Dragon Mining Limited - Annual Report 2014

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Annual Report 2014

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 Financial Statements	36
Contacts	96

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

Boardroom Share Registrars (HK) Limited 31/F, 148 Electric Road North Point Hong Kong

SAMSON PAPER HOLDINGS LIMITED

Financial Highlights

CONSOLIDATED PROFIT AND LOSS ACCOUNT

CONSOLIDATED PROFIT AND LOSS ACCOUNT
	For the year	ended 31 March
	2014	2013
	HK$’000	HK$’000
Revenue	4,969,117	4,669,835
Operating profit	179,650	172,576
Finance costs	92,235	88,943
Profit before taxation	87,415	83,633
Profit attributable to owners of the Company	57,196	63,661

CONSOLIDATED BALANCE SHEET

CONSOLIDATED BALANCE SHEET
	As at 31 March
	2014	2013
	HK$’000	HK$’000
Non-current assets	2,268,786	2,086,484
Current assets	3,331,178	3,159,682
Current liabilities	3,011,758	2,807,920
Shareholders’ funds	1,743,604	1,617,966
Non-current liabilities	674,603	712,834
SHARE STATISTICS
Earnings per share — basic	HK4.84 CENTS	HK5.42 CENTS
Earnings per share — diluted	HK4.49 CENTS	HK5.00 CENTS
Dividends per share	HK1.30 CENTS	HK1.50 CENTS
Net asset value per ordinary share	HK152 CENTS	HK142 CENTS

ANNUAL REPORT 2014

Financial Highlights

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REVENUE
HK$
Million
6,000
5,025 4,969
5,000 4,677 4,670
3,861
4,000
3,000
2,000
1,000
0
09/10 10/11 11/12 12/13 13/14
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PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY

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HK$
Million
79
80
70
62 64
57 57
60
50
40
30
20
10
0
09/10 10/11 11/12 12/13 13/14
(restated) (restated) (restated)
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SHAREHOLDERS’ FUNDS

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HK$
Million
1,744
1,800
1,618
1,539
1,600
1,400
1,226
1,200 1,081
1,000
800
600
400
200
0
09/10 10/11 11/12 12/13 13/14
(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%]
3.30%
2
0
09/10 10/11 11/12 12/13 13/14
(restated) (restated) (restated)
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SAMSON PAPER HOLDINGS LIMITED

Chairman’s Statement

The Economy

During the financial year under review, the global economy remained complicated but was improving. The United States recovered slowly while Europe showed signs of stabilization. In view of this global economic situation, the Chinese government took various support measures to foster its own economic development, and maintained a steady growth.

In Hong Kong, the economy experienced a modest growth, with real GDP in the first quarter of 2014 up by 2.5% over the preceding year, slightly slower than that in the fourth quarter of 2013. Exports continued in weak position due to the uncertain economic growth globally.

The Paper Industry

Paper and board prices hovered at low levels due to continued lackluster demand amid a slowdown of the economy in China. Most grades’ paper prices were gradually stable with some grades of paper products attaining price hikes towards the second half of the year as a result of a decrease in the growth of paper supply in the industry and elimination of outdated production capacity under stricter clean production standards implemented by the government authority. The cautious market sentiment and an impact of the tight monetary policy have caused competition to intensify, with some of competitors sacrificing margins to alleviate their liquidity position.

Overview of Operations

Financial Performance

Facing the complicated market climate, Samson Group (the “Group”) adopted flexible sales strategies and proactively responded to the market to ensure a balance between growth in turnover and profitability. At the same time, the Group timely adjusted its procurement strategies in different regions while watching closely the customer credit risks in the situation of tight money supplies in the Mainland China. For the year, the Group registered a growth of 6.4% reaching HK$4,969 million. In terms of sales volume, the growth was achieved as high as 13.9%.

To further combat the weak market conditions, the Group continued to optimize earning quality, taking further steps to streamline the logistics and warehousing arrangement with customers and suppliers. The operating profit for the year increased moderately by 4.1% to HK$179.7 million. Profit attributable to the owners of the Company was HK$57.2 million. Earning per share were HK4.8 cents, compared to HK5.4 cents for the preceding year.

The Board has recommended the payment of a final dividend of HK0.9 cent per share. Together with an interim dividend of HK0.4 cent per share already paid, total dividend for the year will amount to HK1.3 cents per share, translating to a dividend payout ratio of 29%.

The Group has always taken steps to controlling costs, improving operating efficiency, strengthening inventory reduction and minimizing credit risk. Under a tight monetary supply environment 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$493.2 million as at 31 March 2014. This enables the Group to utilize its own resources when necessary, bargain better price on procurement, lower interest costs and maintain a healthy gearing ratio — currently at approximately 44.8%. In terms of provisions for doubtful debt, it presently represents 0.07% of the Group’s total revenue before taking into account of the write back of the provision of HK$8.7 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 85.4%, 11.6% and 3% of the Group’s total turnover respectively.

ANNUAL REPORT 2014

Chairman’s Statement

Paper Business

With sales offices in over 20 cities scattering across the PRC and other Asian countries, the Group placed great emphasis on serving quality customers extensively in various cities and expanding its sales for packaging boards on indent basis. The Group’s paper product business recorded an increase of 6.3% in turnover from HK$4,538 million to HK$4,822 million. In volume term, the Group’s sales of paper products has a rise of 13.9% to 949,500 metric tonnes. Operating profit amounted to HK$186.8 million, representing an increase of 3.6% when compared to HK$180.3 million last year.

For paper trading business, the Group boosted its sales by 7.6% to HK$4,245 million with a 15.3% rise in sales tonnage, ascribed by expanding the sales of packaging boards in various cities in the PRC and other Asian countries in addition to the sales of printing and writing papers.

The Group’s effort on expanding its presence in China has attained fruitful results. The PRC continues to be the Group’s largest market. Turnover from paper trading business in the market rose significantly by 16.3% to HK$2,850 million with a growth of 25.3% in volume. The Hong Kong market, the Group’s second key market, represented approximately 21% of its total paper trading sales, reported a turnover of HK$910 million, a drop of 15% compared to last year, as a result of the downturn of the export market to overseas. For other countries, the business grew by 14.6% in sales to HK$484.4 million. This is mainly attributable to more sales being achieved by the Korea and Malaysia office for the year compared to last year.

For paper manufacturing business, the segment reported a 1.8% rise in sales tonnage, with a decrease of 9% in turnover, including inter-segment revenue, to HK$578 million. With the softened raw material costs, the effective cost control measures and streamlining work flow procedures, operating profit increased 10.3% to HK$52.6 million compared to last year with operating profit margin stood at 9.1%.

Other Businesses

The aeronautic parts and services business and marine services business recorded turnover of HK$58.5 million and HK$77.2 million respectively during the year.

Prospects

In China, the economy will continue to see within a range of 7.5% growth, which while slower than the decade ended in 2011, is still relatively healthy and will be enough to support positive growth in paper consumption. It is forecasted that world paper demand growth in 2014 will accelerate compared to the paltry gains posted over the past three years. Optimism is based on a better performance in the general economy, with both Europe and North America showing improvements. To foster the economic development, the PRC government authority considers using various tools to expand loans and financing for supporting emerging industries, the agriculture sector, micro and small-sized enterprises and the building for subsidized housing and infrastructure. This helps to ease funding difficulties and high borrowing costs on various sectors in the country’s economy. Paper demand is expected to pick up gradually. Coupled with a recovery in demand, the industry consolidation and the capacity closures should bring the market into balance in the coming years.

The Group’s core business, paper trading business will expand its sales network in Korea, Malaysia and the central and south-western part of China in the coming years. By expanding its 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 to further enhance its profitability. At the same time, the Group will carry out the business quality enhancement measure including organization restructuring, warehouse consolidation and procurement flexibility to shorten working capital flow and sustain the Group’s development.

SAMSON PAPER HOLDINGS LIMITED

Chairman’s Statement

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, 24 June 2014

ANNUAL REPORT 2014

Management Discussion and Analysis

Sales by Geographical Area

For the year under review, the Group reported turnover of HK$4,969.1 million, an increase of 6.4% compared to last year.

With an extensive sales network In the PRC and other Asian countries and expansion in sales of packaging boards, turnover of paper business registered an increase of 6.3% to HK$4,822 million. In volume term, the total sales of paper business in all geographical regions including paper manufacturing activity has 13.9% growth to 949,500 metric tonnes. Sales in the PRC recorded a rise of 12.6% to HK$3,427 million, making up 71.1% of the Group’s total revenue from paper products. Sales of paper products in Hong Kong contributed 18.9% while those in Malaysia and other countries contributed the remaining 10% of the Group’s revenue from paper business.

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$135.3 million, 2.7 % (2013: HK$ 125.1 million, 2.7%) of the Group’s total revenue.

2014 HK$ million Hong Kong Paper trading 910.5 Logistics services and others 5.5 The PRC Paper trading 2,850.0 Paper manufacturing 577.6 Logistics services 5.6 Singapore Marine services 77.2 Aeronautic parts and services 58.1 Other regions Paper trading 484.6 Total revenue 4,969.1 Hong Kong Paper and Board Import/Re-export Statistics (January to December) (in ’000 Metric Tonnes) 2013 Import 756 Re-export 184 Local consumption 572	2013 HK$ million 1,070.8 — 2,450.0 594.3 6.8 75.7 49.4 422.8 4,669.8 2012 857 218 639	% change –15.0% 100% 16.3% –2.8% –17.6% 2.0% 17.6% 14.6%
		6.4%
		+/– –11.8% –15.6% –10.5%

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	2013 110 280 320 1,030 650 70 370 2,830	2012 +/– 130 –15.4% 350 –20.0% 350 –8.6% 1,040 –1.0% 720 –9.7% 140 –50.0% 380 –2.6% 3,110 –9.0%

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 42.5% and 47.2% of the Group’s turnover of paper products respectively. For the year under review, sales of book printing papers decreased slightly by 0.5% while sales of packaging boards rose significantly by 13.5%

Working Capital and Inventory Management

Amid the complex business environment, the management has taken various measures including pricing policy to contain the customers’ risk while at the same time continued to tighten its credit policy on customers and was cautious on customers’ selection. As a result, the collection period is maintained at the same level as last year. 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$3.9 million was still made in the accounts for prudent sake, which is at 0.07% of the Group’s total revenue.

To maintain a stronger working capital position and minimize the risk exposure of the value of stocks against paper price, the Group has kept a low level of stocks at HK$760.6 million as at 31 March 2014 with an aim of keeping the turnover days at the region of 45 days.

Employees and Remuneration Policies

As at 31 March 2014, the Group employed 1,752 staff members, 131 of whom are based in Hong Kong and 1,253 are based in the PRC and 368 are based in other 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 and medical insurance. 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 2014

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 flows generated from operations, long term borrowings and shareholders’ equity for the financing of long-term assets and investments. As at 31 March 2014, short term deposits plus bank balances amounted to HK$493 million (2013: HK$575 million) (including restricted bank deposits of HK$206 million (2013: HK$183 million)) and bank borrowings amounted to HK$2,046 million (2013: HK$2,096 million).

The Group continues to implement prudent financial management policy and strives to maintain a reasonable gearing ratio during expansion. As at 31 March 2014, the Group’s gearing ratio was 44.8% (2013: 46.9%), calculated as net debt divided by total capital. Net debt of HK$1,553 million (2013: HK$1,521 million) is calculated as total borrowings of HK$2,046 million (2013: HK$2,096 million) (including trust receipt loans, short term and long term borrowings, and finance lease obligations) less cash on hand and restricted deposits of HK$493 million (2013: HK$575 million). Total capital is calculated as total equity of HK$1,914 million (2013: HK$1,725 million) plus net debt. The current ratio (current assets divided by current liabilities) was 1.11 times (2013: 1.13 times).

With bank balances and other current assets amounted to HK$3,331 million (2013: HK$3,160 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 2014, bank borrowings in Renminbi amounted to HK$496 million (2013: HK$482 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 2014 was HK$20,000,000 (2013: HK$20,000,000).

Contingent Liabilities and Charge of Assets

As at 31 March 2014, 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 2014 amounted to HK$2,041 million (2013: HK$2,090 million).

Certain land and buildings, investment properties and non-current assets held for sale of the Company’s subsidiaries, with a total carrying value of HK$400 million as at 31 March 2014 (2013: HK$328 million) were pledged to banks as securities for bank loans of HK$91 million (2013: HK$71 million) and trust receipt loans of HK$78 million (2013: HK$71 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 2014, 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 2014

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)	3/4
Mr. LEE Seng Jin
(Deputy Chairman and Chief Executive Officer)
(note 3)	3/4		1/1	1/1
Mr. CHOW Wing Yuen	4/4
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)	4/4	3/3		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 2014 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.

The Nomination Committee has considered a number of aspects, including but not limited to genders, age, cultural and education background, ethnicity, professional experience, skills, knowledge and length of services. The Nomination Committee will also consider factors based on the Company’s business model and specific needs from time to time in determining the optimum composition of the Board.

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 final result for the year ended 31 March 2014 before recommending them to the Board for approval.

ANNUAL REPORT 2014

Corporate Governance

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 2013/2014, the company secretary has taken no less than 15 hours of relevant professional training.

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 2013/2014, 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 2013, 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 2014/2015 was held in January 2014. 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 2013/2014 (i.e. April to September 2013) was conducted in October 2013. 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	2,590
(b) Non-audit services (note)	118

Note: Non-audit services include certain agreed-upon procedures, limited assurance engagement and taxation related services.

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.

Changes in Constitutional Documents

There is no significant change in the Company’s constitutional documents during the year ended 31 March 2014. These documents are published on the website of the Company and the Stock Exchange.

ANNUAL REPORT 2014

Corporate and Social Responsibility

Environment

The Group has been committed to promoting an environmental-friendly conscious among our staff over the years and we have requested ourselves to attain high-standard to preserve our green world in order to create better living conditions for our future generations.

For the Group’s manufacturing business, the production efficiency and improvement of technologies is always on the top of our list to reduce the impact to our environment as well as to comply strictly with the PRC’s environmental policies at the same time. We often invest to updating the effluent treatment facilities and the power station to generate less pollutants and other waste to promote clean and safe production.

For the Group’s trading business, we have received “Chain-of-Custody” certification by using FSC-approved paper and our customers are being encouraged to follow suit. In addition, one of subsidiaries in paper trading is awarded of CarbonCare ® Label from Carbon Care Asia and will continue to strive for better performance by reducing its carbon emissions. It is to show that the Group promotes low-carbon aim, 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’s management believes people is the most fundamental assets of the Company, thus focus is always on the human resources development. To potential staff, the Group spends great deal of effort to provide suitable training and show them with clear career for future development. Moreover, the Group believes that loyalty is another element to the Company’s success, staff satisfaction and communication are always highly addressed within the Company.

Suitable entertainment facilities are being provided in our manufacturing base. We pursue our staff’s physical and mental health is being well-maintained. Team work is being encouraged and team spirit is highly encouraged in all area in our business.

Contributions to Society

The Group holds the participation in charitable activities in high regards. The Group’s management believes that helping those in need and contributing to the society can make a difference to the world, and wish to promote this culture throughout the Company.

SAMSON PAPER HOLDINGS LIMITED

Report of the Directors

The Directors submit their report together with the audited accounts for the year ended 31 March 2014

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 6 January 2013.

The Directors recommend the payment of a final dividend of HK0.9 cent per share, totalling HK$11,459,000.

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$883,000.

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 2014, calculated under the Companies Act of 1981 of Bermuda (as amended), amounted to HK$267,010,000 (2013: HK$269,333,000).

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 2014

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	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	2014 HK$’000 4,969,117
					57,196
					5,599,964 3,686,361
					1,913,603

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 2014, no option has been granted under the Option Scheme. Terms and conditions of the Option Scheme are set out below (2013: Nil).

(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 nil (2013: 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) (note)

Mr. CHOW Wing Yuen

Ms. SHAM Yee Lan, Peggy

Mr. LEE Yue Kong, Albert

Non-executive Director

Mr. LAU Wang Yip, Eric

Independent non-executive Directors

Mr. PANG Wing Kin, Patrick (note)

Mr. TONG Yat Chong

Mr. NG Hung Sui, Kenneth (note)

Note: Mr. LEE Seng Jin, Mr. PANG Wing Kin, Patrick and Mr. NG Hung Sui, Kenneth retire in accordance with clause 99 of the Company’s bye-laws and, being eligible, offer themselves for re-election.

ANNUAL REPORT 2014

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 88, is the founder and Chairman of the Group. Mr. Sham is responsible for the Group’s corporate vision and corporate development. He has over 55 years of experience in the paper distribution industry in Hong Kong.

Mr. LEE Seng Jin, aged 57, 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 55, 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 36 years of experience in the paper distribution industry in Hong Kong.

Ms. SHAM Yee Lan, Peggy, aged 48, 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 58, 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 31 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 58, is a qualified accountant and has over 31 years of working experience in the auditing, finance and general management areas. Mr. Pang is currently a financial consultant to an Australian company which has investment in China. Mr. Pang was appointed independent non-executive Director of the Company in 1995. He is a member of the CPA Australia and the Hong Kong Institute of Certified Public Accountants.

Mr. LAU Wang Yip, Eric, aged 47, 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 57, is a qualified accountant and has over 29 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 47, 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 57, is a Sales Director of Samson Paper (China) Company Limited. He joined the Group in 1976. He has over 27 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 54, is a Sales Director (Northern China) of Samson Paper (China) Company Limited. He joined the Group in 1990 and has over 27 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 2014, 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 2014

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 2014, 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.

SAMSON PAPER HOLDINGS LIMITED

Report of the Directors

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

At 31 March 2014, 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.

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 2014.

Public Float

Based on the information that is publicly available to the Company and within the knowledge of the Directors of the Company, as at the date of this Report, there is sufficient public float of more than 25% of the Company’s issued Shares as required under the Listing Rules.

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.

ANNUAL REPORT 2014

Report of the Directors

Related Party Transactions and Continuing Connected Transactions

Details on related party transactions for the year are set out in note 38 to the consolidated financial statements. Details of any related party transaction which constituted continuing connected transaction and other continuing connected transactions not exempted under Rule 14A.33 of the Listing Rules are disclosed below. The Company has complied with the applicable requirements in accordance with Chapter 14A of the Listing Rules in respect of such transactions.

Continuing connected transactions

On 25 July 2013, Samson Paper Company Limited (a subsidiary of the Company) and DaiEi Papers (H.K.) Limited (a subsidiary of Kokusai Pulp and Paper Company Limited) (“KPP”) entered into a master agreement (the “KPP Master Agreement”) pursuant to which the Group and KPP and its subsidiaries (“KPP Group”) may sell and purchase the paper products to and from each other. As KPP and its subsidiaries (being associates of KPP) were connected persons of the Group by virtue of KPP’s 22.30% interest as a substantial shareholder in Mission Sky Group Limited (a subsidiary of the Company), the sale and purchase transactions with KPP Group under the KPP Master Agreement and those conducted during the financial year ended 31 March 2014 constituted continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

During the financial year ended 31 March 2014, the actual amount of sale and purchase transactions were HK$1,210.5 million in respect of the total purchases by the Group from KPP Group and HK$15.9 million in respect of the total sales to KPP Group by the Group, including but not limited to transactions conducted after commencement of the KPP Master Agreement on 24 September 2013. Of such purchase transactions, HK$227.5 million was purchased from Keishin Papers Trade (Shanghai) Company Limited, a subsidiary of KPP, which is a related party of the Group under the relevant Hong Kong Accounting Standards and a connected person of the Group under the Listing Rules. Such related party transactions, which also constituted continuing connected transactions, were also disclosed on page 93 of this Annual Report under note 38(a) to the consolidated financial statements.

Strictly in respect of those sale and purchase transactions conducted after commencement of the KPP Master Agreement during 24 September 2013 to 31 March 2014, the actual amount of transactions were HK$615.8 million in respect of purchases by the Group from KPP Group and HK$15.9 million in respect of sales to KPP Group by the Group and were within the relevant transaction cap in relation to the KPP Master Agreement of HK$980 million in respect of purchases by the Group from KPP Group and HK$275 million in respect of sales to KPP Group by the Group respectively. Further details of the KPP Master Agreement and the relevant transaction caps were disclosed in the circular of the Company dated 30 August 2013.

The terms and pricing of all such transactions were determined by reference to the prevailing market terms. Payment was generally settled by the purchaser in cash or by banker’s acceptance drafts within a payment period of not more than 120 days in accordance with market practice.

Annual review of continuing connected transactions

The independent non-executive directors of the Company have reviewed the aforesaid continuing connected transactions for the year ended 31 March 2014 (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 (as appropriate) independent third parties;
(iii) in accordance with the relevant agreements governing the Transactions; and
(iv) on terms that are fair and reasonable and in the interests of the Company and its shareholders as a whole.

SAMSON PAPER HOLDINGS LIMITED

Report of the Directors

The Company’s auditor was engaged to report on the above continuing connected transactions 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 issued an unqualified letter containing findings and conclusions in respect of the above continuing connected transactions disclosed by the Group in this Annual Report in accordance with Rule 14A.38 of the Listing Rules. 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.

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, 24 June 2014

ANNUAL REPORT 2014

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 financial statements of Samson Paper Holdings Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages 28 to 95, which comprise the consolidated and the company balance sheets as at 31 March 2014, 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 FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of consolidated financial statements 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 financial statements 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 financial statements 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 financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements 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 financial statements.

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 financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2014, 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, 24 June 2014

ANNUAL REPORT 2014

Consolidated Profit and Loss Account

For the year ended 31 March 2014

Note Revenue 5 Cost of sales Gross profit Other gains and income, net 5 Selling expenses Administrative expenses Other operating income/(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	2014 HK$’000 4,969,117 (4,517,576) 451,541 72,694 (163,824) (198,731) 17,970 179,650 (92,235) 87,415 (26,916) 60,499 57,196 3,303 60,499 HK 4.8 cents HK 4.5 cents 16,551	2013 HK$’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
		HK5.4 cents
		HK5.0 cents
		19,097

The notes on pages 36 to 95 are an integral part of these consolidated financial statements.

SAMSON PAPER HOLDINGS LIMITED

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2014

Profit for the year Other comprehensive income Items that will not be reclassified to profit and loss 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 Items that may be reclassified to profit and loss Currency translation differences 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	2014 HK$’000 60,499 94,210 5,400 99,610 (12,282) 118 (12,164) 87,446 147,945 144,735 3,210 147,945	2013 HK$’000 65,007 8,290 6,720
		15,010
		22,130 114
		22,244
		37,254
		102,261
		99,423 2,838
		102,261

The notes on pages 36 to 95 are an integral part of these consolidated financial statements.

ANNUAL REPORT 2014

Consolidated Balance Sheet

As at 31 March 2014

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 deposits and prepayments 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 assets 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 2014 HK$’000 1,808,574 153,876 226,000 46,323 5,490 21,403 7,120 2,268,786 760,655 1,950,079 726 3,749 205,893 287,303 3,208,405 122,773 3,331,178 1,394,695 639,453 26,575 413 950,622 3,011,758 319,420 2,588,206	31 March 2013 HK$’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

SAMSON PAPER HOLDINGS LIMITED

As at 31 March 2014

Consolidated Balance Sheet

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 2014 HK$’000 127,315 1,604,830 11,459 1,616,289 1,743,604 169,999 1,913,603 126,702 456,382 91,519 674,603 2,588,206	31 March 2013 HK$’000 127,315
		1,476,646 14,005
		1,490,651 1,617,966 107,446 1,725,412 1,486 641,581 69,767 712,834 2,438,246

The notes on pages 36 to 95 are an integral part of these consolidated financial statements.

The financial statements on pages 36 to 95 were approved by the Board of Directors on 24 June 2014 and were signed on its behalf.

SHAM Kit Ying Director

SHAM Yee Lan, Peggy Director

ANNUAL REPORT 2014

Balance Sheet

As at 31 March 2014

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	2014 HK$’000 249,897 306,061 57 306,118 428 428 305,690 555,587 127,315 416,813 11,459 428,272 555,587	2013 HK$’000 249,897 308,419 59 308,478 465 465 308,013 557,910 127,315
		416,590 14,005
		430,595 557,910

Total equity

The notes on pages 36 to 95 are an integral part of these consolidated financial statements.

The financial statements on pages 36 to 95 were approved by the Board of Directors on 24 June 2014 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 2014

Attributable to own	Attributable to own	ers of the Company Retained earnings Subtotal HK$’000 HK$’000 682,252 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)	ers of the Company Retained earnings Subtotal HK$’000 HK$’000 682,252 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$’000 104,801 1,346 1,492 — — — 1,492 2,838 (193) — — — —	Total HK$’000 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$’000 127,315 — — — — — — — — — — — —	Other reserves HK$’000 729,262 — 20,638 8,290 6,720 114 35,762 35,762 (2,717) (17,138) 8,266 — —	Retained earnings HK$’000 682,252 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

ANNUAL REPORT 2014

Consolidated Statement of Changes in Equity

For the year ended 31 March 2014

Attributable to own	Attributable to own	ers of the Company Retained earnings Subtotal HK$’000 HK$’000 737,216 1,617,966 57,196 57,196 — (12,189) — 94,210 — 5,400 — 118 — 87,539 57,196 144,735 — — (682) — (14,005) (14,005) (5,092) (5,092)	ers of the Company Retained earnings Subtotal HK$’000 HK$’000 737,216 1,617,966 57,196 57,196 — (12,189) — 94,210 — 5,400 — 118 — 87,539 57,196 144,735 — — (682) — (14,005) (14,005) (5,092) (5,092)	Non- controlling interests HK$’000 107,446 3,303 (93) — — — (93) 3,210 59,343 — — —	Total HK$’000 1,725,412 60,499 (12,282) 94,210 5,400 118 87,446 147,945 59,343 — (14,005) (5,092)
Share capital HK$’000 127,315 — — — — — — — — — — —	Other reserves HK$’000 753,435 — (12,189) 94,210 5,400 118 87,539 87,539 — 682 — —	Retained earnings HK$’000 737,216 57,196 — — — — — 57,196 — (682) (14,005) (5,092)
127,315 —	841,656 —	763,174 11,459	1,732,145 11,459	169,999 —	1,902,144 11,459
127,315	841,656	774,633	1,743,604	169,999	1,913,603

The notes on pages 36 to 95 are an integral part of these consolidated financial statements.

SAMSON PAPER HOLDINGS LIMITED

Consolidated Statement of Cash Flows

For the year ended 31 March 2014

Note Operating activities Cash generated from/(used in) operations 33(a) Interest paid Hong Kong profits tax paid Overseas taxation paid Net cash generated from/(used in) 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 33(c) 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 disposal of available-for-sale financial assets (Increase)/decrease in non-current deposits and prepayments 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 in trust receipt loans Dividends paid to shareholders Net cash used in financing activities Net decrease 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	2014 HK$’000 199,509 (95,551) (2,664) (3,175) 98,119 (109,070) (970) (278) — 3,074 — — 252 (13,238) 9,134 — — (111,096) 1,098,228 — (1,007,479) (2,355) (22,945) (134,955) (19,097) (88,603) (101,580) 389,452 (569) 287,303	2013 HK$’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

The notes on pages 36 to 95 are an integral part of these consolidated financial statements.

ANNUAL REPORT 2014

Notes to the Financial Statements

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 financial statements.

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 listing on The Stock Exchange of Hong Kong Limited.

These consolidated financial statements are presented in Hong Kong dollars, unless otherwise stated. These financial statements have been approved for issue by the Board of Directors on 24 June 2014.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements 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 financial statements 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 the financial statements 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 financial statements, are disclosed in note 4.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1 Basis of preparation (continued)

(a) The following amended standards are mandatory for the first time for the financial year beginning 1 April 2013 but either have no significant impact to the Group’s results and financial position or are not currently relevant to the Group:

HKAS 1 (Amendment)	Presentation of financial statements
HKAS 19 (Amendment)	Employee benefits
HKAS 27 (Revised 2011)	Separate financial statements
HKAS 28 (Revised 2011)	Associates and joint ventures
HKFRS 1 (Amendment)	First time adoption — government loans
HKFRS 7 (Amendment)	Financial instruments: Disclosures — Offsetting financial assets
	and liabilities
HKFRS 10	Consolidated financial statements
HKFRS 10, HKFRS 11 and	Consolidated financial statements, joint arrangements and
HKFRS 12 (Amendments)	disclosure of interests in other entities: transitional guidance
HKFRS 11	Joint arrangements
HKFRS 12	Disclosures of interests in other entities
HKFRS 13	Fair value measurements
HK (IFRIC) — Int 20	Stripping costs in the production phase of a surface mine

(b) The following new and amended standards have been issued but are not effective for the financial year beginning 1 April 2013 and the Group has not early adopted:

		Effective for
		accounting
		periods
		beginning
		on or after
HKAS 19 (2011) (Amendment)	Defined benefit plans:	1 July 2014
	employee contributions
HKAS 32 (Amendment)	Financial instruments:	1 January 2014
	Presentation — offsetting financial
	assets and financial liabilities
HKAS 36 (Amendment)	Recoverable amount disclosures for	1 January 2014
	non-financial assets
HKAS 39 (Amendment)	Financial instruments: Recognition and	1 January 2014
	measurement — novation of derivatives
HKFRS 9	Financial instruments	To be determined
HKFRS 10, HKFRS 12	Investment entities	1 January 2014
and HKAS 27 (2011)
(Amendment)
HKFRS 7, HKFRS 9	Disclosures: Mandatory effective date of	1 January 2015
(Amendment)	HKFRS and transactional disclosures
HKFRS 14	Regulatory Deferral Accounts	1 January 2016
HK(IFRIC) — Int 21	Levies	1 January 2014

ANNUAL REPORT 2014

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1 Basis of preparation (continued)

(b) The following new and amended standards have been issued but are not effective for the financial year beginning 1 April 2013 and the Group has not early adopted: (continued)

				Effective for
				accounting
				periods
				beginning
				on or after
Annual Improvements Projects	Annual Improvements	2010–2012	Cycle	1 July 2014
Annual Improvements Projects	Annual Improvements	2011–2013	Cycle	1 July 2014

The Group has commenced an assessment of the impact of the above new and amended standards and interpretations and considers that they will not have any significant impact on the results of the Group’s operations and financial position. The Group plans to adopt the above new and amended standard and interpretations when they become effective.

2.2 Subsidiaries

2.2.1 Consolidation

A subsidiary is an entity (including a structured entity) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

(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 amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the profit and loss account.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.2 Subsidiaries (continued)

2.2.1 Consolidation (continued)

(a) Business combinations (continued) Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the group’s accounting policies.

(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 financial statements

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 financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.

2.3 Foreign currency translation

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

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account.

Foreign exchange gains and losses are presented in the profit and loss account within “other operating income/(expenses)”.

ANNUAL REPORT 2014

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.3 Foreign currency translation (continued)

(b) Transactions and balances (continued) 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 and 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 other comprehensive income.

(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 and 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 and loss.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

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.

ANNUAL REPORT 2014

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

2.6 Intangible assets

(a) Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’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.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

(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 and deposits”, “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.

ANNUAL REPORT 2014

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.8 Financial assets (continued)

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.

2.8.3 Offsetting

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

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.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

ANNUAL REPORT 2014

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.12 Non-current assets held for sale

Non-current assets are classified as held for sale when their carrying amounts are to be recovered principally through sale transactions and sales are considered highly probable. It is stated at the lower of carrying amount and fair value less costs to sell. Deferred tax assets, assets arising from employee benefits, financial assets (other than investments in subsidiaries and associates) and investment properties, even if held for sale, would continue to be measured in accordance with the policies set out elsewhere in Note 2.

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.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

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.

ANNUAL REPORT 2014

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

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.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.22 Employee benefits (continued)

(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 2014

Notes to the Financial Statements

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.

(a) Current income tax

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.

(b) Deferred income tax

Inside basis differences

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 financial statements. 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.

Outside basis differences

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, 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. Generally the group is unable to control the reversal of the temporary difference for associates. Only where there is an agreement in place that gives the group the ability to control the reversal of the temporary difference not recognised.

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised.

(c) Offsetting

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.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.26 Dividend distribution

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

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 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, primarily with respect to the United States dollars. In addition, the conversion of Renminbi into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the People’s Republic of China. Any change in exchange rates of these currencies to Hong Kong dollar will impact the Group’s operating results.

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 is minimal.

At 31 March 2014, 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$2,703,000 (2013: HK$180,000) 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 gains/losses on translation of Renminbi denominated borrowings and trade and other payables.

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 2014

Notes to the Financial Statements

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 2014, 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 2014, 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$6,418,000 (2013: HK$5,698,000) 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, other receivables, financial assets at fair value through profit or loss and available-for-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, other receivables, 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.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

3 FINANCIAL RISK MANAGEMENT (continued)

3.1 Financial risk factors (continued)

(b) Credit risk (continued)

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 2014, management does not expect any major impairment on receivables from group companies.

(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.

ANNUAL REPORT 2014

Notes to the Financial Statements

3 FINANCIAL RISK MANAGEMENT (continued)

3.1 Financial risk factors (continued)

(c) Liquidity risk (continued)

	On	Less than	Between	Between	Over
	demand	1 year	1 and 2 years	2 and 5 years	5 years
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Group
At 31 March 2014
Term loans subject to a
repayment on demand clause	109,715	—	—	—	—
Derivative financial instruments	—	413	—	—	—
Other bank borrowings1	—	854,509	433,160	36,551	14,810
Trust receipt loans1	—	643,460	—	—	—
Accounts payable and other
payables	—	1,394,695	126,702	—	—
Finance lease liabilities1	—	2,274	1,634	1,894	103
At 31 March 2013
Term loans subject to a
repayment on demand clause	63,150	—	—	—	—
Derivative financial instruments	—	769	—	—
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	—	—
Finance lease liabilities1	—	2,369	2,369	2,108	54
Company
At 31 March 2014
Accruals	—	428	—	—	—
At 31 March 2013
Accruals	—	465	—	—	—

1 The amounts include interest payable.

The Company provides corporate guarantees as disclosed in note 35.

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.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

3 FINANCIAL RISK MANAGEMENT (continued)

3.1 Financial risk factors (continued)

(c) Liquidity risk (continued)

			Less than	Between	Between
			1 year	1 and 2 years	2 and 5 years
			HK$’000	HK$’000	HK$’000
31	March	2014	110,373	1,457	—
31	March	2013	52,410	10,757	1,495

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	Group
	2014 HK$’000 2,046,457 (493,196) 1,553,261 1,913,603 3,466,864 44.8%	2013 HK$’000 2,096,471 (575,255)
		1,521,216 1,725,412
		3,246,628
		46.9%

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).

ANNUAL REPORT 2014

Notes to the Financial Statements

3 FINANCIAL RISK MANAGEMENT (continued)

3.3 Fair value estimation (continued)

The following table presents the Group’s assets/(liabilities) that are measured at fair value at 31 March 2014.

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$’000 726 — — — — 726	Level 2 HK$’000 — — — — (413) (413)	Level 3 HK$’000 — 4,321 1,169 5,490 — 5,490	Total HK$’000 726
				4,321 1,169
				5,490
				(413)
				5,803

The following table presents the Group’s assets/(liabilities) that were 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

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

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

3 FINANCIAL RISK MANAGEMENT (continued)

3.3 Fair value estimation (continued)

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 Disposal Net changes in fair value transferred to equity (note 30) At 31 March	2014 HK$’000 5,624 — (252) 118 5,490	2013 HK$’000 5,258 252 — 114
		5,624

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 purpose 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.

ANNUAL REPORT 2014

Notes to the Financial Statements

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.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

(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.

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) Fair value gains on non-current assets held for sale (note 21) 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 Gain on disposal of property, plant and equipment Others	Group	Group
	2014 HK$’000 4,886,324 82,793 4,969,117 9,134 — 24,399 8,000 13,818 4,470 51 88 2,662 10,072 72,694	2013 HK$’000 4,587,288 82,547
		4,669,835
		10,897 8 76,604 — 9,418 9,068 1,398 14 174 4,291
		111,872

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 financial statements.

ANNUAL REPORT 2014

Notes to the Financial Statements

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

As at 31 March 2014, 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 assets held for sale and operating cash. They exclude deferred tax assets, taxation recoverable and corporate assets.

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

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

The segment information for the year ended and as at 31 March 2014 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	Paper trading HK$’000 4,288,689 (44,042) 4,244,647 134,153	Paper manufacturing HK$’000 767,634 (189,997) 577,637 52,625	Others HK$’000 153,676 (6,843) 146,833 3,613	Total HK$’000 5,209,999 (240,882)
				4,969,117
				190,391 (10,741)
				179,650 (92,235)
				87,415 (26,916)
				60,499

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

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

Other items for the year ended 31 March 2014

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 Fair value gains on non-current assets held for sale 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$’000 8,170 10,626 864 847 24,399 8,000 18,039 3,091,638 1,848,156	Paper manufacturing HK$’000 947 48,938 3,409 45 — — 87,039 2,328,190 277,142	Others HK$’000 17 9,100 77 4 — — 8,995 169,192 35,538	Total HK$’000 9,134 68,664 4,350 896 24,399 8,000 114,073
				5,589,020 3,749 7,120 75
				5,599,964
				2,160,836 26,575 91,519 1,407,431
				3,686,361

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	Paper trading HK$’000 4,097,377 (153,815) 3,943,562 132,580	Paper manufacturing HK$’000 843,631 (249,302) 594,329 47,735	Others HK$’000 139,746 (7,802) 131,944 2,193	Total HK$’000 5,080,754 (410,919)
				4,669,835
				182,508 (9,932)
				172,576 (88,943)
				83,633 (18,626)
				65,007

ANNUAL REPORT 2014

Notes to the Financial Statements

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

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$’000 9,321 10,143 178 721 76,604 48,041 2,930,047 1,652,817	Paper manufacturing HK$’000 1,566 39,102 3,237 38 — 179,850 2,134,514 427,751	Others HK$’000 10 8,375 72 — — 7,617 172,387 35,368	Total HK$’000 10,897 57,620 3,487 759 76,604 235,508
				5,236,948 890 8,249 79
				5,246,166
				2,115,936 12,523 69,767 1,322,528
				3,520,754

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 2014 2013 HK$’000 HK$’000 915,984 1,070,755 3,432,939 3,051,142 135,752 125,092 402,390 357,696 71,432 60,520 10,620 4,630 4,969,117 4,669,835	Non-current assets1 2014 2013 HK$’000 HK$’000 327,658 259,386 1,854,979 1,730,755 62,293 72,502 2,900 1,298 13,825 14,277 11 17 2,261,666 2,078,235
			2,078,235

1 Non-current assets excluded deferred tax assets.

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

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

6 OPERATING PROFIT

Operating profit is stated after charging and crediting the following:

Charging Cost of inventories sold (note 22) 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 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 assets 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
	2014 HK$’000 4,359,390 68,664 4,350 896 17,054 175,873 — 3,900 110,585 3,206 — 2,662 2,799 88 10,782 8,717	2013 HK$’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 14 — 6,830

ANNUAL REPORT 2014

Notes to the Financial Statements

7 FINANCE COSTS

FINANCE COSTS
Interest on bank borrowings wholly repayable within 5 years Interest on finance lease obligations wholly repayable within 5 years Interest on trade credit facilities Interest on other payables Less: amounts capitalised in property, plant and equipment	Group
	2014 HK$’000 72,245 227 23,079 — 95,551 (3,316) 92,235	2013 HK$’000 76,464 125 13,513 1,327
		91,429 (2,486)
		88,943

The weighted average interest rate on the above capitalised borrowings is approximately 6.4% per annum (2013: 7.0% per annum).

8 TAXATION

Hong Kong profits tax has been provided at the rate of 16.5% (2013: 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 Under/(over)-provision in previous years Deferred taxation relating to origination and reversal of temporary differences (note 31)	Group	Group
	2014 HK$’000 4,937 12,029 66 9,884 26,916	2013 HK$’000 4,619 9,370 (30) 4,667
		18,626

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

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% (2013: 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 Under/(over)-provision in previous years Recognition of previously unrecognised temporary difference	Group	Group
	2014 HK$’000 87,415 14,423 4,012 (5,187) 6,348 6,957 66 297 26,916	2013 HK$’000 83,633
		13,799 2,160 (15,234) 6,742 7,978 (30) 3,211
		18,626

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 2014 since the Group plans to utilise such profits in the PRC and has no plan to distribute such profits in the foreseeable future.

Deferred income tax assets are recognized for tax losses carried forward to the extent that the realisation of the related benefit through future taxable profits is probable. As at 31 March 2014, tax losses of approximately HK$92,122,000 (2013: HK$45,612,000) have no expiry date while the remaining tax losses of approximately HK$9,510,000 (2013: HK$8,277,000) will expire at various dates up to and including 2019 (2013: 2018).

ANNUAL REPORT 2014

Notes to the Financial Statements

8 TAXATION (continued)

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		2014	After tax HK$’000 118 94,210 5,400 99,728		2013
	Before tax HK$’000 118 115,835 — 115,953	Deferred tax (charge)/ credit HK$’000 — (21,625) 5,400 (16,225)		Before tax HK$’000 114 8,290 — 8,404	Deferred tax (charge)/ credit HK$’000 — — 6,720 6,720	After tax HK$’000 114 8,290 6,720
						15,124

9 PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY

The profit attributable to owners of the Company is dealt with in the financial statements of the Company to the extent of HK$16,774,000 (2013: HK$19,581,000) (note 30).

10 DIVIDENDS

DIVIDENDS
Interim — HK$0.004 (2013: HK$0.004) per ordinary share Interim — HK$0.004 (2013: HK$0.004) per preference share Proposed final — HK$0.009 (2013: HK$0.011) per ordinary share Proposed final — HK$0.009 (2013: HK$0.011) per preference share	Groupand Company
	2014 HK$’000 4,564 528 10,270 1,189 16,551	2013 HK$’000 4,564 528 12,552 1,453
		19,097

At a meeting held on 24 June 2014, the directors proposed a final dividend of HK$0.009 per share. This proposed dividend is not reflected as a dividend payable in these financial statements, but will be reflected as an appropriation of retained earnings for the year ending 31 March 2015.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

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$55,215,000 (2013: HK$61,839,000) by the weighted average number of 1,141,076,000 (2013: 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 (2013: Nil) has been granted under the scheme. Such scheme has been expired on 26 February 2014.

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
	2014 57,196 1,141,076 132,065 1,273,141 HK 4.5 cents	2013 63,661
		1,141,076 132,065
		1,273,141
		HK 5.0 cents

12 EMPLOYEE BENEFIT EXPENSES (INCLUDING DIRECTORS’ REMUNERATION)

Wages, salaries and bonus Contributions to pension schemes	Group	Group
	2014 HK$’000 105,298 5,287	2013 HK$’000 118,364 4,704 123,068
	110,585

ANNUAL REPORT 2014

Notes to the Financial Statements

13 DIRECTORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’ emoluments

The remuneration of every director for the year ended 31 March 2014 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	2014 Fee Salary Discretionary bonuses Employer’s contribution to pension scheme Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 — 5,879 — — 5,879 — 6,554 — 164 6,718 — 960 — 51 1,011 — 1,325 — 91 1,416 — 1,140 — 44 1,184 160 — — — 160 160 — — — 160 160 — — — 160 160 — — — 160	2013
		Total HK$’000 5,879 6,771 1,511 1,375 1,684 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 financial statements.

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year include five (2013: five) directors whose emoluments are reflected in the analysis presented above.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

14 PROPERTY, PLANT AND EQUIPMENT — GROUP

Land and buildings HK$’000 227,389 (19,580)	Furniture and fixtures HK$’000 7,594 (6,951)	Machinery and equipment HK$’000 1,082,807 (128,179)	Motor vehicles and vessels HK$’000 43,132 (27,909)	Leasehold improvements HK$’000 25,138 (13,342)	Office and computer equipment HK$’000 26,097 (21,530)	Construction- in-progress HK$’000 326,660 —	Total HK$’000 1,738,817 (217,491)
207,809	643	954,628	15,223	11,796	4,567	326,660	1,521,326
207,809 2,169 13,446 — (31,000) 8,290 — (5,960)	643 (38) 664 — — — — (339)	954,628 14,387 27,329 135,556 — — (508) (47,002)	15,223 163 9,590 — — — (793) (5,620)	11,796 140 3,309 6,669 — — (3) (1,212)	4,567 104 2,072 — — — (21) (1,978)	326,660 11,357 175,954 (142,225) — — — —	1,521,326 28,282 232,364 — (31,000) 8,290 (1,325) (62,111)
194,754	930	1,084,390	18,563	20,699	4,744	371,746	1,695,826
215,879 (21,125)	8,218 (7,288)	1,247,332 (162,942)	50,551 (31,988)	35,281 (14,582)	27,854 (23,110)	371,746 —	1,956,861 (261,035)
194,754	930	1,084,390	18,563	20,699	4,744	371,746	1,695,826
194,754 (1,690) 23,906 6,329 (38,000) (4,773) 115,835 — (7,169)	930 16 1,268 — — — — — (415)	1,084,390 (1,532) 21,471 5,600 — — — (224) (51,655)	18,563 (72) 6,097 — — — — (183) (6,390)	20,699 (26) 3,332 — — — — (2) (2,048)	4,744 (4) 2,294 — — — — (3) (2,162)	371,746 (550) 55,427 (11,929) — — — — —	1,695,826 (3,858) 113,795 — (38,000) (4,773) 115,835 (412) (69,839)
289,192	1,799	1,058,050	18,015	21,955	4,869	414,694	1,808,574
289,192 —	6,712 (4,913)	1,267,334 (209,284)	54,167 (36,152)	35,648 (13,693)	28,616 (23,747)	414,694 —	2,096,363 (287,789)
289,192	1,799	1,058,050	18,015	21,955	4,869	414,694	1,808,574

ANNUAL REPORT 2014

Notes to the Financial Statements

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 2014 on the basis of open market value carried out by Savills Valuation and Professional Services Limited, an independent firm of chartered surveyors, according to the Group’s policy as set out in note 2.4. During the year ended 31 March 2014, land and buildings of HK$38,000,000 (2013: HK$31,000,000) were reclassified to investment properties with a revaluation surplus before taxation of HK$20,511,000 (2013: HK$8,290,000) being credited to other comprehensive income.

Land and buildings in Hong Kong, held on leases of between 10 and 50 years Cost or valuation Accumulated depreciation Net book amount Buildings outside Hong Kong Cost or valuation Accumulated depreciation Net book amount	Group	Group
	2014 HK$’000 39,000 — 39,000 250,192 — 250,192	2013 HK$’000 43,822 (8,336)
		35,486
		172,057 (12,789)
		159,268

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
	2014 HK$’000 92,889 (13,035) 79,854	2013 HK$’000 100,725 (15,703)
		85,022

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

14 PROPERTY, PLANT AND EQUIPMENT — GROUP (continued)

The analysis of the cost or valuation at 31 March 2014 and 2013 of the above assets is as follows:

At cost At valuation As at 31 March 2013 At cost At valuation As at 31 March 2014	Land and buildings HK$’000 — 215,879 215,879 — 289,192 289,192	Furniture and fixtures HK$’000 8,218 — 8,218 6,712 — 6,712	Machinery and equipment HK$’000 1,247,332 — 1,247,332 1,267,334 — 1,267,334	Motor vehicles and vessels HK$’000 50,551 — 50,551 54,167 — 54,167	Leasehold improvements HK$’000 35,281 — 35,281 35,648 — 35,648	Office and computer equipment HK$’000 27,854 — 27,854 28,616 — 28,616	Construction- in-progress HK$’000 371,746 — 371,746 414,694 — 414,694	Total HK$’000 1,740,982 215,879
								1,956,861
								1,807,171 289,192
								2,096,363

At 31 March 2014 and 2013, construction-in-progress represented costs incurred for buildings, machinery and equipment in Shandong and Nantong, the PRC, for the construction of paper mills.

At 31 March 2014, land and buildings with carrying value amounted to approximately HK$51,908,000 (2013: HK$54,777,000) were pledged as securities for bank borrowings made available to the Group (note 37).

At 31 March 2014, the net book amount of motor vehicles held by the Group under finance leases was HK$3,890,000 (2013: HK$3,376,000).

Depreciation expenses of HK$68,664,000 (2013: HK$57,620,000) has been charged in selling and administrative expenses and cost of sales and HK$1,175,000 (2013: HK$4,491,000) has been included in inventories.

ANNUAL REPORT 2014

Notes to the Financial Statements

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 Exchange differences Amortisation (note 6) At 31 March	Group	Group
	2014 HK$’000 157,483 970 (227) (4,350) 153,876	2013 HK$’000 159,762 — 1,208 (3,487)
		157,483

16 INVESTMENT PROPERTIES

INVESTMENT PROPERTIES
At 1 April Transfer from property, plant and equipment (note 14) Transfer to non-current assets held for sale (note 21) Fair value gains (notes 5 and 6) At 31 March	Group
	2014 HK$’000 163,601 38,000 — 24,399 226,000	2013 HK$’000 165,997 31,000 (110,000) 76,604
		163,601

The investment properties were revalued at 31 March 2014 and 2013 by independent, professionally qualified valuers, Savills Valuation and Professional Services 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 and 50 years, are located in Hong Kong.

At 31 March 2014, the investment properties situated in Hong Kong with carrying value of HK$226,000,000 (2013: HK$163,601,000) were pledged as a security for bank borrowings made available to the Group (note 37).

An independent valuation of the Group’s investment properties was performed by the valuer, Savills Valuation and Professional Services Limited to determine the fair value of the investment properties as at 31 March 2014 and 31 March 2013. The fair value gains on investment properties is included in “Other gains and income, net” in consolidated profit and loss account. The following table analyses the investment properties carried at fair value, by valuation method.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

16 INVESTMENT PROPERTIES (continued)

Fair value hierarchy

Description Recurring fair value measurements Investment properties: — Factory building — Hong Kong Non-current assets held for sale: — Factory building — Hong Kong — Building — Singapore	Fair value measurements at 31 March 2014 using
	Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) HK$’000 HK$’000 HK$’000 — — 226,000 — — 118,000 — — 4,773

There were no transfers between Levels 1, 2 and 3 during the year.

All the fair values of the Group’s investment properties and non-current assets held for sale are measured at fair value hierarchy level 3 as at 31 March 2014.

Valuation processes of the group

The Group’s investment properties were valued at 31 March 2014 by independent professionally qualified valuers who hold a recognised relevant professional qualification and have recent experience in the locations and segments of the investment properties valued. For all investment properties, their current use equates to the highest and best use.

The Group’s finance department reviews the valuations performed by the independent valuers for financial reporting purposes. The department reports directly to the Chief Financial Officer (CFO). Discussions of valuation processes and results are held between the CFO, the valuation team and valuers at least once every year, in line with the group’s annual reporting date. As at 31 March 2014, the fair values of the properties have been determined by Savills Valuation and Professional Services Limited.

At each financial year end the finance department:

Verifies all major inputs to the independent valuation report;
Assess property valuations movements when compared to the prior year valuation report;
Holds discussions with the independent valuer.

Valuation techniques

For Hong Kong factory buildings, the valuation was determined using the income capitalization approach (term and reversionary method) which largely used observable inputs (e.g. market rent; yield, etc) and taking into account the significant adjustment on term yield to account for the risk upon reversionary and the estimation in vacancy rate after expiry of current lease.

For building in Singapore, the valuation was determined using the sale comparison approach. Sales prices of comparable properties in close proximity are adjusted for differences in key attributes such as property size. The most significant input into this valuation approach is price per square foot.

ANNUAL REPORT 2014

Notes to the Financial Statements

17 INTANGIBLE ASSETS

INTANGIBLE ASSETS
At 1 April 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 Year ended 31 March 2014 Opening net book amount Exchange differences Additions Amortisation (note 6) Closing net book amount At 31 March 2014 Cost Accumulated amortisation Net book amount		Group
	Computer software HK$’000 5,995 (1,766) 4,229 4,229 9 3,144 (759) 6,623 9,154 (2,531) 6,623 6,623 27 278 (896) 6,032 9,453 (3,421) 6,032	Goodwill HK$’000 40,424 — 40,424 40,424 489 — — 40,913 40,913 — 40,913 40,913 (622) — — 40,291 40,291 — 40,291	Total HK$’000 46,419 (1,766)
			44,653
			44,653 498 3,144 (759)
			47,536
			50,067 (2,531)
			47,536
			47,536 (595) 278 (896)
			46,323
			49,744 (3,421)
			46,323

Amortisation of HK$896,000 (2013: HK$759,000) is 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.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

17 INTANGIBLE ASSETS (continued)

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

Gross margin Growth rate Discount rate	Group
	2014 2013 32% 31% 0% 0% 8% 8%

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 2014 and 2013.

18 AVAILABLE-FOR-SALE FINANCIAL ASSETS

AVAILABLE-FOR-SALE FINANCIAL ASSETS
At 1 April Additions Disposals Net change in fair value transferred to equity (note 30) At 31 March	Group
	2014 HK$’000 5,624 — (252) 118 5,490	2013 HK$’000 5,258 252 — 114
		5,624

Available-for-sale financial assets include the following:

Unlisted securities: — Insurance policy — Other investment	Group	Group
	2014 HK$’000 4,321 1,169 5,490	2013 HK$’000 4,204 1,420
		5,624

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

United States dollars Renminbi	Group	Group
	2014 HK$’000 5,490 — 5,490	2013 HK$’000 5,372 252
		5,624

ANNUAL REPORT 2014

Notes to the Financial Statements

19 NON-CURRENT DEPOSITS AND PREPAYMENTS

The balance represents prepayments for land use right and purchase of machineries.

20 INTERESTS IN SUBSIDIARIES

INTERESTS IN SUBSIDIARIES
Unlisted shares, at cost (note (a)) Amounts due from subsidiaries (note (b))	Company
	2014 HK$’000 249,897 306,061	2013 HK$’000 249,897
		308,419

Notes:

(a) Particulars of the Company’s principal subsidiaries at 31 March 2014 are set out in note 40 to the consolidated financial statements.

(b) Amounts due from subsidiaries are unsecured, interest free and repayable on demand. The carrying amounts are mainly denominated in HK dollars (2013: same).

21 NON-CURRENT ASSETS HELD FOR SALE

Pursuant to the Board of Directors’ resolutions dated on 18 October 2013, a building located in Singapore with a carrying value of SGD775,795 (approximately HK$4,773,000) 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 building is classified as non-current asset held for sale as at 31 March 2014.

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 committed to a plan to sell and the disposal was expected to be completed within one year. As a result, the investment property is classified as non-current assets held for sale as at 31 March 2013. The asset has not been sold by 31 March 2014 as it takes longer time than expected to dispose of the property. Therefore, the asset remained as non-current assets held for sale as at 31 March 2014.

At 1 April Transfer from investment properties (note 16) Transfer from property, plant and equipment (note 14) Disposal Fair value gain (notes 5 and 6) At 31 March	Group	Group
	2014 HK$’000 110,000 — 4,773 — 8,000 122,773	2013 HK$’000 76,000 110,000 — (76,000) —
		110,000

At 31 March 2014, the non-current asset held for sale of HK$122,773,000 was pledged as a security for bank borrowings made available to the Group (2013: HK$110,000,000) (note 37).

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

21 NON-CURRENT ASSETS HELD FOR SALE (continued)

An independent valuation of the Group’s major non-current assets held for sale was performed by the valuer, Savills Valuation and Professional Services Limited to determine the fair value of the investment properties as at 31 March 2014 and 31 March 2013. The fair value gains on non-current assets held for sale is included in “Other gains and income, net” in consolidated profit and loss account.

At 31 March 2014, the non-current assets held for sale with the carrying value of HK$122,773,000 are under level 3 with fair value measurements using significant unobservable inputs in the fair value hierarchy (note 16).

Valuation processes of the group

The Group’s major non-current assets held for sale were valued at 31 March 2014 by independent professionally qualified valuers who hold a recognised relevant professional qualification and have recent experience in the locations and segments of the investment properties valued. For all investment properties, their current use equates to the highest and best use.

At each financial year end the finance department:

Verifies all major inputs to the independent valuation report;
Assess property valuations movements when compared to the prior year valuation report;
Holds discussions with the independent valuer.

Valuation techniques

ANNUAL REPORT 2014

Notes to the Financial Statements

22 INVENTORIES

INVENTORIES
Merchandise and finished goods Raw materials	Group
	2014 HK$’000 585,789 174,866 760,655	2013 HK$’000 529,966 174,570
		704,536

The cost of inventories recognised as expenses and included in cost of sales amounted to HK$4,359,390,000 (2013: HK$3,757,519,000).

As at 31 March 2014, the inventories of the Group are stated after a provision for impairment on inventories of approximately HK$43,111,000 (2013: HK$53,931,000).

23 ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS

ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS
Accounts receivable — net of provision Other receivables, deposits and prepayments	Group
	2014 HK$’000 1,226,996 723,083 1,950,079	2013 HK$’000 1,100,971 667,355
		1,768,326

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
	2014 HK$’000 905,999 166,828 154,169 1,226,996	2013 HK$’000 838,037 136,097 126,837
		1,100,971

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

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 considered fully recoverable. As at 31 March 2014, accounts receivable of HK$111,114,000 (2013: HK$94,698,000) 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
	2014 HK$’000 83,237 27,877 111,114	2013 HK$’000 52,147 42,551
		94,698

As at 31 March 2014, accounts receivable of HK$77,567,000 (2013: HK$88,476,000) 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
	2014 HK$’000 88,476 (2,354) (3,738) (8,717) 3,900 77,567	2013 HK$’000 83,855 179 — (6,830) 11,272
		88,476

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.

ANNUAL REPORT 2014

Notes to the Financial Statements

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
	2014 HK$’000 726	2013 HK$’000 675

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

Changes in fair values of financial assets at fair value through profit or loss are recorded in “other gains and income, net” in the consolidated profit and loss account.

25 RESTRICTED BANK DEPOSITS

RESTRICTED BANK DEPOSITS
Pledged as securities for bills payables (note 37)	Group
	2014 HK$’000 205,893	2013 HK$’000 182,948

Restricted bank deposits earn interest at a fixed rate of 2.28% per annum (2013: 2.89% per annum).

The restricted bank deposits are denominated in the following currencies:

Renminbi Korean Won	Group	Group
	2014 HK$’000 205,893 — 205,893	2013 HK$’000 182,875 73
		182,948

26 BANK BALANCES AND CASH

BANK BALANCES AND CASH
Cash at bank and on hand Short-term bank deposits	Group 2014 2013 HK$’000 HK$’000 209,901 219,229 77,402 173,078 287,303 392,307	Company
	2014 HK$’000 209,901 77,402 287,303	2014 HK$’000 57 — 57	2013 HK$’000 59 —
			59

The effective interest rate on short-term bank deposits was 1.86% per annum (2013: 0.83% per annum). These deposits had an average maturity of three months or less.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

26 BANK BALANCES AND CASH (continued)

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) 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	Group
	2014 2013 HK$’000 HK$’000 287,303 392,307 — (2,855) 287,303 389,452 Group	2013 HK$’000 392,307 (2,855)
		389,452
	2014 HK$’000 1,217,049 304,348 1,521,397 (126,702) 1,394,695	2013 HK$’000 1,154,538 186,686
		1,341,224 (1,486)
		1,339,738

27 ACCOUNTS PAYABLE AND OTHER PAYABLES

Note:

(a) As at 31 March 2014, accounts payable of HK$80,387,000 were unsecured, interest-bearing at 4.0% per annum and were repayable twelve months after the balance sheet date. The remaining balances of HK$43,844,000 were unsecured, interest-free and were repayable twelve months after the balance sheet date.

As at 31 March 2014, rental deposit received of HK$2,471,000 (2013: HK$1,486,000) is not repayable within one year.

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

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

Current to 60 days 61 to 90 days Over 90 days	Group	Group
	2014 HK$’000 733,272 176,890 306,887 1,217,049	2013 HK$’000 922,722 126,027 105,789
		1,154,538

ANNUAL REPORT 2014

Notes to the Financial Statements

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
	2014 HK$’000 400,000 52,903 3,479 456,382 561,703 77,750 639,453 910,849 37,617 — 2,156 950,622 1,590,075 2,046,457	2013 HK$’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

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 Over 5 years		Group	Group
	Bank overdrafts 2014 2013 HK$’000 HK$’000 — 2,855 — — — — — — — 2,855	Bank 2014 HK$’000 948,466 410,034 33,410 9,459 1,401,369	loans 2013 HK$’000 675,373 263,100 363,627 10,527 1,312,627	Trust receipt loans 2014 2013 HK$’000 HK$’000 639,453 774,408 — — — — — — 639,453 774,408
					774,408

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

28 BORROWINGS (continued)

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

Hong Kong dollars Renminbi United States dollars Singapore dollars Malaysia Ringgit	Group	Group
	2014 HK$’000 1,332,097 496,175 200,602 7,309 10,274 2,046,457	2013 HK$’000 1,391,558 481,856 200,053 11,771 11,233
		2,096,471

The effective interest rates at the balance sheet date on bank loans, bank overdrafts and trust receipt loans range from 1.6% to 7.2% per annum (2013: 1.6% to 7.0% 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$1,576,344,000 (2013: HK$1,552,322,000) as at 31 March 2014. 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	Group
	2014 HK$’000 2,274 3,528 103 5,905 (270) 5,635	2013 HK$’000 2,369 4,477 54
		6,900 (319)
		6,581

ANNUAL REPORT 2014

Notes to the Financial Statements

28 BORROWINGS (continued)

BORROWINGS (continued)
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 2014 2013 HK$’000 HK$’000 2,156 2,254 3,379 4,275 100 52 5,635 6,581
		2013 HK$’000 2,254 4,275 52 6,581

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 (2013: 3.8% to 6.5% per annum).

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$0.10 each 2014 2013 HK$’000 HK$’000 1,456,913,987 1,456,913,987 143,086,013 143,086,013 1,600,000,000 1,600,000,000 1,141,075,827 1,141,075,827 132,064,935 132,064,935 1,273,140,762 1,273,140,762	Share capital
	2014 HK$’000 1,456,913,987 143,086,013 1,600,000,000 1,141,075,827 132,064,935 1,273,140,762	2014 HK$’000 145,691 14,309 160,000 114,108 13,207 127,315	2013 HK$’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.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

29 SHARE CAPITAL (continued)

Notes: (continued)

(a) (continued)

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.

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 2014 and 2013, no convertible non-voting preference shares were converted.

ANNUAL REPORT 2014

Notes to the Financial Statements

29 SHARE CAPITAL (continued)

Notes: (continued)

(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 2014, no option has been granted under the Option Scheme (2013: 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 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 nil (2013: 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.
(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 was expired on 26 February 2014.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

30 RESERVES

Group

Share premium HK$’000 161,262 — — — — — — — — — —	Asset revaluation reserve HK$’000 192,373 — 8,290 6,720 114 — — — — (17,138) —	Capital reserve (note a) HK$’000 204,711 — — — — — — — (2,717) — —	Exchange reserve HK$’000 170,916 — — — — 20,638 — — — — —	Statutory reserve (note c) HK$’000 — — — — — — — — — — 8,266	Retained earnings HK$’000 682,252 63,661 — — — — (12,477) (5,092) — 17,138 (8,266)	Total HK$’000 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
161,262 161,262 — — — — — — — —	190,359 190,359 — 94,210 5,400 118 — — — —	201,994 201,994 — — — — — — — —	191,554 191,554 — — — — (12,189) — — —	8,266 8,266 — — — — — — — 682	737,216 737,216 57,196 — — — — (14,005) (5,092) (682)	1,490,651 1,490,651 57,196 94,210 5,400 118 (12,189) (14,005) (5,092) —
161,262 —	290,087 —	201,994 —	179,365 —	8,948 —	763,174 11,459	1,604,830 11,459
161,262	290,087	201,994	179,365	8,948	774,633	1,616,289

ANNUAL REPORT 2014

Notes to the Financial Statements

30 RESERVES (continued)

Company

Share premium HK$’000 161,262 — — —	Contributed surplus (note b) HK$’000 249,697 — — —	Retained earnings HK$’000 17,624 19,581 (12,477) (5,092)	Total HK$’000 428,583 19,581 (12,477) (5,092)
161,262 —	249,697 —	5,631 14,005	416,590 14,005
161,262 161,262 — — —	249,697 249,697 — — —	19,636 19,636 16,774 (14,005) (5,092)	430,595 430,595 16,774 (14,005) (5,092)
161,262 —	249,697 —	5,854 11,459	416,813 11,459
161,262	249,697	17,313	428,272

(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 in 2011 and the gain on disposal of 22.3% equity interests in a subsidiary of HK$170,660,000 in 2012.

(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.
(c) The amount is determined under the relevant laws and regulations in the PRC.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

31 DEFERRED TAXATION

Deferred taxation is calculated in full on temporary differences under the liability method using a principal taxation rate of 16.5% (2013: 16.5%).

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

At 1 April Charged to consolidated profit and loss account (note 8) Credited/(charged) directly to equity Exchange difference At 31 March	Group	Group
	2014 HK$’000 61,518 9,884 16,225 (3,228) 84,399	2013 HK$’000 63,130 4,667 (6,720) 441
		61,518

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

At 1 April (Charged)/credited to consolidated profit and loss account Exchange difference At 31 March		Group
	Provisions 2014 2013 HK$’000 HK$’000 10,998 — (3,808) 10,916 812 82 8,002 10,998	Tax losses 2014 2013 HK$’000 HK$’000 25,968 12,639 (12,753) 13,129 (23) 200 13,192 25,968	Total 2014 2013 HK$’000 HK$’000 36,966 12,639 (16,561) 24,045 789 282 21,194 36,966
				36,966

Deferred tax liabilities

Deferred tax liabilities
At 1 April Charged/(credited) directly to equity (notes 8) (Credited)/charged to consolidated profit and loss account Exchange difference At 31 March		Group
	Accelerated tax depreciation 2014 2013 HK$’000 HK$’000 58,932 29,497 — — (6,676) 28,712 (2,440) 723 49,816 58,932	Fair value gains 2014 2013 HK$’000 HK$’000 16,457 23,177 16,225 (6,720) — — — — 32,682 16,457	Others 2014 2013 HK$’000 HK$’000 23,095 23,095 — — — — — — 23,095 23,095	Total 2014 2013 HK$’000 HK$’000 98,484 75,769 16,225 (6,720) (6,676) 28,712 (2,440) 723 105,593 98,484
					98,484

ANNUAL REPORT 2014

Notes to the Financial Statements

31 DEFERRED TAXATION (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
	2014 HK$’000 7,120 (91,519) (84,399)	2013 HK$’000 8,249 (69,767)
		(61,518)

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 2014 was HK$20,000,000 (2013: HK$20,000,000). As at 31 March 2014, the interest rate under the interest rate swap was 1.73% (2013: 1.73%) per annum.

33 CONSOLIDATED STATEMENT OF CASH FLOWS

(a) Reconciliation of operating profit to net cash generated from/(used in) 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 Fair value gains on non-current assets held for sale Losses on disposal of non-current assets held for sale Gains on disposal of property, plant and equipment Realised and unrealised gains on derivative financial instruments Realised and unrealised gains on investments in financial assets at fair value through profit and loss (Written-back)/provision for impairment on receivables, net (Written-back)/provision for impairment on inventories Dividend income Interest income Operating profit before working capital changes Increase in inventories Increase in accounts receivable, deposits and prepayments Increase/(decrease) in accounts payable and accruals Effect of change in exchange rates Net cash generated from/(used in) operations	Group	Group
	2014 HK$’000 179,650 68,664 4,350 896 (24,399) (8,000) — (2,662) (88) (51) (4,817) (10,782) — (9,134) 193,627 (44,162) (176,936) 239,516 (12,536) 199,509	2013 HK$’000 172,576 57,620 3,487 759 (76,604) — 726 (174) (14) (1,398) 4,442 25,979 (8) (10,897)
		176,494 (19,362) (141,797) (59,317) (4,404)
		(48,386)

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

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 2014 HK$’000 1,312,627 (2,007) 1,098,228 (1,007,479) 1,401,369	loans 2013 HK$’000 1,304,674 7,101 1,094,928 (1,094,076)
		1,312,627

Net book amount Gains on disposal of property, plant and equipment	Group	Group
	2014 HK$’000 412 2,662 3,074	2013 HK$’000 1,325 174
		1,499

(d) Non-cash transaction

During the year, a non-controlling shareholder has undertaken a shareholder loan of HK$59,343,000 to a subsidiary of the Group. Such contribution was satisfied by debiting against the payable balances due to certain subsidiaries of the non-controlling shareholder as mutually agreed by the parties involved.

34 TRANSACTIONS WITH NON-CONTROLLING INTERESTS

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 noncontrolling 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)

ANNUAL REPORT 2014

Notes to the Financial Statements

35 BANK GUARANTEES

At 31 March 2014, 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 2014 amounted to HK$2,040,822,000 (2013: HK$2,089,890,000).

36 COMMITMENTS

(a) Capital commitments

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

Contracted but not provided Property, plant and equipment Contracted but not provided for	Group
	2014 2013 HK$’000 HK$’000 158,080 176,501

(b) 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.

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
	2014 HK$’000 27,197 17,204 1,920 46,321	2013 HK$’000 29,674 30,852 2,707
		63,233

(c) 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
	2014 HK$’000 15,245 26,681 41,926	2013 HK$’000 12,381 38,604
		50,985

SAMSON PAPER HOLDINGS LIMITED

Notes to the Financial Statements

37 CHARGE OF ASSETS

At 31 March 2014, trust receipt loans of HK$77,750,000 (2013: HK$71,188,000) and bank loans of HK$90,520,000 (2013: HK$70,711,000) 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$400,681,000 (2013: HK$328,378,000) (notes 14, 16 and 21).

At 31 March 2014, bills payables of HK$734,927,000 (2013: HK$669,373,000) are secured by restricted bank deposits of HK$205,893,000 (2013: HK$182,948,000) (note 25).

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
	2014 2013 HK$’000 HK$’000 227,486 226,942

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

(b) Year-end balances arising from purchases of goods

Payables to an investee company	Group
	2014 2013 HK$’000 HK$’000 102,246 88,299

As at 31 March 2014, accounts payable of HK$58,402,000 were unsecured, interest-free and were repayable with credit period of 90 days. The remaining balances of HK$43,844,000 were unsecured, interest-free and were repayable twelve months after the balance sheet date (note 27).

The carrying amounts are denominated in RMB (2013: same).

(c) Key management compensation

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

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 2014

Notes to the Financial Statements

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
				2014 & 2013
	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:
	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			the PRC
	High Flyer International	Hong Kong	1,000,000 ordinary	100	Logistics services
	Limited (Formerly known as		shares of HK$1 each		and others in
	“High Flyer Logistics (Hong				Hong Kong
	Kong) Limited”)
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 Financial Statements

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
				2014 & 2013
	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 Limited2		RMB61,650,000		products in the
					PRC
1	Samson Paper (Shenzhen)	The PRC	Registered capital	100	Trading of paper
	Company Limited2		HK$48,300,000		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		trading of paper
					products in the
					PRC
1	Universal Pulp and Paper	The PRC	Registered capital	79.93	Manufacturing &
	(Shandong) Co. Ltd.2		US$51,741,300		trading of paper
					products in the
					PRC

1 The statutory financial statements of these subsidiaries were not audited by PricewaterhouseCoopers.

2 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 2014

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

3/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

3/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 2014

50109_rns_2014-07-30_ae458737-ee8c-4dfe-8e02-9158e1b62359.pdf

Contents

Corporate Information

Board of Directors

Executive Directors

Non-executive Director

Independent Non-executive Directors

Company Secretary

Principal Bankers

Independent Auditor

Registered Office

Financial Highlights

CONSOLIDATED PROFIT AND LOSS ACCOUNT

CONSOLIDATED BALANCE SHEET

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

Chairman’s Statement

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

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

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

Changes in Constitutional Documents

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 2014