Dragon Mining Limited — Annual Report 2014

Jun 24, 2014

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liabilities whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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SAMSON PAPER HOLDINGS LIMITED 森信紙業集團有限公司 *

(Incorporated in Bermuda with limited liability)

(Stock Code: 731)

ANNOUNCEMENT OF RESULTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2014

The board of directors (the “Board”) of Samson Paper Holdings Limited (the “Company”) is pleased to announce the consolidated results of the Company and its subsidiaries (the “Group”) for the financial year ended 31 March 2014 and consolidated balance sheet as at that date together with comparative figures for the financial year ended 31 March 2013. The annual results have been reviewed by the Company’s audit committee.

CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the year ended 31 March 2014

Note Revenue 2 Cost of sales Gross profit Other gains and income, net Selling expenses Administrative expenses Other operating income/(expenses) Operating profit 3 Finance costs Profit before taxation Taxation 4 Profit for the year	2014 2013 HK$’000 HK$’000 4,969,117 4,669,835 (4,517,576) (4,208,853) 451,541 460,982 72,694 111,872 (163,824) (177,283) (198,731) (197,515) 17,970 (25,480) 179,650 172,576 (92,235) (88,943) 87,415 83,633 (26,916) (18,626) 60,499 65,007

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Note Attributable to: Owners of the Company Non-controlling interests Earnings per share 5 Basic Diluted Dividends 6	2014 HK$’000 57,196 3,303 60,499 HK4.8 cents HK4.5 cents 16,551	2013 HK$’000 63,661 1,346
		65,007
		HK5.4 cents
		HK5.0 cents
		19,097

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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 gain, upon transfer from property, plant 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 2013 HK$’000 HK$’000 60,499 65,007 94,210 8,290 5,400 6,720 99,610 15,010 (12,282) 22,130 118 114 (12,164) 22,244 87,446 37,254 147,945 102,261 144,735 99,423 3,210 2,838 147,945 102,261	2013 HK$’000 65,007 8,290 6,720
		15,010
		37,254
		102,261
		99,423 2,838
		102,261

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As at 31 March 2014

CONSOLIDATED BALANCE SHEET

Note Non-current assets Property, plant and equipment Prepaid premium for land leases Investment properties Intangible assets Available-for-sale financial assets Non-current deposits and prepayments Deferred tax assets Current assets Inventories Accounts receivable, deposits and prepayments 7 Financial assets at fair value through profit or loss Taxation recoverable Restricted bank deposits Bank balances and cash Non-current assets held for sale Current liabilities Accounts payable and other payables 8 Trust receipt loans Taxation payable Derivative financial instruments Borrowings 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

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Note Equity Equity attributable to owners of the Company Share capital Reserves Proposed final dividend Non-controlling interests Total equity Non-current liabilities Accounts payable and other payables 8 Borrowings Deferred tax liabilities	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

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Notes :

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.

(a) New and amended standards

• (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 HKFRS Consolidated financial statements, joint arrangements and 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

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• (b) The following new and amended standards have been issued but are not effective for the financial year beginning 1 April 2014 and the Group has not early adopted:

		Effective for
		accounting periods
		beginning on or after
HKAS 19 (2011)	Defined benefit plans: employee contributions	1 July 2014
(Amendment)
HKAS 32 (Amendment)	Financial instruments: Presentation — offsetting	1 January 2014
	financial assets and financial liabilities
HKAS 36 (Amendment)	Recoverable amount disclosures for non-	1 January 2014
	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 and	Investment entities	1 January 2014
HKAS 27 (2011)
(Amendment)
HKFRS 7, HKFRS 9	Disclosures: Mandatory effective date of	1 January 2015
(Amendments)	HKFRS and transactional disclosures
HKFRS 14	Regulatory deferral accounts	1 January 2016
HK(IFRIC) — Int 21	Levies	1 January 2014
Annual Improvements	Annual improvements 2010–2012 cycle	1 July 2014
Projects
Annual Improvements	Annual improvements 2011–2013 cycle	1 July 2014
Projects

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. SEGMENT INFORMATION

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.

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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 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 Reportable segment assets Taxation recoverable Deferred tax assets Corporate assets Total assets Reportable segment liabilities Taxation payable Deferred tax liabilities Corporate liabilities Total liabilities	Paper trading HK$’000 4,288,689 (44,042) 4,244,647 134,153 8,170 10,626 864 847 3,091,638 1,848,156	Paper manufacturing HK$’000 767,634 (189,997) 577,637 52,625 947 48,938 3,409 45 2,328,190 277,142	Others HK$’000 153,676 (6,843) 146,833 3,613 17 9,100 77 4 169,192 35,538	Total HK$’000 5,209,999 (240,882) 4,969,117 190,391 (10,741) 179,650 (92,235) 87,415 (26,916) 60,499 9,134 68,664 4,350 896 5,589,020 3,749 7,120 75 5,599,964 2,160,836 26,575 91,519 1,407,431 3,686,361

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

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

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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 Revenue Non-current assets1 2014 2013 2014 2013 HK$’000 HK$’000 HK$’000 HK$’000 915,984 1,070,755 327,458 259,386 3,432,939 3,051,142 1,854,979 1,730,755 135,752 125,092 62,493 72,502 402,390 357,696 2,900 1,298 71,432 60,520 13,825 14,277 10,620 4,630 11 17 4,969,117 4,669,835 2,261,666 2,078,235	Group Revenue Non-current assets1 2014 2013 2014 2013 HK$’000 HK$’000 HK$’000 HK$’000 915,984 1,070,755 327,458 259,386 3,432,939 3,051,142 1,854,979 1,730,755 135,752 125,092 62,493 72,502 402,390 357,696 2,900 1,298 71,432 60,520 13,825 14,277 10,620 4,630 11 17 4,969,117 4,669,835 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 accounts, excludes Hong Kong Special Administrative Region of the PRC, Macau Special Administrative Region of the PRC and Taiwan.

3. OPERATING PROFIT

Operating profit is stated after charging and crediting the following:

Charging Cost of inventories sold Depreciation of property, plant and equipment Amortisation of prepaid premium for land leases Amortisation of intangible assets Operating lease rentals in respect of: — land and buildings Transportation costs Provision for impairment on inventories Provision for impairment on receivables Employee benefit expenses 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	Group 2014 2013 HK$’000 HK$’000 4,359,390 3,757,519 68,664 57,620 4,350 3,487 896 759 17,054 17,196 175,873 120,917 — 25,979 3,900 11,272 110,585 123,068 3,206 2,620 — 726 2,662 174 2,799 5,865 88 14 10,782 — 8,717 6,830	Group 2014 2013 HK$’000 HK$’000 4,359,390 3,757,519 68,664 57,620 4,350 3,487 896 759 17,054 17,196 175,873 120,917 — 25,979 3,900 11,272 110,585 123,068 3,206 2,620 — 726 2,662 174 2,799 5,865 88 14 10,782 — 8,717 6,830
		174 5,865 14 — 6,830

4. 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.

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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	Group 2014 2013 HK$’000 HK$’000 4,937 4,619 12,029 9,370 66 (30) 9,884 4,667 26,916 18,626	Group 2014 2013 HK$’000 HK$’000 4,937 4,619 12,029 9,370 66 (30) 9,884 4,667 26,916 18,626
		18,626

5. 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$’000) Weighted average number of ordinary shares in issue(’000) Adjustment for: — Preference shares(’000) Weighted average number of shares for diluted earnings per share(’000)_ Diluted earnings per share	Group 2014 2013 57,196 63,661 1,141,076 1,141,076 132,065 132,065 1,273,141 1,273,141 HK$ 4.5 cents HK 5.0 cents	Group 2014 2013 57,196 63,661 1,141,076 1,141,076 132,065 132,065 1,273,141 1,273,141 HK$ 4.5 cents HK 5.0 cents
		1,141,076 132,065
		1,273,141
		HK 5.0 cents

6. 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$0.011) per preference share	Group and Company 2014 2013 HK$’000 HK$’000 4,564 4,564 528 528 10,270 12,552 1,189 1,453 16,551 19,097	Group and Company 2014 2013 HK$’000 HK$’000 4,564 4,564 528 528 10,270 12,552 1,189 1,453 16,551 19,097
		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 accounts, but will be reflected as an appropriation of retained earnings for the year ending 31 March 2015.

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7. ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS

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

Current to 60 days 61 to 90 days Over 90 days	Group 2014 2013 HK$’000 HK$’000 905,999 838,037 166,828 136,097 154,169 126,837 1,226,996 1,100,971	Group 2014 2013 HK$’000 HK$’000 905,999 838,037 166,828 136,097 154,169 126,837 1,226,996 1,100,971
		1,100,971

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

8. ACCOUNTS PAYABLE AND OTHER PAYABLES

ACCOUNTS PAYABLE AND OTHER PAYABLES
Accounts and bills payables Accruals and other payables Less: non-current portions: Accounts payable and other payables	Group 2014 2013 HK$’000 HK$’000 1,217,049 1,154,538 304,348 186,686 1,521,397 1,341,224 (126,702) (1,486 1,394,695 1,339,738
		1,341,224 (1,486
		1,339,738

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

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

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MANAGEMENT DISCUSSION AND ANALYSIS

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, 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

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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.

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

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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.

FINAL DIVIDEND

The Board has resolved to recommend a final dividend of HK0.9 cent per share (2013: HK1.1 cents) payable on or around 21 October 2014 to persons who are registered shareholders of the Company on 26 September 2014 subject to the approval of shareholders at the forthcoming annual general meeting. Together with the interim dividend of HK0.4 cent per share (2013: HK0.4 cent), the total dividend for the financial year is HK1.3 cents per share (2013: HK1.5 cents).

CLOSURE OF REGISTER OF MEMBERS

The Register of Members of the Company will be closed from 17 September 2014 to 19 September 2014 (both days inclusive), during which period no transfer of shares will be effected. In order to qualify for the entitlement to attend and vote at the Meeting, all transfer of shares accompanied by the relevant share certificates must be lodged with the Company’s Hong Kong branch share registrar, Boardroom Share Registrars (HK) Limited, at 31/F, 148 Electric Road, North Point, Hong Kong for registration not later than 4:30 p.m. on 16 September 2014.

The Register of Members of the Company will be closed from 29 September 2014 to 30 September 2014 (both days inclusive), during which period no transfer of shares will be effected. In order to qualify for the proposed final dividend, all transfer of shares accompanied by the relevant share certificates must be lodged with the Company’s Hong Kong branch share registrar, Boardroom Share Registrars (HK) Limited, at 31/F, 148 Electric Road, North Point, Hong Kong for registration not later than 4:30 p.m. on 26 September 2014.

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.

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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.

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

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internal controls. The Committee has met with the senior management of the Company and the Company’s external auditor to review the final results for the year ended 31 March 2014 before recommending them to the Board for approval.

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.

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.

COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES OF THE LISTING RULES

In the opinion of the Directors, the Company was in compliance with the Code of Corporate Governance Practices as set out in Appendix 14 of Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) during the accounting period covered by the annual results except that the non-executive Directors were not appointed for a specific term but are subject to retirement by rotation and re-election at the Company’s annual general meetings in accordance with the bye-laws of the Company.

PUBLICATION OF DETAILED RESULTS ANNOUNCEMENT ON THE STOCK EXCHANGE’S WEBSITE

The 2013/2014 Annual Report of the Company containing all information required by the Listing Rules will be published on the Stock Exchange’s website (www.hkexnews.com.hk) and the Company’s website (www.samsonpaper.com) in due course.

BOARD OF DIRECTORS

As at the date of this announcement, the Board comprises five executive Directors, namely Mr. SHAM Kit Ying, Mr. LEE Seng Jin, Mr. CHOW Wing Yuen, Ms. SHAM Yee Lan, Peggy and Mr. LEE Yue Kong, Albert, one non-executive Director, Mr. LAU Wang Yip, Eric and three independent non-executive Directors, namely Mr. PANG Wing Kin, Patrick, Mr. TONG Yat Chong and Mr. NG Hung Sui, Kenneth.

By Order of the Board SHAM Kit Ying Chairman

Hong Kong, 24 June 2014

• for identification purpose only

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