Dragon Mining Limited - Annual Report 2013

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Contents
Corporate Information	2
Financial Highlights	3
Chairman’s Statement	5
Management Discussion and Analysis	8
Corporate Governance	11
Corporate and Social Responsibility	16
Report of the Directors	17
Independent Auditor’s Report	26
Consolidated Profit and Loss Account	28
Consolidated Statement of Comprehensive Income	29
Consolidated Balance Sheet	30
Balance Sheet	32
Consolidated Statement of Changes in Equity	33
Consolidated Statement of Cash Flows	35
Notes to the Accounts	36
Contacts	88

Corporate Information

Board of Directors

Executive Directors

SHAM Kit Ying (Chairman) (alias SHAM Kit) LEE Seng Jin (Deputy Chairman) CHOW Wing Yuen SHAM Yee Lan, Peggy LEE Yue Kong, Albert

Non-executive Director

LAU Wang Yip, Eric

Independent Non-executive Directors

PANG Wing Kin, Patrick TONG Yat Chong NG Hung Sui, Kenneth

Company Secretary

LEE Yue Kong, Albert

Principal Bankers

Bank of Tokyo-Mitsubishi UFJ BNP Paribas Hong Kong Branch China CITIC Bank International Limited DBS Bank Ltd., Hong Kong Branch Hang Seng Bank Limited The Hongkong and Shanghai Banking Corporation Limited Industrial and Commercial Bank of China (Asia) Limited Mizuho Bank, Ltd., Hong Kong Branch Oversea-Chinese Banking Corporation Limited Standard Chartered Bank (Hong Kong) Limited

Independent Auditor

PricewaterhouseCoopers Certified Public Accountants

Registered Office

Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Head Office and Principal Place of Business

3/F, Seapower Industrial Centre 177 Hoi Bun Road Kwun Tong Kowloon, Hong Kong

Principal Share Registrar and Transfer Office

Butterfield Corporate Services Limited 6 Front Street Hamilton Bermuda

Hong Kong Share Registrar and Transfer Office

Computershare Hong Kong Investor Services Limited Shop 1712–16 17/F, Hopewell Centre 183 Queen’s Road East Hong Kong

SAMSON PAPER HOLDINGS LIMITED

Financial Highlights

CONSOLIDATED PROFIT AND LOSS ACCOUNT

CONSOLIDATED PROFIT AND LOSS ACCOUNT
	For the year ended 31 March
	2013	2012
	HK$’000	HK$’000
		(Restated)
Revenue	4,669,835	5,025,024
Operating profit	172,576	153,596
Finance costs	88,943	82,311
Profit before taxation	83,633	71,285
Profit attributable to owners of the Company	63,661	56,710
CONSOLIDATED BALANCE SHEET
	As at 31 March
	2013	2012
	HK$’000	HK$’000
		(Restated)
Non-current assets	2,086,484	1,917,336
Current assets	3,159,682	3,358,811
Current liabilities	2,807,920	2,931,203
Shareholders’ funds	1,617,966	1,538,829
Non-current liabilities	712,834	701,314
SHARE STATISTICS
Earnings per share — basic	HK5.42 CENTS	HK4.80 CENTS
Earnings per share — diluted	HK5.00 CENTS	HK4.45 CENTS
Dividends per share	HK1.50 CENTS	HK1.48 CENTS
Net asset value per ordinary share	HK142 CENTS	HK135 CENTS

ANNUAL REPORT 2013

Financial Highlights

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REVENUE
HK$
Million
6,000
5,025
5,000 4,677 4,670
3,861
4,000 3,744
3,000
2,000
1,000
0
08/09 09/10 10/11 11/12 12/13
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PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY

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HK$
Million
79
80
70
62 64
57
60
50
40
30
18
20
10
0
08/09 09/10 10/11 11/12 12/13
(restated) (restated) (restated) (restated)
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SHAREHOLDERS’ FUNDS

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HK$
Million
1,618
1,600 1,539
1,400
1,226
1,200
1,081
1,001
1,000
800
600
400
200
0
08/09 09/10 10/11 11/12 12/13
(restated) (restated) (restated) (restated)
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RETURN ON SHAREHOLDERS’ FUNDS

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%
10
8
6.44%
5.74%
6
4 3.70% [3.96%]
1.80%
2
0
08/09 09/10 10/11 11/12 12/13
(restated) (restated) (restated) (restated)
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SAMSON PAPER HOLDINGS LIMITED

Chairman’s Statement

The Economy

During the financial year under review, the business environment was bleak. In Europe, the sovereign debt crisis lingered stubbornly and a number of countries continued to adopt austerity policies. In the United States, the recovery of economy was still rife with uncertainties and high unemployment rate. Under the effects of globalization, the real economies in different countries worldwide, including Hong Kong and Mainland China, had great negative impact.

In the Mainland, exports and foreign investments dropped sharply while domestic demand was anaemic because of weak consumer confidence and tight money supplies.

In Hong Kong, the economy experienced a modest growth, with real GDP in the first quarter of 2013 up by 2.8% over the preceding year, similar to that in the fourth quarter of 2012. Exports remained weak in the face of an unsteady global economic conditions that affected the motherland.

The Paper Industry

Amid the stagnant market situation, customers were cautious in procurement and kept less stock for their operation and thus led to weaker demand for paper products. As new capacities from paper mills in the PRC kept starting up, this further exacerbated the imbalance situation of supply and demand in the industry. Under the market condition, prices of book printing paper and packaging board decreased 5% and 15% respectively as compared to those in the beginning of the year. However, the price has been stabilized from a downward trend towards the end of the financial year.

The slowdown in demand growth as a result of the tight monetary policy and the feeble consumer confidence has caused competition to intensify and thus margins are under pressure in the industry.

Under the tight monetary supply situation in the PRC, the liquidity of customers was seriously affected and the risk of credit default became much higher for those customers in a weak financial position.

Overview of Operations

Financial Performance

Against this challenge business climate, Samson Group (the “Group”) strategically shifted its focus to serving quality customers and optimizing earning quality instead of seeking turnover growth. As a result, the Group’s turnover decreased by 7.1% year on year from HK$5,025 million to HK$4,670 million but sales volume rose by 2% with actively consolidation of the existing sales network in the PRC. Attaining favourable pricing from suppliers, streamlining the logistic and warehousing arrangement with customers and suppliers as well as an aggressive procurement strategy adopted in the PRC market, the gross profit margin recovered during the second half of the year and thus the overall gross profit margin improved 8.9% from 9.1% to 9.9%. After provision made for slow moving stocks of HK$26 million and doubtful debts of HK$11 million, consistent with group accounting policies, profit for the year increased 16% to HK$65 million. Net profit margin stood at 1.4% compared to 1.1% last year. Earning per share were HK5.4 cents, compared to HK4.8 cents (restated) for the preceding year.

The Board has recommended the payment of a final dividend of HK1.1 cents per share. Together with an interim dividend of HK0.4 cent per share already paid, total dividend for the year will amount to HK1.5 cents per share, translating to a dividend payout ratio of 30%.

ANNUAL REPORT 2013

Chairman’s Statement

The Group has always been committed to controlling costs, improving operating efficiency and minimizing credit risk. With tight monetary supply and more stringent credit policies in China, the management has maintained an appropriate level of cash and bank balance (including restricted bank deposit), which reached HK$575 million as at 31 March 2013. This enables the Group to tap its own resources when necessary, lower interest costs and maintain a healthy gearing ratio — currently at approximately 46.9%. In terms of provisions for doubtful debt, it presently represents 0.1% of the Group’s total revenue after taking into account of the write back of the provision of HK$6.8 million. All of the measures taken also serve to highlight the Group’s healthy financial position.

By business segment, paper trading, paper manufacturing and other businesses accounted for 84.4%, 12.8% and 2.8% of the Group’s total turnover respectively.

Paper Business

The Group focused its sales strategy on serving quality customers to mitigate the credit risk and the effect of the downward price trend. The Group’s paper product business reported a decrease of 7.5% in turnover to HK$4,538 million compared with HK$4,905 million last year but in volume term, the Group’s sales of paper products has a rise of 2% to 833,400 metric tonnes supported by the strong extensive sales network in the PRC. Operating profit amounted to HK$180 million, representing an increase of 10% when compared to HK$163 million last year.

The Group’s effort to expand its presence in China has achieved notable results. The PRC continues to be the Group’s largest market, accounting for 67% of total turnover of paper products. Hong Kong — the Group’s second largest market — accounted for approximately 23.6% of total paper products sales whereas other Asian markets accounted for the remaining 9.4%.

As at 31 March 2013, the Group has sales offices in 20 cities across the country. While continuously strengthening its presence in China, the Group has also sought to optimize the efficiency of individual offices, and has started to reap the benefits of such effort. Turnover of the paper trading business reported a decrease of 2.7% to HK$3,944 million but with a 7.9% rise in sales tonnage, despite sluggish economic conditions.

As the domestic market became stabilized in the second half of the year and sales efforts targeted on quality customers, the sales revenue and tonnage of paper manufacturing business has picked up significantly. The paper manufacturing business recorded a decrease of 19% in turnover of HK$844 million and 4.1% drop in sales tonnage. With the soften fibre costs, the effective of cost control measures and streamlining work flow procedures, operating profit of HK$48 million was recorded for the year while operating profit margin slightly decreased by 3.9% to 8.0%.

Other Businesses

The aeronautic parts and services business and marine services business recorded turnover of HK$49 million and HK$76 million respectively during the year.

SAMSON PAPER HOLDINGS LIMITED

Chairman’s Statement

Prospects

With the current global economic conditions, to mitigate the current market instability and uncertainties, the management believes that a prudent with visionary approach on business development shall be continued to adopt as the overall group policy. The Group’s core business, paper trading business, will set its effort on expansion of sales network by setting up more sales offices in the central part of China in the coming years. By expanding the sales coverage, the Group will be able to speedily leverage its extensive sales network upon the economy picking up and capture the market share further in the domestic market. For the other core business, paper manufacturing business, the management will continue to optimize the productivity and efficiency of the business to enhance its profitability continuously. With the intensified environmental protection effort of the PRC government, the speed of closing down the inefficient paper production capacities is expected to be escalated, and thus to alleviate the market imbalance, this will give a great opportunity to fully exert the potential of the paper manufacturing business.

Urbanisation in the PRC increased in speed following the initiation of the national reform policy. By the end of 2012, the PRC had a big portion of total urban population, highly rising from 1990. The government believes that it will continue to expand in latitude in the coming years. This will effectively boost domestic demand and serves as a structural adjustment for the future sustainable and stable growth of China’s economy. Consequently, the overall businesses of the Group will definitely be benefited by this fundamental element.

Appreciation

On behalf of the Board, I would like to take this opportunity to express my sincere gratitude to our shareholders, business partners and customers for their continuous support. Appreciation must also be extended to the management team and the entire Group’s workforce.

By Order of the Board SHAM Kit Ying Chairman

Hong Kong, 25 June 2013

ANNUAL REPORT 2013

Management Discussion and Analysis

Sales by Geographical Area

Against the adverse market situation and the downward paper price trend, the Group reported turnover of HK$4,669.8 million for the year under review, a decrease of 7.1%.

With the sales strategy focusing on quality customers and extensive sales network In the PRC region, turnover of paper business reported a 7.5% decrease to HK$4,537.9 million. Sales in the PRC slightly dropped 1.4% to HK$3,044.3 million, making up 67% of the Group’s total revenue from paper products. Sales of paper products in Hong Kong contributed 23.6% while those in Malaysia and other countries contributed the remaining 9.4% of the Group’s revenue from paper business. Despite the challenging business environment, in volume terms, the total sales of paper business in all geographical regions including paper manufacturing activity has a rise of 2% to 833,400 metric tonnes.

Apart from the paper business, the Group has involved in the distribution business of consumable aeronautic parts and provision of related services and marine services business. These business segments together contributed HK$125.1 million, 2.7% (2012: HK$ 112.8 million, 2.2%) of the Group’s total revenue.

2013 HK$ million Hong Kong Paper trading 1,070.8 The PRC Paper trading 2,450.0 Paper manufacturing 594.3 Logistics services 6.8 Singapore Marine services 75.7 Aeronautic parts and services 49.4 Other regions Paper trading 422.8 Total revenue 4,669.8 Hong Kong Paper and Board Import/Re-export Statistics (January to December) (in ‘000 Metric Tonnes) 2012 Import 857 Re-export 218 Local consumption 639	2012 HK$ million 1,423.8 2,236.1 851.3 7.5 65.6 47.2 393.5 5,025.0 2011 873 262 611	% change –24.8% 9.6% –30.2% –9.3% 15.4% 4.7% 7.5%
		–7.1%
		+/– –1.8% –16.8% 4.6%

SAMSON PAPER HOLDINGS LIMITED

Management Discussion and Analysis

Sales by Geographical Area (continued)

Import Statistics of Paper & Board to the Mainland China (January to December)

(in ‘000 Metric Tonnes) Newsprint Woodfree Coated paper Corrugated board Duplex board Corrugating medium Others	2012 130 350 350 1,040 720 140 380 3,110	2011 +/– 10 1,200% 400 –12.5% 370 –5.4% 1,110 –6.3% 790 –8.9% 170 –17.6% 460 –17.4% 3,310 –6.0%

Major Product Analysis

As a national paper distributor in the Mainland China and one of the largest paper traders in Hong Kong, the Group currently maintains a stock of over 100 paper brands. The Group’s two main product categories, book printing papers and packaging boards, accounted for 45.4% and 34.4% of the Group’s turnover of paper products respectively. For the year under review, sales of book printing papers increased 1.9% while sales of packaging boards decreased by 26.5%.

Working Capital and Inventory Management

Under the tight monetary policy adopted by the PRC government authority, customers tended to settle their outstanding balances longer. As a result, the collection period in average has been increased by 7 days. To mitigate the situation, the management has taken a measure by offering cash discount to customers to encourage more cash on delivery transactions while at the same time continued to tighten its credit policy on customers and was cautious on customers’ selection. In order to further hedge the credit exposure on the trade receivables, the majority of the Group’s open credit sales are covered by credit insurance. Impaired receivable provision of HK$11 million was still made in the accounts according to the Group’s policy, which is at 0.1% of the Group’s total revenue after taking into account of the write back of the provision of HK$6.8 million.

To maintain a stronger working capital position and minimize the risk exposure of the value of stocks against the downward price trend, the Group has kept a low level of stocks at HK$704.5 million as at 31 March 2013 with an aim of keeping the turnover days at the region of 45 days.

Employees and Remuneration Policies

As at 31 March 2013, the Group employed 1,813 staff members, 125 of whom are based in Hong Kong, 1,360 are based in the PRC and 328 are based in other Asian countries. The Group’s remuneration policies are primarily based on prevailing market salary levels and the performance of the Group and of the individuals concerned. Remuneration policies are reviewed regularly to ensure that the Group is offering competitive employment packages. In addition to salary payments, other staff benefits include performance bonuses, education subsidies, provident fund, medical insurance and the use of a share option scheme to reward highcalibre staff. Training for various levels of staff is undertaken on a regular basis, consisting of development in the strategic, implementation, sales and marketing disciplines.

ANNUAL REPORT 2013

Management Discussion and Analysis

Liquidity and Financial Resources

The Group normally finances short term funding requirements with cash generated from operations, credit facilities available from suppliers and banking facilities (both secured and unsecured) provided by our bankers. The Group uses cash flow generated from operations, long term borrowings and shareholders’ equity for the financing of long-term assets and investments. As at 31 March 2013, short term deposits plus bank balances amounted to HK$575 million (2012: HK$939 million) (including restricted bank deposits of HK$183 million (2012: HK$174 million)) and bank borrowings amounted to HK$2,096 million (2012: HK$2,148 million).

The Group continues to implement prudent financial management policy and strives to maintain a reasonable gearing ratio during expansion. As at 31 March 2013, the Group’s gearing ratio was 46.9% (2012 (restated): 42.4%), calculated as net debt divided by total capital. Net debt of HK$1,521 million (2012: HK$1,209 million) is calculated as total borrowings of HK$2,096 million (2012: HK$2,148 million) (including trust receipt loans, short term and long term borrowings, and finance lease obligations) less cash on hand and restricted deposits of HK$575 million (2012: HK$939 million). Total capital is calculated as total equity of HK$1,725 million (2012 (restated): HK$1,644 million) plus net debt. The current ratio (current assets divided by current liabilities) was 1.13 times (2012: 1.15 times).

With bank balances and other current assets amounted to HK$3,160 million (2012: HK$3,359 million) as well as available banking and trade facilities, the directors of the Company (the “Directors”) believe the Group has sufficient working capital for its present requirement.

Foreign Exchange Risk

The Group’s transaction currencies are principally denominated in Renminbi, United States dollar and Hong Kong dollar. The Group hedged its position with foreign exchange contracts and options when considered necessary. The Group has continued to obtain Renminbi loans which provide a natural hedge against currency risks. As at 31 March 2013, bank borrowings in Renminbi amounted to HK$482 million (2012: HK$439 million). The remaining borrowings are mainly in Hong Kong dollar. The majority of the Group’s borrowings bear interest costs which are based on floating interest rates. The Group has entered an interest rate swap contract, the notional principal amount of the outstanding interest rate swap contract as at 31 March 2013 was HK$20,000,000 (2012: HK$20,000,000).

Contingent Liabilities and Charge Of Assets

As at 31 March 2013, the Company continued to provide corporate guarantees on banking facilities granted to the Group’s subsidiaries. The amount of bank borrowings utilised by the subsidiaries as at 31 March 2013 amounted to HK$2,090 million (2012: HK$2,145 million).

Certain land and buildings, investment properties and non-current asset held for sale of the Company’s subsidiaries, with a total carrying value of HK$328 million as at 31 March 2013 (2012: HK$308 million) were pledged to banks as securities for bank loans of HK$71 million (2012: HK$96 million) and trust receipt loans of HK$71 million (2012: HK$280 million) granted to the Group.

SAMSON PAPER HOLDINGS LIMITED

Corporate Governance

Corporate Governance Practices

The Company has always recognised the importance of transparency in governance and accountability to shareholders. It is the belief of the Board that good corporate governance practices are essential for the growth of the Group and for safeguarding and maximising shareholders’ interests.

The Board is committed to maintaining high standards of corporate governance and endeavours in following the code provisions (the “Code Provisions”) of the “Code on Corporate Governance Practices” (the “Code”) as set out in Appendix 14 to the Rules (the “Listing Rules”) Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The Company periodically reviews its corporate governance practices to ensure that these continue to meet the requirements of the Code. Throughout the financial year of 2013, the Company has met the Code Provisions set out in the Code except that the nonexecutive Directors were not appointed for a specific term but are subject to retirement by rotation and reelection pursuant to the Company’s bye-laws.

Board of Directors

The Board currently comprises five executive and four non-executive Directors of whom three are independent as defined by the Stock Exchange. (The biographies of the Directors, together with information about the relationship among them, are set out on page 20). Independent non-executive Directors are one-third of the Board. Under the Company’s bye-laws, every Director is subject to retirement by rotation at least once every three year. One-third of the Directors, who have served the longest on the Board, must retire from office at each Annual General Meeting and their re-election is subject to a vote of shareholders.

The Board is responsible for the leadership and control of the Company and oversees the Group’s businesses, strategic decisions and financial performance. Day-to-day management of the Group’s businesses is delegated to the executive Director or officer in charge of each division. The functions and authority that are so delegated are reviewed periodically to ensure that they remain appropriate.

Matters that reserved for the Board are those affecting the Group’s overall strategic policies, finances and shareholders including financial statements, dividend policy, significant changes in accounting policy, material contracts and major investments. All Board members have access to the advice and services of the Company Secretary. All Directors have separate and independent access to the Management for enquiries and to obtain information when required. Independent professional advice can be sought at the Group’s expense upon reasonable requests. The Directors are covered by appropriate insurance on Directors’ liabilities from risk exposures arising from the management of the Company.

ANNUAL REPORT 2013

Corporate Governance

Board of Directors (continued)

The Board meets regularly to review the financial and operating performance of the Group and approve future strategies. Details of the number of Board meetings held in the year and attendance of each Board member at those meetings and meetings of the Audit Committee, the Remuneration Committee and the Nomination Committee are set out below:

	Attendance/Number of Meetings	Attendance/Number of Meetings	Attendance/Number of Meetings	Attendance/Number of Meetings
		Audit	Remuneration	Nomination
Directors	Board	Committee	Committee	Committee
Executive Directors
Mr. SHAM Kit Ying (Chairman)	4/4
Mr. LEE Seng Jin
(Deputy Chairman and Chief Executive Officer)
(note 3)	3/4		1/1	1/1
Mr. CHOW Wing Yuen	3/4
Ms. SHAM Yee Lan, Peggy	4/4
Mr. LEE Yue Kong, Albert	4/4
Independent Non-executive Directors
Mr. PANG Wing Kin, Patrick (note 2)	3/4	2/3		1/1
Mr. TONG Yat Chong (note 1)	4/4	3/3	1/1
Mr. NG Hung Sui, Kenneth	4/4		1/1	1/1
Non-executive Director
Mr. LAU Wang Yip, Eric	4/4	3/3
Note 1: Chairman of Remuneration Committee
Note 2: Chairman of Audit Committee
Note 3: Chairman of Nomination Committee

To implement the strategies and plans adopted by the Board effectively, an executive committee of selected executive Directors and senior managers meet monthly to review the performance of the businesses of the Group and make financial and operational decisions.

Chairman and Chief Executive Officer

The Group has appointed a Chairman, Mr. Sham Kit Ying and a Chief Executive Officer, Mr. Lee Seng Jin. The roles of the Chairman and the Chief Executive Officer are segregated. The primary role of the Chairman is to provide leadership for the Board and to ensure that it works effectively in the discharge of its responsibilities. The Chief Executive Officer is a Board member and has executive responsibilities over the business direction and operational decisions of the Group.

Non-executive Directors

There are currently four non-executive Directors of whom three are independent. As a deviation from the Code, the term of office for non-executive Directors is not fixed but subject to retirement from office by rotation and be eligible for re-election in accordance with the provisions of the Company’s bye-laws. At every Annual General Meeting, one-third of the Directors for the time being, who have served the longest on the Board, or if their number is not a multiple of three, then the number nearest to but not less than one-third shall retire from office. As such, the Company considers that such provisions are sufficient to meet the underlying objectives of the relevant provisions of the Code.

SAMSON PAPER HOLDINGS LIMITED

Corporate Governance

Remuneration of Directors

The Remuneration Committee has clear terms of reference and is accountable to the Board. The principle role of the Remuneration Committee is to make recommendations to the Board on the Company’s policies and structure for all remuneration of Directors and senior management and on the establishment of a formal and transparent procedure for developing policy on such remuneration. The Remuneration Committee comprises three members including the Deputy Chairman and two independent non-executive Directors. The current Committee members are:

Mr. Lee Seng Jin Mr. Tong Yat Chong Mr. Ng Hung Sui, Kenneth

The Remuneration Committee met once in the year with the attendance rate of 100%.

During the year, the Remuneration Committee reviewed the remuneration policies and approved the salaries and bonuses of the executive Directors and certain key executives. No executive Director has taken part in any discussion about his/her own remuneration.

The Directors’ emoluments paid or payable to the Directors during the year are set out on an individual and named basis, in note 13 to the accounts of this Annual Report.

Pursuant to B.1.5 of the Corporate Governance Code, the remuneration of the members of the Senior Management (including executive directors) by band for the year ended 31 March 2013 is set out below:

	Number of
Remuneration band (HK$)	persons
1 to 2,000,000	5
above 2,000,000	2

Nomination Committee

The Board established a Nomination Committee on 28 March 2012. The Nomination Committee comprises one executive Director, Mr. Lee Seng Jin and two independent non-executive Directors, Mr. Pang Wing Kin, Patrick and Mr. Ng Hung Sui, Kenneth. The full terms of reference are available on the Stock Exchange’s website. Its written terms of reference cover recommendations to the Board on the appointment of Directors, evaluation of board composition, assessment of the independence of Independent Non-executive Directors and the management of board succession.

Audit Committee

The audit committee of the Company (the “Committee”) comprises two independent non-executive Directors of the Company, namely Mr. Pang Wing Kin, Patrick and Mr. Tong Yat Chong and one non-executive Director of the Company, namely Mr. Lau Wang Yip, Eric. The principal activities of the Committee include the review and supervision of the Group’s financial reporting process and internal controls. The Committee has met with the senior management of the Company and the Company’s external auditor to review the annual financial statements as at 31 March 2013 before recommending them to the Board for approval.

Company Secretary

The company secretary is a full time employee of the Company and has day-to-day knowledge of the Company’s affairs. The company secretary reports to the board chairman and the chief executive. During the year 2012/2013, the company secretary has taken no less than 15 hours of relevant professional training.

ANNUAL REPORT 2013

Corporate Governance

Internal Control and Risk Management

The Board maintains a sound and effective system of internal controls in the Group and reviews its effectiveness through the Audit Committee. The system is set up to address key business risks of failure to meet corporate objectives. The purpose of such system is to manage and control risks properly, but not eliminate it. The Board decides the overall policies and strategies which are implemented by the executive management as well as the review of material controls including the financial, operational and compliance controls and risk management functions.

The Group carries out the businesses under an established control environment which is consistent with the principles stated in Internal Control and Risk Management — A Basic Framework issued by the Hong Kong Institute of Certified Public Accountants. The internal control of the Group is designed to provide reasonable assurance regarding the achievements of effectiveness and efficiency of operation, reliability of financial reporting and compliance with applicable laws and regulations.

The Group’s internal audit team under the supervision of Internal Audit Manager independently reviews the internal controls and evaluates their adequacy, effectiveness and compliance. The team comprises qualified personnel to maintain and monitor the system of controls on an ongoing basis. The Internal Audit Department reports the major findings and recommendations to the Audit Committee on a regular basis.

In the year 2012/2013, the internal audit reports of the Group were completed regularly and sent to the Audit Committee to review. According to the assessments made by the Board and the Group’s Internal Audit team in 2012, the Audit Committee is satisfied that:

The internal controls and accounting systems of the Group have been functioning effectively. They provide the reasonable assurance that the business risks are detected and monitored. The material assets are protected and the accounts are reliable. They help to ensure compliance with applicable laws and regulations.
There is an ongoing basis of identifying and managing the risks existing in the Group.

Business Planning and Budgeting

The Group’s budget meeting is held annually in the beginning of each year. It is a key control process in business planning. The budget meeting of the year 2013/2014 was held in January 2013. The scope of the meeting included the following areas:

Sales/product strategy;
Market analysis and competitor profile;
Purchasing strategy; and
Customers analysis.

On the other hand, the half-yearly performance review for the year 2012/2013 (i.e. April to September 2012) was conducted in October 2012. The monthly performance reviews for the same year were carried out as well. It is important to monitor results and progress against the budget. Revenue and expenditures were compared with the budget and projections were revised when considered necessary.

SAMSON PAPER HOLDINGS LIMITED

Corporate Governance

Auditor’s Remuneration

The Company’s external auditor is PricewaterhouseCoopers, Hong Kong. During the year, PricewaterhouseCoopers, Hong Kong provided the following audit and non-audit services to the Group:

Service	Fee charged
	HK$’000
(a) Audit services	2,350
(b) Tax compliance services	128

Model Code for Securities Transactions

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as the Company’s code of conduct for dealings in securities of the Company by the Directors. Having made specific enquiry of all the Directors, the Directors confirmed that they have complied with the required standard set out in the Model Code throughout the accounting period covered by the annual results.

Financial Reporting

Management provides such explanation and information to the Board so as to enable the Board to make an informed assessment of the financial and other information put before the Board for approval.

The Board is responsible for presenting a clear and balanced view of the Company’s annual and interim reports, price-sensitive announcements, disclosures required under the Listing Rules, and other regulatory requirements. The Directors acknowledge their responsibility for the preparation of the financial statements of the Group. In preparing the financial statements, the generally accepted accounting standards in Hong Kong have been adopted, appropriate accounting policies have been used and applied consistently, and reasonable and prudent judgments and estimates have been made.

The Board is not aware of any material uncertainties relating to events or conditions which may cast significant doubt over the Group’s ability to continue as a going concern. Accordingly, the Board has continued to adopt the going concern basis in preparing the financial statements.

The statement of the external auditor of the Company about their reporting responsibilities on the financial statements of the Group is set out in the Independent Auditor’s Report on page 26.

Communication with Shareholders

The Board and senior management recognise their responsibilities to look after the interests of the shareholders of the Company. The Company reports on its financial and operating performance to the shareholders through interim and annual reports. At the Annual General Meeting, shareholders can raise any questions relating to the performance and future directions of the Company to the Directors. Our corporate website which contains information, interim and annual reports, announcements and circulars issued by the Company as well as the recent development of the Group, enables the Company’s shareholders to access information on the Group on a timely basis.

Shareholders’ Rights

Under the Company’s Bye-laws, two or more shareholders holding not less than one-tenth of the paid-up capital of the Company can, by deposit a written requisition signed by the shareholders concerned to the Board or the Company Secretary to the principal place of business of the Company at 3/F, Seapower Industrial Centre, 177 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong, require a special general meeting to be called by the Board for the transaction of any business specified in such requisition.

ANNUAL REPORT 2013

Corporate and Social Responsibility

Environment

The Group recognizes that the public awareness on environmental protection has increased in high respect in the past decade and we know that paper industry consumes a great deal of water and papermaking materials. The Group is committed to building an environmental-friendly enterprise with sustainable development. The Group adheres to use its best effort to maintain clear sky and clean water for our future generations while creating economic benefit for the society.

The Group’s manufacturing business has persistently applied concepts of environmental protection and recycling on various aspects including improving our production efficiency and technologies in order to reduce the impact to the environment. It strives to ensure its businesses are operating in an environmentally responsible manner in compliance with local regulations pertaining to environmental protection, which include reduction of water and electricity consumption and exercise of controls over the sources of pollutants. The concept of environmental protection is being cultivated in the minds of the employees throughout the business. The PRC’s environmental policies are being strictly complied. It also goes to great lengths to ensure that proper environmentally friendly administration is in place and vigorously promotes clean and safe production. By the efficient effluent treatment facility and thermal power station with desulphurization capabilities, the waste water and pollutants are being dealt with in accordance with both local and national emission standards. In March 2009, the ‘Clean Production Performance’ award was granted from Shandong Provincial Environment Protection Bureau to the Group’s manufacturing business.

The Group’s trading business has received “Chain-of-Custody” certification by using FSC-approved paper and our customers are being encouraged to follow suit. One of our group companies is awarded of 2013 CarbonCare ® Label from Carbon Care Asia on 30 May 2013 by undertaking a sophisticated process of measuring, reducing and offsetting its carbon emissions. It is to show that the Group promotes a low-carbon economy in Hong Kong, commended the Group’s efforts to reduce carbon emissions and promote sustainable development, filling its corporate social responsibility and leadership in the industry perspective.

Human Resource Management

The Group is committed to the “people-oriented” management philosophy for its human resource development strategy in long term, providing suitable career development prospects and clear career path in accordance with the job duties and working experiences of the staff.

Staff’s job satisfaction and loyalty is a concern of the management. The management of the Group believes that better communication would bring higher performance in the means of providing interactive channels to improve the communications between management and lower level staff. The management cares physical and mental health of the staff, providing safe and comfortable working environment and makes sure the employees have peace of mind.

In the Group’s manufacturing business, we provide free dormitory lodging for our employees that come fully equipped with both recreational and fitness facilities. Team-building activities are also frequently organized, such as, ping-pong tournaments, basketball competitions, work competency exercises and annual dinner functions. All are to foster the team spirit and enriching our peoples’ lives. In March 2010, we obtained “Safe Workplace” certification from Zaozhuang City Workplace Safety Inspection Office.

Contributions to Society

Helping the poor and contributing to the society are always the great virtues and is mark of progress in a civilized society, especially in traditional Chinese society. As an enterprise that holds such values in high regard, the Group has since its formation been actively supporting charitable activities, such as funding educational institutions development in the PRC and providing financial relief aid during natural disasters.

SAMSON PAPER HOLDINGS LIMITED

Report of the Directors

The Directors submit their report together with the audited accounts for the year ended 31 March 2013.

Principal Activities and Geographical Analysis of Operations

The principal activity of the Company is investment holding. The principal activities of the subsidiaries are manufacturing, trading and marketing of paper products as set out in note 40 to the accounts. The Group also engages in trading of consumable aeronautic parts and provision of related services, provision of logistic services and marine services. The Group’s customers are mainly based in Hong Kong and the PRC.

An analysis of the Group’s performance for the year by business and geographical segments is set out in note 5 to the accounts.

Results and Appropriations

The results of the Group for the year are set out in the consolidated profit and loss account on page 28.

The Directors have declared an interim dividend of HK0.4 cent per share, totalling HK$5,092,000, which was paid on 16 January 2013.

The Directors recommend the payment of a final dividend of HK1.1 cents per share, totalling HK$14,005,000.

Reserves

Movements in the reserves of the Group and of the Company during the year are set out in note 30 to the accounts.

Donations

Charitable and other donations made by the Group during the year amounted to HK$228,000.

Property, Plant and Equipment

Details of the movements in property, plant and equipment of the Group during the year are set out in note 14 to the accounts.

Share Capital

Details of the movements in share capital of the Company are set out in note 29 to the accounts.

Distributable Reserves

Distributable reserves of the Company at 31 March 2013, calculated under the Companies Act of 1981 of Bermuda (as amended), amounted to HK$269,333,000 (2012: HK$267,321,000).

Pre-emptive Rights

There is no provision for pre-emptive rights under the Company’s bye-laws and there is no restriction against such rights under the laws of Bermuda, which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders.

ANNUAL REPORT 2013

Report of the Directors

Five Year Financial Summary

A summary of the results, assets and liabilities of the Group for the last five financial years is set out below:

Revenue Profit attributable to owners of the Company Total assets Total liabilities Total equity	2009 HK$’000 (restated) 3,744,184 17,951 3,087,004 2,078,328 1,008,676	2010 HK$’000 (restated) 3,861,245 61,999 3,787,882 2,695,789 1,092,093	2011 HK$’000 (restated) 4,676,899 79,225 4,709,535 3,473,169 1,236,366	2012 HK$’000 (restated) 5,025,024 56,710 5,276,147 3,632,517 1,643,630	2013 HK$’000 4,669,835
					63,661
					5,246,166 3,520,754
					1,725,412

Purchase, Sale or Redemption of Shares

The Company has not redeemed any of its shares during the year. Neither the Company nor any of its subsidiaries has purchased or sold any of the Company’s shares during the year.

Share Options

At the Special General Meeting of the Company held on 26 February 2004, the shareholders of the Company approved the adoption of a share option scheme (the “Option Scheme”) to comply with the requirements of Chapter 17 of the Listing Rules. At 31 March 2013, no option has been granted under the Option Scheme. Terms and conditions of the Option Scheme are set out below.

(1) Purpose

The purpose of the Option Scheme is to provide incentives to Participants (as defined below) to contribute to the Group and to enable the Group to recruit high-calibre employees and attract human resources that are valuable to the Group and any entity in which the Group holds any equity interest (the “Invested Entity”).

(2) Participants

All Directors and employees of the Group and suppliers, consultants, advisors, agents, customers, service providers, contractors, any member of or any holder of any securities issued by any member of the Group or any Invested Entity.

(3) Maximum number of shares

The number of shares which may be issued upon exercise of all options to be granted under the Option Scheme and any other share option scheme(s) of the Company must not exceed 10% of the nominal amount of the issued share capital of the Company as at the date of adoption of the Option Scheme. The maximum number of shares available for issue under the Option Scheme is 42,925,803 as at the date of this report.

(4) Maximum entitlement of each Participant

The maximum number of shares issued and to be issued upon exercise of the options granted to any one Participant (including both exercised and unexercised options) in any 12-month period shall not exceed one percent of the shares in issue as at the date of grant.

SAMSON PAPER HOLDINGS LIMITED

Report of the Directors

Share Options (continued)

(5) Time of exercise of option

An option may be exercised in accordance with the terms of the Option Scheme at any time during the period to be notified by the Board to each grantee of the option at the date of grant provided that such period shall not exceed a period of ten years from the date of grant but subject to the provisions for early termination of the option as contained in the terms of the Option Scheme.

(6) The eligible person shall pay HK$1.0 to the Company in consideration of the grant of an option upon acceptance of the grant of option.

(7) Exercise price

The option price per share payable on the exercise of an option is determined by the Board and shall not be less than the highest of:

(a) the closing price of the shares as stated in the daily quotations sheet of the Stock Exchange on the date of grant;
(b) the average closing price of the shares as stated in the Stock Exchange’s daily quotations sheets for the five business days immediately preceding the date of grant; and
(c) the nominal value of a share on the date of grant.

(8) Remaining life of the Option Scheme

The Option Scheme will remain in force until 26 February 2014.

Directors

The Directors during the year and up to the date of this report were:

Executive Directors

Mr. SHAM Kit Ying (Chairman) (alias SHAM Kit)

Mr. LEE Seng Jin (Deputy Chairman)

Mr. CHOW Wing Yuen (note)

Ms. SHAM Yee Lan, Peggy

Mr. LEE Yue Kong, Albert (note)

Non-executive Director

Mr. LAU Wang Yip, Eric

Independent non-executive Directors

Mr. PANG Wing Kin, Patrick Mr. TONG Yat Chong (note) Mr. NG Hung Sui, Kenneth

Note: Mr. CHOW Wing Yuen, Mr. LEE Yue Kong, Albert and Mr. TONG Yat Chong retire in accordance with clause 99 of the Company’s bye-laws and, being eligible, offer themselves for re-election.

ANNUAL REPORT 2013

Report of the Directors

Directors’ Service Contracts

Each of the executive Directors has entered into a service contract with the Company for a term of three years from the date of their respective contract and each of such service contracts will continue thereafter until terminated by either party concerned with not less than three month’s notice in writing.

Apart from the above, none of the Directors has an unexpired service contract with the Company which is not determinable by the Company within one year without payment of compensation other than under statutory compensation.

Directors’ Interests in Contracts

No contracts of significance in relation to the Group’s business to which the Company, its holding company or its subsidiaries was a party and in which a Director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

Biographical Details of Directors and Senior Management

Brief biographical details of the Directors and senior management of the Group are set out as follows:

Executive Directors

Mr. SHAM Kit Ying (alias SHAM Kit), aged 87, is the founder and Chairman of the Group. Mr. Sham is responsible for the Group’s corporate vision and corporate development. He has over 54 years of experience in the paper distribution industry in Hong Kong.

Mr. LEE Seng Jin, aged 56, is the Deputy Chairman and Chief Executive Officer of the Group. Mr. Lee is responsible for the formulation of the Group’s corporate strategies and development. He joined the Group in 1997. He is the husband of Ms. Sham Yee Lan, Peggy and a son-in-law of Mr. Sham Kit Ying.

Mr. CHOW Wing Yuen, aged 54, is the Chief Operating Officer of the Group. Mr. Chow joined the Group in 1978 and is responsible for the overall management of the Group’s operation in Hong Kong and the PRC. Mr. Chow has over 35 years of experience in the paper distribution industry in Hong Kong.

Ms. SHAM Yee Lan, Peggy, aged 47, is a Director of the Group. Ms. Sham joined the Group in 1989 and is responsible for the Group’s overall credit and administrative management. Ms. Sham is the wife of Mr. Lee Seng Jin and a daughter of Mr. Sham Kit Ying.

Mr. LEE Yue Kong, Albert, aged 57, is the Chief Financial Officer of the Group and the Company Secretary of the Company. Mr. Lee is responsible for the Group’s financial and accounting management. He has over 30 years of experience in the finance, auditing and accounting fields. Prior to joining the Group in June 1997, Mr. Lee was an independent non-executive Director of the Company. He is an associate member of the Institute of Chartered Accountants in Australia and the Hong Kong Institute of Certified Public Accountants.

Non-executive Directors

Mr. PANG Wing Kin, Patrick, aged 57, is a qualified accountant and has over 30 years of working experience in the auditing, finance and general management areas. Mr. Pang was appointed independent non-executive Director of the Company in 1995. He is a member of the CPA Australia, the Hong Kong Institute of Certified Public Accountants and the Institute of Internal Auditors of the United Kingdom.

Mr. LAU Wang Yip, Eric, aged 46, is a solicitor practising in Hong Kong. He was appointed non-executive Director of the Company in 1997 and is currently a partner of a local law firm. Mr. Lau holds a Bachelor’s degree in Laws and has been admitted as a solicitor in England and Wales. He has also been admitted as a legal practitioner in Tasmania, Australia.

SAMSON PAPER HOLDINGS LIMITED

Report of the Directors

Biographical Details of Directors and Senior Management (continued)

Non-executive Directors (continued)

Mr. TONG Yat Chong, aged 56, is a qualified accountant and has over 28 years of experience in finance, accounting and management. Mr. Tong was appointed independent non-executive Director of the Company in 2004. Mr. Tong holds a Master of Business Administration degree from the University of Wales. He is a fellow member of The Association of Chartered Certified Accountants in the United Kingdom and a Certified Public Accountant in Hong Kong.

Mr. NG Hung Sui, Kenneth, aged 46, is a solicitor practising in Hong Kong. He was appointed independent non-executive Director of the Company in 2005 and is currently a partner of a local law firm. Mr. NG holds a Bachelor’s degree in Laws and has been admitted as a solicitor in Hong Kong. He was also admitted as a solicitor in England and Wales and as a legal practitioner in Tasmania, Australia. He was appointed as a Notary Public of Hong Kong on 3 April 2008.

Mr. Ng was appointed as an independent non-executive director of Mexan Limited (stock code: 22) on 19 April 2007. He has been a member of the Criminal Law and Procedure Committee of the Law Society of Hong Kong since January 2007. He has also been a member of the Standing Committee on External Affairs since 2009 and appointed member of Standing Committee on Practitioners’ Affairs of the Law Society of Hong Kong in February, 2012.

Senior Management

Mr. CHU Wai Kwong, aged 56, is a Sales Director of Samson Paper (China) Company Limited. He joined the Group in 1976. He has over 26 years of sales experience in the paper distribution industry and is responsible for the purchases of packaging boards and overseeing the general operations in China.

Mr. CHAN Kwok Keung, aged 53, is a Sales Director (Northern China) of Samson Paper (China) Company Limited. He joined the Group in 1990 and has over 26 years of working experience in the paper distribution industry and is responsible for the purchases of printing paper and overseeing the general operations in Northern China.

Directors’ and Chief Executives’ Interests and Short Positions in the Shares, Underlying Shares and Debentures of the Company or any Associated Corporation

As at 31 March 2013, the interests and short positions of each Director and Chief Executive of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)), as recorded in the register required to be kept by the Company under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code are as follows:

(a) Long position in shares of the Company

Ordinary shares of HK$0.10 each

Mr. LEE Seng Jin Ms. SHAM Yee Lan, Peggy Mr. CHOW Wing Yuen	Number of ordinaryshares beneficiallyheld
	Capacity Personal interest Corporate interest Family interest Total Percentage Beneficial owner 128,459,688 688,533,247 33,425,112 850,418,047 74.53% Beneficial owner 1,145,112 32,280,000 816,992,935 850,418,047 74.53% Beneficial owner 1,080,000 — — 1,080,000 0.09%

ANNUAL REPORT 2013

Report of the Directors

Directors’ and Chief Executives’ Interests and Short Positions in the Shares, Underlying Shares and Debentures of the Company or any Associated Corporation (continued)

(a) Long position in shares of the Company (continued)

Convertible non-voting preference shares (“CP shares”) of HK$0.10 each

Mr. LEE Seng Jin	Number of CP shares beneficiallyheld
	Capacity Personal interest Corporate interest Family interest Total Percentage Beneficial owner — 132,064,935 — 132,064,935 100%

Save as disclosed above, as at 31 March 2013, none of the Directors and Chief Executives had any interests or short positions in the shares, underlying shares or debentures of, or had been granted, or exercised any rights to subscribe for shares (or warrants or debentures, if applicable) of, the Company and any of its associated corporation (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which had been recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

Other than those interests disclosed above, the Directors and Chief Executives also hold shares of certain subsidiaries solely for the purpose of ensuring that the relevant subsidiary has more than one member.

At no time during the year was the Company, its holding company, its subsidiaries or its associated companies a party to any arrangement to enable any Director or Chief Executive of the Company to acquire benefits by means of acquisition of shares in, or debentures of, the Company and its associated corporations as defined in the SFO.

(b) Short positions in shares and underlying shares of the Company

None of the Directors and the Chief Executive of the Company or their associates had any short positions in the shares, underlying shares and debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

Substantial Shareholders’ Interests and Short Positions in the Shares, Underlying Shares of the Company

At 31 March 2013, the interests and short positions of the shareholders other than a Director or Chief Executive of the Company, in the shares and underlying shares of the Company as recorded in the register which were required to be kept by the Company under Section 336 of the SFO are as follows:

Long position in ordinary shares of HK$0.10 each in the Company

Name of shareholder	Number of ordinary shares	Percentage
Quinselle Holdings Limited (note)	688,533,247	60.34%
Long position in CP shares of HK$0.10 each in the Company
Name of shareholder	Number of CP shares	Percentage
Quinselle Holdings Limited (note)	132,064,935	100%

Note: Quinselle Holdings Limited is wholly owned by Mr. Lee Seng Jin.

SAMSON PAPER HOLDINGS LIMITED

Report of the Directors

Substantial Shareholders’ Interests and Short Positions in the Shares, Underlying Shares of the Company (continued)

Long position in CP shares of HK$0.10 each in the Company (continued)

Save as disclosed above, the register which is required to be kept under Section 336 of the SFO shows that the Company had not been notified of any interests or short positions in the shares or underlying shares of the Company as at 31 March 2013.

Management Contracts

No contracts concerning the management and administration of the whole or any substantial part of the business of the Company were entered into or existed during the year.

Major Customers and Suppliers

During the year, the Group purchased less than 30% of its goods and services from its five largest suppliers and therefore no additional disclosure with regard to major suppliers is made.

During the year, the Group sold less than 30% of its goods and services to its five largest customers and therefore no additional disclosure with regard to major customers is made.

Related Party Transactions and Connected Transactions

Details on related party transactions for the year are set out in note 38 to the consolidated accounts. Details of any related party transaction which constitute connected transaction or continuing connected transaction and other continuing transactions not exempted under Rule 14A.31 or Rule 14A.33 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) are disclosed below.

Continuing transactions and continuing connected transactions

The Group had from time to time purchased paper products from certain subsidiaries of Kokusai-Pulp and Paper Company Limited (“KPP”), an international paper trading company incorporated in Japan. KPP and its subsidiaries (being associates of KPP under the Listing Rules) became connected persons of the Group on 15 March 2012 when KPP acquired 22.30% interest in Mission Sky Group Limited, a subsidiary of the Company.

Such purchase transactions had been ongoing before, and continuing subsequent to, KPP and its subsidiaries becoming connected persons of the Group had become continuing connected transactions of the Group from 15 March 2012 onwards. In this regard, subsequent to the reporting date, an announcement has been issued by the Company in compliance with the disclosure requirements under Chapter 14A of the Listing Rules and detail of such transactions are summarised as follows:

Samson Paper (Shenzhen) Company Limited, a subsidiary of the Company, had been purchasing from Keishin Papers Trade (Shanghai) Company Limited, a subsidiary of KPP, pursuant to a basic sales contract entered into between the parties on 24 December 2010 with no set termination date, certain paper products from the Oji-NT paper mill in Jiangsu, the PRC on the pricing and other terms based on individual purchase orders from time to time. The purchase price was generally determined with reference to the prevailing market prices of the relevant paper products. The amounts payable by the Group in respect of such transactions for the period from 15 March 2012 to 31 March 2012 and for the financial year ended 31 March 2013 are respectively HK$14,902,000 and HK$226,942,000. Such related party transactions are also disclosed under note 38(a) to the consolidated accounts.

ANNUAL REPORT 2013

Report of the Directors

Samson Paper Company Limited, a subsidiary of the Company, had been purchasing from DaiEi Papers (H.K.) Limited, a subsidiary of KPP, under similar supply arrangements for many years with no set termination date, various brands of paper products on the pricing and other terms based on individual purchase orders from time to time. The purchase price was generally determined with reference to the prevailing market prices of the relevant paper products. The amounts payable by the Group in respect of such transactions for the period from 15 March 2012 to 31 March 2012 and for the financial year ended 31 March 2013 are respectively HK$9,027,000 and HK$490,664,000. Such transactions did not constitute related party transactions under the relevant accounting standards.

Annual review of continuing connected transactions

Subsequent to the reporting date, the independent non-executive directors of the Company have reviewed the above continuing connected transactions for the period from 15 March 2012 up to the end of the financial year ended 31 March 2013 (the “Transactions”) and confirmed that the Transactions were entered into: -

(i) in the ordinary and usual course of business of the Group;
(ii) on normal commercial terms or on terms no less favourable to the Group than terms available to or from independent third parties; and
(iii) in accordance with the terms of the respective agreements and arrangements that are fair and reasonable and in the interests of the shareholders of the Company as a whole.

Subsequent to the reporting date, the Company’s auditor was engaged to report on the Group’s continuing connected transactions for the period from 15 March 2012 up to the end of the financial year ended 31 March 2013 in accordance with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” and with reference to Practice Note 740 “Auditor’s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules” issued by the Hong Kong Institute of Certified Public Accountants. The auditor reported to the Board that for the period from 15 March 2012 to 31 March 2013 the above continuing connected transactions, (i) have received the approval from the Board and (ii) have been entered into in accordance with the relevant invoices, purchase orders and/ or other relevant agreements governing such transactions. A copy of the auditor’s letter has been provided to the Stock Exchange.

Independence of Independent Non-executive Directors

The Company has received, from each of the Independent Non-executive Directors of the Company, an annual confirmation of his independence pursuant to Rules 3.13 of the Listing Rules. The Company considers all of the Independent Non-executive Directors are independent.

Compliance with the Continuing Disclosure Requirement under Chapter 13 of the Listing Rules

In accordance with the continuing disclosure requirements under Rule 13.21 of Chapter 13 of the Listing Rules (as amended on 31 March 2004), the Directors reported below details of the Group’s loan agreements, which contains covenants requiring performance obligations of the controlling shareholder of the Company.

SAMSON PAPER HOLDINGS LIMITED

Report of the Directors

A subsidiary of the Company has been granted a three and a half-year revolving credit and term loan facility amounting to HK$620,000,000 in June 2012. The loan facility requires that (i) Mr. Sham Kit Ying, Mr. Lee Seng Jin, Ms. Sham Yee Lan, Peggy and members of their respective immediate family shall in aggregate maintain not less than 100% of the direct or indirect legal and beneficial interest in Quinselle Holdings Limited; and maintain management control over Quinselle Holdings Limited; and (ii) Quinselle Holdings Limited shall maintain at least 51% of the direct or indirect legal and beneficial interest in the Company and remain the single largest shareholder of the Company.

Independent Auditor

The accounts have been audited by PricewaterhouseCoopers who retire and, being eligible, offer themselves for re-appointment.

On behalf of the Board

SHAM Kit Ying Chairman

Hong Kong, 25 June 2013

ANNUAL REPORT 2013

Independent Auditor’s Report

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Independent Auditor’s Report

To the shareholders of Samson Paper Holdings Limited

(Incorporated in Bermuda with limited liability)

We have audited the consolidated accounts of Samson Paper Holdings Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages 28 to 87, which comprise the consolidated and the company balance sheets as at 31 March 2013, and the consolidated profit and loss account, 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 a summary of significant accounting policies and other explanatory information.

Directors’ Responsibility for the Consolidated Accounts

The directors of the Company are responsible for the preparation of consolidated accounts that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated accounts that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated accounts based on our audit and to report our opinion solely to you, as a body, in accordance with Section 90 of the Companies Act 1981 of Bermuda and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated accounts that give a true and fair view 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated accounts.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

PricewaterhouseCoopers, 22/F, Prince’s Building, Central, Hong Kong T: +852 2289 8888, F: +852 2810 9888, www.pwchk.com

SAMSON PAPER HOLDINGS LIMITED

Independent Auditor’s Report

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Opinion

In our opinion, the consolidated accounts give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2013, and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

PricewaterhouseCoopers Certified Public Accountants

Hong Kong, 25 June 2013

ANNUAL REPORT 2013

Consolidated Profit and Loss Account

For the year ended 31 March 2013

Note Revenue 5 Cost of sales Gross profit Other gains and income, net 5 Selling expenses Administrative expenses Other operating expenses Operating profit 6 Finance costs 7 Profit before taxation Taxation 8 Profit for the year Attributable to: Owners of the Company Non-controlling interests Earnings per share Basic 11 Diluted 11 Dividends 10	2013 HK$’000 4,669,835 (4,208,853) 460,982 111,872 (177,283) (197,515) (25,480) 172,576 (88,943) 83,633 (18,626) 65,007 63,661 1,346 65,007 HK 5.4 cents HK 5.0 cents 19,097	2012 HK$’000 (Restated) 5,025,024 (4,569,795)
		455,229 54,734 (174,023) (179,688) (2,656)
		153,596 (82,311)
		71,285 (15,221)
		56,064
		56,710 (646)
		56,064
		HK 4.8 cents
		HK 4.5 cents
		18,843

The notes on pages 36 to 87 are an integral part of these consolidated accounts.

SAMSON PAPER HOLDINGS LIMITED

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2013

Profit for the year Other comprehensive income Currency translation differences Revaluation of land and buildings, net of deferred tax Reversal of deferred tax on fair value gains upon transfer from property, plant and equipment to investment properties Revaluation of available-for-sale financial assets Other comprehensive income for the year, net of tax Total comprehensive income for the year Attributable to: — Owners of the Company — Non-controlling interests Total comprehensive income for the year	2013 HK$’000 65,007 22,130 8,290 6,720 114 37,254 102,261 99,423 2,838 102,261	2012 HK$’000 (Restated) 56,064 44,841 49,009 9,758 112
		103,720
		159,784
		160,304 (520)
		159,784

The notes on pages 36 to 87 are an integral part of these consolidated accounts.

ANNUAL REPORT 2013

Consolidated Balance Sheet

As at 31 March 2013

Note Non-current assets Property, plant and equipment 14 Prepaid premium for land leases 15 Investment properties 16 Intangible assets 17 Available-for-sale financial assets 18 Non-current deposit 19 Deferred tax assets 31 Current assets Inventories 22 Accounts receivable, deposits and prepayments 23 Financial assets at fair value through profit or loss 24 Taxation recoverable Restricted bank deposits 25 Bank balances and cash 26 Non-current asset held for sale 21 Current liabilities Accounts payable and other payables 27 Trust receipt loans 28 Taxation payable Derivative financial instruments 32 Borrowings 28 Net current assets Total assets less current liabilities	31 March 2013 HK$’000 1,695,826 157,483 163,601 47,536 5,624 8,165 8,249 2,086,484 704,536 1,768,326 675 890 182,948 392,307 3,049,682 110,000 3,159,682 1,339,738 774,408 12,523 769 680,482 2,807,920 351,762 2,438,246	31 March 2012 HK$’000 (Restated) 1,521,326 159,762 165,997 44,653 5,258 15,400 4,940 1,917,336 706,662 1,630,971 2,673 3,014 174,446 765,045 3,282,811 76,000 3,358,811 1,326,672 839,292 15,158 795 749,286 2,931,203 427,608 2,344,944	1 April 2011 HK$’000 (Restated) 1,330,148 42,343 150,000 45,168 4,327 14,863 7,195
			1,594,044
			836,973 1,431,250 6,282 6,004 152,258 682,724
			3,115,491 —
			3,115,491
			1,362,261 815,841 15,239 — 520,572
			2,713,913
			401,578
			1,995,622

SAMSON PAPER HOLDINGS LIMITED

Consolidated Balance Sheet

As at 31 March 2013

Note Equity Equity attributable to owners of the Company Share capital 29 Reserves 30 Proposed final dividend 30 Non-controlling interests Total equity Non-current liabilities Accounts payable and other payables 27 Borrowings 28 Deferred tax liabilities 31	31 March 2013 HK$’000 127,315	31 March 2012 HK$’000 (Restated) 127,315 1,399,037 12,477 1,411,514 1,538,829 104,801 1,643,630 73,869 559,375 68,070 701,314 2,344,944	1 April 2011 HK$’000 (Restated) 127,315
	1,476,646 14,005	1,399,037 12,477	1,086,176 12,731
	1,490,651 1,617,966 107,446 1,725,412 1,486 641,581 69,767 712,834 2,438,246		1,098,907 1,226,222 10,144 1,236,366 — 720,986 38,270 759,256 1,995,622

The notes on pages 36 to 87 are an integral part of these consolidated accounts.

The financial statements on pages 28 to 87 were approved by the Board of Directors on 25 June 2013 and were signed on its behalf.

SHAM Kit Ying Director

SHAM Yee Lan, Peggy Director

ANNUAL REPORT 2013

Balance Sheet

As at 31 March 2013

Note Non-current assets Investments in subsidiaries 20 Current assets Amounts due from subsidiaries 20 Bank balances and cash 26 Current liabilities Accruals Net current assets Total assets less current liabilities Equity Equity attributable to owners of the Company Share capital 29 Reserves 30 Proposed final dividend 30 Total equity	2013 HK$’000 249,897 308,419 59 308,478 465 465 308,013 557,910 127,315 416,590 14,005 430,595 557,910	2012 HK$’000 249,897 306,534 60 306,594 593 593 306,001 555,898 127,315
		416,106 12,477
		428,583 555,898

The notes on pages 36 to 87 are an integral part of these consolidated accounts.

The financial statements on pages 28 to 87 were approved by the Board of Directors on 25 June 2013 and were signed on its behalf.

SHAM Kit Ying Director

SHAM Yee Lan, Peggy Director

SAMSON PAPER HOLDINGS LIMITED

Consolidated Statement of Changes in Equity

For the year ended 31 March 2013

Attributable to	Attributable to	owners of the Company Retained earnings Subtotal HK$’000 HK$’000 636,584 1,212,141 8,055 14,081 644,639 1,226,222 56,710 56,710 — 44,715 — 49,009 — 9,758 — 112 — 103,594 56,710 160,304 — 740 — 170,660 (12,731) (12,731) (6,366) (6,366)	owners of the Company Retained earnings Subtotal HK$’000 HK$’000 636,584 1,212,141 8,055 14,081 644,639 1,226,222 56,710 56,710 — 44,715 — 49,009 — 9,758 — 112 — 103,594 56,710 160,304 — 740 — 170,660 (12,731) (12,731) (6,366) (6,366)	Non- controlling interests HK$’000 10,144 — 10,144 (646) 126 — — — 126 (520) (3,163) 98,340 — —	Total HK$’000 1,222,285 14,081 1,236,366 56,064 44,841 49,009 9,758 112 103,720 159,784 (2,423) 269,000 (12,731) (6,366)
Share capital HK$’000 127,315 — 127,315 — — — — — — — — — — —	Other reserves HK$’000 448,242 6,026 454,268 — 44,715 49,009 9,758 112 103,594 103,594 740 170,660 — —	Retained earnings HK$’000 636,584 8,055 644,639 56,710 — — — — — 56,710 — — (12,731) (6,366)
127,315 —	729,262 —	669,775 12,477	1,526,352 12,477	104,801 —	1,631,153 12,477
127,315	729,262	682,252	1,538,829	104,801	1,643,630

ANNUAL REPORT 2013

Consolidated Statement of Changes in Equity

For the year ended 31 March 2013

Attributable to	Attributable to	owners of the Company Retained earnings Subtotal HK$’000 HK$’000 671,688 1,511,877 10,564 26,952 682,252 1,538,829 63,661 63,661 — 20,638 — 8,290 — 6,720 — 114 — 35,762 63,661 99,423 — (2,717) 17,138 — (8,266) — (12,477) (12,477) (5,092) (5,092)	owners of the Company Retained earnings Subtotal HK$’000 HK$’000 671,688 1,511,877 10,564 26,952 682,252 1,538,829 63,661 63,661 — 20,638 — 8,290 — 6,720 — 114 — 35,762 63,661 99,423 — (2,717) 17,138 — (8,266) — (12,477) (12,477) (5,092) (5,092)	Non- controlling interests HK$’000 104,801 — 104,801 1,346 1,492 — — — 1,492 2,838 (193) — — — —	Total HK$’000 1,616,678 26,952 1,643,630 65,007 22,130 8,290 6,720 114 37,254 102,261 (2,910) — — (12,477) (5,092)
Share capital HK$’000 127,315 — 127,315 — — — — — — — — — — — —	Other reserves HK$’000 712,874 16,388 729,262 — 20,638 8,290 6,720 114 35,762 35,762 (2,717) (17,138) 8,266 — —	Retained earnings HK$’000 671,688 10,564 682,252 63,661 — — — — — 63,661 — 17,138 (8,266) (12,477) (5,092)
127,315 —	753,435 —	723,211 14,005	1,603,961 14,005	107,446 —	1,711,407 14,005
127,315	753,435	737,216	1,617,966	107,446	1,725,412

The notes on pages 36 to 87 are an integral part of these consolidated accounts.

SAMSON PAPER HOLDINGS LIMITED

Consolidated Statement of Cash Flows

For the year ended 31 March 2013

Note Operating activities Cash (used in)/generated from operations 33(a) Interest paid Hong Kong profits tax paid Overseas taxation paid Net cash (used in)/generated from operating activities Investing activities Purchase of property, plant and equipment Purchase of prepaid premium for land leases Purchase of intangible assets Purchase of available-for-sale financial assets Proceeds from disposal of property, plant and equipment Proceeds from disposal of non-current assets held for sale Proceeds from disposal of financial assets at fair value through profit or loss Proceeds from partial disposal of interests in a subsidiary, net of transaction costs Refund of deposit paid for purchase of machinery Interest received Dividends received from investments in financial assets Acquisition of additional interest from non-controlling interest Net cash used in investing activities Financing activities Bank loans raised 33(b) Finance lease liabilities raised Repayment of bank loans 33(b) Repayment of finance lease liabilities Increase in restricted bank deposits (Decrease)/increase in trust receipt loans Dividends paid to shareholders Net cash (used in)/generated from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect of changes in exchange rates on cash and cash equivalents Cash and cash equivalents at end of the year 26	2013 HK$’000 (48,386) (88,943) (8,115) (6,355) (151,799) (227,785) — (3,144) (252) 1,499 75,274 3,396 — 6,675 10,897 8 (2,910) (136,342) 1,094,928 4,582 (1,094,076) (5,243) (8,502) (64,884) (17,569) (90,764) (378,905) 763,675 4,682 389,452	2012 HK$’000 157,511 (85,861) (5,603) (3,829)
		62,218
		(232,123) (117,742) (25) (819) 19,784 — 4,773 294,595 — 11,668 241 (1,883)
		(21,531)
		504,576 1,536 (452,662) (2,005) (22,188) 23,451 (19,097)
		33,611
		74,298 680,083 9,294
		763,675

The notes on pages 36 to 87 are an integral part of these consolidated accounts.

ANNUAL REPORT 2013

Notes to the Accounts

1 GENERAL INFORMATION

The principal activity of the Company is investment holding. The principal activities of the subsidiaries are manufacturing, trading and marketing of paper products. The Group is also engaged in the trading of consumable aeronautic parts and provision of marine services. Detailed analysis of these business segments are set out in note 5 to the accounts.

The Company is a limited liability company incorporated in Bermuda. The address of its registered office is 3/F Seapower Industrial Centre, 177 Hoi Bun Road, Kwun Tong, Hong Kong.

The Company has its primary listing on The Stock Exchange of Hong Kong Limited.

These consolidated accounts are presented in Hong Kong dollars, unless otherwise stated. These accounts have been approved for issue by the Board of Directors on 25 June 2013.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated accounts are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated accounts of the Group have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The consolidated accounts have been prepared under the historical cost convention, as modified by the revaluation of properties, available-for-sale financial assets and financial assets/liabilities (including derivative financial instruments) at fair value through profit or loss, which are carried at fair value.

The preparation of accounts in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated accounts, are disclosed in note 4.

(a) Changes in accounting policy and disclosures on the provision of deferred tax on revaluation of investment properties:

The HKICPA has amended Hong Kong Accounting Standard (“HKAS”) 12, “Income Taxes”, to introduce an exception to the principle for the measurement of deferred tax assets or liabilities arising on an investment property measured at fair value. HKAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. The amendment introduces a rebuttable presumption that an investment property measured at fair value is recovered entirely by sale. The amendment is applicable retrospectively to annual periods beginning on or after 1 January 2012.

The Group has adopted this amendment retrospectively for the financial year ended 31 March 2013 and the effects of adoption are disclosed as follows.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1 Basis of preparation (continued)

(a) Changes in accounting policy and disclosures on the provision of deferred tax on revaluation of investment properties: (continued)

As disclosed in note 16, the Group has investment properties measured at their fair values totalling HK$165,997,000 (1 April 2011: HK$150,000,000) as of 1 April 2012. As required by the amendment, the Group has re-measured the deferred tax relating to certain investment properties amounting to HK$165,997,000 (1 April 2011: HK$150,000,000) as of 1 April 2012 according to the tax consequence on the presumption that they are recovered entirely by sale retrospectively. The comparative figures for the year ended 31 March 2012 have been restated to reflect the change in accounting policy, as summarised below.

Effect on consolidated balance sheet	31 March 2013	31 March 2012	1 April 2011
	HK$’000	HK$’000	HK$’000
Decrease in deferred tax liabilities	45,860	26,952	14,081
Increase in retained earnings	23,204	10,564	8,055
Increase in asset revaluation reserve	22,656	16,388	6,026
		Year ended 31 March
Effect on consolidated profit and loss account		2013	2012
		HK$’000	HK$’000
Decrease in income tax expense		12,640	2,509
Increase in net profit attributable to owners of the Company		12,640	2,509
Increase in basic earnings per share (“EPS”)		HK1.1 cents	HK0.2 cent
Increase in diluted EPS		HK1.0 cent	HK0.2 cent

(b) The following amended standards are mandatory for the first time for the financial year beginning 1 April 2012 but either have no significant impact to the Group’s results and financial position or are not currently relevant to the Group:
HKFRS 1 (Amendment) Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters
HKFRS 7 (Amendment) Disclosures — Transfers of Financial Assets

ANNUAL REPORT 2013

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1 Basis of preparation (continued)

(c) New and amended standards have been issued but are not effective for the financial year beginning 1 April 2012 and have not been early adopted by the Group

The following new and amended standards have been issued but are not effective for the financial year beginning 1 April 2012 and the Group has not early adopted:

		Effective for
		accounting
		periods
		beginning
		on or after
HKAS 1 (Amendment)	Presentation of financial statements	1 July 2012
HKAS 19 (Amendment)	Employee benefits	1 January 2013
HKAS 27 (Revised 2011)	Separate financial statements	1 January 2013
HKAS 28 (Revised 2011)	Associates and joint ventures	1 January 2013
HKAS 32 (Amendment)	Offsetting financial assets and financial liabilities	1 January 2014
HKFRS 1 (Amendment)	First time adoption — government loans	1 January 2013
HKFRS 7 (Amendment)	Financial instruments: Disclosures	1 January 2013
	— Offsetting financial assets and liabilities
HKFRS 7 and HKFRS 9	Mandatory effective date and transition disclosures	1 January 2015
(Amendment)
HKFRS 9	Financial instruments	1 January 2015
HKFRS 10	Consolidated financial statements	1 January 2013
HKFRS 10, HKFRS 11 and	Consolidated financial statements,	1 January 2013
HKFRS 12 (Amendments)	Joint arrangements and disclosure of
	Interests in other entities: transitional guidance
HKFRS 10, HKFRS 12 and	Investment entities	1 January 2014
HKFRS 27 (2011) (Amendments)
HKFRS 11	Joint arrangements	1 January 2013
HKFRS 12	Disclosures of interests in other entities	1 January 2013
HKFRS 13	Fair value measurements	1 January 2013
HK (IFRIC) — Int 20	Stripping costs in the production phase of	1 January 2013
	a surface mine
Fourth annual improvement	Improvements to HKFRS published in June 2012	1 January 2013
project

The directors are currently assessing the impact on their adoption and the impact of adoption of these new standards, revised standards and amendments and interpretations to existing standards in future periods is not currently known or cannot be reasonably estimated.

2.2 Subsidiaries

2.2.1 Consolidation

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.2 Subsidiaries (continued)

2.2.1 Consolidation (continued)

(a) Business combinations

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amount of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

(b) Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions — that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

2.2.2 Separate accounts

In the Company’s balance sheet, investments in subsidiaries are accounted for at cost less impairment. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving dividends from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate accounts exceeds the carrying amount in the consolidated accounts of the investee’s net assets including goodwill.

2.3 Foreign currency translation

(a) Functional and presentation currency Items included in the accounts of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated accounts are presented in Hong Kong dollars (HK$), which is the Company’s functional and the Group’s presentation currency.

ANNUAL REPORT 2013

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.3 Foreign currency translation (continued)

(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 yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account.

Foreign exchange gains and losses are presented in the profit and loss account within “other gains and income, net”.

Translation differences on non-monetary financial assets and liabilities, such as equity instruments held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equity instruments classified as available-for-sale, are included in other comprehensive income.

(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:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
(ii) income and expenses for each profit and loss account are translated at average exchange rates (unless this average 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 rates on the dates of the transactions); and
(iii) all resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in equity.

(d) Disposal of foreign operation and partial disposal

On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the equity holders of the Company are reclassified to profit or loss.

In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are reattributed to non-controlling interests and are not recognised in profit or loss.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.4 Property, plant and equipment

Land and buildings comprise mainly warehouses and offices. Subsequent to initial recognition, leasehold land classified as financial leases and buildings are carried at their revalued amounts less subsequent accumulated depreciation and impairment losses. Valuation of land and buildings in and outside Hong Kong are valued by external independent valuers on a regular basis with an interval of not more than 3 years. In the intervening years, the directors review the carrying value of the land and buildings and adjustment is made where they consider that there has been a material change. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

Increases in the carrying amount arising on revaluation of land and buildings are credited to other comprehensive income. Decreases that offset previous increases of the same asset are charged against other comprehensive income; all other decreases are expensed in the profit and loss account.

All other property, plant and equipment are stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are expensed in the profit and loss account during the financial period in which they are incurred.

Leasehold land classified as finance lease commences amortisation from the time when the land interest becomes available for its intended use. Amortisation on leasehold land classified as finance lease and depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated lives, as follows:

Leasehold land classified as finance lease	Shorter of remaining lease term of 50 years or useful life
Buildings	2.5% to 5.9%
Furniture and fixtures Machinery and equipment	10% to 25% 4% to 20%
Office and computer equipment	10% to 20%
Motor vehicles and vessels	20%
Leasehold improvements	20% or over the unexpired lease term, whichever is shorter

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 2.10).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit and loss account. When revalued assets are sold, the amounts included in “asset revaluation reserve” are transferred to retained earnings.

2.5 Construction in progress

Construction in progress represents property, plant and equipment under construction and pending installation and is stated at cost less accumulated impairment losses, if any. Cost includes the cost of construction of buildings, the cost of plant and machinery and interest charges arising from borrowings used to finance these assets during the period of construction or installation and testing, if any. No provision for depreciation is made on construction in progress until such time as the relevant assets are completed and are available for intended use. When the assets concerned are brought into use, the costs are transferred to property, plant and equipment and depreciated in accordance with the policy as stated in note 2.4.

ANNUAL REPORT 2013

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.6 Intangible assets

(a) Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Company’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.

(b) Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.

Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred.

Costs incurred to acquire and bring specific computer software licences to working condition are capitalised and amortised over their estimated useful lives of ten years.

2.7 Investment properties

Investment property is defined as property held to earn rentals or for capital appreciation or both, rather than for: (a) use in the production of supply of goods or services or for administrative purposes; or (b) sale in the ordinary course of business.

Investment property, principally comprising leasehold land and office buildings, is held for long-term rental yields and is not occupied by the Group. Investment property is carried at fair value, representing open market value determined annually by external valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If the information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. Changes in fair values are recorded in the profit and loss account.

2.8 Financial assets

2.8.1 Classification

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.8 Financial assets (continued)

2.8.1 Classification (continued)

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Group’s loans and receivables are classified as “accounts receivable, deposits and prepayments”, “restricted bank deposits” and “bank balances and cash” in the balance sheet.

(c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the balance sheet date.

2.8.2 Recognition and measurement

Regular way purchases and sales of financial assets are recognised on the trade-date — the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the profit and loss account. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Gains and losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are included in the profit and loss account within ‘other gains and income — net’ in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the profit and loss account as part of other income when the Group’s right to receive payments is established.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs.

Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as “other gains and income, net”.

Interest on available-for-sale securities calculated using the effective interest method is recognised in the profit and loss account as part of other income. Dividends on available-for-sale equity instruments are recognised in the profit and loss account as part of other income when the Group’s right to receive payments is established.

ANNUAL REPORT 2013

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.9 Derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Assets and liabilities are classified as current if expected to be settled within 12 months; otherwise, they are classified as non-current.

Gains or losses arising from changes in the fair value of the derivatives are presented in the profit and loss account within “other gains and income, net” in the period in which they arise.

2.10 Impairment of non-financial assets

Assets that have an indefinite useful life, for example, goodwill, are not subject to amortisation and are tested at least annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

2.11 Impairment of financial assets

(a) Assets carried at amortised cost The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in the profit and loss account. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the profit and loss account.

(b) Assets classified as available-for-sale

The Group assesses at the balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss — measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss — is removed from equity and recognised in profit and loss account. Impairment losses recognised in the consolidated profit and loss account on equity instruments are not reversed through the consolidated profit and loss account.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.12 Non-current asset held for sale

A non-current asset is classified as an asset for sale when its carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. It is stated at the lower of carrying amount and fair value less costs to sell.

2.13 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost for trading merchandise is determined using the first-in, first-out method and cost for manufactured merchandise is determined using the weighted-average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

2.14 Accounts and other receivables

Accounts receivable are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of accounts and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Accounts and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

2.15 Cash and cash equivalents

In the consolidated statement of cash flows, cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. In the consolidated balance sheet, bank overdrafts are shown within borrowings in current liabilities.

2.16 Borrowings

Borrowings 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 profit and loss account over the period of the borrowings 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 end of the reporting period.

2.17 Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

ANNUAL REPORT 2013

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.18 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 noncurrent liabilities.

Accounts payable are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.19 Share capital

Ordinary shares and convertible non-voting preference shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or warrants are shown in equity as a deduction, net of tax, from the proceeds.

2.20 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown, net of value added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Revenue is recognised as follows:

Sales of goods and scrap materials are recognised when a group entity has delivered products to the customer, the customer has accepted the products and collectability of the related receivables is reasonably assured.

Service income is recognised when the relevant services are rendered.

Operating lease rental income is recognised on a straight-line basis over lease period of the lease. When the properties provide incentives to its tenants, the cost of incentives will be recognised over the lease term, on a straight-line basis, as a reduction of rental income.

Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.

Dividend income is recognised when the right to receive payment is established.

2.21 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Directors who make strategic decisions.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.22 Employee benefits

(a) Employee leave entitlements Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(b) Retirement benefit obligations

The Group operates a number of defined contribution schemes for all its employees in Hong Kong and overseas. A defined contribution scheme is a pension scheme that the Group pays fixed contribution into a separate entity. The Group’s contributions to the defined contribution retirement schemes are expensed as incurred and are not reduced by contributions forfeited by those employees who leave the schemes prior to vesting fully in the contributions.

The Group also contributes on a monthly basis to various defined contribution schemes, organised by relevant municipal and provincial governments in the Peoples’ Republic of China (the “PRC”) for all its employees in the PRC. The municipal and provincial governments undertake to assume the retirement benefit obligations payable to all existing and future retired employees for post-retirement benefits beyond the contributions made. The assets of these plans are held separately from those of the Group in independently administered funds managed by the PRC government. Contributions to these schemes are expensed as incurred.

(c) Bonus plan

The Group recognises a provision for bonus when contractually obligated or when there is a past practice that have created a constructive obligation.

2.23 Leases (as lessee)

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor), including upfront payment made for leasehold land and land use rights, are charged to the profit and loss account on a straight-line basis over the period of the lease.

The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and the finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance cost is charged to the profit and loss account over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.

2.24 Leases (as lessor)

A lease is an agreement whereby the lessor conveys to the lessee in return for a payment, or series of payments, the right to use an asset for an agreed period of time.

ANNUAL REPORT 2013

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.25 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the profit and loss account, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries 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. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated accounts. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.26 Dividend distribution

Dividend distribution to the Company’s owners is recognised as a liability in the Group’s and the Company’s accounts in the period in which the dividends are approved by the Company’s owners.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

3 FINANCIAL RISK MANAGEMENT

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, price risk and cash flow interest-rate risk), credit risk and liquidity risk. The Group’s overall risk management policy focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to reduce certain risk exposures.

Risk management policies approved by the Board of Directors are carried out by a central treasury department (“Group Treasury”). Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units.

(a) Market risk

(i) Currency risk

The Group operates in various Asian countries and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Renminbi and United States dollars. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

The carrying amounts of the Group’s accounts receivable are mainly denominated in Hong Kong dollars and Renminbi. The carrying amounts of the Group’s accounts payable and accruals are mainly denominated in Hong Kong dollars, Renminbi and United States dollars. The carrying amounts of cash and bank balances are mainly denominated in Hong Kong dollars, Renminbi and United States dollars. The carrying amounts of trust receipt loans are mainly denominated in Hong Kong dollars.

The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group’s foreign operations is managed primarily through borrowings and trust receipt loans denominated in the relevant foreign currencies. The Group is presently not using any forward exchange contracts to hedge against foreign exchange risk as management considers its exposure minimal.

At 31 March 2013, if Hong Kong dollars had weakened/strengthened by 5% against the Renminbi with all other variables held constant, post-tax profit for the year would have been HK$180,000 (2012: HK$6,040,000) higher/lower, mainly as a result of the foreign exchange gains/losses on translation of Renminbi-denominated bank balances and cash, accounts and other receivables, and the foreign exchange losses/gains on translation of Renminbidenominated borrowings.

Hong Kong dollars is pegged to United States dollars, the foreign exchange exposure between United States dollars and Hong Kong dollars is therefore limited.

ANNUAL REPORT 2013

Notes to the Accounts

3 FINANCIAL RISK MANAGEMENT (continued)

3.1 Financial risk factors (continued)

(a) Market risk (continued)

(ii) Cash flow interest-rate risk

As the Group and the Company has no significant interest-bearing assets, the Group’s and the Company’s income and operating cash flows are substantially independent of changes in market interest rates.

The Group’s interest-rate risk arises from bank borrowings. As at 31 March 2013, borrowings are primarily at floating interest rates. In order to manage the cash flow interest-rate risk, the Group sometimes enters into interest rate swap.

At 31 March 2013, if interest rates on Hong Kong dollar-denominated borrowings had been 50 basis points higher/lower with all other variables held constant, the Group’s post-tax profit for the year would have been HK$5,698,000 (2012: HK$5,073,000) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings.

(b) Credit risk

Credit risk is managed on a group basis. The Group’s credit risk is primarily attributable to cash and bank deposits, accounts receivable, financial assets at fair value through profit or loss and availablefor-sale financial assets.

The Group’s cash and bank deposits are entered into with a diversified portfolio of reputable financial institutions. Counterparties’ credit risks are carefully reviewed and in general, the Group only deals with financial institutions with low credit risk. The amount of counterparties’ lending exposure to the Group is also an important consideration as a means to control credit risk.

Credit risk on trade debtors is managed by management of the individual business units and monitored by the Group’s management on a group basis. The Group’s trade debtors are mainly market leaders in their industries with low credit risk. For other smaller customers, management assesses their credit quality by considering its financial position, past experience and other relevant factors. The utilisation of credit limits is regularly monitored. Debtors with overdue balances will be requested to settle their outstanding balance.

The Group has put in place policies to ensure that sales of products are made to customers with an appropriate credit history and the Group performs periodic credit evaluations of its customers. The Group’s historical experience in collection of accounts and other receivables falls within the recorded allowances. There was no individual customer with balance representing more than 10% of the Group’s total accounts receivable from third parties, thus there was no concentration of credit risk with respect to accounts receivable as there were a large number of customers. In addition, majority of the Group’s open credit sales are covered by credit insurance.

The carrying amount of cash and bank deposits, accounts receivable and other receivables and other financial assets at fair value through profit or loss and available-for-sale financial assets included in the consolidated balance sheet represents the Group’s maximum exposure to credit risk in relation to its financial assets.

The Company has no significant concentrations of credit risk. The carrying amounts of bank balances and balances with group companies included in the balance sheet represent the Company’s maximum exposure to credit risk in relation to its financial assets.

As at 31 March 2013, management does not expect any major impairment on receivables from group companies.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

3 FINANCIAL RISK MANAGEMENT (continued)

3.1 Financial risk factors (continued)

(c) Liquidity risk

The Group has been prudent in liquidity risk management by maintaining sufficient cash and the availability of funding through an adequate amount of available credit facilities. Management aims to maintain flexibility in funding by keeping credit lines available.

Management monitors rolling forecasts of the Group’s liquidity reserve (comprises undrawn borrowing facilities (note 28) and bank balances and cash (note 26)) on the basis of expected cash flow.

The table below analyses the Group’s and the Company’s financial liabilities and net settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.

Specifically, for term loans which contain a repayment on demand clause which can be exercised at the bank’s sole discretion, the analysis shows the cash outflow based on the earliest period in which the entity can be required to pay, that is if the lenders were to involve their unconditional rights to call the loans with immediate effect. The maturity analysis for other borrowings is prepared based on the scheduled repayment dates.

	On	Less than	Between	Between
	demand	1 year	1 and 2 years	2 and 5 years	Over 5 years
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Group
At 31 March 2013
Term loans subject to a repayment on demand clause	63,150	—	—	—	—
Other bank borrowings1	—	625,504	276,479	394,444	15,880
Trust receipt loans1	—	774,784	—	—	—
Accounts payable and
other payables	—	1,339,738	1,486	—	—
Derivative financial instruments	—	769	—	—	—
Finance lease liabilities1	—	2,369	2,369	2,108	54
At 31 March 2012
Term loans subject to a
repayment on demand clause	18,344	—	—	—	—
Other bank borrowings1	—	741,707	359,244	231,312	—
Trust receipt loans1	—	844,202	—	—	—
Accounts payable and
other payables	—	1,326,672	73,869	—	—
Derivative financial instruments	—	795	—	—	—
Finance lease liabilities1	—	693	254	1,393	373
Company
At 31 March 2013
Accruals	—	465	—	—	—
At 31 March 2012
Accruals	—	593	—	—	—
1 The amounts include interest	payable.

The Company provides corporate guarantees as disclosed in note 35.

ANNUAL REPORT 2013

Notes to the Accounts

3 FINANCIAL RISK MANAGEMENT (continued)

3.1 Financial risk factors (continued)

(c) Liquidity risk (continued)

The following table summarises the maturity analysis of term loans with a repayment on demand clause based on agreed scheduled repayments set out in the loan agreements. The amounts include interest payments computed using contractual rates. As a result, these amounts are greater than the amounts disclosed in the “on demand” time band in the maturity analysis. Taking into account the Group’s financial position, the directors do not consider that it is probable that the bank would exercise its discretion to demand immediate repayment. The directors believe that such term loans will be repaid in accordance with the scheduled repayment dates set out in the loan agreements.

			Less than	Between	Between
			1 year	1 and 2 years	2 and 5 years
			HK$’000	HK$’000	HK$’000
31	March	2013	52,410	10,757	1,495
31	March	2012	11,518	3,512	4,153

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 and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the consolidated balance sheet) less cash, bank balances and restricted deposits. Total capital is calculated as “equity”, as shown in the consolidated balance sheet, plus net debt.

Total borrowings (note 28) Less: Cash, bank balances and restricted deposits Net debt Total equity Total capital Gearing ratio	Group 2013 2012 HK$’000 HK$’000 (Restated) 2,096,471 2,147,953 (575,255) (939,491) 1,521,216 1,208,462 1,725,412 1,643,630 3,246,628 2,852,092 46.9% 42.4%
	2013 HK$’000 2,096,471 (575,255) 1,521,216 1,725,412 3,246,628 46.9%

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

3 FINANCIAL RISK MANAGEMENT (continued)

3.3 Fair value estimation

The table below analyses financial instruments carried at fair value by valuation method. The different levels have been defined as follows:

Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The following table presents the Group’s assets/(liabilities) that are measured at fair value at 31 March 2013.

Financial assets at fair value through profit or loss — Trading securities Available-for-sale financial assets — Insurance policy — Other investment Derivative financial instruments — Interest rate swap	Level 1 HK$’000 675 — — — — 675	Level 2 HK$’000 — — — — (769) (769)	Level 3 HK$’000 — 4,204 1,420 5,624 — 5,624	Total HK$’000 675
				4,204 1,420
				5,624
				(769)
				5,530

ANNUAL REPORT 2013

Notes to the Accounts

3 FINANCIAL RISK MANAGEMENT (continued)

3.3 Fair value estimation (continued)

The following table presents the Group’s assets/(liabilities) that were measured at fair value at 31 March 2012.

Financial assets at fair value through profit or loss — Trading securities Available-for-sale financial assets — Insurance policy — Other investment Derivative financial instruments — Interest rate swap	Level 1 HK$’000 2,673 — — — — 2,673	Level 2 HK$’000 — — — — (795) (795)	Level 3 HK$’000 — 4,089 1,169 5,258 — 5,258	Total HK$’000 2,673
				4,089 1,169
				5,258
				(795)
				7,136

There has been no transfer of financial assets and liabilities between levels 1, 2 and 3 during the year.

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. 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.

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value as instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. There is no quoted market price in an active market for certain financial assets and for which the range of other methods of reasonably estimating fair value is significant and the probabilities of the various estimates cannot be reasonably assessed without incurring excessive costs.

The following table presents the changes in level 3 instruments:

At 1 April Additions Net changes in fair value transferred to equity (note 30) At 31 March	2013 HK$’000 5,258 252 114 5,624	2012 HK$’000 4,327 819 112
		5,258

The carrying amount of receivables, bank balances, payables and bank borrowings are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal 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.

(a) Current and deferred income taxes

The Group is subject to income taxes in various jurisdictions. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

(b) Estimated provision for accounts receivable and other receivables

The Group makes provision for impairment of receivables based on an assessment of the recoverability of accounts receivable and other receivables. Provisions are applied to accounts and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of impaired receivables requires the use of judgement and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying value of accounts and other receivables and impairment expenses in the period in which such estimate has been changed.

(c) Estimated write-downs of inventories to net realisable value

The Group writes down inventories to net realisable value based on an assessment of the realisability of inventories. Write-downs on inventories are recorded where events or changes in circumstances indicate that the balances may not be realised. The identification of write-downs requires the use of judgement and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying value of inventories and write-downs of inventories in the period in which such estimate has been changed.

(d) Useful lives and residual values of property, plant and equipment and impairment assessment of property, plant and equipment

The Group’s management determines the estimated useful lives, residual values and related depreciation expenses for the Group’s property, plant and equipment. Management will revise the depreciation expenses where useful lives and residual values are different to previously estimated, or it will write off or write down technically obsolete or non-strategic assets that have been abandoned or sold.

Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The recoverable amounts have been determined based on value-in-use calculations or market valuations. The calculations require the use of judgements and estimates.

(e) Estimated impairment of goodwill

The Group tests annually whether goodwill has suggested any impairment, in accordance with the accounting policy stated in note 2.6. The recoverable amounts have been determined based on value-in-use calculations. These calculations require the use of estimates (note 17). Goodwill is not impaired where the discount rate and growth rate used differ by 5% from management estimates.

(f) Estimated valuation of investment properties

Investment properties are stated at fair value based on the valuation performed by an independent and professionally qualified valuer.

In determining the fair value, the valuer has based on property valuation techniques which involve, inter alia, certain estimates including comparable sales in the relevant market, current market rents for similar properties in the same location and condition, appropriate discount rates and expected future market rents. In relying on the valuation report, management has exercised their judgement and is satisfied that the method of valuation is reflective of the current market condition.

ANNUAL REPORT 2013

Notes to the Accounts

5 REVENUE, OTHER GAINS AND INCOME, NET AND SEGMENT INFORMATION

Revenue recognised is as follows:

Revenue Sale of goods Provision of services Other gains and income, net Interest income Dividend income — listed investments Fair value gains on investment properties (note 16) Rental income Sales of scrap materials Realised and unrealised gains on investments in financial assets at fair value through profit and loss Realised and unrealised gains on derivative financial instrument Others	Group	Group
	2013 HK$’000 4,587,288 82,547 4,669,835 10,897 8 76,604 9,418 9,068 1,398 14 4,465 111,872	2012 HK$’000 4,951,882 73,142
		5,025,024
		11,668 241 15,208 8,992 7,875 1,563 — 9,187
		54,734

The chief operating decision-maker has been identified as the Executive Directors. The Executive Directors review the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on the reports reviewed by the Executive Directors.

The Executive Directors consider the performance of the Group from the perspective of the nature of products and services. The chief operating decision-maker assesses the performance of the operating segments based on a measure of segment profit/loss without allocation of finance costs which is consistent with that in the accounts.

As at 31 March 2013, the Group is organised on a worldwide basis into three main business segments:

(1) Paper trading: trading and marketing of paper products;
(2) Paper manufacturing: manufacturing of paper products in Shandong, the PRC;
(3) Others: including trading and marketing of aeronautic parts and provision of related services and the provision of marine services to marine, oil and gas industries.

Segment assets consist primarily of property, plant and equipment, prepaid premium for land leases, investment properties, intangible assets, inventories, receivables, financial instruments, non-current asset held for sale and operating cash. They exclude deferred tax assets and taxation recoverable.

Segment liabilities comprise accounts and other payables, financial instruments, borrowings and trust receipt loans. They exclude deferred tax liabilities and taxation payable.

Capital expenditure comprise additions to property, plant and equipment (note 14), prepaid premium for land leases (note 15) and intangible assets (note 17).

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

5 REVENUE, OTHER GAINS AND INCOME, NET AND SEGMENT INFORMATION (continued)

The segment information for the year ended and as at 31 March 2013 is as follows:

Total segment revenue Inter-segment revenue Revenue from external customers Reportable segment results Corporate expenses Operating profit Finance costs Profit before taxation Taxation Profit for the year Other items for the year ended 31 March 2013 Interest income Depreciation of property, plant and equipment Amortisation of prepaid premium for land leases Amortisation of intangible assets Fair value gains on investment properties Capital expenditure Reportable segment assets Taxation recoverable Deferred tax assets Corporate assets Total assets Reportable segment liabilities Taxation payable Deferred tax liabilities Corporate liabilities Total liabilities	Paper trading HK$’000 4,097,377 (153,815) 3,943,562 132,580 9,321 10,143 178 721 76,604 48,041 Paper trading HK$’000 2,930,047 1,652,817	Paper manufacturing HK$’000 843,631 (249,302) 594,329 47,735 1,566 39,102 3,237 38 — 179,850 Paper manufacturing HK$’000 2,134,514 427,751	Others HK$’000 139,746 (7,802) 131,944 2,193 10 8,375 72 — — 7,617 Others HK$’000 172,387 35,368	Total HK$’000 5,080,754 (410,919)
				4,669,835
				182,508 (9,932)
				172,576 (88,943)
				83,633 (18,626)
				65,007
				10,897 57,620 3,487 759 76,604 235,508
				Total HK$’000 5,236,948 890 8,249 79
				5,246,166
				2,115,936 12,523 69,767 1,322,528
				3,520,754

ANNUAL REPORT 2013

Notes to the Accounts

5 REVENUE, OTHER GAINS AND INCOME, NET AND SEGMENT INFORMATION (continued)

The segment information for the year ended and as at 31 March 2012 is as follows:

Total segment revenue Inter-segment revenue Revenue from external customers Reportable segment results Corporate expenses Operating profit Finance costs Profit before taxation Taxation Profit for the year Other items for the year ended 31 March 2012: Interest income Depreciation of property, plant and equipment Amortisation of prepaid premium for land leases Amortisation of intangible assets Fair value gains on investment properties Capital expenditure Reportable segment assets Taxation recoverable Deferred tax assets Corporate assets Total assets Reportable segment liabilities Taxation payable Deferred tax liabilities Corporate liabilities Total liabilities	Paper trading HK$’000 4,199,128 (145,683) 4,053,445 92,049 9,425 11,776 837 541 15,208 43,421 Paper trading HK$’000 3,198,780 1,798,387	Paper manufacturing HK$’000 1,041,901 (190,627) 851,274 71,078 2,226 34,082 550 30 — 313,318 Paper manufacturing HK$’000 1,901,982 410,165	Others HK$’000 134,713 (14,408) 120,305 5,506 17 7,673 72 — — 5,719 Others HK$’000 167,350 31,483	Total HK$’000 (Restated) 5,375,742 (350,718)
				5,025,024
				168,633 (15,037)
				153,596 (82,311)
				71,285 (15,221)
				56,064
				11,668 53,531 1,459 571 15,208 362,458
				Total HK$’000 (Restated) 5,268,112 3,014 4,940 81
				5,276,147
				2,240,035 15,158 68,070 1,309,254
				3,632,517

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

5 REVENUE, OTHER GAINS AND INCOME, NET AND SEGMENT INFORMATION (continued)

The Group’s operating segments operate in the following geographical areas, even though they are managed on a worldwide basis.

Hong Kong The PRC2 Singapore Korea Malaysia USA	Group	Group	Group
	Revenue 2013 2012 HK$’000 HK$’000 1,070,755 1,423,808 3,051,142 3,094,932 125,092 112,768 357,696 323,472 60,520 63,084 4,630 6,960 4,669,835 5,025,024	Non-current assets1 2013 2012 HK$’000 HK$’000 259,386 266,307 1,730,755 1,558,148 72,502 87,054 1,298 638 14,277 239 17 10 2,078,235 1,912,396
			1,912,396

1 Non-current assets excluded deferred tax assets.

2 The PRC, for the presentation purpose in these accounts, excludes Hong Kong Special Administrative Region of the PRC, Macau Special Administrative Region of the PRC and Taiwan.

6 OPERATING PROFIT

Operating profit is stated after charging and crediting the following:

Charging Cost of inventories sold Depreciation of property, plant and equipment (note 14) Amortisation of prepaid premium for land leases (note 15) Amortisation of intangible assets (note 17) Operating lease rentals in respect of: — land and buildings Transportation costs Unrealised losses on derivative financial instruments Provision for impairment on inventories Provision for impairment on receivables (note 23) Employee benefit expenses (note 12) Auditor’s remuneration Losses on disposal of non-current asset held for sale Crediting Gains on disposal of property, plant and equipment Net exchange gains Realised and unrealised gains on derivative financial instruments Provision for impairment on inventories written back Provision for impairment on receivables written back (note 23)	Group	Group
	2013 HK$’000 3,757,519 57,620 3,487 759 17,196 120,917 — 25,979 11,272 123,068 2,620 726 174 5,865 — — 6,830	2012 HK$’000 4,538,163 53,531 1,459 571 15,432 121,765 795 — 6,461 110,089 2,522 —
		96 953 396 42 2,143

ANNUAL REPORT 2013

Notes to the Accounts

7 FINANCE COSTS

FINANCE COSTS
Interest on bank borrowings and finance lease obligations wholly repayable within 5 years Interest on trade credit facilities Interest on other payables (note 27) Less: amounts capitalised in property, plant and equipment and construction in progress	Group
	2013 HK$’000 76,589 13,513 1,327 91,429 (2,486) 88,943	2012 HK$’000 73,012 13,562 4
		86,578 (4,267)
		82,311

The weighted average interest rate on the above capitalised borrowings is approximately 7.0% per annum (2012: 7.0% per annum).

8 TAXATION

Hong Kong profits tax has been provided at the rate of 16.5% (2012: 16.5%) on the estimated assessable profit for the year. Taxation on overseas profit has been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the countries in which the Group operates.

The amount of taxation charged to the consolidated profit and loss account represents:

Hong Kong profits tax Overseas taxation Over provision in previous years Deferred taxation relating to origination and reversal of temporary differences (note 31)	Group	Group
	2013 HK$’000 4,619 9,370 (30) 4,667 18,626	2012 HK$’000 (Restated) 6,535 5,806 — 2,880
		15,221

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

8 TAXATION (continued)

The taxation on the Group’s profit before taxation differs from the theoretical amount that would arise using the taxation rate of the home country of the Company as follows:

Profit before taxation Calculated at a taxation rate of 16.5% (2012: 16.5%) Effect of different taxation rates in other countries Income not subject to taxation Expenses not deductible for taxation purposes Tax losses not recognised Over provision in previous years Recognition of previously unrecognised temporary difference Others	Group	Group
	2013 HK$’000 83,633 13,799 2,160 (15,234) 6,742 7,978 (30) 3,211 — 18,626	2012 HK$’000 (Restated) 71,285
		11,762 2,792 (4,588) 3,379 1,873 — — 3
		15,221

According to the New Corporate Income Tax Law, the profits of the PRC subsidiaries of the Group derived since 1 January 2008 will be subject to withholding tax at a rate of 5% upon the distribution of such profits to foreign investors incorporated in Hong Kong, or at rate of 10% for other foreign investors. The Group determined that no deferred withholding tax liabilities shall be recognised in respect of the profits of the PRC subsidiaries for the year ended 31 March 2013 since the Group plans to utilise such profits in the PRC and has no plan to distribute such profits in the foreseeable future.

The tax (charge)/credit relating to components of other comprehensive income is as follows:

Revaluation of available-for-sale financial assets Revaluation of land and buildings Reversal of deferred tax on fair value gains upon transfer from property, plant and equipment to investment properties Other comprehensive income		2013	After tax HK$’000 114 8,290 6,720 15,124		2012
	Before tax HK$’000 114 8,290 — 8,404	Deferred tax (charge)/ credit HK$’000 — — 6,720 6,720		Before tax HK$’000 112 64,125 — 64,237	Deferred tax (charge)/ credit HK$’000 (restated) — (15,116) 9,758 (5,358)	After tax HK$’000 (restated) 112 49,009 9,758
						58,879

9 PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY

The profit attributable to owners of the Company is dealt with in the accounts of the Company to the extent of HK$19,581,000 (2012: HK$19,605,000) (note 30).

ANNUAL REPORT 2013

Notes to the Accounts

10 DIVIDENDS

DIVIDENDS
Interim — HK$0.004 (2012: HK$0.0050) per ordinary share Interim — HK$0.004 (2012: HK$0.0050) per preference share Proposed final — HK$0.011 (2012: HK$0.0098) per ordinary share Proposed final — HK$0.011 (2012: HK$0.0098) per preference share	Groupand Company
	2013 HK$’000 4,564 528 12,552 1,453 19,097	2012 HK$’000 5,706 660 11,183 1,294
		18,843

At a meeting held on 25 June 2013, the directors proposed a final dividend of HK$0.011 per share. This proposed dividend is not reflected as a dividend payable in these accounts, but will be reflected as an appropriation of retained earnings for the year ending 31 March 2014.

11 EARNINGS PER SHARE

(a) Basic

Basic earnings per share is calculated by dividing the profit attributable to the owners of the Company less preference dividends of HK$61,839,000 (2012: HK$54,729,000 (restated)) by the weighted average number of 1,141,076,000 (2012: 1,141,076,000) ordinary shares in issue during the year.

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares: preference shares. The Company has a share option scheme but no share option (2012: Nil) has been granted under the scheme.

Profit attributable to the owner of the Company (HK$’000) Weighted average number of ordinary shares in issue (’000) Adjustment for: — Preference shares (’000) Weighted average number of shares for diluted earnings per share (’000) Diluted earnings per share	Group	Group
	2013 63,661 1,141,076 132,065 1,273,141 HK5.0 cents	2012 (Restated) 56,710
		1,141,076 132,065
		1,273,141
		HK4.5 cents

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

12 EMPLOYEE BENEFIT EXPENSES (INCLUDING DIRECTORS’ REMUNERATION)

Wages, salaries and bonus Contributions to pension schemes	Group	Group
	2013 HK$’000 118,364 4,704 123,068	2012 HK$’000 106,776 3,313
		110,089

13 DIRECTORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’ emoluments

The remuneration of every director for the year ended 31 March 2013 is set out below:

Executive Directors Sham Kit Ying Lee Seng Jin Sham Yee Lan, Peggy Chow Wing Yuen Lee Yue Kong, Albert Non-executive Directors Pang Wing Kin, Patrick Lau Wang Yip, Eric Tong Yat Chong Ng Hung Sui, Kenneth	2013 Fee Salary Discretionary bonuses Employer’s contribution to pension scheme Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 — 5,879 — — 5,879 — 3,600 — 125 3,725 — 1,460 — 51 1,511 — 1,325 — 50 1,375 — 1,640 — 44 1,684 80 — — — 80 80 — — — 80 100 — — — 100 80 — — — 80	2012
		Total HK$’000 5,879 3,725 1,011 1,375 1,184 80 80 100 80

During the year, no directors agree to waive future emoluments, and no amounts are paid to any of the directors as inducement to join the Group or as compensation for loss of office.

The Company’s executive directors represent all of the Company’s chief executives. Accordingly, no separate disclosure in respect of the remuneration of the chief executives is made in the accounts.

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year include five (2012: five) directors whose emoluments are reflected in the analysis presented above.

ANNUAL REPORT 2013

Notes to the Accounts

14 PROPERTY, PLANT AND EQUIPMENT — GROUP

At 1 April 2011 Cost or valuation Accumulated depreciation Net book amount Year ended 31 March 2012 Opening net book amount Exchange differences Additions (note(a)) Transfer Transfer to investment properties (note 16) Revaluation surplus Disposals Depreciation Closing net book amount At 31 March 2012 Cost or valuation Accumulated depreciation Net book amount Year ended 31 March 2013 Opening net book amount Exchange differences Additions Transfer Transfer to investment properties (note 16) Revaluation surplus Disposals Depreciation Closing net book amount At 31 March 2013 Cost or valuation Accumulated depreciation Net book amount	Land and buildings HK$’000 172,493 (15,979) 156,514 156,514 387 67,786 — (76,789) 64,125 — (4,214) 207,809 227,389 (19,580) 207,809 207,809 2,169 13,446 — (31,000) 8,290 — (5,960) 194,754 215,879 (21,125) 194,754	Furniture and fixtures HK$’000 7,330 (6,672) 658 658 62 232 — — — (3) (306) 643 7,594 (6,951) 643 643 (38) 664 — — — — (339) 930 8,218 (7,288) 930	Machinery and equipment HK$’000 991,239 (83,489) 907,750 907,750 32,001 40,699 36,211 — — (19,062) (42,971) 954,628 1,082,807 (128,179) 954,628 954,628 14,387 27,329 135,556 — — (508) (47,002) 1,084,390 1,247,332 (162,942) 1,084,390	Motor vehicles and vessels HK$’000 36,208 (23,325) 12,883 12,883 24 8,313 — — — (623) (5,374) 15,223 43,132 (27,909) 15,223 15,223 163 9,590 — — — (793) (5,620) 18,563 50,551 (31,988) 18,563	Leasehold improvements HK$’000 20,118 (12,195) 7,923 7,923 193 4,537 244 — — — (1,101) 11,796 25,138 (13,342) 11,796 11,796 140 3,309 6,669 — — (3) (1,212) 20,699 35,281 (14,582) 20,699	Office and computer equipment HK$’000 24,382 (19,726) 4,656 4,656 105 1,674 — — — — (1,868) 4,567 26,097 (21,530) 4,567 4,567 104 2,072 — — — (21) (1,978) 4,744 27,854 (23,110) 4,744	Construction in progress HK$’000 239,764 — 239,764 239,764 1,901 121,450 (36,455) — — — — 326,660 326,660 — 326,660 326,660 11,357 175,954 (142,225) — — — — 371,746 371,746 — 371,746	Total HK$’000 1,491,534 (161,386)
								1,330,148
								1,330,148 34,673 244,691 — (76,789) 64,125 (19,688) (55,834)
								1,521,326
								1,738,817 (217,491)
								1,521,326
								1,521,326 28,282 232,364 — (31,000) 8,290 (1,325) (62,111)
								1,695,826
								1,956,861 (261,035)
								1,695,826

Note:

(a) On 20 February 2008, the Group entered into an asset transfer agreement (the “Asset Transfer Agreement”) with receivers of two companies under liquidation in the PRC to acquire all the remaining assets of the two companies included land and factories which consisted of machineries currently in use, the production equipment, the power plant, the water treatment plant, and certain fixtures at a total consideration of RMB389 million (HK$440 million). As of 31 March 2012, the transfer of the land and building has been completed and accordingly, land and building amounted to HK$117,742,000 and HK$67,786,000 were recognised in prepaid premium for land leases (note 15) and property, plant and equipment, respectively.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

14 PROPERTY, PLANT AND EQUIPMENT — GROUP (continued)

Land and buildings situated in Hong Kong and major buildings outside Hong Kong were revalued at 31 March 2011 on the basis of open market value carried out by FPD Savills (Hong Kong) Limited, an independent firm of chartered surveyors, according to the Group’s policy as set out in note 2.4. Buildings recognised during the year ended 31 March 2012 as mentioned in note (a) above were revalued at 31 March 2012 on the basis of open market value carried out by FPD Savills (Hong Kong) Limited, an independent firm of chartered surveyors and the directors. During the year ended 31 March 2013, land and buildings of HK$31,000,000 (2012: HK$76,789,000) were reclassified as investment properties with a revaluation surplus before taxation of HK$8,290,000 (2012: HK$49,009,000 (restated)) being credited to other comprehensive income.

Land and buildings in Hong Kong, held on leases of between 10 to 50 years Cost or valuation Accumulated depreciation Net book amount Buildings outside Hong Kong Cost or valuation Accumulated depreciation Net book amount	Group	Group
	2013 HK$’000 43,822 (8,336) 35,486 172,057 (12,789) 159,268	2012 HK$’000 71,088 (11,879)
		59,209
		156,301 (7,701)
		148,600

If the land and buildings were stated at historical cost, the amounts would be as follows:

Land and buildings Cost Accumulated depreciation Net book amount	Group	Group
	2013 HK$’000 100,725 (15,703) 85,022	2012 HK$’000 110,477 (16,681)
		93,796

The analysis of the cost or valuation at 31 March 2013 and 2012 of the above assets is as follows:

At cost At valuation As at 31 March 2012 At cost At valuation As at 31 March 2013	Land and buildings HK$’000 — 227,389 227,389 — 215,879 215,879	Furniture and fixtures HK$’000 7,594 — 7,594 8,218 — 8,218	Machinery and equipment HK$’000 1,082,807 — 1,082,807 1,247,332 — 1,247,332	Motor vehicles and vessels HK$’000 43,132 — 43,132 50,551 — 50,551	Leasehold improvements HK$’000 25,138 — 25,138 35,281 — 35,281	Office and computer equipment HK$’000 26,097 — 26,097 27,854 — 27,854	Construction in progress HK$’000 326,660 — 326,660 371,746 — 371,746	Total HK$’000 1,511,428 227,389
								1,738,817
								1,740,982 215,879
								1,956,861

At 31 March 2013 and 2012, construction in progress represented costs incurred for buildings, machinery and equipment in Shandong and Nantong, the PRC, for the construction of paper mills.

ANNUAL REPORT 2013

Notes to the Accounts

14 PROPERTY, PLANT AND EQUIPMENT — GROUP (continued)

At 31 March 2013, land and buildings with carrying value amounted to approximately HK$54,777,000 (2012: HK$65,573,000) were pledged as securities for bank borrowings made available to the Group (note 37).

At 31 March 2013, the net book amount of motor vehicles held by the Group under finance leases was HK$3,376,000 (2012: HK$3,350,000).

Depreciation expenses of HK$57,620,000 (2012: HK$53,531,000) has been charged in selling and administrative expenses and cost of sales and HK$4,491,000 (2012: HK$2,303,000) has been included in inventories.

15 PREPAID PREMIUM FOR LAND LEASES

The Group’s interests in leasehold land and land use rights represent prepaid operating lease payments outside Hong Kong held on leases of between 10 and 50 years. Their net book values are analysed as follows:

At 1 April Additions (note 14(a)) Exchange differences Amortisation (note 6) At 31 March	Group	Group
	2013 HK$’000 159,762 — 1,208 (3,487) 157,483	2012 HK$’000 42,343 117,742 1,136 (1,459)
		159,762

16 INVESTMENT PROPERTIES

INVESTMENT PROPERTIES
At 1 April Transfer from property, plant and equipment (note 14) Transfer to non-current asset held for sale (note 21) Fair value gains (note 5) At 31 March	Group
	2013 HK$’000 165,997 31,000 (110,000) 76,604 163,601	2012 HK$’000 150,000 76,789 (76,000) 15,208
		165,997

The investment properties were revalued at 31 March 2013 and 2012 by independent, professionally qualified valuers, FPD Savills (Hong Kong) Limited. Valuations were based on current prices in an active market for the properties.

The Group’s interests in investment properties, held on leases of between 10 to 50 years, are located in Hong Kong.

At 31 March 2013, the investment properties situated in Hong Kong with carrying value of HK$163,601,000 (2012: HK$165,997,000) were pledged as a security for bank borrowings made available to the Group (note 37).

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

17 INTANGIBLE ASSETS

INTANGIBLE ASSETS
At 1 April 2011 Cost Accumulated amortisation Net book amount Year ended 31 March 2012 Opening net book amount Exchange differences Additions Amortisation (note 6) Closing net book amount At 31 March 2012 Cost Accumulated amortisation Net book amount Year ended 31 March 2013 Opening net book amount Exchange differences Additions Amortisation (note 6) Closing net book amount At 31 March 2013 Cost Accumulated amortisation Net book amount		Group
	Computer software HK$’000 5,950 (1,192) 4,758 4,758 17 25 (571) 4,229 5,995 (1,766) 4,229 4,229 9 3,144 (759) 6,623 9,154 (2,531) 6,623	Goodwill HK$’000 40,410 — 40,410 40,410 14 — — 40,424 40,424 — 40,424 40,424 489 — — 40,913 40,913 — 40,913	Total HK$’000 46,360 (1,192)
			45,168
			45,168 31 25 (571)
			44,653
			46,419 (1,766)
			44,653
			44,653 498 3,144 (759)
			47,536
			50,067 (2,531)
			47,536

Amortisation of HK$759,000 (2012: HK$571,000) included in administrative expenses.

The Group completed its annual impairment test for goodwill allocated to the Group’s cash generating unit (“CGU”) by comparing their recoverable amount to their carrying amount as at the balance sheet date. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below.

ANNUAL REPORT 2013

Notes to the Accounts

17 INTANGIBLE ASSETS (continued)

The key assumptions used for value-in-use calculations are as follows:

Gross margin Growth rate Discount rate	Group
	2013 2012 31% 34% 0% 0% 8% 10%

The goodwill is associated with marine services business in Singapore.

The directors are of the opinion that there was no impairment of goodwill as at 31 March 2013 and 2012.

18 AVAILABLE-FOR-SALE FINANCIAL ASSETS

AVAILABLE-FOR-SALE FINANCIAL ASSETS
At 1 April Additions Net change in fair value transferred to equity (note 30) At 31 March	Group
	2013 HK$’000 5,258 252 114 5,624	2012 HK$’000 4,327 819 112
		5,258

Available-for-sale financial assets include the following:

Unlisted securities: — Insurance policy — Other investment	Group	Group
	2013 HK$’000 4,204 1,420 5,624	2012 HK$’000 4,089 1,169
		5,258

The available-for-sale financial assets are denominated in the following currencies:

United States dollars Renminbi	Group	Group
	2013 HK$’000 5,372 252 5,624	2012 HK$’000 5,258 —
		5,258

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

19 NON-CURRENT DEPOSIT

The balance represents prepayment for the purchase of machineries.

20 INTERESTS IN SUBSIDIARIES

INTERESTS IN SUBSIDIARIES
Unlisted shares, at cost (note (a)) Amounts due from subsidiaries (note (b))	Company
	2013 HK$’000 249,897 308,419	2012 HK$’000 249,897
		306,534

Notes:

(a) Particulars of the Company’s principal subsidiaries at 31 March 2013 are set out in note 40 to the accounts.

(b) Amounts due from subsidiaries are unsecured, interest free and repayable on demand. The carrying amounts are mainly denominated in HK dollars (2012: same).

21 NON-CURRENT ASSET HELD FOR SALE

Pursuant to the Board of Directors’ resolutions dated on 18 December 2012, an investment property located in Hong Kong with a carrying value of HK$110,000,000 was offered for sale. The Board of Directors has been committed to a plan to sell and the disposal is expected to be completed within one year. As a result, the investment property is classified as non-current asset held for sale as at 31 March 2013.

On 6 March 2012, the Group entered into a provisional sale and purchase agreement with a third party to dispose of an investment property located in Hong Kong at a cash consideration of HK$76,000,000. On 7 January 2013, the disposal was completed.

At 1 April Transfer from investment properties (note 16) Disposal At 31 March	Group	Group
	2013 HK$’000 76,000 110,000 (76,000) 110,000	2012 HK$’000 — 76,000 —
		76,000

At 31 March 2013 and 2012, the non-current asset held for sale was pledged as a security for bank borrowings made available to the Group (note 37).

ANNUAL REPORT 2013

Notes to the Accounts

22 INVENTORIES

INVENTORIES
Merchandise and finished goods Raw materials	Group
	2013 HK$’000 529,966 174,570 704,536	2012 HK$’000 583,372 123,290
		706,662

The cost of inventories recognised as expenses and included in cost of sales amounted to HK$3,757,519,000 (2012: HK$4,538,163,000).

As at 31 March 2013, the inventories of the Group are stated after a provision for impairment on inventories of approximately HK$53,931,000 (2012: HK$27,952,000).

23 ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS

ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS
Accounts receivable — net of provision Other receivables, deposits and prepayments	Group
	2013 HK$’000 1,100,971 667,355 1,768,326	2012 HK$’000 1,088,457 542,514
		1,630,971

The carrying values of the Group’s accounts and other receivables approximate their fair values.

The Group normally grants credit to customers ranging from 30 to 90 days.

The aging analysis of accounts receivable is as follows:

Current to 60 days 61 to 90 days Over 90 days	Group	Group
	2013 HK$’000 838,037 136,097 126,837 1,100,971	2012 HK$’000 771,218 132,868 184,371
		1,088,457

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

23 ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS (continued)

Accounts receivable that are less than 90 days past due relate to a large number of diversified customers who have had no recent history of default. Based on past experience, the directors were of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. As at 31 March 2013, accounts receivable of HK$94,698,000 (2012: HK$76,110,000) were past due but not impaired. These related to a number of independent customers who have had no recent history of default. The aging analysis of these accounts receivable is as follows:

Past due by: 91–120 days Over 120 days	Group	Group
	2013 HK$’000 52,147 42,551 94,698	2012 HK$’000 18,721 57,389
		76,110

As at 31 March 2013, accounts receivable of HK$88,476,000 (2012: HK$83,855,000) were considered impaired. The individual impaired receivables mainly related to customers which are in unexpected difficult economic situations.

The movement of the provision for impairment of accounts receivable is as follows:

At 1 April Exchange differences Bad debt written off against provision Provision for impairment written back (note 6) Provision for the year (note 6) At 31 March	Group	Group
	2013 HK$’000 83,855 179 — (6,830) 11,272 88,476	2012 HK$’000 102,043 (3,229) (19,277) (2,143) 6,461
		83,855

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security.

24 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Listed equities outside Hong Kong, at fair value	Group
	2013 HK$’000 675	2012 HK$’000 2,673

The fair values of listed equity securities are based on their current bid prices in an active market.

ANNUAL REPORT 2013

Notes to the Accounts

25 RESTRICTED BANK DEPOSITS

RESTRICTED BANK DEPOSITS
Pledged as securities for bills payables (note 37)	Group
	2013 HK$’000 182,948	2012 HK$’000 174,446

Restricted bank deposits earn interest at a fixed rate of 2.89% per annum (2012: 3.17% per annum).

The restricted bank deposits are denominated in the following currencies:

Renminbi Korean Won	Group	Group
	2013 HK$’000 182,875 73 182,948	2012 HK$’000 174,446 —
		174,446

26 BANK BALANCES AND CASH

BANK BALANCES AND CASH
Cash at bank and in hand Short-term bank deposits	Group 2013 2012 HK$’000 HK$’000 219,229 219,707 173,078 545,338 392,307 765,045	Company
	2013 HK$’000 219,229 173,078 392,307	2013 HK$’000 59 — 59	2012 HK$’000 60 —
			60

The effective interest rate on short-term bank deposits was 0.83% per annum (2012: 0.89% per annum). These deposits had an average maturity of 77 days (2012: 63 days).

Cash and cash equivalents include the following for the purpose of the consolidated statement of cash flows:

Bank balances and cash Bank overdrafts (note 28)	Group	Group
	2013 HK$’000 392,307 (2,855) 389,452	2012 HK$’000 765,045 (1,370)
		763,675

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

27 ACCOUNTS PAYABLE AND OTHER PAYABLES

ACCOUNTS PAYABLE AND OTHER PAYABLES
Accounts and bills payables Accruals and other payables Less: non-current portions: Accounts payable and other payables (note (a))	Group
	2013 HK$’000 1,154,538 186,686 1,341,224 (1,486) 1,339,738	2012 HK$’000 1,167,892 232,649
		1,400,541 (73,869)
		1,326,672

Note:

(a) As at 31 March 2012, accounts payable of HK$24,670,000 were unsecured, interest-bearing at 4.8% per annum and were repayable twelve months after the balance sheet date. The remaining balances of HK$49,199,000 were unsecured, interest-free and were repayable twelve months after the balance sheet date.

As at 31 March 2013, rental deposit received of HK$1,486,000 (2012: Nil) is not expected to be settled within one year.

The carrying values of the accounts payable and other payables approximate their fair value.

The aging analysis of accounts and bills payables is as follows:

Current to 60 days 61 to 90 days Over 90 days	73 Group 2013 2012 HK$’000 HK$’000 922,722 900,106 126,027 170,658 105,789 97,128 1,154,538 1,167,892
	2013 HK$’000 922,722 126,027 105,789 1,154,538

ANNUAL REPORT 2013

Notes to the Accounts

28 BORROWINGS

BORROWINGS
Non-current Bank loans — unsecured Bank loans — secured (note 37) Finance lease liabilities Total non-current borrowings Current Trust receipt loans — unsecured Trust receipt loans — secured (note 37) Bank loans — unsecured Bank loans — secured (note 37) Bank overdrafts (note 26) Finance lease liabilities Total current borrowings Total borrowings	Group
	2013 HK$’000 595,770 41,484 4,327 641,581 703,220 71,188 774,408 646,146 29,227 2,855 2,254 680,482 1,454,890 2,096,471	2012 HK$’000 497,500 59,916 1,959
		559,375
		559,732 279,560
		839,292
		711,312 35,946 1,370 658
		749,286
		1,588,578
		2,147,953

The Group’s bank loans, overdrafts and trust receipt loans were repayable as follows:

Within one year In the second year In the third to fifth years inclusive		Group	Group
	Bank overdrafts 2013 2012 HK$’000 HK$’000 2,855 1,370 — — — — 2,855 1,370	Bank 2013 HK$’000 675,373 263,100 374,154 1,312,627	loans 2012 HK$’000 747,258 341,277 216,139 1,304,674	Trust receipt loans 2013 2012 HK$’000 HK$’000 774,408 839,292 — — — — 774,408 839,292
					839,292

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

28 BORROWINGS (continued)

The carrying amount of borrowings are denominated in the following currencies:

Hong Kong dollars Renminbi United State dollars Singapore dollars Malaysia Ringgit	Group	Group
	2013 HK$’000 1,391,558 481,856 200,053 11,771 11,233 2,096,471	2012 HK$’000 1,664,051 439,040 25,231 19,407 224
		2,147,953

The effective interest rates at the balance sheet date on bank loans, bank overdrafts and trust receipt loans range from 1.6% to 7.0% per annum (2012: 2.0% to 8.0% per annum).

The carrying amounts of bank loans, bank overdrafts and trust receipt loans approximate their fair values.

The Group has undrawn borrowing facilities of HK$1,552,322,000 (2012: HK$1,220,205,000) as at 31 March 2013. All of the Group’s facilities are at floating rates and subject to periodic renewal.

Finance lease liabilities

Finance lease liabilities
Gross finance lease liabilities — minimum lease payments: Not later than 1 year Later than 1 year but not later than 5 years Later than 5 years Future finance charges on finance leases Present value of finance lease liabilities The present value of finance lease liabilities was as follows: Not later than 1 year Later than 1 year and no later than 5 years Later than 5 years	Group
	2013 2012 HK$’000 HK$’000 2,369 693 4,477 1,648 54 373 6,900 2,714 (319) (97) 6,581 2,617 Group	2012 HK$’000 693 1,648 373
		2,714 (97)
		2,617
	2013 HK$’000 2,254 4,275 52 6,581	2012 HK$’000 658 1,593 366
		2,617

At the balance sheet date, the carrying amounts of finance lease liabilities approximate their fair values.

The effective interest rates at the balance sheet date ranged from 3.8% to 6.5% per annum (2012: 3.8% to 6.5% per annum).

ANNUAL REPORT 2013

Notes to the Accounts

29 SHARE CAPITAL

SHARE CAPITAL
Authorised: Ordinary shares At beginning and end of the year Convertible non-voting preference shares At beginning and end of the year Total Issued and fully paid: Ordinary shares At beginning and end of the year Convertible non-voting preference shares At beginning and end of the year Total Notes:	Number of shares of HK$0.10 each 2013 2012 1,456,913,987 1,456,913,987 143,086,013 143,086,013 1,600,000,000 1,600,000,000 1,141,075,827 1,141,075,827 132,064,935 132,064,935 1,273,140,762 1,273,140,762	Share capital
	2013 1,456,913,987 143,086,013 1,600,000,000 1,141,075,827 132,064,935 1,273,140,762	2013 HK$’000 145,691 14,309 160,000 114,108 13,207 127,315	2012 HK$’000 145,691 14,309
			160,000
			114,108
			13,207
			127,315

(a) On 27 October 2008, 143,086,013 convertible non-voting preference shares (“CP shares”) of HK$0.10 each were issued at HK$0.70 each and a total consideration of HK$100,160,000 was received. The rights, privileges and restrictions of the CP shares are set out below:

Dividend

The holders of CP shares shall have the same right to dividend payment as to the holders of ordinary shares.

Conversion

Each holder of CP share shall be entitled to convert its shares into fully paid ordinary shares of HK$0.10 each in the capital of the Company on the basis of one ordinary share for every CP share. Unless previously redeemed, cancelled or converted, each holder of CP shares will be entitled to convert in respect of the whole or any part of its CP shares into fully paid ordinary shares on the basis of one ordinary share for every CP share at any time after the date of issue of the CP Shares upon the giving of a Conversion Notice. If the Continuing Notice is served before 31 March 2009, the relevant CP shares will not be subject to mandatory conversion.

At the end of business on 31 March 2009, unless previously redeemed, purchased and cancelled, converted or that a Continuing Notice has been served and delivered to the Company, all CP shares will be mandatorily converted into ordinary shares by the Company. The dividend entitlement attaching to any CP shares will cease to apply with effect from the date of conversion. Ordinary shares arising on conversion shall rank pari passu in all respects with ordinary shares, including the rights to receive any dividends and other distributions declared. So long as the Company remains listed in Hong Kong, those holders of the CP shares will not exercise their right to convert the CP shares into ordinary shares of the Company unless at least 25% of the Company’s total issued share capital that are listed on the Hong Kong Stock Exchange will at all times be held by the public.

Voting rights

The holders of CP shares will be entitled to receive notice of every general meeting of the Company but will not be entitled (i) to vote upon any resolution unless it is a resolution for winding-up the Company or reducing its share capital in any manner or a resolution modifying, varying or abrogating any of the special rights attached to the CP shares or (ii) to attend or speak at any general meeting of the Company unless the business of the meeting includes the consideration of a resolution upon which the holders of CP shares are entitled to vote.

Transferability

None of the CP shares will be assignable or transferable without the prior written approval of the Board of Directors of the Company. The Company will not apply for a listing of any of the CP shares on any stock exchange anywhere in the world.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

29 SHARE CAPITAL (continued)

Notes: (continued)

(a) (continued)

Redemption

Subject to the provisions of the Companies Act, the Company shall be entitled, at any time after the fifth anniversary of the date of issue of the CP shares by resolution of the directors of the Company to redeem all or any of the CP shares. These shall be paid on each CP share redeemed a sum equal to (i) the subscription price thereof and (ii) all arrears (if any) of the Dividend thereon. As from the Redemption Date such Dividend shall cease to apply.

During the years ended 31 March 2013 and 2012, no convertible non-voting preference shares were converted.

(b) At the Special General Meeting of the Company held on 26 February 2004, the shareholders of the Company approved the adoption of a share option scheme (the “Option Scheme”) to comply with the requirements of Chapter 17 of the Listing Rules. At 31 March 2013, no option has been granted under the Option Scheme (2012: Nil).

Terms and conditions of the Option Scheme are set out below.

(1) Purpose The purpose of the Option Scheme is to provide incentives to Participants (as defined below) to contribute to the Group and to enable the Group to recruit high-calibre employees and attract human resources that are valuable to the Group and any entity in which the Group holds any equity interest (the “Invested Entity”).

(2) Participants All directors and employees of the Group and suppliers, consultants, advisors, agents, customers, service providers, contractors, any member of or any holder of any securities issued by any member of the Group or any Invested Entity.
(3) Maximum number of shares

(4) Maximum entitlement of each Participant The maximum number of shares issued and to be issued upon exercise of the options granted to any one Participant (including both exercised and unexercised options) in any 12-month period shall not exceed one percent of the shares in issue as at the date of grant.

(5) Time of exercise of option An option may be exercised in accordance with the terms of the Option Scheme at any time during the period to be notified by the Board to each grantee of the option at the date of grant provided that such period shall not exceed a period of ten years from the date of grant but subject to the provisions for early termination of the option as contained in the terms of the Option Scheme.

(6) The eligible person shall pay HK$1.0 to the Company in consideration of the grant of an option upon acceptance of the grant of option.

(7) Exercise price The option price per share payable on the exercise of an option is determined by the Board and shall not be less than the highest of:

(a) the closing price of the shares as stated in the daily quotations sheet of the Stock Exchange on the date of grant;
(b) the average closing price of the shares as stated in the Stock Exchange’s daily quotations sheets for the five business days immediately preceding the date of grant; and
(c) the nominal value of a share on the date of grant.
(8) Remaining life of the Option Scheme

The Option Scheme will remain in force until 26 February 2014.

ANNUAL REPORT 2013

Notes to the Accounts

30 RESERVES

Group

Share premium HK$’000 161,262 — 161,262 — — — — — — — — —	Asset revaluation reserve HK$’000 127,468 6,026 133,494 — 49,009 9,758 112 — — — — —	Capital reserve (note a) HK$’000 33,311 — 33,311 — — — — — — — 740 170,660	Exchange reserve HK$’000 126,201 — 126,201 — — — — 44,715 — — — —	Statutory reserve (note c) HK$’000 — — — — — — — — — — — —	Retained earnings HK$’000 636,584 8,055 644,639 56,710 — — — — (12,731) (6,366) — —	Total HK$’000 1,084,826 14,081 1,098,907 56,710 49,009 9,758 112 44,715 (12,731) (6,366) 740 170,660
161,262 —	192,373 —	204,711 —	170,916 —	— —	669,775 12,477	1,399,037 12,477
161,262 161,262 — — — — — — — — — —	192,373 192,373 — 8,290 6,720 114 — — — — (17,138) —	204,711 204,711 — — — — — — — (2,717) — —	170,916 170,916 — — — — 20,638 — — — — —	— — — — — — — — — — — 8,266	682,252 682,252 63,661 — — — — (12,477) (5,092) — 17,138 (8,266)	1,411,514 1,411,514 63,661 8,290 6,720 114 20,638 (12,477) (5,092) (2,717) — —
161,262 —	190,359 —	201,994 —	191,554 —	8,266 —	723,211 14,005	1,476,646 14,005
161,262	190,359	201,994	191,554	8,266	737,216	1,490,651

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

30 RESERVES (continued)

Company

Share premium HK$’000 161,262 — — —	Contributed surplus (note b) HK$’000 249,697 — — —	Retained earnings HK$’000 17,116 19,605 (12,731) (6,366)	Total HK$’000 428,075 19,605 (12,731) (6,366)
161,262 —	249,697 —	5,147 12,477	416,106 12,477
161,262 161,262 — — —	249,697 249,697 — — —	17,624 17,624 19,581 (12,477) (5,092)	428,583 428,583 19,581 (12,477) (5,092)
161,262 —	249,697 —	5,631 14,005	416,590 14,005
161,262	249,697	19,636	430,595

(a) The capital reserve of the Group includes the difference between the nominal value of the shares issued by Samson Paper (BVI) Limited and the nominal value of the share capital of those companies forming the Group pursuant to a group reorganisation in 1995 amounted to HK$33,311,000. In addition, it also includes the loss from the acquisition of additional interests in subsidiaries of HK$1,977,000 as set out in note 34(a) and (b) and the gain on disposal of 22.3% equity interests in a subsidiary of HK$170,660,000 as set out in note 34(c).

(b) The contributed surplus of the Company arose when the Company issued shares in exchange for the shares of subsidiaries being acquired, and represents the difference between the nominal value of the Company’s shares issued and the value of net assets of the subsidiaries acquired. Under the Companies Act of 1981 of Bermuda (as amended), the contributed surplus is distributable to the shareholders. At Group level, the contributed surplus is reclassified into its component of reserves of the underlying subsidiaries.

ANNUAL REPORT 2013

Notes to the Accounts

31 DEFERRED TAXATION

Deferred taxation is calculated in full on temporary differences under the liability method using a principal taxation rate of 16.5% (2012: 16.5%).

The movement of the net deferred tax liabilities account is as follows:

The movement of the net deferred tax liabilities account is as follows:
At 1 April, as previously reported Effect of adoption of HKAS 12 amendment (note 2) At 1 April, as restated Charged to profit and loss account (note 8) Charged directly to equity Exchange difference At 31 March	Group
	2013 HK$’000 90,082 (26,952) 63,130 4,667 (6,720) 441 61,518	2012 HK$’000 (Restated) 45,156 (14,081)
		31,075 2,880 28,453 722
		63,130

The movement of deferred tax assets and liabilities (prior to offsetting of balances within the same taxation jurisdiction) during the year is as follows:

Deferred tax assets

Deferred tax assets
At 1 April Credited/(charged) to profit and loss account Exchange difference At 31 March		Group
	Provisions 2013 2012 HK$’000 HK$’000 — — 10,916 — 82 — 10,998 —	Tax losses 2013 2012 HK$’000 HK$’000 12,639 26,461 13,129 (14,266) 200 444 25,968 12,639	Total 2013 2012 HK$’000 HK$’000 12,639 26,461 24,045 (14,266) 282 444 36,966 12,639
				12,639

Deferred tax liabilities

Deferred tax liabilities
At 1 April, as previously reported Effect of adoption of HKAS 12 amendment (note 2) At 1 April, as restated Charged directly to equity (notes 8 and 34(c)) Charged/(credited) to profit and loss account Exchange difference At 31 March		Group
	Accelerated tax depreciation 2013 2012 HK$’000 HK$’000 29,497 39,717 — — 29,497 39,717 — — 28,712 (11,386) 723 1,166 58,932 29,497	Fair value gains 2013 2012 HK$’000 HK$’000 (Restated) 50,129 31,900 (26,952) (14,081) 23,177 17,819 (6,720) 5,358 — — — — 16,457 23,177	Others 2013 2012 HK$’000 HK$’000 23,095 — — — 23,095 — — 23,095 — — — — 23,095 23,095	Total 2013 2012 HK$’000 HK$’000 (Restated) 102,721 71,617 (26,952) (14,081) 75,769 57,536 (6,720) 28,453 28,712 (11,386) 723 1,166 98,484 75,769
				75,769 (6,720) 28,712 723
				98,484

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

31 DEFERRED TAXATION (continued)

Deferred tax liabilities (continued)

The net amounts shown in the balance sheet include the following:

Deferred tax assets to be recovered after more than 12 months Deferred tax liabilities to be settled after more than 12 months	Group	Group
	2013 HK$’000 8,249 (69,767) (61,518)	2012 HK$’000 (Restated) 4,940 (68,070)
		(63,130)

32 DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments represent an interest rate swap entered into by the Group. The notional principal amount of the outstanding interest rate swap contract as at 31 March 2013 was HK$20,000,000 (2012: HK$20,000,000). As at 31 March 2013, the interest rate under the interest rate swap was 1.73% (2012: 1.73%) per annum.

33 CONSOLIDATED STATEMENT OF CASH FLOWS

(a) Reconciliation of operating profit to net cash (used in)/generated from operations

Operating profit
Depreciation of property, plant and equipment
Amortisation of prepaid premium for land leases
Amortisation of intangible assets
Fair value gains on investment properties
Losses on disposal of non-current assets held for sale
Gains on disposal of property, plant and equipment
Realised and unrealised (gains)/losses on derivative financial instruments
Realised and unrealised gains on investments in financial assets at fair value
through profit and loss
Dividend income
Interest income
Operating profit before working capital changes
Decrease in inventories
Increase in accounts receivable, deposits and prepayments
(Decrease)/increase in accounts payable and accruals
Effect of change in exchange rates
Net cash (used in)/generated from operations

81
Group
2013
2012
HK$’000
HK$’000
172,576
153,596
57,620
53,531
3,487
1,459
759
571
(76,604)
(15,208)
726
—
(174)
(96)
(14)
399
(1,398)
(1,563)
(8)
(241)
(10,897)
(11,668)
146,073
180,780
6,617
132,614
(137,355)
(199,721)
(59,317)
28,922
(4,404)
14,916
(48,386)
157,511

2013
HK$’000
172,576
57,620
3,487
759
(76,604)
726
(174)
(14)
(1,398)
(8)
(10,897)
146,073
6,617
(137,355)
(59,317)
(4,404)
(48,386)

ANNUAL REPORT 2013

Notes to the Accounts

33 CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

(b) Analysis of changes in financing during the year

At 1 April Exchange differences Bank loans raised Repayment of bank loans At 31 March	Group	Group
	Bank 2013 HK$’000 1,304,674 7,101 1,094,928 (1,094,076) 1,312,627	loans 2012 HK$’000 1,237,991 14,769 504,576 (452,662)
		1,304,674

34 TRANSACTIONS WITH NON-CONTROLLING INTERESTS

(a) Acquisition of 1% additional interest in a subsidiary

On 7 March 2013, the Group acquired the remaining 1% of equity interests in Universal Pulp & Paper (Jiangsu) Company Limited (“UPP Jiangsu”) at a consideration of RMB2,323,000 (equivalents to HK$2,910,000) from a non-controlling shareholder. The effect of changes in the ownership interest of UPP Jiangsu on the equity attributable to owners of the Company during the year is summarised as follows:

Carrying amount of non-controlling interests acquired Consideration paid Excess of consideration paid recognised within equity	2013 HK$’000 193 (2,910)
	(2,717)

(b) Allotment of ordinary shares and acquisition of 9% additional interest in a subsidiary

On 9 September 2011, the shareholders of Samson Paper (M) Sdn. Bhd. (“Samson Paper Malaysia”) resolved to increase the share capital from RM2,250,000 divided into 2,250,000 ordinary shares of RM1.00 each to RM7,500,000 divided into 7,500,000 ordinary shares of RM1.00 each. The Group allotted 5,250,000 ordinary shares of RM1.00 on 28 October 2011 and increased its shareholdings in Samson Paper Malaysia from 70% to 91%.

On 1 November 2011, the Group acquired the remaining 9% equity interests in Samson Paper Malaysia at the consideration of RM743,000 (equivalents to HK$1,883,000) from the non-controlling shareholder. The effect of changes in the ownership interest of Samson Paper Malaysia on the equity attributable to owners of the Company during the year is summarised as follows:

Carrying amount of interests acquired Acquisition of additional interest from a non-controlling shareholder Consideration paid Gain from acquisition recognised within equity	2012 HK$’000 12,776 3,163
	15,939
	(15,199)
	740

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

34 TRANSACTIONS WITH NON-CONTROLLING INTERESTS (continued)

(c) Disposal of 22.3% equity interests in a subsidiary

On 15 March 2012, the Group disposed of 22.3% equity interest in a wholly owned subsidiary, Mission Sky Group Limited (“Mission Sky”), at a consideration of US$38,051,000 (approximately HK$294,895,000). The principal activities of Mission Sky and its subsidiaries are investment holding, trading of various paper products and manufacturing of paper products in the PRC.

The effect of changes on the equity attributable to owners of the Company in 2012 is summarised as follows:

Consideration received Carrying amount of equity interest disposed of Acquisition-related costs directly attributable to the transaction Deferred taxation (note 31) Gain on disposal recorded in equity, net deferred taxation	2012 HK$’000 294,895 (98,340) (2,800) (23,095)
	170,660

35 BANK GUARANTEES

At 31 March 2013, the Company continues to provide corporate guarantees on the banking facilities granted to the Group’s subsidiaries. The amount of bank borrowings utilised by the subsidiaries as at 31 March 2013 amounted to HK$2,089,890,000 (2012: HK$2,143,966,000).

36 COMMITMENTS

(a) Capital commitments

Capital expenditure committed at the balance sheet date but not yet incurred is as follows:

Property, plant and equipment Contracted but not provided for	Group
	2013 2012 HK$’000 HK$’000 176,501 217,333

(b) As at 31 March 2013, the Company had no commitment (2012: approximately HK$93,920,000) in respect of the injection of capital into certain subsidiaries in the PRC.

(c) Operating lease commitments

The Group leases various warehouses under non-cancellable operating lease agreements. The lease terms are mainly between one and four years, and the majority of lease agreements are renewable at the end of the lease period at market rate.

ANNUAL REPORT 2013

Notes to the Accounts

36 COMMITMENTS (continued)

(c) Operating lease commitments (continued)

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Not later than one year Later than one year and not later than five years Later than five years	Group	Group
	2013 HK$’000 29,674 30,852 2,707 63,233	2012 HK$’000 15,747 7,223 2,259
		25,229

(d) Operating lease receivable

The Group leases out various warehouses under non-cancellable operating lease agreements. The lease terms are between one to five years, and the majority of lease agreements are renewable at the end of the lease period at market rate.

The future minimum lease payments receivable under non-cancellable operating leases are as follows:

Not later than one year Later than one year and not later than five years	Group	Group
	2013 HK$’000 12,381 38,604 50,985	2012 HK$’000 4,152 7,921
		12,073

37 CHARGE OF ASSETS

At 31 March 2013, trust receipt loans of HK$71,188,000 (2012: HK$279,560,000) and bank loans of HK$70,711,000 (2012: HK$95,862,000) are secured by legal charges on the Group’s land and buildings, investment properties and non-current asset held for sale with aggregate net book amount of HK$328,378,000 (2012: HK$307,570,000) (notes 14, 16 and 21).

At 31 March 2013, bills payables of HK$669,373,000 (2012: HK$494,113,000) are secured by restricted bank deposits of HK$182,948,000 (2012: HK$174,446,000) (note 25).

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

38 RELATED PARTY TRANSACTIONS

Related parties refer to entities in which the Group has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions, or directors or officers of the Company and its subsidiaries. A summary of significant related party transactions, which are carried out in the normal course of the Group’s business, are as follows:

(a) Purchase from related party Purchase of merchandise from an investee company	Group
	2013 2012 HK$’000 HK$’000 226,942 310,371

The above transactions was conducted at negotiated prices between transacting parties.

(b) Year-end balances arising from purchases of goods Payables to an investee company	Group
	2013 2012 HK$’000 HK$’000 88,299 69,224

Amounts due are unsecured, interest-free and repayable with credit period of 90 days.

The carrying amounts are denominated in RMB (2012: same).

(c) Key management compensation

Details of key management compensation are set out in note 13 to the accounts.

39 ULTIMATE HOLDING COMPANY

The directors regard Quinselle Holdings Limited, a company incorporated in the British Virgin Islands, as the ultimate holding company.

ANNUAL REPORT 2013

Notes to the Accounts

40 PARTICULARS OF PRINCIPAL SUBSIDIARIES

		Place(s) of	Particulars of issued and
		incorporation/	fully paid up share	Percentage
	Name of subsidiar(ies)	establishment	capital/registered capital	holding(s)	Nature of business
				2013 & 2012
	Shares held directly:
1	Samson Paper (BVI) Limited	British Virgin	110,000 ordinary shares	100	Investment holding
		Islands	of HK$1 each		in Hong Kong
	Shares held indirectly:
	Boardton Consultants Limited	Hong Kong	10,000 ordinary shares	100	Property investment
			of HK$1 each		in Hong Kong
	Burotech Limited	Hong Kong	4,000,000 ordinary	100	Printing and sales of
			shares of HK$1 each		computer forms
					and trading of
					commercial paper
					products in Hong
					Kong
1	Foshan NanHai JiaLing Paper	The PRC	Registered capital	100	Processing and
	Company Limited2		HK$81,380,000		trading of paper
					products in the
					PRC
	Foundation Paper Company	Hong Kong	10,000 ordinary shares	100	Export trading of
	Limited		of HK$100 each		paper products to
					the PRC
1	Global Century Investments	British Virgin	1 ordinary share of US$1	100	Property holding in
	Limited	Islands			Hong Kong
	High Flyer Logistics	Hong Kong	1,000,000 ordinary	100	Logistics services in
	(Hong Kong) Limited		shares of HK$1 each		Hong Kong
1	Hypex Holdings Limited	British Virgin	2 ordinary shares of	100	Investment holding
		Islands	US$1 each		in Singapore
1	Shenzhen High Flyer	The PRC	Registered capital	80.4	Container transport
	International Transportation		RMB10,000,000		services in the
	Co. Ltd.2				PRC
	Samson Paper Company	Hong Kong	10 ordinary shares of	100	Trading of paper
	Limited		HK$100 each		products in Hong
					Kong
			28,500 non-voting	100
			shares of HK$100
			each

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

40 PARTICULARS OF PRINCIPAL SUBSIDIARIES (continued)

		Place(s) of	Particulars of issued and
		incorporation/	fully paid up share	Percentage
	Name of subsidiar(ies)	establishment	capital/registered capital	holding(s)	Nature of business
				2013 & 2012
	Shares held indirectly: (continued)
1	Samson Paper (Beijing)	The PRC	Registered capital	100	Trading of paper
	Company Limited2		HK$16,380,000		products in the
					PRC
	Samson Paper (China)	Hong Kong	1,000 ordinary shares of	100	Investment holding
	Company Limited		HK$10 each		in Hong Kong
1	Samson Paper (M) Sdn. Bhd.	Malaysia	7,500,000 ordinary	100	Trading of paper
			shares of RM1 each		products in
					Malaysia
1	Samson Paper (Shanghai)	The PRC	Registered capital	100	Trading of paper
	Company Limited		RMB61,650,000		products in the
					PRC
1	Samson Paper (Shenzhen)	The PRC	Registered capital	100	Trading of paper
	Company Limited2		HK$17,000,000		products in the
					PRC
	Shun Hing Paper Company	Hong Kong	7,600 ordinary shares of	100	Trading of paper
	Limited		HK$100 each		products in Hong
					Kong
			2,400 non-voting shares	100
			of HK$100 each
	United Aviation (Singapore)	Singapore	2 ordinary shares of	100	Trading of
	Pte. Ltd.		US$1 each		aeronautical parts
					in Singapore
1	Universal Pulp and Paper	The PRC	Registered capital	100	Manufacturing &
	(Jiangsu) Co. Ltd.2		US$30,000,000	(2012: 99)	trading of paper
					products in the
					PRC
1	Universal Pulp and Paper	The PRC	Registered capital	79.93	Manufacturing &
	(Shandong) Co. Ltd.2		US$41,111,000		trading of paper
					products in the
					PRC

The statutory accounts of these subsidiaries were not audited by PricewaterhouseCoopers.
Foreign investment enterprises.

All subsidiaries operate in Hong Kong unless otherwise stated. All of the subsidiaries established in the PRC are limited liability companies.

The above table only lists those subsidiaries of the Company which, in the opinion of the directors, principally affect the results for the year or formed a substantial portion of the net assets of the Group.

ANNUAL REPORT 2013

Contacts

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG

3/F, Seapower Industrial Centre 177 Hoi Bun Road, Kwun Tong Kowloon, Hong Kong Customer Service Hotline: (852) 2342 7181 Fax Hotline: (852) 2343 9195 Web-site: www.samsonpaper.com

BUROTECH LIMITED

4/F, Seapower Industrial Centre 177 Hoi Bun Road, Kwun Tong Kowloon, Hong Kong Customer Service Hotline: (852) 2763 1383 Fax Hotline: (852) 2342 8852 Web-site: www.burotech.com

UNITED AVIATION (SINGAPORE) PTE. LTD.

PRINCIPAL PLACE OF BUSINESS IN THE PRC

Room D, 37/F, Block C Electronic S&T Building 2070 Shennan Mid Road Futian District Shenzhen, China Postal Code: 518031 Customer Service Hotline: (86) 755-8328 7925 Fax Hotline: (86) 755-8328 7814

132 Gul Circle, Singapore 629597 Customer Service Hotline: (65) 6863 6067 Fax Hotline: (65) 6863 9197 Web-site: www.uaviation.com

HYPEX ENGINEERING PTE. LIMITED

132 Gul Circle, Singapore 629597 General Line: (65) 6897 7090 Fax Hotline: (65) 6897 7089

SAMSON PAPER COMPANY LIMITED

3/F, Seapower Industrial Centre 177 Hoi Bun Road, Kwun Tong Kowloon, Hong Kong Customer Service Hotline: (852) 2342 7181 Fax Hotline: (852) 2343 9195 Web-site: www.samsonpaper.com

SHUN HING PAPER COMPANY LIMITED

UNIVERSAL PULP AND PAPER (SHANDONG) CO. LTD.

No. 3388 Zaocao Road Xuecheng District, Zaozhuang City Shandong Province, China Customer Service Hotline: (86) 632-440 1820 Fax Hotline: (86) 632-440 1830

4/F, Seapower Industrial Centre 177 Hoi Bun Road, Kwun Tong Kowloon, Hong Kong Customer Service Hotline: (852) 2346 2898 Fax Hotline: (852) 2346 7275

SAMSON PAPER HOLDINGS LIMITED

AI assistant

Dragon Mining Limited — Annual Report 2013

50109_rns_2013-07-30_05f41731-16cc-49f4-a020-f130816a153a.pdf

Contents

Corporate Information

Board of Directors

Executive Directors

Non-executive Director

Independent Non-executive Directors

Company Secretary

Principal Bankers

Independent Auditor

Registered Office

Principal Share Registrar and Transfer Office

Financial Highlights

CONSOLIDATED PROFIT AND LOSS ACCOUNT

Financial Highlights

PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY

SHAREHOLDERS’ FUNDS

RETURN ON SHAREHOLDERS’ FUNDS

Chairman’s Statement

The Economy

The Paper Industry

Overview of Operations

Financial Performance

Paper Business

Other Businesses

Prospects

Appreciation

Management Discussion and Analysis

Sales by Geographical Area

Sales by Geographical Area (continued)

Import Statistics of Paper & Board to the Mainland China (January to December)

Major Product Analysis

Working Capital and Inventory Management

Employees and Remuneration Policies

Management Discussion and Analysis

Liquidity and Financial Resources

Foreign Exchange Risk

Contingent Liabilities and Charge Of Assets

Corporate Governance

Corporate Governance Practices

Board of Directors

Board of Directors (continued)

Chairman and Chief Executive Officer

Non-executive Directors

Remuneration of Directors

Nomination Committee

Audit Committee

Company Secretary

Internal Control and Risk Management

Business Planning and Budgeting

Auditor’s Remuneration

Model Code for Securities Transactions

Financial Reporting

Communication with Shareholders

Shareholders’ Rights

Corporate and Social Responsibility

Environment

Human Resource Management

Contributions to Society

Report of the Directors

Principal Activities and Geographical Analysis of Operations

Results and Appropriations

Reserves

Donations

Property, Plant and Equipment

Share Capital

Distributable Reserves

Pre-emptive Rights

Five Year Financial Summary

Purchase, Sale or Redemption of Shares

Share Options

(1) Purpose

(2) Participants

(3) Maximum number of shares

(4) Maximum entitlement of each Participant

Share Options (continued)

(5) Time of exercise of option

(7) Exercise price

Dragon Mining Limited Annual Report 2013