2021 as the second half of the year was buoyed by government economic stimulus, a stabilized COVID situation and a resumption of economic activities. With demand for fast and reliable connectivity remaining strong, the Telecommunications Services ("TSS") benefited on the back of its well-established and resilient network as well as its enterprise focused services. The consumer broadband business witnessed an expansion in its subscriber base with further subscriptions to its fiber-to-the-home ("FTTH”) services and take-up of Home Wi-Fi solutions lifting average revenue per user ("ARPU"). The enterprise segment demonstrated robust growth as enterprise customers accelerated their digital transformation during the year. As a result, the local data services business registered 4% growth in revenue during the year. The International Telecommunications Services business was impacted by a moderation in wholesale voice revenue and the absence of lumpy one-off cable revenues from the prior year. Consequently, total TSS revenue edged down by 2% to HK$21,812 million. However, after excluding the International Telecommunications Services business, revenue from our local TSS business increased by 1% year-on-year. Total TSS EBITDA increased by 1% to HK$8,468 million with the margin improving to 39%, reflecting the shift in revenue mix towards local data services and productivity improvements achieved during the year. The Mobile business recorded healthy 13% growth in total revenue to HK$11,748 million during the year. The 2% growth in local core revenue reflected the ARPU uplift from new subscriptions and upgrades to our 5G plans as well as a continued expansion in our customer base. Roaming overhang persisted due to the strict travel conditions in Hong Kong which partially offset the local revenue growth resulting in Mobile services revenue growth of 1%. Mobile product sales returned to more than pre-pandemic levels reflecting consumer upgrades to new 5G handset models amid improved sentiment stimulated by the Government's Consumption Voucher Scheme. EBITDA from the Mobile segment increased by 1% to HK$4,780 million during the year, in line with growth in Mobile services revenue. The Pay TV business, which included the first full-year contribution from Now TV, generated revenue of HK$2,456 million and EBITDA of HK$481 million for the year ended December 31, 2021. Despite rising competition from direct-to-consumer ("D2C") over-the-top ("OTT") players, Now TV delivered resilient business performance due to its unrivalled sports content offering, growing subscriptions on its Now E streaming service and healthy growth in advertising revenue. Pro-forma EBITDA grew by 6% during the year, aided by savings in content costs and the benefits accruing from HKT's quadplay platform. As a result, HKT's total revenue for the year increased by 5% to HK$33,961 million and total EBITDA increased by 2% to HK$12,733 million. Total EBITDA increased by 5% if adjusted for the impact of ESS in 2020. Profit attributable to holders of share stapled units of the HKT Trust and HKT (“Share Stapled Units") was HK$4,808 million for the year. This was impacted by the absence of one-time other gains recorded in 2020 and higher depreciation and amortization expenses from the Now TV integration and re-assignment of mobile spectrum. Basic earnings per Share Stapled Unit was 63.49 HK cents. Adjusted funds flow for the year ended December 31, 2021 rose to HK$5,513 million, an increase of 2.4% over the previous year. Annual adjusted funds flow per Share Stapled Unit was 72.77 HK cents. The board of directors of the Trustee-Manager has recommended the payment of a final distribution of 42.07 HK cents per Share Stapled Unit for the year ended December 31, 2021. This brings the 2021 full-year distribution to 72.77 HK cents per Share Stapled Unit (comprising 30.70 HK cents as interim distribution and 42.07 HK cents as final distribution) representing the full payout of the annual adjusted funds flow per Share Stapled Unit. 2#3OUTLOOK Just as Hong Kong was gradually pulling itself out of the economic quagmire, the Omicron variant strain has thrown a spanner in the works. As before, HKT will continue to exercise vigilance against escalation of the pandemic situation and respond appropriately to protect our employees and customers while ensuring business continuity and our quality services. Looking ahead, HKT will continue to maximize the synergy of our quadplay businesses and leverage the group assets of PCCW Limited to establish new competitive edges to bolster our market-leading fiber broadband, mobile and pay-TV businesses, all of which turned in a robust performance last year despite the challenging market conditions. With increasing consumer uptake, we will be able to further unlock the value of our 5G network and realize ARPU uplift through the development of augmented reality ("AR") and virtual reality ("VR") applications and content as part of our foray into the metaverse. As a technological innovator in full support of Hong Kong's aspiration to become a smart city, HKT is also committed to helping enterprises and public bodies navigate their digital transformation journeys. Farther afield, we are constantly on the lookout for opportunities to contribute to the development of the Greater Bay Area. Under the new normal, consumers are increasingly gravitating toward all things digital. HKT will continue to nurture its digital ecosystem, integrating its loyalty program and a host of online services meeting customers' health, banking, and other needs. On November 29, 2021, HKT celebrated the 10th anniversary of its Hong Kong stock exchange listing. The numerous milestones achieved by the Company in the past decade have been a collective effort of our staff, business partners, customers, and other supporters, for which we are truly grateful. Such collaborative efforts form a part of HKT's DNA, driving our energy and progress to give us a competitive advantage. Having laid a solid foundation, HKT is poised for further growth when the economy regains its footing, as we are well placed to transform Hong Kong and the public's way of living with even more game-changing products and services. 3#4FINANCIAL REVIEW BY SEGMENT For the year ended December 31, HK$ million 2020 2021 Better/ (Worse) Full Full H1 H2 Year H1 H2 Year y-o-y Revenue TSS - Local TSS Services - International Telecommunications Services Mobile Mobile Services Mobile Product Sales Pay TV Other Businesses Eliminations Total revenue Total revenue (excluding Mobile Product Sales) Cost of sales Operating costs before depreciation, amortization, and gains on disposal of property, plant and equipment and right-of-use assets, net EBITDA¹ 10,386 11,971 22,357 10,243 11,569 21,812 6,622 8,091 14,713 6,926 7,880 14,806 (2)% 1% 3,764 3,880 7,644 3,317 3,689 7,006 (8)% 4,543 5,823 10,366 5,108 6,640 11,748 13% 3,573 4,184 7,757 3,577 4,241 7,818 1% 970 1,639 2,609 1,531 2,399 3,930 51% 647 647 1,231 1,225 2,456 280% 155 210 365 408 464 872 139% (117)% 5% 13,636 16,144 29,780 14,112 15,919 30,031 (6,941) (8,762) (15,703) (7,550) (9,179) (16,729) 1% (7)% (478) (868) (1,346) (1,347) (1,580) (2,927) 14,606 17,783 32,389 15,643 18,318 33,961 (2,119) (2,040) (4,159) (2,378) (2,121) (4,499) (8)% TSS Mobile Mobile Services 3,801 4,611 8,412 3,824 4,644 8,468 2,050 2,697 4,747 2,072 2,708 2,057 2,639 4,696 1% 4,780 1% 2,058 2,643 4,701 Mobile Product Sales (7) 58 51 14 65 79 55% Pay TV 174 174 212 269 481 176% Other Businesses (305) Total EBITDA¹ 5,546 (501) (806) 6,981 12,527 5,715 (393) (603) (996) (24)% 7,018 12,733 2% TSS EBITDA Margin 37% 39% 38% 37% 40% 39% Mobile EBITDA Margin 45% 46% 46% 41% 41% 41% - Mobile Services EBITDA' Margin 58% 63% 61% 58% 62% 60% Pay TV EBITDA¹ Margin 27% 27% 17% 22% 20% Total EBITDA Margin 38% 39% 39% 37% 38% 37% Total EBITDA Margin (excluding Mobile Product Sales) Depreciation and amortization Gains on disposal of property, plant 41% 43% 42% 40% 44% 42% (2,491) (2,850) (5,341) (2,751) (2,901) (5,652) (6)% and equipment and right-of-use assets, net 2 Other (losses)/gains, net (50) Finance costs, net (658) 2 411 361 (638) (1,296) (561) 2 22 24 >500% (8) (8) NA (587) (1,148) 11% Share of results of associates and joint ventures Profit before income tax (30) (49) (79) (63) 2,319 3,855 6,174 2,342 (67) (130) 3,477 5,819 (65)% (6)% Profit before income tax (excluding other (losses)/gains, net) 2,369 3,444 5,813 2,342 3,485 5,827 4#5ADJUSTED FUNDS FLOW³ For the year ended December 31, HK$ million 2020 2021 Better/ (Worse) Full Full H1 H2 Year H1 H2 Year y-o-y Total EBITDA¹ Less cash outflows in respect of capital expenditures, customer acquisition costs and licence fees²: Capital expenditures 5,546 6,981 12,527 5,715 7,018 12,733 (1,169) (1,208) (2,377) (1,170) (1,208) (2,378) 2% Customer acquisition costs and licence fees (411) (921) (1,332) (534) (1,166) (1,700) (28)% Fulfillment costs (289) (228) (517) (227) (260) (487) 6% Right-of-use assets (764) (826) (1,590) (809) (815) (1,624) (2)% Adjusted funds flow³ before tax paid, net finance costs paid and changes in working capital 2,913 3,798 6,711 2,975 3,569 6,544 (2)% Adjusted for: Net finance costs paid (378) (372) (750) (281) (319) (600) 20% Tax payment (149) (367) (516) (180) (194) (374) 28% Changes in working capital (106) 45 (61) (188) 131 (57) 7% Adjusted funds flow³ 2,280 3,104 5,384 2,326 3,187 5,513 2.4% Annual adjusted funds flow per Share Stapled Unit (HK cents)4 71.07 72.77 KEY OPERATING DRIVERS5 2020 2021 Better/ (Worse) H1 H2 H1 H2 y-o-y Exchange lines in service ('000) 2,564 2,522 2,486 2,443 (3)% Business lines ('000) 1,227 1,212 1,206 1,195 (1)% Residential lines ('000) 1,337 1,310 1,280 1,248 (5)% Total broadband access lines ('000) 1,622 1,627 1,634 1,637 1% (Consumer, business and wholesale) Retail consumer broadband access lines ('000) 1,454 1,457 1,464 1,461 0.3% Retail business broadband access lines ('000) 157 160 161 163 2% Mobile subscribers ('000) 4,372 4,605 4,477 4,770 4% Post-paid subscribers ('000) 3,250 3,252 3,263 3,297 1% Prepaid subscribers ('000) 1,122 1,353 1,214 1,473 9% Pay TV installed base ('000) 1,348 1,352 1,373 2% The Club members ('000) 3,043 3,178 3,293 3,541 11% Tap & Go accounts in service ('000) 2,629 2,744 3,003 3,603 31% 5#6Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 EBITDA represents earnings before interest income, finance costs, income tax, depreciation and amortization, gains/losses on disposal of property, plant and equipment, interests in leasehold land, right-of-use assets and intangible assets, net other gains/losses, losses on property, plant and equipment, restructuring costs, impairment losses on goodwill, tangible and intangible assets and interests in associates and joint ventures, and the Group's share of results of associates and joint ventures. While EBITDA is commonly used in the telecommunications industry worldwide as an indicator of operating performance, leverage and liquidity, it is not presented as a measure of operating performance in accordance with the Hong Kong Financial Reporting Standards ("HKFRSS") and should not be considered as representing net cash flows from operating activities. The computation of the Group's EBITDA may not be comparable to similarly titled measures of other companies. Group capital expenditures represent additions to property, plant and equipment and interests in leasehold land. Fulfillment costs and right-of-use assets are considered as part of customer acquisition costs and capital expenditures, respectively, for the purpose of adjusted funds flow calculation. Adjusted funds flow is defined as EBITDA less capital expenditures, customer acquisition costs and licence fees paid, taxes paid, finance costs and interest expense paid, and adjusted for interest income received and changes in working capital. It is not presented as a measure of leverage or liquidity in accordance with HKFRSS and should not be considered as representing net cash flows or any other similar measures derived in accordance with HKFRSS, or an alternative to cash flow from operations or a measure of liquidity. The Group's adjusted funds flow is computed in accordance with the above definition using financial information derived from the Group's audited consolidated financial statements. The adjusted funds flow may be used for debt repayment. Annual adjusted funds flow per Share Stapled Unit is calculated by dividing the adjusted funds flow for the year by the number of Share Stapled Units in issue as at the respective year end. Figures are stated as at the period end. Gross debt refers to the principal amount of short-term borrowings and long-term borrowings. 6#7Telecommunications Services For the year ended December 31, HK$ million 2020 2021 Better/ (Worse) Full Full H1 H2 Year H1 H2 Year y-o-y TSS Revenue Local TSS Services - Local Data Services - Local Telephony Services - Other Services International Telecommunications Services Total TSS Revenue Cost of sales Operating costs before depreciation and amortization Total TSS EBITDA¹ TSS EBITDA margin 8,560 2,826 (8)% 6,622 8,091 14,713 6,926 3,696 4,521 8,217 3,877 4,683 1,532 1,552 3,084 1,449 1,377 1,394 2,018 3,412 1,600 1,820 7,880 14,806 1% 4% 3,420 3,764 3,880 7,644 3,317 3,689 7,006 (8)% 10,386 11,971 22,357 10,243 11,569 21,812 (5,346) (6,539) (11,885) (5,305) (6,149) (11,454) (2)% 4% (1,239) (821) (2,060) (1,114) (776) (1,890) 8% 3,801 4,611 8,412 3,824 4,644 8,468 1% 37% 39% 38% 37% 40% 39% Local TSS revenue grew by 1% to HK$14,806 million for the year ended December 31, 2021 underpinned by an increase of 4% in Local Data Services revenue to HK$8,560 million, a revenue base now representing 58% of the Local TSS Services segment. Local Telephony Services generated HK$2,826 million in revenue reflecting the continued industry shift away from traditional voice towards broadband and mobile services. Revenue from International Telecommunications Services came in at HK$7,006 million during the year. As a result, total TSS revenue edged down 2% to HK$21,812 million. Local Data Services. Comprising broadband network revenue and local data revenue, Local Data Services revenue rose by 4% to HK$8,560 million for the year ended December 31, 2021. The Broadband Network business recorded revenue growth for the 14th successive year, with revenue increasing by 2%. The business continued to benefit from the superior quality and reliability of HKT's fiber network and the success of our three-pronged strategy. This strategy encompasses the targeted marketing of our leading FTTH service through the brands of "HKT Premier”, “NETVIGATOR” and “LiKE100" with our diverse range of value added services. With home entertainment, online learning and remote work arrangements being the norm, demand for fast and reliable broadband connectivity and Home Wi-Fi solutions remained strong during the year. Despite fierce price competition and elevated line terminations due to households relocating overseas, the business achieved an overall net gain in broadband customers during the year, with total broadband access lines growing by 1% to 1.637 million as at the end of December 2021. Of these, 944,000 were FTTH connections which represented a net increase of 52,000 or 6% growth from a year earlier. Penetration of our Home Wi-Fi solutions also continued to rise steadily, which helped lift overall ARPU. During the year, a total of 333,000 customers subscribed to our Home Wi-Fi solutions, up 8% compared to the previous year and representing 23% of the consumer broadband base. 7#8Telecommunications Services (Continued) The enterprise segment delivered robust growth momentum during the year as enterprise customers accelerated their digital transformation, recognizing the urgency and necessity of adopting digital solutions which has been amplified by the pandemic. This drove demand for our wide range of fixed-mobile converged solutions that now incorporate not only 5G but also artificial intelligence, Internet of Things and other new, emerging technologies. As a result, local data revenue recorded substantial growth of 8% for the year ended December 31, 2021. Local Telephony Services. Local Telephony Services revenue was HK$2,826 million for the year ended December 31, 2021 versus HK$3,084 million a year earlier. This result reflected the continued migration of residential fixed-line customers to our broadband and mobile services, coupled with increased fixed-line terminations due to household relocations, as well as continued softness in the small and medium-sized enterprise segment during the year. As such, the total number of fixed lines in service at the end of December 2021 was 2.443 million, compared to 2.522 million a year earlier. Other Services. Other Services revenue comes mainly from the sale of network equipment and customer premises equipment and the provision of technical and maintenance subcontracting services and contact center services ("Teleservices"). Other services revenue for the year ended December 31, 2021 remained steady at HK$3,420 million. International Telecommunications Services. International Telecommunications Services revenue was HK$7,006 million for the year ended December 31, 2021 versus HK$7,644 million a year earlier. The pullback primarily stemmed from the global wholesale voice business which was affected by the curtailment of international travel and a shift in voice traffic to digital platforms as well as the absence of lumpy one-off cable revenues that occurred in 2020. However, wholesale voice is a relatively thin margin business. As cloud computing adoption continues to spread globally, demand for cloud interconnectivity services offered through our Console Connect platform grew. To support this growth, Console Connect has extended its reach and, as of the end of December 2021, allowed users to instantly reach almost 600 data centers and 150 cloud zones globally on an on-demand basis. The TSS business registered an increase in EBITDA of 1% to HK$8,468 million with the EBITDA margin increasing to 39%, primarily due to the shift in revenue mix towards Local Data Services and further operating efficiencies amid an ongoing focus on cost initiatives during the year. 8#9Mobile For the year ended December 31, HK$ million Mobile Revenue Mobile Services Mobile Product Sales Total Mobile Revenue Mobile EBITDA¹ Mobile Services Mobile Product Sales Total Mobile EBITDA¹ 2020 2021 Better/ (Worse) Full Full H1 H2 Year H1 H2 Year y-o-y 3,573 4,184 7,757 970 1,639 2,609 3,577 4,241 7,818 1,531 2,399 3,930 1% 51% 4,543 5,823 10,366 5,108 6,640 11,748 13% 2,057 (7) 2,639 58 4,696 51 2,058 14 2,643 65 4,701 79 55% 2,050 2,697 4,747 2,072 2,708 4,780 1% Mobile EBITDA' margin Mobile Services EBITDA' margin 45% 46% 46% 41% 41% 41% 58% 63% 61% 58% 62% 60% The Mobile business recorded a healthy 13% growth in revenue to HK$11,748 million for the year ended December 31, 2021. Mobile services revenue rose by 1% to HK$7,818 million, as the 2% growth in local core revenue more than offset the overhang of moderated roaming and IDD revenue resulting from extended travel restrictions. The expansion in local core revenue benefited from the ARPU uplift from new subscriptions and upgrades to our 5G plans alongside growth in our overall customer base. Mobile product sales increased by 51% to HK$3,930 million reflecting consumer upgrades to new 5G handset models amid improved sentiment and increased spending stimulated by the Government's Consumption Voucher Scheme. Revenue growth was also aided by our digital platform, Club Shopping, which provides customers with a convenient service through our "redeem and shop" offerings that also helps to build customer loyalty. Despite intense market competition, the Mobile business continued to report a net gain in post-paid customers to 3.297 million in 2021, representing net additions of 45,000 or 1% growth during the year. By leveraging The Club to deepen customer engagement and loyalty, the churn rate for post-paid customers reached an all-time low of 0.7% in 2021. In November 2021, the Mobile business launched a unique and innovative digital campaign “csl. 5G x MIRROR" which incorporated AR technology. Receiving an overwhelming response, the campaign has helped to further drive subscriptions to our 5G plans. As at the end of December 2021, our 5G customer base was 680,000. By January 2022, this had increased further to 756,000 customers representing 23% of our post-paid base as subscribers were pulled in by our first to market 5G celebrity premium plans. The post-paid exit ARPU as at December 31, 2021 rebounded by 2% to HK$187 versus HK$184 as at December 31, 2020, primarily driven by the 5G service plan uplift. Mobile services EBITDA for the year was steady at HK$4,701 million with a margin of 60% reflecting continuing discipline in operating expenditure and optimization of offline-to-online sales channels. Total Mobile EBITDA for the year increased by 1% to HK$4,780 million from HK$4,747 million a year earlier supported by the healthy growth in Mobile product sales. 9#10Pay TV The Pay TV business, which included the first full-year contribution from Now TV, recorded revenue of HK$2,456 million for the year ended December 31, 2021. Despite rising competition from global D2C OTT players, Now TV delivered a resilient business performance with a significant increase of 56% in pro-forma revenue from its Now E streaming service and growth of 17% in pro-forma advertising revenue during the year. By the end of December 2021, Now TV's installed base grew by 2% to 1.373 million, compared to 1.348 million at the end of December 2020. This performance reflected our unrivalled sports content offering including the exclusive broadcast of UEFA EURO 2020™ and Tokyo 2020 Olympics in 2021. Take-up of our Now E streaming service continued to perform well with its unique content proposition and flexible subscription plans. It is particularly popular among the millennial segment, which is more accustomed to non-linear entertainment consumption. Now TV strives to bring world-class sporting events to the Hong Kong market. It offers the widest range of football programming in Hong Kong with broadcasts of the Premier League ("PL"), UEFA Champions League, Europa League, La Liga, Serie A and Ligue 1. During 2021, Now TV secured the broadcast rights for key sporting content including the Formula One, UFC, Tennis Grand Slams and Moto GP, and recently renewed its exclusive PL broadcast rights for another three seasons. Moreover, new interactive features for live football matches such as Multi-Angle, Watch Party and Third Audio were also launched to enhance customer enjoyment and deepen customer engagement. Apart from sports, Now TV is enhancing the breadth and depth of self-curated content by offering award- winning documentaries and inspiring true stories on Now True and a range of Western and Chinese dramas for Now Studio video-on-demand (“VOD”) services. Our wide range of VOD libraries currently cover movie, drama, documentary, variety show, kids and infotainment etc. with over 30,000 hours of on demand, compelling content. Now TV has recently strengthened its offerings in the educational segment by launching a cross TV and online tutoring service that offers digital learning packages for junior secondary students. EBITDA for the year ended December 31, 2021 amounted to HK$481 million, representing a margin of 20%. Pro-forma EBITDA grew by 6% during the year, aided by strenuous efforts to rationalize content costs and the benefits accruing from HKT's quadplay platform. Other Businesses Primarily comprising new business areas such as The Club and HKT Financial Services, as well as corporate support functions, Other Businesses recorded a substantial revenue growth of 139% to HK$872 million for the year ended December 31, 2021 versus HK$365 million a year earlier, primarily driven by the strong performance of Club Shopping. The Club's membership base further expanded by 11% to 3.54 million as of December 31, 2021 versus 3.18 million a year earlier. During the year, The Club succeeded not only in attracting new members but also in deepening engagement with members as the full convergence of multiple online businesses into a single online platform enhanced the customer experience and drove traffic and transactions with rewards. As a result, gross merchandise value ("GMV") on Club Shopping more than doubled from a year ago. In the second half of 2021, Tap & Go assisted the Government in disbursing consumption vouchers to help invigorate the local economy and promote electronic payment methods in Hong Kong. As such, Tap & Go recorded a significant growth in both consumer and merchant users, together with substantial increases year-on-year in both online and physical store transaction volumes. As at December 31, 2021, Tap & Go had over 3.60 million accounts in service, an increase of 31% from 2.74 million a year earlier. 10#11Eliminations Eliminations were HK$2,927 million for the year ended December 31, 2021 versus HK$1,346 million a year earlier, reflecting the increased collaboration across all of HKT's business segments and the full-year impact of the integration of Now TV business with HKT. Cost of Sales Cost of sales for the year ended December 31, 2021 increased by 7% to HK$16,729 million, reflecting the costs associated with higher Mobile product sales and the full-year impact of the integration of Now TV business during the year. General and Administrative Expenses For the year ended December 31, 2021, the Group achieved savings of 9% in operating costs before depreciation, amortization, and gains on disposal of property, plant and equipment and right-of-use assets, net (“operating costs") for the TSS and Mobile businesses due to the continuous focus on operating efficiency through digitalizing business processes as well as optimizing offline-to-online sales channels and retail footprint. These savings were reinvested in new businesses including The Club, Tap & Go and DrGo to support their growth momentum. Nevertheless, operating costs excluding the Pay TV business remained flat during the year. After taking into account the full-year impact of the integration of Now TV business, total operating costs for the year increased by 8% to HK$4,499 million, and the operating costs-to-revenue ratio was 13.2% versus 12.8% a year earlier. Depreciation expenses increased by 4% and amortization expenses increased by 7% during the year, largely due to the full-year impact of the integration of Now TV business and an increase in the amortization of the 900MHz and 1800MHz mobile spectrum licenses arising from the reassignment in 2021. As such, total depreciation and amortization expenses increased by 6% to HK$5,652 million for the year ended December 31, 2021. As a result of the above, general and administrative expenses increased by 7% to HK$10,127 million for the year ended December 31, 2021 versus HK$9,498 million a year earlier. EBITDA¹ Total EBITDA increased by 2% to HK$12,733 million for the year ended December 31, 2021 versus HK$12,527 million a year earlier. The overall EBITDA margin was 37% in 2021 versus 39% a year earlier, primarily due to the increased share of revenue contributed by Mobile product sales. Excluding Mobile product sales, the EBITDA margin held steady at 42% for the year. Finance Costs, Net Net finance costs for the year ended December 31, 2021 decreased by 11% to HK$1,148 million from HK$1,296 million a year earlier, mainly due to a lower prevailing HIBOR during the year. The average cost of debt decreased to 2.4% during the year, compared to 2.9% a year earlier. We will continue to closely monitor the interest rate environment to optimize the ratio of floating to fixed rate debt. Income Tax Income tax expense for the year ended December 31, 2021 was HK$997 million, as compared to HK$855 million a year earlier. The effective tax rate for the year was 17.1%, compared to 13.8% a year earlier. The lower effective tax rate in 2020 was mainly due to certain non-taxable one-off capital gains and credits. 11#12Non-controlling Interests Non-controlling interests of HK$14 million (2020: HK$16 million) mainly comprised the net profit attributable to the non-controlling shareholders of Sun Mobile Limited. Profit Attributable to Holders of Share Stapled Units/Shares of the Company Profit attributable to holders of Share Stapled Units/shares of the Company for the year ended December 31, 2021 was HK$4,808 million (2020: HK$5,303 million). LIQUIDITY AND CAPITAL RESOURCES The Group actively and regularly reviews and manages its capital structure to maintain a balance between shareholder return and sound capital position. Adjustments are made, when necessary, to maintain an optimal capital structure in light of changes in economic conditions and to reduce the cost of capital. HKT's gross debt6 was HK$43,886 million as at December 31, 2021 (December 31, 2020: HK$42,493 million). Cash and short-term deposits totaled HK$2,883 million as at December 31, 2021 (December 31, 2020: HK$2,630 million). HKT's gross debt to total assets was 40% as at December 31, 2021 (December 31, 2020: 41%). As at December 31, 2021, HKT had ample liquidity as evidenced by banking facilities totaling HK$32,209 million, of which HK$9,878 million remained undrawn. CREDIT RATINGS OF HONG KONG TELECOMMUNICATIONS (HKT) LIMITED As at December 31, 2021, Hong Kong Telecommunications (HKT) Limited, an indirect wholly-owned subsidiary of the Company, had investment grade ratings with Moody's Investors Service (Baa2) and S&P Global Ratings (BBB). CAPITAL EXPENDITURE² was Capital expenditure including capitalized interest for the year ended December 31, 2021 HK$2,458 million (2020: HK$2,437 million). Capital expenditure relative to revenue was 7.2% for the year ended December 31, 2021 (2020: 7.5%). Capital expenditure for HKT's Mobile business was steady in 2021 with spending focused on our 5G network expansion and enrichment. TSS capital expenditure dropped during the year, in line with the capital expenditure cycle of our extensive local fiber network and international cable systems. Overall capital expenditure increased slightly by 1% during the year due to the full-year impact of the integration of Now TV business with HKT. HKT will continue to invest in building digital capabilities to support its existing businesses and enable its growth in new areas, and prudently invest in expanding its 5G network, taking into account the prevailing market conditions, and using assessment criteria including internal rate of return, net present value and payback period. 12#13ADJUSTED FUNDS FLOW³ Adjusted funds flow increased by 2.4% to HK$5,513 million for the year ended December 31, 2021 from HK$5,384 million for the year ended December 31, 2020. Growth was driven by the 2% expansion in EBITDA, disciplined capex investments and lower fulfillment costs. There was also a 20% reduction in net finance costs paid and lower tax payment during the year. These positive factors were partially offset by the higher customer acquisition costs and right-of-use asset payments associated with the full-year impact of the integration of Now TV business, and higher licence fees arising from the re-assignment of mobile spectrum in 2021. The amounts presented in adjusted funds flow calculation represent the respective cash flows to the Group during the year, which may be different from the related corresponding amounts recognized in the consolidated income statement due to various reasons such as non-cash items recognized in the consolidated income statement and timing difference between accounting recognition and actual cash flows. HEDGING Market risk arises from foreign currency and interest rate exposure related to investments and financing. As a matter of policy, HKT continues to manage the market risk directly relating to its operations and financing and does not undertake any speculative derivative trading activities. The Finance and Management Committee, a sub-committee of the Executive Committee of the board of directors of the Company, determines the appropriate risk management activities with the aim of prudently managing the market risk associated with transactions undertaken in the normal course of the Group's business. All treasury risk management activities are carried out in accordance with policies and guidelines approved by the Finance and Management Committee, which are reviewed on a regular basis. More than three quarters of HKT's consolidated revenue and costs are denominated in Hong Kong dollars. For those operations with revenues denominated in foreign currencies, the related costs and expenses are usually denominated in the same foreign currencies and hence provide a natural hedge against each other. Therefore, the Group is not exposed to significant foreign currency fluctuation risk from operations. A significant portion of HKT's financing is denominated in foreign currencies including United States dollars. Accordingly, HKT has entered into forward and swap contracts in order to manage its exposure to adverse fluctuations in foreign currency exchange rates and interest rates. These instruments are executed with creditworthy financial institutions. As at December 31, 2021, all forward and swap contracts were designated as cash flow hedges for the related financing of HKT. As a result, the impacts of these operational and financial risks to HKT are considered not material. CHARGE ON ASSETS As at December 31, 2021, no assets of the Group (2020: nil) were pledged to secure loans and banking facilities of HKT. 13#14CONTINGENT LIABILITIES As at December 31, HK$ million Performance guarantees Others 2020 2021 955 994 18 2 973 996 The Group is subject to certain corporate guarantee obligations to guarantee the performance of its subsidiaries in the normal course of their businesses. The amount of liabilities arising from such obligations, if any, cannot be ascertained but the directors are of the opinion that any resulting liability will not materially affect the financial position of the Group. HUMAN RESOURCES HKT had over 15,400 employees as at December 31, 2021 (2020: 16,300) located in 21 countries and cities. About 67% of these employees work in Hong Kong and the others are based mainly in mainland China, the Philippines and the United States. HKT has established performance based bonus and incentive schemes designed to motivate and reward employees at all levels to achieve business performance targets. Payment of performance bonuses is generally based on achievement of revenue, EBITDA and free cash flow targets for HKT as a whole and for each of the individual business units and performance ratings of employees. FINAL DIVIDEND/DISTRIBUTION The board of directors of the Trustee-Manager has recommended the payment of a final distribution by the HKT Trust in respect of the Share Stapled Units, of 42.07 HK cents per Share Stapled Unit (after deduction of any operating expenses permissible under the trust deed dated November 7, 2011 constituting the HKT Trust (the "Trust Deed")), in respect of the year ended December 31, 2021 (and in order to enable the HKT Trust to pay that distribution, the board of directors of the Company has recommended the payment of a final dividend in respect of the ordinary shares in the Company held by the Trustee-Manager, of 42.07 HK cents per ordinary share, in respect of the same period), subject to the approval of unitholders of the HKT Trust and of shareholders of the Company at the forthcoming annual general meeting of unitholders of the HKT Trust and of shareholders of the Company to be held on a combined basis as a single meeting characterized as an annual general meeting of registered holders of Share Stapled Units ("AGM"). An interim distribution/dividend of 30.70 HK cents per Share Stapled Unit/ordinary share of the Company for the six months ended June 30, 2021 was paid to holders of Share Stapled Units/shareholder of the Company in September 2021. The board of directors of the Trustee-Manager has confirmed, in accordance with the Trust Deed, that (i) the auditor of the Group has performed limited assurance procedures in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) "Assurance Engagements Other than Audits or Reviews of Historical Financial Information" issued by the Hong Kong Institute of Certified Public Accountants to review and verify the Trustee-Manager's calculation of the above distribution entitlement per Share Stapled Unit and (ii) having made all reasonable enquiries, immediately after making the above distribution to the registered unitholders of the HKT Trust, the Trustee-Manager will be able to fulfill, from the Trust Property (as defined in the Trust Deed), the liabilities of the HKT Trust as they fall due. 14#15CLOSURE OF BOOKS The record date for the proposed final distribution will be Friday, May 20, 2022. The register of registered holders of Share Stapled Units, the register of holders of units, the principal and Hong Kong branch registers of members of the Company and the register of beneficial interests as maintained by the Trustee-Manager and the Company in accordance with the provisions of the Trust Deed will all be closed from Thursday, May 19, 2022 to Friday, May 20, 2022 (both days inclusive), in order to determine entitlements to the proposed final distribution. During such period, no transfer of Share Stapled Units will be effected. In order to qualify for the proposed final distribution, all transfers of Share Stapled Units accompanied by the relevant certificates in respect of the Share Stapled Units must be lodged with the Share Stapled Units Registrar, Computershare Hong Kong Investor Services Limited, Transfer Office, Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong (the "Share Stapled Units Registrar"), for registration no later than 4:30 p.m. on Wednesday, May 18, 2022. Subject to the approval of holders of Share Stapled Units at the AGM, distribution warrants will be despatched to holders of Share Stapled Units on or around Tuesday, May 31, 2022. RECORD DATE FOR DETERMINING ELIGIBILITY TO ATTEND AND VOTE AT THE AGM The record date for determining the entitlement of the holders of Share Stapled Units to attend and vote at the AGM, which is to be held on Friday, May 13, 2022, will be Friday, May 6, 2022. All transfers of Share Stapled Units accompanied by the relevant certificates in respect of the Share Stapled Units must be lodged with the Share Stapled Units Registrar for registration no later than 4:30 p.m. on Friday, May 6, 2022. PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES Under the Trust Deed and for so long as the Trust Deed remains in effect, the Share Stapled Units cannot be repurchased or redeemed by the HKT Trust and the Company unless and until specific regulations which expressly permit repurchase or redemption are introduced by the Securities and Futures Commission. Therefore, the holders of Share Stapled Units have no right to request the Trustee-Manager to repurchase or redeem their Share Stapled Units, and the HKT Trust and the Company are not allowed to repurchase their own Share Stapled Units. During the year ended December 31, 2021, none of the HKT Trust (including the Trustee-Manager), the Company or the Company's subsidiaries purchased, sold or redeemed any Share Stapled Units. AUDIT COMMITTEE The Trustee-Manager's Audit Committee and the Company's Audit Committee have reviewed the accounting policies adopted by the Group and the Trustee-Manager, the audited consolidated financial statements of the HKT Trust and HKT Limited for the year ended December 31, 2021 and the audited financial statements of the Trustee-Manager for the same period. 15#16CORPORATE GOVERNANCE CODE The HKT Trust, the Trustee-Manager and the Company are committed to maintaining a high standard of corporate governance, the principles of which serve to uphold a high standard of ethics, transparency, responsibility and integrity in all aspects of their businesses, and to ensure that their affairs are conducted in accordance with applicable laws and regulations. The HKT Trust and the Company have applied the principles, and complied with all relevant code provisions of the applicable Corporate Governance Code (the “CG Code”) in each case as set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited during the year ended December 31, 2021, save and except for the code provisions set out below. The requirement to establish a separate Remuneration Committee with written terms of reference for the Trustee-Manager under the code provision B.1.2 of the CG Code is not relevant to the Trustee-Manager as its directors are not entitled to any remuneration under the Trust Deed, and therefore has not been complied with. In addition, given the unique circumstances of the HKT Trust i.e., the fact that the Trust Deed requires that the directors of the Company and the directors of the Trustee-Manager must always be the same individuals, the establishment of a separate Nomination Committee for the Trustee-Manager as required by code provision A.5.1 of the CG Code is not relevant to the Trustee-Manager, and therefore has not been complied with. The appointment of company secretary during the year was considered and approved at a meeting of the executive committee (in accordance with delegated board authority and the outcome of which was reported to the directors), rather than at a physical meeting of the board as required under code provision F.1.2 of the CG Code. Accordingly, the requirement under code provision F.1.2 of the CG Code to approve this matter by physical board meeting has not been strictly complied with. However, the directors of the Trustee-Manager and the directors of the Company considered that the approval process was appropriate and efficient. Having regard to the mandatory global travel restrictions in connection with the COVID-19 pandemic, certain directors of the Trustee-Manager and the Company participated in the combined annual general meeting of unitholders of the HKT Trust and of shareholders of the Company on May 7, 2021 by video/audio conferencing, and such directors, including the chairpersons of the board committees, were available to answer questions at the meeting pursuant to code provision E.1.2 of the CG Code. PUBLICATION OF RESULTS ANNOUNCEMENT AND ANNUAL REPORT This announcement is published on the websites of the Company (www.hkt.com/ir) and Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk). The 2021 annual report will be despatched to holders of Share Stapled Units and available on the above websites in due course. Hong Kong, February 24, 2022 By order of the boards of HKT Management Limited and HKT Limited Cheung Hok Chee, Vanessa Group General Counsel and Company Secretary 16#17AUDITED CONSOLIDATED INCOME STATEMENT OF HKT TRUST AND OF HKT LIMITED For the year ended December 31, 2021 (In HK$ million except for earnings per Share Stapled Unit/share of the Company) Note(s) 2020 2021 Revenue 2,3 32,389 33,961 Cost of sales (15,703) (16,729) General and administrative expenses (9,498) (10,127) Other gains/(losses), net 4 361 (8) Finance costs, net (1,296) (1,148) Share of results of associates (68) (115) Share of results of joint ventures (11) (15) Profit before income tax 2,5 6,174 5,819 Income tax 6 (855) (997) Profit for the year 5,319 4,822 Profit attributable to: Holders of Share Stapled Units/shares of the Company Non-controlling interests 5,303 4,808 16 14 Profit for the year 5,319 4,822 Earnings per Share Stapled Unit/share of the Company 8 Basic 70.01 cents 63.49 cents Diluted 70.00 cents 63.48 cents 17#18AUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF HKT TRUST AND OF HKT LIMITED For the year ended December 31, 2021 (In HK$ million) Profit for the year 2020 2021 5,319 4,822 Other comprehensive income/(loss) Items that have been reclassified or may be reclassified subsequently to consolidated income statement: Exchange differences on translating foreign operations Reclassification of currency translation reserve on disposal of subsidiaries 75 (38) 5 Cash flow hedges: - effective portion of changes in fair value (268) (2) - transfer from equity to consolidated income statement (82) 8 Costs of hedging 181 (55) Other comprehensive loss for the year (89) (87) Total comprehensive income for the year 5,230 4,735 Attributable to: Holders of Share Stapled Units/shares of the Company Non-controlling interests 5,216 4,721 14 14 Total comprehensive income for the year 5,230 4,735 18#19AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF HKT TRUST AND OF HKT LIMITED As at December 31, 2021 (In HK$ million) As at December 31, As at December 31, Note 2020 2021 ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 24,019 25,198 Right-of-use assets Interests in leasehold land Goodwill Intangible assets Fulfillment costs Customer acquisition costs Contract assets 2,430 2,139 202 189 49,816 49,809 11,408 15,617 1,418 1,512 670 858 354 300 Interests in associates 211 360 Interests in joint ventures 602 555 Financial assets at fair value through other comprehensive income 124 124 Financial assets at fair value through profit or loss 49 38 Derivative financial instruments 214 131 Deferred income tax assets 841 758 Other non-current assets 1,076 889 93,434 98,477 Current assets Inventories 820 1,218 Prepayments, deposits and other current assets 2,209 2,141 Contract assets 657 699 Trade receivables, net 3,253 3,953 Amounts due from related companies 40 31 Financial assets at fair value through profit or loss 16 15 Tax recoverable 5 8 Restricted cash 107 187 Short-term deposits 538 472 Cash and cash equivalents 2,092 2,411 9,737 11,135 19#20AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF HKT TRUST AND OF HKT LIMITED (CONTINUED) As at December 31, 2021 (In HK$ million) Current liabilities Short-term borrowings Trade payables Accruals and other payables Derivative financial instruments Carrier licence fee liabilities Amount due to a fellow subsidiary Amount due to a related company Advances from customers Contract liabilities Lease liabilities Current income tax liabilities As at December 31, As at December 31, Note 2020 2021 (1,552) (61) 10 (3,945) (5,250) (4,084) (4,221) (24) (215) (315) (1,585) (1,962) (42) (65) (247) (270) (1,423) (1,513) (1,251) (1,023) (1,001) (1,523) (15,369) (16,203) Non-current liabilities Long-term borrowings (40,719) (43,628) Derivative financial instruments (128) (128) Deferred income tax liabilities (4,253) (4,674) Carrier licence fee liabilities (627) (3,449) Contract liabilities Lease liabilities Other long-term liabilities (1,074) (1,159) (1,458) (1,162) (1,643) (2,012) (49,902) (56,212) 37,900 37,197 Net assets CAPITAL AND RESERVES Share capital Reserves 8 37,830 8 37,133 Equity attributable to holders of Share Stapled Units/shares of the Company 37,838 37,141 Non-controlling interests 62 56 Total equity 37,900 37,197 20 20#21NOTES 1. BASIS OF PREPARATION The HKT Trust (the "HKT Trust”) is constituted by a Hong Kong law governed trust deed and as supplemented, amended or substituted from time to time (the "Trust Deed"), entered into between HKT Management Limited (the “Trustee-Manager", in its capacity as the trustee-manager of the HKT Trust) and HKT Limited (the "Company"). In accordance with the Trust Deed, the HKT Trust and the Company are each required to prepare their own sets of financial statements on a consolidated basis. The HKT Trust consolidated financial statements for the year ended December 31, 2021 comprise the consolidated financial statements of the HKT Trust, the Company and its subsidiaries (together the “Group”), and the Group's interests in associates and joint ventures. The HKT Limited consolidated financial statements for the year ended December 31, 2021 comprise the consolidated financial statements of the Company and its subsidiaries (together the “HKT Limited Group") and the HKT Limited Group's interests in associates and joint ventures, and the Company's statement of financial position. The HKT Trust controls the Company and the sole activity of the HKT Trust during the year ended December 31, 2021 was investing in the Company. Therefore, the consolidated financial results and financial position that would be presented in the consolidated financial statements of the HKT Trust are identical to the consolidated financial results and financial position of the Company with the only differences being disclosures of the capital of the Company. The directors of the Trustee-Manager and the directors of the Company believe therefore that it is clearer to present the consolidated financial statements of the HKT Trust and of the Company together. The consolidated financial statements of the HKT Trust and the consolidated financial statements of the Company are presented together to the extent they are identical and are hereinafter referred to as the "HKT Trust and HKT Limited consolidated financial statements". The consolidated income statements, consolidated statements of comprehensive income, consolidated statements of financial position, consolidated statements of changes in equity, consolidated statements of cash flows, principal accounting policies and the related explanatory information are common to the HKT Trust and the Company. The Group and the HKT Limited Group are referred to as the "Groups". The HKT Trust and HKT Limited consolidated financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards, which is a collective term for all individual Hong Kong Financial Reporting Standards ("HKFRSS"), Hong Kong Accounting Standards ("HKASS") and Interpretations issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance (Cap. 622). The following amended Hong Kong Financial Reporting Standards are adopted for the financial year beginning January 1, 2021, but have no material effect on the Groups' reported results and financial position for the current and prior accounting periods. - HKAS 39 (Amendments), Financial Instruments: Recognition and Measurement - HKFRS 4 (Amendments), Insurance Contracts - HKFRS 7 (Amendments), Financial Instruments: Disclosures HKFRS 9 (2014) (Amendments), Financial Instruments - HKFRS 16 (Amendments), Leases 21#221. BASIS OF PREPARATION (CONTINUED) The Groups have not early adopted any other new or amended Hong Kong Financial Reporting Standards that are not yet effective for the current accounting period. As at December 31, 2021, the current liabilities of the Groups exceeded their current assets by HK$5,068 million. Included in the current liabilities was current portion of contract liabilities of HK$1,513 million recognized for which no direct cash settlement is required but will gradually reduce over the contract terms through the satisfaction of performance obligations. Also, considering the Groups' ability to generate net operating cash inflows and raise additional debt financing, and the undrawn banking facilities totaling HK$9,878 million as at December 31, 2021, management considers the Groups are able to meet their liabilities as and when they fall due within the next twelve-month period. Accordingly, these consolidated financial statements have been prepared on a going concern basis. The financial information of the Trustee-Manager relating to the years ended December 31, 2020 and 2021 included in this preliminary announcement of annual results for the year ended December 31, 2021 does not constitute the Trustee-Manager's statutory annual financial statements for those years but is derived from those financial statements. Further information relating to those statutory financial statements required to be disclosed in accordance with section 436 of the Hong Kong Companies Ordinance (Cap. 622) is as follows: - - The Trustee-Manager's financial statements combined with the HKT Trust and HKT Limited consolidated financial statements (collectively the "Combined Financial Statements") for the year ended December 31, 2020 have been delivered to the Registrar of Companies and the Combined Financial Statements for the year ended December 31, 2021 will be delivered to the Registrar of Companies in due course. The Trustee-Manager's auditor has reported on the financial statements of the Trustee-Manager for both years. The auditor's reports were unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its reports; and did not contain a statement under sections 406(2), 407(2) or (3) of the Hong Kong Companies Ordinance (Cap. 622). Estimates and judgements 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 Groups make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Management has also made judgements in applying the Groups' accounting policies. 22 22#232. SEGMENT INFORMATION The chief operating decision-maker (the "CODM") is the Groups' senior executive management. The CODM reviews the Groups' internal reporting in order to assess performance and allocate resources and the segment information is reported below in accordance with this internal reporting. The CODM considers the business from the product perspective and assesses the performance of the following segments: - Telecommunications Services ("TSS") is the leading provider of telecommunications and related services which include local telephony, local data and broadband, international telecommunications, enterprise solutions, and other telecommunications businesses such as customer premises equipment sales, outsourcing, consulting, and contact centers. It operates primarily in Hong Kong, and also serves customers in mainland China and other parts of the world. Mobile includes the Groups' mobile telecommunications businesses in Hong Kong. Pay TV includes interactive pay-TV services in Hong Kong. Other businesses of the Groups ("Other Businesses") primarily comprises new business areas such as The Club and HKT Financial Services, and corporate support functions. The CODM assesses the performance of the operating segments based on a measure of adjusted earnings before interest, tax, depreciation and amortization ("EBITDA”). EBITDA represents earnings before interest income, finance costs, income tax, depreciation and amortization, gains/losses on disposal of property, plant and equipment, interests in leasehold land, right-of-use assets and intangible assets, net other gains/losses, losses on property, plant and equipment, restructuring costs, impairment losses on goodwill, tangible and intangible assets and interests in associates and joint ventures, and the Groups' share of results of associates and joint ventures. Segment revenue, expense and segment performance include transactions between segments. Inter-segment pricing is based on similar terms to those available to other external parties for similar services. The revenue from external parties reported to the CODM is measured in a manner consistent with that in the consolidated income statement. 23#242. SEGMENT INFORMATION (CONTINUED) Information regarding the Groups' reportable segments as provided to the Groups' CODM is set out below: For the year ended December 31, 2020 (In HK$ million) Other TSS Mobile Pay TV Businesses Eliminations Consolidated Revenue External revenue 21,608 10,006 418 357 32,389 Inter-segment revenue 749 360 229 8 (1,346) Total revenue 22,357 10,366 647 365 (1,346) 32,389 External revenue from contracts with customers: Timing of revenue recognition At a point in time 2,672 2,395 9 185 5,261 Over time 18,868 7,611 409 161 27,049 External revenue from other sources: Rental income 68 11 79 21,608 10,006 418 357 32,389 Results EBITDA 8,412 For the year ended December 31, 2021 (In HK$ million) 4,747 174 (806) 12,527 Other TSS Mobile Pay TV Businesses Eliminations Consolidated Revenue External revenue Inter-segment revenue 20,708 1,104 10,838 1,551 864 33,961 910 905 8 (2,927) Total revenue 21,812 11,748 2,456 872 (2,927) 33,961 External revenue from contracts with customers: Timing of revenue recognition At a point in time Over time 2,855 17,798 3,367 17 667 6,906 7,471 1,534 197 27,000 External revenue from other sources: Rental income Results EBITDA 55 55 20,708 10,838 1,551 864 33,961 8,468 4,780 481 (996) 12,733 24#252. SEGMENT INFORMATION (CONTINUED) Commencing from January 1, 2021, the CODM assesses the business of The Club separately from the reportable segments other than “Other Businesses", and revenue of other reportable segments generated through the e-commerce platform of The Club are included in the segment of “Other Businesses" together with the corresponding cost of sales. To conform with the current year's presentation, relevant revenue of HK$124 million is reclassified to "Other Businesses” for the year ended December 31, 2020 with no impact on EBITDA. A reconciliation of total segment EBITDA to profit before income tax is provided as follows: 3. In HK$ million 2020 2021 Total segment EBITDA 12,527 12,733 Gains on disposal of property, plant and equipment and right-of-use assets, net 2 Depreciation and amortization Other gains/(losses), net Finance costs, net Share of results of associates (5,341) 24 (5,652) 361 (8) (1,296) (1,148) (68) (115) Share of results of joint ventures Profit before income tax (11) (15) 6,174 5,819 The following table sets out information about the geographical location of the Groups' revenue from external customers. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location that the Groups derive revenue from customers. In HK$ million Hong Kong (place of domicile) Mainland and other parts of China Others 2020 2021 27,024 28,303 942 1,166 4,423 4,492 32,389 33,961 As at December 31, 2021, the total of non-current assets, other than financial instruments and deferred income tax assets, located in Hong Kong was HK$94,304 million (2020: HK$88,937 million), and the total of these non-current assets located in other geographical locations was HK$3,012 million (2020: HK$2,957 million). REVENUE In HK$ million 2020 2021 Revenue from contracts with customers Revenue from other sources: rental income 32,310 79 33,906 55 32,389 33,961 25#263. REVENUE (CONTINUED) a. Revenue recognition in relation to contract liabilities In HK$ million 2020 2021 Revenue recognized that was included in the contract liability balance at the beginning of the year 1,361 1,423 b. Unsatisfied long-term fixed-price contracts In HK$ million 2020 2021 Aggregate amount of the transaction price allocated to long-term fixed-price contracts that are partially or fully unsatisfied as at December 31, 18,670 20,107 As at December 31, 2021, management expected that 57% and 24% (2020: 58% and 25%) of the transaction price allocated to the unsatisfied long-term fixed-price contracts would be recognized as revenue during the first and second year respectively after the end of the reporting period. The remaining 19% (2020: 17%) would be recognized as revenue in the periods afterwards. The amount disclosed above does not include unsatisfied performance obligation that is related to the Groups' contracts with customers with duration of one year or less and contracts with customers billed directly according to performance completed to date. 4. OTHER GAINS/(LOSSES), NET 2020 2021 In HK$ million Negative goodwill on acquisition of subsidiaries Write-off of intangible assets 692 (302) Loss on disposal of subsidiaries, net Others 5. PROFIT BEFORE INCOME TAX Profit before income tax was stated after charging the following: (35) 6 361 (8) In HK$ million 2020 2021 Cost of inventories sold 5,130 6,648 Cost of sales, excluding inventories sold 10,573 10,081 Depreciation of property, plant and equipment 1,118 1,234 Depreciation of right-of-use assets - land and buildings 1,302 1,338 Depreciation of right-of-use assets – network capacity and equipment 175 139 Amortization of land lease premium - interests in leasehold land 13 13 Amortization of intangible assets 1,327 1,500 Amortization of fulfillment costs 481 393 Amortization of customer acquisition costs 925 1,035 26#276. INCOME TAX 7. In HK$ million Current income tax: Hong Kong profits tax Overseas tax Movement of deferred income tax 2020 2021 417 477 17 15 421 505 855 997 Hong Kong profits tax is provided at the rate of 16.5% (2020: 16.5%) on the estimated assessable profits for the year. Overseas tax is calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the respective jurisdictions. DISTRIBUTIONS/DIVIDENDS In HK$ million Interim distribution/dividend declared and paid in respect of the current year of 30.70 HK cents (2020: 30.10 HK cents) per Share Stapled Unit/ordinary share of the Company Less: distribution/dividend for Share Stapled Units/ ordinary shares of the Company held by the Share Stapled Units award schemes 2020 2021 2,280 2,326 (1) (1) 2,279 2,325 Final distribution/dividend declared in respect of the previous financial year, approved and paid during the year of 40.97 HK cents (2020: 40.37 HK cents) per Share Stapled Unit/ordinary share of the Company Less: distribution/dividend for Share Stapled Units/ ordinary shares of the Company held by the Share Stapled Units award schemes 3,058 3,104 (1) (1) 3,057 3,103 5,336 5,428 For the year ended December 31, 2021, the Company proposed a final dividend of 42.07 HK cents per ordinary share, totaling HK$3,187 million (2020: 40.97 HK cents per ordinary share, totaling HK$3,104 million) to the HKT Trust after the end of the reporting period. For the year ended December 31, 2021, the HKT Trust proposed a final distribution of 42.07 HK cents per Share Stapled Unit, totaling HK$3,187 million (2020: 40.97 HK cents per Share Stapled Unit, totaling HK$3,104 million) to holders of Share Stapled Units after the end of the reporting period. The final distribution/dividend proposed after the end of the reporting period, referred to above, is not recognized as a liability as at the end of the reporting period. 27#288. EARNINGS PER SHARE STAPLED UNIT/SHARE OF THE COMPANY The calculations of basic and diluted earnings per Share Stapled Unit/share of the Company were based on the following data: Earnings (in HK$ million) 2020 2021 Earnings for the purpose of basic and diluted earnings per Share Stapled Unit/share of the Company 5,303 4,808 Number of Share Stapled Units/shares of the Company Weighted average number of Share Stapled Units/ordinary shares of the Company Effect of Share Stapled Units held under the Share Stapled Units award schemes Weighted average number of Share Stapled Units/ordinary shares of the Company for the purpose of basic earnings per Share Stapled Unit/share of the Company Effect of Share Stapled Units awarded under the Share Stapled Units award schemes 7,574,922,662 7,575,742,334 (195,875) (2,967,769) 7,574,726,787 7,572,774,565 1,477,218 1,443,288 Weighted average number of Share Stapled Units/ordinary shares of the Company for the purpose of diluted earnings per Share Stapled Unit/share of the Company 7,576,204,005 7,574,217,853 28#299. TRADE RECEIVABLES, NET The aging of trade receivables based on the date of invoice is set out below: In HK$ million 2020 2021 1 - 30 days 2,043 2,829 31 - 60 days 61 - 90 days 91 - 120 days Over 120 days 455 440 274 180 106 92 570 575 3,448 4,116 Less: loss allowance (195) (163) 3,253 3,953 As at December 31, 2021, included in trade receivables, net were amounts due from related parties of HK$39 million (2020: HK$21 million). The Groups' normal credit period for customers is ranging up to 30 days from the date of invoice unless there is a separate mutual agreement on extension of the credit period. The Groups maintain a well-defined credit policy and individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer's past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Debtors who have overdue balances are requested to settle all outstanding balances before any further credit is granted. 10. TRADE PAYABLES The aging of trade payables based on the date of invoice is set out below: In HK$ million 2020 2021 1 - 30 days 1,708 2,318 31 - 60 days 61 - 90 days 91 - 120 days 906 696 548 879 268 547 Over 120 days 515 810 3,945 5,250 11. As at December 31, 2021, included in trade payables were amounts due to related parties of HK$22 million (2020: HK$28 million). SUBSEQUENT EVENT On January 18, 2022, HKT Capital No. 6 Limited, an indirect wholly-owned subsidiary of the Company, issued US$650 million 3.00% guaranteed notes due 2032, which are listed on the Singapore Exchange Securities Trading Limited. The notes are irrevocably and unconditionally guaranteed by HKT Group Holdings Limited ("HKTGH”) and Hong Kong Telecommunications (HKT) Limited ("HKTL"), both being wholly-owned subsidiaries of the Company, and rank pari passu with all other outstanding unsecured and unsubordinated obligations of HKTGH and HKTL. 29#30AUDITED INCOME STATEMENT OF HKT MANAGEMENT LIMITED For the year ended December 31, 2021 In HK$'000 2020 2021 Management fee income 54 54 General and administrative expenses (54) (54) Result before income tax Income tax Result for the year AUDITED STATEMENT OF COMPREHENSIVE INCOME OF HKT MANAGEMENT LIMITED For the year ended December 31, 2021 In HK$'000 Result for the year Other comprehensive income Total comprehensive income for the year 2020 2021 30 30#31AUDITED STATEMENT OF FINANCIAL POSITION OF HKT MANAGEMENT LIMITED As at December 31, 2021 In HK$'000 As at December 31, As at December 31, 2020 2021 ASSET AND LIABILITIES Current asset Amount due from a fellow subsidiary 438 492 438 492 Current liabilities Accruals and other payables (52) (52) Amounts due to fellow subsidiaries (386) (440) (438) (492) Net assets CAPITAL AND RESERVES Share capital Reserves Total equity 31#32As at the date of this announcement, the directors of the Trustee-Manager and the Company are as follows: Executive Directors: Li Tzar Kai, Richard (Executive Chairman) and Hui Hon Hing, Susanna (Group Managing Director) Non-Executive Directors: Peter Anthony Allen; Chung Cho Yee, Mico; Mai Yanzhou; Wang Fang and Srinivas Bangalore Gangaiah (aka BG Srinivas) Independent Non-Executive Directors: Professor Chang Hsin Kang, FREng, GBS, JP; Sunil Varma; Aman Mehta and Frances Waikwun Wong Forward-Looking Statements This announcement may contain certain forward-looking statements. These forward-looking statements include, without limitation, statements relating to revenues, earnings and prospects. The words "believe", “intend”, “expect”, “anticipate”, “project”, “estimate”, “predict”, “is confident”, “has confidence” and similar expressions are also intended to identify forward-looking statements. These forward-looking statements are not historical facts. Rather, the forward-looking statements are based on the current beliefs, assumptions, expectations, estimates and projections of the directors and management of HKT relating to the business, industry and markets in which HKT operates. 32