Dragon Mining Limited - Annual Report 2009

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2009 Annual Report

Contents
Corporate Information	2
Financial Highlights	3
Chairman’s Statement	5
Management Discussion and Analysis	9
Corporate Governance	13
Report of the Directors	18
Independent Auditor’s Report	25
Consolidated Profit and Loss Account	26
Consolidated Balance Sheet	27
Balance Sheet	28
Consolidated Statement of Changes in Equity	29
Consolidated Cash Flow Statement	30
Notes to the Accounts	31
Contacts	80

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 Construction Bank Corporation CITIC Ka Wah Bank 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 Oversea-Chinese Banking Corporation Limited Standard Chartered Bank (Hong Kong) Limited

Independent Auditor

PricewaterhouseCoopers Certified Public Accountants

Registered Office

Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Head Office and Principal Place of Business

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

Principal Share Registrar and Transfer Office

Butterfield Corporate Services Limited 6 Front Street Hamilton Bermuda

Hong Kong Share Registrar and Transfer Office

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

SAMSON PAPER HOLDINGS LIMITED

Financial Highlights

CONSOLIDATED PROFIT AND LOSS ACCOUNT

	For the year	ended 31 March
	2009	2008
	HK$’000	HK$’000
Revenue	3,744,184	3,834,380
Operating profit	84,469	145,790
Finance costs	48,481	53,587
Profit before taxation	36,154	93,482
Profit attributable to equity holders	19,433	71,564

CONSOLIDATED BALANCE SHEET

	As at 31 March	As at 31 March
	2009	2008
	HK$’000	HK$’000
Non-current assets	956,165	629,746
Current assets	2,091,216	2,261,852
Current liabilities	1,633,636	1,840,909
Shareholders’ funds	959,139	813,958
Non-current liabilities	446,460	227,700
SHARE STATISTICS
Earnings per share — basic	HK4.4 CENTS	HK16.7 CENTS
Earnings per share — diluted	HK4.0 CENTS	HK16.7 CENTS
Dividends per share	HK1.0 CENT	HK5.0 CENTS
Net asset value per ordinary share	HK192 CENTS	HK192 CENTS

ANNUAL REPORT 2009

Financial Highlights

REVENUE

SHAREHOLDERS’ FUNDS

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HK$
Million
4,000 3,834 3,744
3,500
3,120 3,147
2,944
3,000
2,500
2,000
1,500
1,000
500
0
04/05 05/06 06/07 07/08 08/09
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PROFIT ATTRIBUTABLE TO EQUITY HOLDERS

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RETURN ON SHAREHOLDERS’ FUNDS

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SAMSON PAPER HOLDINGS LIMITED

Chairman’s Statement

The Economy

The economy went from one extreme to the other in the first and second half of the financial year under review. During the first six months, both the economy in Hong Kong Special Administrative Region (“Hong Kong” or “HK”) and the People’s Republic of China (the “PRC”) flourished and achieved remarkable growth. However, in the second half year, when the global financial turmoil began to spread, the two economies slowed down significantly and offset the growth achieved in the first half year. The GDP of Hong Kong reported a modest increase of 3.8% in calendar year 2008 and that for the first quarter of calendar year 2009 shrank by a considerable 7.3% year-on-year, indicative of an overall decline in all sectors.

The GDP of China was also down to 6.8% in the fourth quarter of 2008 and was only 9.0% for the full year, the weakest in the past seven years.

The Printing and Paper Product Industries

For the Hong Kong market, with export dragged down by the global recession, demand for printing paper also declined, offsetting the growth in the first half of the financial year.

The PRC paper industry remained stable during the year with the country reporting outstanding economic performance during the first half of the financial year. According to PRC Paper Association figures, the market consumed 79.8 million metric tonnes of paper in calendar year 2008, representing year-on-year growth of 8.6%. In the same period, total output of paper products increased by 8.9% to 79.4 million metric tonnes. However, demand for paper products in the PRC dropped considerably in the second half of the financial year.

The gloomy economic outlook has also posed pressure on paper prices. The price of book printing paper and packaging boards fluctuated and fell significantly in the last quarter of calendar year 2008.

Operations Review

During the review year, Samson Group (the “Group”) faced unprecedented challenges. Turmoil in the financial markets and a sudden and drastic tightening of credits since August 2008 gave a tremendous shock to the economy, followed closely by a reduction in private sector consumption and a drastic decline in China exports. Operating under such difficult economic conditions, the Group’s revenue and gross profit remained stable, down only slightly by 2.4% and 2.6% to HK$3,744 million and HK$356 million respectively supported by the satisfactory results achieved in the first half of the year. Amid the tough market conditions, profit attributable to shareholders decreased by 72.8% to HK$19.4 million (2008: HK$71.6 million) resulting from the contraction of the market demand, tremendous price volatility and increased competition during the second half of the year.

Moreover, the Group incurred a fair value loss on investment properties of HK$2 million and unrealised forex year end closing rate translation loss on inter-companies transaction balances of HK$6.3 million for the year versus a revaluation gain on investment properties of HK$11 million and unrealised respective forex year end closing rate translation gain of HK$5.1 million respectively recorded last year. Disregarding the above noncash adjustment items of fair value on investment properties and unrealised forex year end closing translation on inter-companies transaction balances, the profit attributable to shareholders should have been HK$27.8 million against HK$55.5 million last year, representing a decrease of 50%. Basic earnings per share were HK4.4 cents (2008: HK16.7 cents).

In the face of the adverse market situation, the Group continued to maintain a sound balance sheet and healthy working capital by further controlling the levels of accounts receivable, inventories and capital expenditure. As a result, the level of accounts receivable was drastically reduced by 38.8% to HK$716 million compared to HK$1,170 million last year while the level of inventories was decreased by 16.7% to HK$436 million compared to HK$523 million last year even though the Group’s turnover was only slightly down by 2.4%. A timely bank loan of HK$420 million was arranged in June 2008 providing the Group with a cash buffer to weather the current crisis. This helps to reduce the short term bank borrowings from HK$360 million last year to HK$148 million in the current financial year. Apart from these measures, the Group has further tightened its policies on customers selection, granting of credits and entered into a credit insurance policy on receivables. This proved to be successful. The collection period has been shortened by 9 days while provision for doubtful debts, after taking into account the provision written back of HK$2.9 million, decreased from 0.4% to 0.29% of total Group’s turnover.

ANNUAL REPORT 2009

Chairman’s Statement

To ensure the Group has strong cash reserve in the uncertain business environment, the Board does not recommend payment of a final dividend for the year ended 31 March 2009. Taking into account the interim dividend of HK1.0 cent per share already paid, the Group has adhered to the set policy of 30% yearly dividend payout ratio. As at 31 March 2009, the Group had cash on hand and restricted deposits of HK$665 million from prudent management of working capital.

By business segment, paper trading, paper manufacturing, consumable aeronautic parts & services, logistics services and marine services accounted for 90.7%, 3.6%, 2.8%, 0.9% and 2.0% of the Group’s total turnover respectively.

Paper Trading Business

During the year, the Group continued to manage its business on a conservative basis. In particular, it was more careful in selecting its customers amid the market downturn and tightening credit policy. Paper product sales of the Group declined by 5.4% to HK$3,396 million, with sales volume slipped by 10.2% to 524,700 metric tonnes, and operating profit down by 35.7% to HK$78.9 million.

The Group paid much attention on the PRC market which accounted for 52.6% of the Group’s total turnover. It made effort to broaden the sales network in the country so as to better capitalise on the relatively stable economy. During the year, the Group opened new offices in Qingdao and Hangzhou. However, with a decline in prices of paper products starting in the second quarter of the financial year, turnover from paper product sales in the PRC was HK$1,786 million, down by 6.5% from last year’s HK$1,911 million. To mitigate the credit risk exposure, the Group actively negotiated with customers for better business terms, tightened credit control policy and shortened payment collection period.

Hong Kong, the Group’s second key market, accounted for 40.8% of total paper product sales. It recorded turnover of HK$1,386 million, a 3.0% decline against last year. For other Asian countries such as Malaysia, the Group has been consolidating its business interests to control credit risk exposure. As a result, paper sales to Asian markets dropped by 9.9% to HK$223 million, which accounted for 6.6% of the turnover from paper trading business. As for Singapore-listed United Pulp & Paper Company Limited, an associated company of the Group, it made a profit of S$543,000 (HK$2.8 million), of which the Group’s share of profit is HK$166,000.

Book printing papers and packaging boards accounted for 49.1% and 36.3% of the Group’s total turnover respectively. Sales contributions from the two products remained stable.

Paper Manufacturing Business

The Group expanded upstream into paper manufacturing during the year. In February 2008, the Group acquired the entire assets of a paper mill in Shandong province, the PRC. The paper mill, which includes two production lines with a total annual output capacity of 170,000 metric tonnes of duplex boards, has started to contribute revenue and operating profit to the Group. The segment reported turnover and operating profit of HK$228.9 million including inter-companies sales and HK$7.1 million respectively. In view of the difficult operating environment, the management has taken measures to maintain a low level of inventories and raw materials in the mill to minimize the impact of the drop in prices in the third quarter of the financial year.

Consumable Aeronautic Parts and Services Business

The segment, which has been in operation for a few years, reported steady results. It achieved a 11% growth in revenue to HK$104.9 million and operating profit up by 40.2% against last year to HK$12.7 million despite of a slow down of business in the last quarter of the financial year.

Logistics Services Business

The Group continued to consolidate its logistics services business, focusing on providing services internally to its paper operation. As a result, turnover from the business declined by 38% to HK$33.6 million. Operating loss of HK$3.3 million were recorded after taking into account a fair value loss of HK$1 million on investment property against a fair value gain of HK$5.9 million last year.

SAMSON PAPER HOLDINGS LIMITED

Chairman’s Statement

Marine Services Business

The segment provides corrosion prevention services to the marine, oil and gas industries in Singapore with a trading arm supplying and distributing marine hardware and consumable products. Like most other industries, the marine industry has been affected by the effects caused by the global credit crunch. The segment recorded turnover of HK$75.2 million, representing a decrease of 22.4%, and the operating profit reduced significantly to HK$143,000. The Group remains positive of the marine industry in the longer term outlook as the orders of ship repair works gradually pick up and shipyards successfully renegotiate their contracts with ship and oil-rig owners.

Others

In November 2008, the Group raised approximately HK$100 million by issuing convertible non-voting preference shares (“CP shares”) to shareholders. At the same time, it issued bonus warrants to holders of both ordinary shares and CP shares of the Group with proceeds estimated at HK$76 million assuming full subscription of the new ordinary shares under the bonus warrant issue. In March 2009, HK$50 million was raised when the warrants were partially converted into fully paid ordinary shares. The total funding of HK$150 million raised during the year has strengthened the Company’s capital base giving its boosted working capital to cope with the uncertain economic environment ahead.

Prospects

The Chinese economy has been among the most resilient in the global economic downturn. The mainland government was quick to implement economic stimulus packages to brace domestic consumption and the economic stamina of the country. The management is therefore optimistic that the mainland economy will continue to achieve steady growth in and after 2009.

As for other parts of the world, consumer confidence will require time to recuperate. The Group’s overall performance in the first half of the coming financial year will not improve dramatically. However, the management is well equipped and will capture the opportunity when the market rebounds.

Looking at the paper industry, the prices of book printing paper and packaging boards started to stabilise in the last quarter of the financial year. Prices of various types of paper products began to increase in the range of 10% to 20% in March 2009 as compared with the trough in December 2008. The management believes demand for paper will become stable and hence paper prices when economic conditions gradually improve.

The Group commenced its paper manufacturing business in February 2008, supported by the paper mill in Shandong. The management is satisfied with the performance of the plant as it achieved satisfactory level of sales. Since the market started to recover and demand for paper products has been returned since the end of the second quarter of 2009, the plant is operating at its optimum level to meet customer’s demand. The Group is in the course to expand the mill, installing an additional production line that can produce up to 200,000 metric tonnes of kraft liner boards and corrugated medium per annum. When the new production line is completed and in operation, the annual production capacity of the Group currently at 170,000 metric tonnes will be more than doubled.

For its key revenue source paper trading business, the Group will focus on increasing sales in China. Expecting the proportion of customers from the PRC in its clientele to continue to grow, the Group will continue to enhance its presence in the country. The management believes there is still significant room for growth for the Group in markets in other regions of the mainland. It plans to open one to two more offices in the country in the coming year.

To boost the financial strength of the Group in the current economic downturn, the management will continue to tighten credit control policies and continue to sell products to reputable customers so as to minimise possible bad debts. With banks still keeping a tight credit grip, the Group will also preserve a high level of liquidity.

ANNUAL REPORT 2009

Chairman’s Statement

Apart from boosting its liquidity, the Group has also worked hard at controlling costs. It has reviewed the cost structure of each department and streamlined operations where appropriate. Furthermore, the management will continue to negotiate with landlords to reduce rent for warehousing and seek to maximize synergies between businesses aiming for cost benefits. Its decision to integrate logistics services business with paper business is set to allow the Group to reduce administration expenses. The management will continue to meticulously examine all aspects of the Group’s operation and apply relevant cost control measures to raise profit margin.

Looking ahead, the Group expects its paper trading business to deliver stable performance with prices already bottomed-out and its paper manufacturing business to grow in revenue. With the Group having a vertically integrated operation in place now, the management is confident of the long term development of the Group. However, given the still uncertain market environment, it is cautiously optimistic about the performance of the Group in the coming year.

Appreciation

On behalf of the Board, I would like to extend my gratitude to our customers, suppliers and bankers for their support in the past year. I wish to also express my appreciation to the management and staff for their diligence and dedication critical to seeing the Group through this severely testing time.

By Order of the Board SHAM Kit Ying Chairman

Hong Kong, 20 July 2009

SAMSON PAPER HOLDINGS LIMITED

Management Discussion and Analysis

Sales by Geographical Area

During the year, amid the market downturn, the Group’s revenue decreased slightly by 2.4% to HK$3,744 million.

With the Group’s strategic move during the year to expand business upstream to paper manufacturing and the dedicated effort to broaden its sales network in the PRC, the PRC paper market continued to be a main growth driver of the segment. Despite the slacken market demand in the second half of the financial year, the Group is able to sell the same level of paper products in tonnage to customers in the market with the support of the extensive sales network in the market. In value term, including the sales of paper manufacturing segment, revenue from paper products sales in the PRC market increased slightly by 0.5% to HK$1,921 million, making up 54.4% of the Group’s total revenue from paper products. Sales of paper products in Hong Kong contributed 39.3% while those in Malaysia and other Asian countries contributed the remaining 6.3% to the Group’s revenue from paper business. In volume term, the total sales of paper business in all geographical regions including paper manufacturing activity is 566,000 metric tonnes.

Apart from the paper business, the Group has diversified into the distribution business of consumable aeronautic parts and provision of related services, logistics services and marine services business. These business segments together contributed HK$213.7 million, 5.7% (2008: HK$245.7 million, 6.4%) of the Group’s total revenue.

2009 HK$ million Hong Kong Paper 1,386.4 Logistics services 24.9 The PRC Paper 1,920.6 Logistics services 8.7 Singapore Marine services 75.2 Aeronautic parts and services 104.9 Other regions Paper 223.5 Total revenue 3,744.2 Hong Kong Paper and Board Import/Re-export Statistics (January to December) (in ’000 Metric Tonnes) 2008 Import 1,064 Re-export 353 Local consumption 711	2008 HK$ million % change 1,429.5 -3.0% 44.7 -44.3% 1,911.1 0.5% 9.6 -9.4% 96.9 -22.4% 94.5 11.0% 248.1 -9.9% 3,834.4 -2.4% 2007 +/- 1,262 -15.7% 473 -25.4% 789 -9.9%

ANNUAL REPORT 2009

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	2008 20 390 540 1,000 640 450 540	2007 +/- 20 0.0% 450 -13.3% 560 -3.6% 1,130 -11.5% 700 -8.6% 530 -15.1% 620 -12.9% 4,010 -10.7%
	3,580

Analysis of the PRC’s Contribution to the Group’s Turnover of Paper Products

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 47.2% and 38.8% of the Group’s turnover of paper products respectively. Sales of book printing papers decreased by 12.5% resulting from the market downturn in the second half of the year while sales for packaging boards rose by 8% with the boost from the contribution of the paper manufacturing segment compared with the previous financial year.

SAMSON PAPER HOLDINGS LIMITED

Management Discussion and Analysis

Working Capital and Inventory Management

In view of the difficult operating environment, the Group has taken swift measures to mitigate the credit exposure on customers while at the same time to maintain the turnover. The Group has thoroughly reviewed the credit position of each customer, set new sales target for each reputable customer and enhanced the sale commission scheme focused on the collection period. These measures proved to be successful. The collection period was shorten by 9 days and the level of accounts receivable as at 31 March 2009 was reduced by 38.8% compared to last year. Impaired receivable provision after write back of the previous year’s impaired receivable of HK$2.9 million was reduced from HK$15.5 million to HK$10.7 million, a decrease of 31%.

To build up more cash reserve to weather the financial crisis, the Group has reduced the level of inventories while the level of the turnover was maintained and more sales offices were opened during the year. The average stock turnover day in tonnes was kept at 46 days.

Employees and Remuneration Policies

As at 31 March 2009, the Group employed 1,512 staff members, 155 of whom were based in Hong Kong and 921 were based in the PRC and 436 were based in other Asian countries. The Group’s remuneration policies are primarily based on prevailing market salary levels and the performance of the Group and of the individuals concerned. Remuneration policies are reviewed regularly to ensure that the Group is offering competitive employment packages. In addition to salary payments, other staff benefits include performance bonuses, education subsidies, provident fund, medical insurance and the use of a share option scheme to reward high-calibre staff. Training for various levels of staff is undertaken on a regular basis, consisting of development in the strategic, implementation, sales and marketing disciplines.

Liquidity and Financial Resources

The Group normally finances short term funding requirements with cash generated from operations, credit facilities available from suppliers and banking facilities (both secured and unsecured) provided by our bankers. The Group uses cash flow generated from operations and shareholders’ equity for the financing of long-term assets and investments. As at 31 March 2009, short term deposits plus bank balances and bank borrowings amounted to HK$665 million (including restricted bank deposits of HK$70 million) and HK$1,059 million respectively.

As at 31 March 2009, the Group’s gearing ratio was 29.5%, calculated as net debt divided by total capital. The Group’s gearing ratio decreased from last year of 45.3% as the Group’s total equity was further strengthened by the capital funds raised of HK$150 million during the year. Net debt of HK$405 million is calculated as total borrowings of HK$1,070 million (including trust receipt loans, short term and long term borrowings) less cash, bank balances and restricted deposits of HK$665 million. Total capital is calculated as total equity of HK$967 million plus net debt. The current ratio (current assets divided by current liabilities) was 1.28 times (2008: 1.23 times).

The intended increase in the long term bank borrowings and the reduction in the short term bank borrowings is to enable the Group to have a better working capital position and stronger balance sheet structure in light of the difficult operating environment.

With bank balances and other current assets of HK$2,091 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.

ANNUAL REPORT 2009

Management Discussion and Analysis

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 2009, bank borrowings in Renminbi amounted to HK$43 million (2008: HK$100 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. As at 31 March 2009, the Group has no outstanding interest rate swap contracts (2008: HK$50 million).

Contingent Liabilities and Charge of Assets

As at 31 March 2009, Samson Paper Holdings Limited (the “Company”) continued to provide corporate guarantees on banking facilities granted to the Group’s subsidiaries. The amounts of facilities utilised by the subsidiaries as at 31 March 2009 amounted to HK$1,059 million (2008: HK$1,006 million).

Certain prepaid premium for land leases, buildings and investment properties in Hong Kong of the Company’s subsidiaries, with a total carrying value of HK$160 million as at 31 March 2009 (2008: HK$163 million) were pledged to banks as securities for bank loans of HK$66.2 million (2008: HK$87.6 million) and trust receipt loans of HK$161 million (2008: HK$227 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 year of 2009, the Company has met the Code Provisions set out in the Code except that the non-executive Directors were not appointed for a specific term but are subject to retirement by rotation and re-election 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 21). 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 2009

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 and the Remuneration Committee are set out below:

	Attendance/Number	Attendance/Number	of Meetings
		Audit	Remuneration
Directors	Board	Committee	Committee
Executive Directors
Mr. SHAM Kit Ying (Chairman)	4/4
Mr. LEE Seng Jin
(Deputy Chairman and Chief Executive Officer) (note 1)	4/4		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	2/2
Mr. TONG Yat Chong	4/4	2/2	1/1
Mr. NG Hung Sui, Kenneth	4/4		1/1
Non-executive Director
Mr. LAU Wang Yip, Eric	4/4	2/2
Note 1: Chairman of Remuneration Committee
Note 2: Chairman of Audit 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, established in August 2005, 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 (Chairman) 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.

Nomination of Directors

The Company has not established a nomination committee. The Board as a whole is responsible for approving the appointment of its members and nominating them for election and re-election by the shareholders of the Company. New directors are sought mainly through referrals or internal promotion. In evaluating whether an appointee is suitable to act as a director of the Company, the Board will review the independence, professional knowledge, industry experience and personal skills of the appointee as well as personal ethics, integrity and time commitments of the appointee. During the year, there was no nomination of directors to fill board vacancies.

Audit Committee

The Company set up an Audit Committee in December 1998. The Audit Committee has clear terms of reference and is accountable to the Board. It assists the Board in meeting its responsibilities for ensuring an effective system of internal control and compliance, and in meeting its external financial reporting objectives. The Audit Committee comprises three non-executive Directors, two of them including the Chairman being independent. The current Committee members are:

Mr. Pang Wing Kin, Patrick (Chairman) Mr. Lau Wang Yip,Eric Mr. Tong Yat Chong

The Committee members possess diversified industry experience and the Chairman has professional qualifications and experience in financial matters. The Audit Committee met two times during the year, together with senior management and auditors, both internal and external, if considered necessary, to review the Company’s internal controls and risk management process, financial reporting and compliance procedures, financial results and reports and to assess the external auditor for re-appointment. The Audit Committee reviews the interim and annual financial statements before submission to the Board for approval. The Group’s unaudited interim results and audited annual results for 2009 had been reviewed by the Audit Committee which was of the opinion that the preparation of such results complied with the applicable accounting standards and requirements and that adequate disclosures had been made.

ANNUAL REPORT 2009

Corporate Governance

Audit Committee (continued)

The Audit Committee is also entrusted with monitoring and assessing the independence and objectivity of the external auditor and the effectiveness of the audit process. The annual fees for audit and non-audit services are subject to close scrutiny by the Audit Committee. The Audit Committee has recommended to the Board that PricewaterhouseCoopers be re-appointed as the Group’s external auditor at the coming Annual General Meeting.

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 2008/2009, 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 2008, 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 2009/2010 was held from 2 to 6 March 2009. The scope of the meeting included the following areas:

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

SAMSON PAPER HOLDINGS LIMITED

Corporate Governance

Business Planning and Budgeting (continued)

On the other hand, the half-yearly performance review for the year 2008/2009 (i.e. April to September 2008) was conducted in October 2008. 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.

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	1,700
(b) Tax compliance services	213
(c) Other assurance services	403

Directors’ Securities Transactions

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”) contained in Appendix 10 of the Listing Rules. Having made specific enquiry, all Directors have fully complied with the required standards set out in the Model Code throughout the year of 2009.

Financial Reporting

The 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 25.

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.

ANNUAL REPORT 2009

Report of the Directors

The Directors submit their report together with the audited accounts for the year ended 31 March 2009.

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 38 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 26.

The Directors have declared an interim dividend of HK1 cent per ordinary share, totalling HK$5,723,000, which was paid on 21 January 2009.

The Directors do not recommend the payment of a final dividend.

Reserves

Movements in the reserves of the Group and of the Company during the year are set out in note 29 to the accounts.

Donations

Charitable and other donations made by the Group during the year amounted to HK$189,000.

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 28 to the accounts.

Distributable Reserves

Distributable reserves of the Company at 31 March 2009, calculated under the Companies Act of 1981 of Bermuda (as amended), amounted to HK$253,415,000 (2008: HK$264,066,000).

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.

SAMSON PAPER HOLDINGS LIMITED

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 equity holders Total assets Total liabilities Total equity	2005 HK$’000 2,944,408 56,584 1,974,969 1,356,449 618,520	2006 HK$’000 3,120,108 30,449 2,029,301 1,391,402 637,899	2007 HK$’000 3,146,763 50,867 2,175,209 1,468,346 706,863	2008 HK$’000 3,834,380 71,564 2,891,598 2,068,609 822,989	2009 HK$’000 3,744,184
					19,433
					3,047,381 2,080,096
					967,285

Purchase, Sale or Redemption of Securities

The Company has not redeemed any of its shares during the year. Neither the Company nor any of its subsidiaries have 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 2009, no option has been granted under the Option Scheme. Terms and conditions of the Option Scheme are set out below.

(1) Purpose

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

(2) Participants

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

(3) Maximum number of shares

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

(4) Maximum entitlement of each Participant

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

ANNUAL REPORT 2009

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) (note) Mr. LEE Seng Jin (Deputy Chairman) Mr. CHOW Wing Yuen Ms. SHAM Yee Lan, Peggy (note) Mr. LEE Yue Kong, Albert

Non-executive Director

Mr. LAU Wang Yip, Eric (note)

Independent non-executive Directors

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

Note: Mr. SHAM Kit Ying, Ms. SHAM Yee Lan, Peggy and Mr. LAU Wang Yip, Eric retire in accordance with clause 99 of the Company’s bye-laws and, being eligible, offer themselves for re-election.

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.

SAMSON PAPER HOLDINGS LIMITED

Report of the Directors

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 83, is the founder and Chairman of the Group. Mr. Sham is responsible for the Group’s corporate vision and corporate development. He has over 50 years of experience in the paper distribution industry in Hong Kong.

Mr. LEE Seng Jin, aged 52, 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 50, 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 31 years of experience in the paper distribution industry in Hong Kong.

Ms. SHAM Yee Lan, Peggy, aged 43, is a Director of the Group. Ms. Sham joined the Group in 1989 and is responsible for the Group’s overall credit 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 53, 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 26 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 53, is a qualified accountant and has over 26 years of working experience in the auditing, finance and general management areas. Mr. Pang was appointed independent non-executive Director of the Company in 1995. He is a member of the CPA Australia, the Hong Kong Institute of Certified Public Accountants and the Institute of Internal Auditors of the United Kingdom.

Mr. LAU Wang Yip, Eric, aged 42, 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.

Mr. TONG Yat Chong, aged 52, is a qualified accountant and has over 24 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 42, is a solicitor practicing 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.

Mr. Ng was also appointed as an independent non-executive director of Mexan Limited (stock code: 22) on 19 April 2007. He has also been a member of the Criminal Law and Procedure Committee of the Law Society of Hong Kong since January 2007. He was appointed as a Notary Public of Hong Kong on 3 April 2008.

ANNUAL REPORT 2009

Report of the Directors

Biographical Details of Directors and Senior Management (continued)

Senior Management

Mr. CHU Wai Kwong, aged 52, is a Sales Director, Southern China of Samson Paper (China) Company Limited. He joined the Group in 1976. He has over 23 years of sales experience in the paper distribution industry and is responsible for the purchases of packaging boards and overseeing the general operations in Southern China.

Mr. HOI Tin On, Joseph, aged 47, is the General Manager of High Flyer Logistics (Hong Kong) Limited. He joined the Group in 1990. He has over 23 years of working experience in the paper distribution industry.

Mr. CHAN Kwok Keung, aged 49, is a Sales Director, Northern China of Samson Paper (China) Company Limited. He joined the Group in 1990 and has over 22 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 2009, 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

		Number	of ordinary shares beneficially	of ordinary shares beneficially	held
		Personal	Corporate	Family
	Capacity	interest	interest	interest	Total	Percentage
Mr. LEE Seng Jin	Beneficial owner	64,229,844	278,234,156	16,712,556	359,176,556	73.04%
Ms. SHAM Yee Lan,
Peggy	Beneficial owner	572,556	16,140,000	342,464,000	359,176,556	73.04%
Mr. CHOW Wing Yuen	Beneficial owner	540,000	—	—	540,000	0.11%

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

		Number of CP shares	Number of CP shares	beneficially held	beneficially held
		Personal	Corporate	Family
	Capacity	interest	interest	interest	Total	Percentage
Mr. LEE Seng Jin	Beneficial owner	—	132,064,935	—	132,064,935	92.30%

Warrant at a subscription price of HK$0.80 per share which will be expired on 4 June 2010

			Number of warrants held	Number of warrants held
		Personal	Corporate	Family
	Capacity	interest	interest	interest	Total	Percentage
Mr. LEE Seng Jin	Beneficial owner	6,171,489	—	2,785,426	8,956,915	27.23%
Ms. SHAM Yee Lan,
Peggy	Beneficial owner	95,426	2,690,000	6,171,489	8,956,915	27.23%
Mr. CHOW Wing Yuen	Beneficial owner	90,000	—	—	90,000	0.27%

SAMSON PAPER HOLDINGS LIMITED

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)

Save as disclosed above, as at 31 March 2009, none of the Directors and chief executives had any interests or short positions in the shares, underlying shares or debentures of, or had been granted, or exercised any rights to subscribe for shares (or warrants or debentures, if applicable) of, the Company and any of its associated corporation (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which had been recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

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

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

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

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

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

At 31 March 2009, 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)	278,234,156	56.58%
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	92.30%

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 2009.

ANNUAL REPORT 2009

Report of the Directors

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.

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.

The Company has been granted a three and a half-year revolving credit and term loan facility amounting to HK$420,000,000 in June 2008 which 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, 20 July 2009

SAMSON PAPER HOLDINGS LIMITED

Independent Auditor’s Report

羅兵咸永道會計師事務所

PricewaterhouseCoopers 22nd Floor Prince’s Building Central Hong Kong

Independent Auditor’s Report

To the shareholders of Samson Paper Holdings Limited

(incorporated in Bermuda with limited liability)

We have audited the consolidated accounts of Samson Paper Holdings Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages 26 to 79, which comprise the consolidated and Company balance sheets as at 31 March 2009, and the consolidated profit and loss account, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation and the true and fair presentation of these consolidated accounts 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. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of accounts that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

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

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

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

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

Opinion

In our opinion, the consolidated accounts give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2009 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, 20 July 2009

ANNUAL REPORT 2009

Consolidated Profit and Loss Account

For the financial year ended 31 March 2009

Note Revenue 5 Cost of sales Gross profit Other gains and income, net 5 Selling expenses Administrative expenses Other operating expenses Operating profit 6 Finance costs 7 Share of profit of an associated company Profit before taxation Taxation 8 Profit for the year Attributable to: Equity holders of the Company Minority interests Dividends 10 Earnings per share Basic 11 Diluted 11 Dividends per share Interim Proposed final	2009 HK$’000 3,744,184 (3,388,345) 355,839 10,904 (139,298) (124,314) (18,662) 84,469 (48,481) 166 36,154 (16,780) 19,374 19,433 (59) 19,374 5,723 4.4 cents 4.0 cents 1.0 cent — 1.0 cent	2008 HK$’000 3,834,380 (3,468,942)
		365,438 26,116 (122,623) (110,202) (12,939)
		145,790 (53,587) 1,279
		93,482 (21,119)
		72,363
		71,564 799
		72,363
		21,462
		16.7 cents
		16.7 cents
		2.5 cents 2.5 cents
		5.0 cents

SAMSON PAPER HOLDINGS LIMITED

Consolidated Balance Sheet

As at 31 March 2009

Note Non-current assets Property, plant and equipment 14 Prepaid premium for land leases 15 Non-current deposits 22 Investment properties 16 Intangible assets 17 Interest in an associated company 19 Deferred tax assets 31 Finance lease receivables 21 Current assets Inventories 20 Accounts receivable, deposits and prepayments 21 Financial assets at fair value through profit or loss 23 Taxation recoverable Restricted bank deposits 24 Bank balances and cash 25 Current liabilities Accounts payable and accrued charges 26 Trust receipt loans 27 Taxation payable Financial liabilities at fair value through profit or loss 23 Borrowings 27 Net current assets Total assets less current liabilities Equity Share capital 28 Reserves 29 Proposed final dividend 29 Shareholders’ funds Minority interests Total equity Non-current liabilities Borrowings 27 Other payable 30 Deferred tax liabilities 31	2009 HK$’000 673,755 63,260 — 115,000 38,631 60,140 5,379 — 956,165 435,750 976,854 11,434 2,428 70,046 594,704 2,091,216 946,792 523,060 10,466 356 152,962 1,633,636 457,580 1,413,745 63,485 895,654 — 895,654 959,139 8,146 967,285 393,763 33,975 18,722 446,460 1,413,745	2008 HK$’000 226,230 64,146 110,700 117,000 36,932 69,670 5,023 45 629,746 523,044 1,378,073 17,817 1,615 60,235 281,068 2,261,852 1,014,536 442,823 11,150 4,715 367,685 1,840,909 420,943 1,050,689 42,926
		760,301 10,731
		771,032 813,958 9,031 822,989 213,294 — 14,406 227,700 1,050,689

On behalf of the Board

SHAM Kit Ying Director

SHAM Yee Lan, Peggy Director

ANNUAL REPORT 2009

Balance Sheet

As at 31 March 2009

Note Non-current assets Interests in subsidiaries 18 Current assets Amounts due from subsidiaries 18 Dividend receivable from a subsidiary Tax recoverable Bank balances and cash 25 Current liabilities Accrued charges Net current assets Total assets less current liabilities Equity Share capital 28 Reserves 29 Proposed final dividend 29 Total equity On behalf of the Board	2009 HK$’000 249,897 290,990 — 20 89 291,099 385 290,714 540,611 63,485 477,126 — 477,126 540,611	2008 HK$’000 249,897 142,578 10,731 16 69 153,394 6 153,388 403,285 42,926
		349,628 10,731
		360,359 403,285

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 2009

Attributable to equity holders of the Company Share capital Other reserves Retained earnings Subtotal HK$’000 HK$’000 HK$’000 HK$’000 42,926 183,556 473,509 699,991 — 12,479 — 12,479 — 51,314 — 51,314 — 72 — 72 — 63,865 — 63,865 — — 71,564 71,564 — 63,865 71,564 135,429 — — — — — — (10,731) (10,731) — — (10,731) (10,731)	Attributable to equity holders of the Company Share capital Other reserves Retained earnings Subtotal HK$’000 HK$’000 HK$’000 HK$’000 42,926 183,556 473,509 699,991 — 12,479 — 12,479 — 51,314 — 51,314 — 72 — 72 — 63,865 — 63,865 — — 71,564 71,564 — 63,865 71,564 135,429 — — — — — — (10,731) (10,731) — — (10,731) (10,731)	Attributable to equity holders of the Company Share capital Other reserves Retained earnings Subtotal HK$’000 HK$’000 HK$’000 HK$’000 42,926 183,556 473,509 699,991 — 12,479 — 12,479 — 51,314 — 51,314 — 72 — 72 — 63,865 — 63,865 — — 71,564 71,564 — 63,865 71,564 135,429 — — — — — — (10,731) (10,731) — — (10,731) (10,731)	Attributable to equity holders of the Company Share capital Other reserves Retained earnings Subtotal HK$’000 HK$’000 HK$’000 HK$’000 42,926 183,556 473,509 699,991 — 12,479 — 12,479 — 51,314 — 51,314 — 72 — 72 — 63,865 — 63,865 — — 71,564 71,564 — 63,865 71,564 135,429 — — — — — — (10,731) (10,731) — — (10,731) (10,731)	Minority interests HK$’000 6,872 — 173 — 173 799 972 1,187 — —	Total HK$’000 706,863
Share capital HK$’000 42,926 — — — — — — — — —	Other reserves HK$’000 183,556 12,479 51,314 72 63,865 — 63,865 — — —	Retained earnings HK$’000 473,509 — — — — 71,564 71,564 — (10,731) (10,731)
					12,479 51,487 72
					64,038 72,363
					136,401 1,187 (10,731) (10,731)
42,926 —	247,421 —	512,880 10,731	803,227 10,731	9,031 —	812,258 10,731
42,926 42,926 — — — — — — 14,309 6,250 — — 63,485	247,421 247,421 (2,910) (746) (2,119) (5,775) — (5,775) 83,668 43,750 — — 369,064	523,611 523,611 — — — — 19,433 19,433 — — (10,731) (5,723) 526,590	813,958 813,958 (2,910) (746) (2,119) (5,775) 19,433 13,658 97,977 50,000 (10,731) (5,723) 959,139	9,031 9,031 — (826) — (826) (59) (885) — — — — 8,146	822,989
					822,989
					(2,910) (1,572) (2,119)
					(6,601) 19,374
					12,773 97,977 50,000 (10,731) (5,723)
					967,285

ANNUAL REPORT 2009

Consolidated Cash Flow Statement

For the year ended 31 March 2009

Note Operating activities Cash inflow generated from operations 32(a) Interest paid Hong Kong profits tax paid Overseas taxation paid Net cash inflow from operating activities Investing activities Decrease for non-current deposits Payment for subscription of rights issue of an associated company Proceeds from sales of rights issue of an associated company Purchase of property, plant and equipment Purchase of prepaid premium for land leases Purchase of intangible assets Proceeds from disposal of property, plant and equipment Capital element received from finance lease receivables Interest element received from finance lease receivables Proceeds from sale of investments in financial assets Interest received Dividends received from investments in financial assets Net cash outflow from investing activities Financing activities Bank loans raised 32(b) Repayment of bank loans 32(b) Repayment of finance lease liabilities Increase in restricted bank deposits Increase in trust receipt loans Dividends paid to shareholders Capital contribution from minority shareholders of subsidiaries Issuance of preference shares, net of issuance expenses Issuance of ordinary shares Net cash inflow from financing activities Effect of changes in exchange rates on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 25	2009 HK$’000 456,577 (48,481) (10,521) (6,706) 390,869 — — — (252,270) — (586) 1,431 1,658 61 — 6,784 1,149 (241,773) 410,563 (440,275) (9,303) (9,811) 80,237 (16,454) — 97,977 50,000 162,934 1,606 313,636 281,068 594,704	2008 HK$’000 106,110 (53,587) (3,048) (8,497)
		40,978
		(110,700) (6,624) 8,388 (125,310) (36,610) — 2,338 2,765 345 8,022 9,753 1,389
		(246,244)
		273,027 (117,642) (5,298) (46,140) 53,314 (21,462) 1,187 — —
		136,986
		12,786
		(55,494) 336,562
		281,068

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

1 GENERAL INFORMATION

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

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

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

These consolidated accounts are presented in thousands of units of Hong Kong dollars (HK$’000), unless otherwise stated. These consolidated accounts have been approved for issue by the Board of Directors on 20 July 2009.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

2.1 Basis of Preparation

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

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

(a) Amendments and interpretations effective in 2008/2009

HKAS 39, “Financial instruments: Recognition and measurement”, amendment on reclassification of financial assets permits reclassification of certain financial assets out of the held-for-trading and available-for-sale categories if specified conditions are met. The related amendment to HKFRS 7, “Financial instruments: Disclosures”, introduces disclosure requirements with respect to financial assets reclassified out of the held-for-trading and available-for-sale categories. The amendment is effective prospectively from 1 July 2008. This amendment does not have any impact on the Group’s accounts as the Group has not reclassified any financial assets.
HK(IFRIC) — Int 11, “HKFRS 2 — Group and treasury share transactions”, provides guidance on whether share-based transactions involving treasury shares or involving group entities (for example, options over a parent’s shares) should be accounted for as equity-settled or cash-settled share-based payment transactions in the stand-alone accounts of the parent and group companies. This interpretation does not have an impact on the Group’s accounts.
HK(IFRIC) — Int 12, “Service concession arrangements”, applies to contractual arrangements whereby a private sector operator participates in the development, financing, operation and maintenance of infrastructure for public sector services. This interpretation is not relevant to the Group’s operation because the Group does not provide public sector services.

ANNUAL REPORT 2009

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1 Basis of Preparation (continued)

(a) Amendments and interpretations effective in 2008/2009 (continued)
HK(IFRIC) — Int 14, “HKAS 19 — The limit on a defined benefit asset, minimum funding requirements and their interaction”, provides guidance on assessing the limit in HKAS 19 on the amount of the surplus that can be recognised as an asset. It also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement. This interpretation does not have any impact on the Group’s accounts as the Group does not operate any defined benefit pension plan.
(b) The following new standards, amendments to standards and interpretations have been published and are mandatory for the Group’s accounting period beginning or after 1 April 2009 or later periods, but the Group has not early adopted them:

HKFRS 1 and HKAS 27	Amendments to HKFRS 1 First-time adoption of HKFRSs and HKAS
Amendments	27 consolidated and separate financial statements — cost of an
	investment in a subsidiary, jointly controlled entity or associate2
HKFRS 2 Amendments	Share-based payment — vesting conditions and cancellations1
HKFRS 3 (Revised)	Business combinations2
HKFRS 8	Operating segments1
HKAS 1 (Revised)	Presentation of financial statements1
HKAS 23 (Revised)	Borrowing costs1
HKAS 27 (Revised)	Consolidated and separate financial statements2
HKAS 32 and HKAS 1	Financial instruments: presentation and HKAS 1 presentation of financial
Amendments	statements — puttable financial instruments and obligations arising on
	liquidation1
HKAS 39 Amendment	Financial instruments: recognition and measurement — eligible hedged
	items2
HK(IFRIC) — Int 9	Reassessment of embedded derivatives2
HK(IFRIC) — Int 13	Customer loyalty programmes3
HK(IFRIC) — Int 15	Agreements for the construction of real estate1
HK(IFRIC) — Int 16	Hedges of a net investment in a foreign operation4
HK(IFRIC) — Int 17	Distribution of non-cash assets to owners2
HK(IFRIC) — Int 18	Transfers of assets from customers2

In addition, the HKICPA has also issued Improvements to HKFRSs and Improvements to HKFRSs 2009.

Notes:

(1) Effective for financial periods beginning on or after 1 January 2009 (2) Effective for financial periods beginning on or after 1 July 2009 (3) Effective for financial periods beginning on or after 1 July 2008 (4) Effective for financial periods beginning on or after 1 October 2008

The Group is in the process of making an assessment of the impact of those new and revised HKFRSs upon initial application. So far, it has concluded that while the adoption of HKFRS 8 and HKAS 1 (Revised) may result in new or amended disclosures, those new and revised HKFRSs are unlikely to have a significant impact on the Group’s results of operations and financial position.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.2 Consolidation

The consolidated accounts include the accounts of the Company and all of its subsidiaries made up to 31 March.

(a) Subsidiaries

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

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

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the consolidated profit and loss account (note 2.10).

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary in the consolidated accounts, to ensure consistency with the policies adopted by the Group.

In the Company’s balance sheet the investments in subsidiaries are stated at cost less provision for impairment losses (note 2.3). The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

(b) Transactions with minority interests

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the consolidated profit and loss account. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.

(c) Associated companies

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss (note 2.10).

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the consolidated profit and loss account, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

ANNUAL REPORT 2009

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.2 Consolidation (continued)

(c) Associated companies (continued) Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

Dilution gains and losses arising in investments in associates are recognised in the consolidated profit and loss account.

2.3 Impairment of investments in subsidiaries, associates and non-financial assets

Assets that have an indefinite useful life are not subject to amortisation, but are tested at least annually for impairment. Assets 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.

2.4 Financial assets

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its investments 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 classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

(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 twelve months after the balance sheet date. These are classified as non-current assets. Loans and receivables are classified as trade and other receivables in the balance sheet.

Regular purchases and sales of financial assets are recognised on trade-date — the date on which the Group commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus transaction costs for all other 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. Other financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are 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 in the period in which they arise.

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.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.5 Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the assets is reduced through the use of an allowance account, and the amount of the loss is recognised in the profit and loss account within “other operating expenses”. When a receivable is uncollectible, it is written off against the allowance account for receivables. Subsequent recoveries of amounts previously written off are credited against “other operating expenses” in the profit and loss account.

2.6 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 balance sheet date.

2.7 Foreign currency translation

(a) Functional and presentation currency Items included in the accounts of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated accounts are presented in Hong Kong dollars, which is the Company’s functional and presentation currency.
(b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. 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, except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges.

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

(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 dates of the transactions); and

ANNUAL REPORT 2009

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.7 Foreign currency translation (continued)

(c) Group companies (continued) (iii) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is partially disposed or sold, such exchange differences that were recorded in equity are recognised in the profit and loss account as part of the gain or loss on sale.

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.

2.8 Property, plant and equipment

Buildings comprise mainly warehouses and offices. Subsequent to initial recognition, buildings are carried at their revalued amounts less subsequent accumulated depreciation and impairment losses. Valuation of buildings inside 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 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. 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.

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

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate cost or revalued amounts to their residual values over their estimated useful lives. The principal annual rates are as follows:

Buildings 2.5% to 5.9% Furniture and fixtures 10% to 25% Machinery and equipment 4% to 20% Office and computer equipment 10% to 20% Motor vehicles and vessels 20% Leasehold improvements 20% or over the unexpired lease period, whichever is shorter

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.8 Property, plant and equipment (continued)

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 2.3).

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

2.9 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 costs 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 the preceding paragraphs.

2.10 Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investment in associates. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The Company allocates goodwill to each business segment in each country in which it operates (note 2.3).

(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.

Computer software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed ten years.

ANNUAL REPORT 2009

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.11 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.

Land held under operating leases are classified and accounted for as investment property when the rest of the definition of investment property is met. The operating lease is accounted for as if it were a finance lease.

2.12 Operating 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.

2.13 Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less.

2.14 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.

2.15 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 balance sheet date.

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

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.15 Employee benefits (continued)

(b) Retirement benefit obligations

The Group operates a number of defined contribution schemes for all its employees in Hong Kong. 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 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.

2.16 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 directly in equity. In this case, the tax is also recognised in equity.

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 and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

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

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

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except 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.

ANNUAL REPORT 2009

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.17 Revenue recognition

Revenue comprises 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 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.

Sales commission is recognised when the right to receive payment is established.

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.

2.18 Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

2.19 Finance lease (as lessor)

When assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income.

Lease income is recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return.

When assets are leased out under an operating lease, the asset is included in the balance sheet based on the nature of the asset. Lease income from operating lease is recognised over the term of the lease on a straight-line basis.

2.20 Finance lease (as lessee)

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 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 other short-term and other long-term payables. 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.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.21 Provisions

Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

2.22 Dividend distribution

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

2.23 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.

3 FINANCIAL RISK MANAGEMENT

3.1 Financial risk factors

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

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

(a) Market risk

(i) Currency risk

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

To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, the Group enters into forward contracts to reduce foreign exchange risk.

The carrying amounts of the Group’s accounts receivable are mainly denominated in Hong Kong dollar and Renminbi. The carrying amounts of the Group’s accounts payable and accrued charges are mainly denominated in Renminbi and United States dollar. The carrying amounts of cash and bank balances are mainly denominated in Hong Kong dollar, Renminbi and United States dollar.

ANNUAL REPORT 2009

Notes to the Accounts

3 FINANCIAL RISK MANAGEMENT (continued)

3.1 Financial risk factors (continued)

(a) Market risk (continued)

(i) Currency risk (continued)

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 denominated in the relevant foreign currencies.

At 31 March 2009, if Hong Kong dollar had weakened/strengthened by 5% against the Renminbi with all other variables held constant, post-tax profit for the year would have been HK$6,546,000 (2008: HK$933,000) higher/lower, mainly as a result of offsetting the foreign exchange gains/ losses on translation of Renminbi-denominated bank balances and cash, trade and other receivables, and the foreign exchange losses/gains on translation of Renminbi-denominated borrowings. Profit or loss is more sensitive to movements in Hong Kong dollar/Renminbi exchange rates in 2009 than 2008 because of the decreased amount of Renminbi-denominated borrowings which acts a natural hedge against Renminbi-denominated bank balances and cash, and trade and other receivables.

Hong Kong dollar is pegged to United States dollar at a range between 7.75 to 7.85, the foreign exchange exposure between United States dollar and Hong Kong dollar is therefore limited.

Management considers that the Group is not exposed to significant foreign exchange risk arising from other foreign currencies, such as Euro, Singapore dollar, Japanese Yen, Korean Won and Malaysian Ringgits.

(ii) Price risk

The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated balance sheet as financial assets at fair value through profit or loss. The Group maintained these equity securities investments for long-term strategic purpose.

With all other variables held constant, if the average future prices of equity securities increase/ decrease by 5%, the impact on the Group’s profit would be a maximum increase/decrease of HK$558,000 (2008: HK$832,000).

(iii) Cash flow interest-rate risk

As the Group has no significant interest-bearing assets, the Group’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 2009, borrowings were primarily at floating rates.

At 31 March 2009, if interest rates on Hong Kong dollar-denominated borrowings had been 100 basis points higher/lower with all other variables held constant, post-tax profit for the year would have been HK$7,347,000 (2008: HK$5,549,000) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

3 FINANCIAL RISK MANAGEMENT (continued)

3.1 Financial risk factors (continued)

(b) Credit risk

The Group’s credit risk is primarily attributable to cash and bank deposits, trade and other receivables, and other financial assets (including derivative financial instruments) at fair value through profit or loss.

The Group’s cash and bank deposits and derivative financial instruments 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 investment grade credit rating. The amount of counterparties’ lending exposure to the Group is also an important consideration as a means to control credit risk.

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 trade and other receivables falls within the recorded allowances. There was no individual customer with balance representing more than 2.7% of the Group’s total trade receivables from third parties, thus there was no concentration of credit risk with respect to trade receivable as there are a large number of customers.

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

ANNUAL REPORT 2009

Notes to the Accounts

3 FINANCIAL RISK MANAGEMENT (continued)

3.1 Financial risk factors (continued)

(c) Liquidity risk

The Group has been prudent in liquidity risk management by maintaining sufficient cash and the availability of funding through an adequate amount of available credit facilities. The 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 and bank balances and cash (note 25)) 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.

	Less than	Between	Between
	1 year	1 and 2 years	2 and 5 years
	HK$’000	HK$’000	HK$’000
Group
At 31 March 2009
Bank borrowings	149,357	158,354	257,262
Trust receipt loans	525,065	—	—
Derivative financial instruments	356	—	—
Accounts payable, other payable and accrued
charges	946,792	33,975	—
Finance lease liabilities	5,676	4,698	1,681
At 31 March 2008
Bank borrowings	365,788	167,143	45,183
Trust receipt loans	445,037	—	—
Derivative financial instruments	4,715	—	—
Accounts payable and accrued charges	1,014,536	—	—
Finance lease liabilities	7,978	5,800	6,031
Company
At 31 March 2009
Accrued charges	385	—	—
At 31 March 2008
Accrued charges	6	—	—

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

3 FINANCIAL RISK MANAGEMENT (continued)

3.1 Financial risk factors (continued)

(c) Liquidity risk (continued)

The table below analyses the Group’s derivative financial instruments in respect of United States dollar forward or option contracts that will be settled on a gross basis 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 twelve months equal their carrying balances, as the impact of discounting is not significant.

	Group	Group
	Less than		Between
	1 year	1	and 2 years
	HK$’000		HK$’000
At 31 March 2009
Forward foreign exchange contracts — not qualified
for cash flow hedges:
— outflow	239,790		—
— inflow	239,776		—
At 31 March 2008
Forward foreign exchange contracts — not qualified
for cash flow hedges:
— outflow	210,677		101,360
— inflow	210,532		97,604
Interest rate swap contracts — not qualified for cash flow hedges
— outflow	50,000		—
— inflow	50,371		—

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.

Consistent with others in the industry, 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.

ANNUAL REPORT 2009

Notes to the Accounts

3 FINANCIAL RISK MANAGEMENT (continued)

3.2 Capital risk management (continued)

Total borrowings (note 27) Less: Cash, bank balances and restricted deposits Net debt Total equity Total capital Gearing ratio	Group	Group
	2009 HK’000 1,069,785 (664,750) 405,035 967,285 1,372,320 29.5%	2008 HK’000 1,023,802 (341,303)
		682,499 822,989
		1,505,488 45.3%

The decrease in the gearing ratio was due to the Group’s total equity being further strengthened by capital funds raised and the 40.7% decrease in net debt during the year.

3.3 Fair value estimation

The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date.

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) 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 trade and other receivables

The Group makes provision for impairment of receivables based on an assessment of the recoverability of trade and other receivables. Provisions are applied to trade 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 trade 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) Estimated impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.10. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates (note 17).

(e) Useful lives and impairment 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 calculation require the use of judgements and estimates.

(f) Fair value of investment properties

The fair value of each investment property individually is determined at each balance sheet date by independent professional valuers by reference to comparable market transactions and where appropriate on the basis of capitalisation of the net rental income/net income, after allowing for outgoings, and in appropriate cases provisions for reversionary income potential. These methodologies are based upon estimates of future results and a set of assumptions as to income and expenses of the property and future economic conditions. The fair value of each investment property reflects, among other things, rental income from current bases and assumptions about rental income from future leases in the light of current market conditions. The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property.

ANNUAL REPORT 2009

Notes to the Accounts

5 REVENUE, OTHER GAINS AND INCOME AND SEGMENT INFORMATION

Revenue recognised is as follows:

Revenue Sale of goods Provision of services Other gains and income, net Interest income Gain on sales of rights issue of an associated company Dividends income — listed investments Fair value (losses)/gains on investment properties Rental income Gains on disposal of property, plant and equipment Net losses on investments in financial assets Others	Group	Group
	2009 HK$’000 3,601,798 142,386 3,744,184 6,845 — 912 (2,000) 7,813 — (5,399) 2,733 10,904	2008 HK$’000 3,651,991 182,389
		3,834,380
		10,098 3,596 1,389 10,986 3,058 315 (4,976) 1,650
		26,116

(a) Primary reporting format — business segments

At 31 March 2009, the Group is organised on a worldwide basis into four main business segments:

(1) Manufacturing, trading and marketing of paper products;

(2) Provision of logistics services;
(3) Trading and marketing of aeronautic parts and provision of services; and
(4) Provision of marine services to marine, oil and gas industries.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

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

(a) Primary reporting format – business segments (continued)

The segment results for the year ended 31 March 2009 are as follows:

Total segment revenue Inter-segment revenue Revenue Segment results Finance costs (note 7) Share of profit of an associated company Profit before taxation Taxation (note 8) Profit for the year	Paper HK$’000 3,530,504 — 3,530,504 86,067 166	Logistics services HK$’000 72,257 (38,659) 33,598 (3,299) —	Aeronautic parts and services HK$’000 104,890 — 104,890 12,651 —	Marine services HK$’000 75,192 — 75,192 143 —	Unallocated HK$’000 — — — (11,093) —	Group HK$’000 3,782,843 (38,659) 3,744,184 84,469 (48,481) 166 36,154 (16,780) 19,374

The segment results for the year ended 31 March 2008 are as follows:

Total segment revenue Inter-segment revenue Revenue Segment results Finance costs (note 7) Share of profit of an associated company Profit before taxation Taxation (note 8) Profit for the year	Paper HK$’000 3,588,831 — 3,588,831 122,657 1,279	Logistics services HK$’000 98,182 (43,972) 54,210 1,051 —	Aeronautic parts and services HK$’000 94,463 — 94,463 9,024 —	Marine services HK$’000 96,876 — 96,876 15,723 —	Unallocated HK$’000 — — — (2,665) —	Group HK$’000 3,878,352 (43,972)
						3,834,380
						145,790 (53,587) 1,279
						93,482 (21,119)
						72,363

ANNUAL REPORT 2009

Notes to the Accounts

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

(a) Primary reporting format – business segments (continued)

Segment assets consist primarily of non-current assets and current assets except taxation and other corporate assets.

Segment liabilities comprise accounts payable and accrued charges, trust receipt loans, other financial liabilities at fair value through profit or loss and other payable.

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

The segment assets and segment liabilities at 31 March 2009 and capital expenditure for the year then ended are as follows:

Assets Associated company Segment assets Segment liabilities Capital expenditure (notes 14 and 17)	Paper HK$’000 2,710,244 60,140 2,770,384 1,458,481 476,752	Logistics services HK$’000 71,336 — 71,336 2,834 2,034	Aeronautic parts and services HK$’000 56,213 — 56,213 12,858 13	Marine services HK$’000 96,335 — 96,335 28,425 1,564	Unallocated HK$’000 53,113 — 53,113 577,498 46	Group HK$’000 2,987,241 60,140
						3,047,381
						2,080,096
						480,409

The segment assets and segment liabilities at 31 March 2008 and capital expenditure for the year then ended are as follows:

Assets Associated company Segment assets Segment liabilities Capital expenditure (notes 14 and 15)	Paper HK$’000 2,500,974 69,670 2,570,644 1,399,346 143,925	Logistics services HK$’000 87,368 — 87,368 8,115 4,761	Aeronautic parts and services HK$’000 48,865 — 48,865 19,226 841	Marine services HK$’000 127,373 — 127,373 33,706 20,354	Unallocated HK$’000 57,348 — 57,348 608,216 —	Group HK$’000 2,821,928 69,670
						2,891,598
						2,068,609
						169,881

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

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

(a) Primary reporting format – business segments (continued)

Other segment items included in the consolidated profit and loss account are as follows:

			Year ended 31	March 2009
			Aeronautic
		Logistics	parts and	Marine
	Paper	services	services	services Unallocated		Group
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Depreciation of property, plant
and equipment (note 14)	6,012	2,939	776	7,477	108	17,312
Amortisation of prepaid premium
for land leases (note 15)	719	—	—	—	62	781
Amortisation of intangible assets	86	—	—	—	—	86
			Year ended 31	March 2008
			Aeronautic
		Logistics	parts and	Marine
	Paper	services	services	services Unallocated		Group
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Depreciation of property, plant
and equipment (note 14)	5,613	2,795	647	7,412	101	16,568
Amortisation of prepaid premium for land leases (note 15)	1,506	—	—	—	62	1,568
Amortisation of intangible assets	—	—	—	—	—	—

ANNUAL REPORT 2009

Notes to the Accounts

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

(b) Secondary reporting format — geographical segments

The Group’s four business segments operate in three main geographical areas, even though they are managed on a worldwide basis.

	Group
Revenue 2009 2008 HK$’000 HK$’000 1,411,330 1,474,228 1,929,284 1,920,678 180,081 191,339 223,489 248,135 3,744,184 3,834,380 — — 3,744,184 3,834,380	Segment assets 2009 2008 HK$’000 HK$’000 1,250,698 1,282,129 1,519,852 1,279,673 152,548 176,238 71,170 96,210 2,994,268 2,834,250 53,113 57,348 3,047,381 2,891,598	Capital expenditure 2009 2008 HK$’000 HK$’000 9,573 8,061 467,738 140,410 1,623 21,195 1,475 215 480,409 169,881 — — 480,409 169,881
			169,881 —
			169,881

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

6 OPERATING PROFIT

Operating profit is stated after charging and crediting the following:

Charging Cost of inventories sold Depreciation of property, plant and equipment Amortisation of prepaid premium for land leases Amortisation of intangible assets Loss on disposal of property, plant and equipment Operating lease rentals in respect of land and buildings Transportation costs Provision for impairment on inventories Provision for impairment on receivables Employee benefits expenses (note 12) Auditor’s remuneration Unrealised losses on derivative financial instruments Net exchange losses Outgoings related to investment properties Crediting Net exchange gains Realised and unrealised gains on derivative financial instruments Provision for impairment on receivables written back	Group	Group
	2009 HK$’000 3,280,592 17,312 781 86 1,102 7,192 80,793 3,594 13,542 107,994 3,368 — 6,344 — — 3,456 2,863	2008 HK$’000 3,323,242 16,568 1,568 — — 6,766 101,146 886 16,276 139,771 1,942 7,940 — 1,177
		5,119 — 781

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

7 FINANCE COSTS

Interest on bank borrowings wholly repayable within 5 years Interest on trade credit facilities Less: amounts capitalised in property, plant and equipment and construction in progress	Group	Group
	2009 HK$’000 39,680 17,618 (8,817) 48,481	2008 HK$’000 41,090 12,497 —
		53,587

The weighted average interest rate on such capitalised borrowings is approximately 3.2%.

8 TAXATION

Hong Kong profits tax has been provided at the rate of 16.5% (2008: 17.5%) on the estimated assessable profit for the year. Taxation on overseas profits 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
	2009 HK$’000 8,964 6,436 330 1,050 16,780	2008 HK$’000 6,763 12,819 (850) 2,387
		21,119

ANNUAL REPORT 2009

Notes to the Accounts

8 TAXATION (continued)

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

Profit before taxation Less: Share of profit of an associated company Calculated at a taxation rate of 16.5% (2008: 17.5%) Effect of different taxation rates in other countries Income not subject to taxation Expenses not deductible for taxation purposes Tax losses not recognised Effect of change of tax rate Under/(over) provision in previous years Others	2009 HK$’000 36,154 (166) 35,988 5,938 839 (4,129) 10,611 2,461 (41) 330 771 16,780	2008 HK$’000 93,482 (1,279)
		92,203
		16,135 1,723 (6,454) 10,123 — — (850) 442
		21,119

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 2009 since the Group plans to reinvest such profits in the PRC and has no plan to distribute such profits in the foreseeable future.

9 PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The profit attributable to equity holders of the Company is dealt with in the accounts of the Company to the extent of HK$5,803,000 (2008: HK$21,501,000) (note 29).

10 DIVIDENDS

Interim — HK$0.01 (2008: HK$0.025) per ordinary share Interim — HK$0.01 (2008: Nil) per preference share Proposed final — Nil (2008: HK$0.025) per share	Group	Group
	2009 HK$’000 4,292 1,431 — 5,723	2008 HK$’000 10,731 — 10,731
		21,462

At a meeting held on 20 July 2009, the Directors do not recommend the payment of a final dividend.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

11 EARNINGS PER SHARE

(a) Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

Profit attributable to shareholders Weighted average number of ordinary shares in issue Basic earnings per share	Group	Group
	2009 HK$’000 19,433 438,302 4.4 cents	2008 HK$’000 71,564
		429,258
		16.7 cents

(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 two categories of dilutive potential ordinary shares: preference shares and warrants. The preference shares are assumed to be converted into ordinary shares. For the warrants, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s share) based on the monetary value of the subscription rights attached to outstanding warrants. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the warrants. The Company has a share option scheme but no share option (2008: nil) has been granted under the scheme. The exercise of warrants is anti-dilutive and therefore not included in the calculation of diluted earnings per share.

Profit attributable to shareholders Weighted average number of ordinary shares in issue Adjustments for: — Assumed conversion of preference shares — Share options and warrants Weighted average number of shares for diluted earnings per share Diluted earnings per share	Group	Group
	2009 HK$’000 19,433 438,302 52,138 — 490,440 4.0 cents	2008 HK$’000 71,564
		429,258 — —
		429,258
		16.7 cents

ANNUAL REPORT 2009

Notes to the Accounts

12 EMPLOYEE BENEFITS EXPENSES (INCLUDING DIRECTORS’ REMUNERATION)

Wages, salaries and bonus Contributions to pension schemes	Group	Group
	2009 HK$’000 103,499 4,495 107,994	2008 HK$’000 134,051 5,720
		139,771

13 DIRECTORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’ emoluments

The remuneration of every Director for the year ended 31 March 2009 is set out below:

2009 Fee Salary Discretionary bonuses Employer’s contribution to pension scheme Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Executive directors Sham Kit Ying — 5,459 1,800 — 7,259 Lee Seng Jin — 3,600 2,800 125 6,525 Sham Yee Lan, Peggy — 960 700 51 1,711 Chow Wing Yuen — 1,325 500 50 1,875 Lee Yue Kong, Albert — 1,140 700 44 1,884 Non-executive directors Pang Wing Kin, Patrick 80 — — — 80 Lau Wang Yip, Eric 80 — — — 80 Tong Yat Chong 100 — — — 100 Ng Hung Sui, Kenneth 80 — — — 80	2008
	Total HK$’000 6,039 7,325 1,809 2,174 1,983 80 80 100 80

2009
Fee
Salary
Discretionary
bonuses
Employer’s
contribution
to pension
scheme
Total
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
Executive directors
Sham Kit Ying
—
5,459
1,800
—
7,259
Lee Seng Jin
—
3,600
2,800
125
6,525
Sham Yee Lan, Peggy
—
960
700
51
1,711
Chow Wing Yuen
—
1,325
500
50
1,875
Lee Yue Kong, Albert
—
1,140
700
44
1,884
Non-executive directors
Pang Wing Kin, Patrick
80
—
—
—
80
Lau Wang Yip, Eric
80
—
—
—
80
Tong Yat Chong
100
—
—
—
100
Ng Hung Sui, Kenneth
80
—
—
—
80

2008

Total
HK$’000
6,039
7,325
1,809
2,174
1,983
80
80
100
80

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

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year included five (2008: five) Directors whose emoluments are reflected in the analysis presented above.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

14 PROPERTY, PLANT AND EQUIPMENT — GROUP

			Group
Buildings Inside Hong Kong Outside Hong Kong HK$’000 HK$’000 41,714 17,385 (970) (927) 40,744 16,458 40,744 16,458 — 1,372 — 7,986 17,526 — (33,086) — — — (786) (1,240) 24,398 24,576 25,971 26,849 (1,573) (2,273) 24,398 24,576 24,398 24,576 — (690) — — — — (603) (1,394) 23,795 22,492 25,971 26,140 (2,176) (3,648) 23,795 22,492	Furniture and fixtures HK$’000 7,181 (5,539) 1,642 1,642 33 354 — — — (488) 1,541 7,556 (6,015) 1,541 1,541 3 503 (712) (391) 944 6,959 (6,015) 944	Machinery and equipment HK$’000 69,696 (29,842) 39,854 39,854 3,963 14,164 — — — (7,164) 50,817 88,781 (37,964) 50,817 50,817 (4,445) 233,054 (103) (10,748) 268,575 315,727 (47,152) 268,575	Motor vehicles and vessels HK$’000 32,129 (15,966) 16,163 16,163 833 10,208 — — (2,008) (5,344) 19,852 39,570 (19,718) 19,852 19,852 (322) 4,458 (1,194) (6,041) 16,753 40,791 (24,038) 16,753	Leasehold improvements HK$’000 11,326 (10,616) 710 710 (158) 403 — — — (164) 791 11,606 (10,815) 791 791 206 835 — (253) 1,579 12,672 (11,093) 1,579	Office and computer equipment HK$’000 17,143 (14,303) 2,840 2,840 (110) 1,693 — — (15) (1,382) 3,026 18,500 (15,474) 3,026 3,026 3 2,638 (524) (1,291) 3,852 20,253 (16,401) 3,852	Construction in progress HK$’000 — — — — 2,766 98,463 — — — — 101,229 101,229 — 101,229 101,229 969 233,567 — — 335,765 335,765 — 335,765	Total HK$’000 196,574 (78,163)
							118,411
							118,411 8,699 133,271 17,526 (33,086) (2,023) (16,568)
							226,230
							320,062 (93,832)
							226,230
							226,230 (4,276) 475,055 (2,533) (20,721)
							673,755
							784,278 (110,523)
							673,755

Buildings situated in Hong Kong and major buildings situated outside Hong Kong were revalued at 31 March 2008 on the basis of open market value carried out by FPD Savills (Hong Kong) Limited, an independent firm of chartered surveyors. The remaining buildings situated outside Hong Kong were revalued at 31 March 2008 by the Directors. The buildings were stated at directors’ revaluation as at 31 March 2009.

ANNUAL REPORT 2009

Notes to the Accounts

14 PROPERTY, PLANT AND EQUIPMENT — GROUP (continued)

If buildings were stated on the historical cost basis, the amounts would be as follows:

Cost Accumulated depreciation Net book amount	Group	Group
	2009 HK$’000 33,858 (9,621) 24,237	2008 HK$’000 33,858 (8,618)
		25,240

The analysis of the cost or valuation at 31 March 2009 of the above assets is as follows:


Furniture and fixtures Machinery and equipment Motor vehicles and vessels Leasehold improvements Office and computer equipment HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 6,959 315,727 40,791 12,672 20,253 — — — — — 6,959 315,727 40,791 12,672 20,253 31 March 2008 of the above assets is as follows: 7,556 88,781 39,570 11,606 18,500 — — — — — 7,556 88,781 39,570 11,606 18,500	Construction in progress HK$’000 335,765 — 335,765 101,229 — 101,229	Total HK$’000 732,167 52,111
		784,278
		267,242 52,820
		320,062

At 31 March 2009, construction in progress represented costs incurred for the buildings, machineries and equipment in Shandong and Nantong, the PRC for the construction of paper mills.

At 31 March 2009, buildings situated in Hong Kong and outside Hong Kong with carrying value amounted to approximately HK$23,795,000 (2008: HK$24,398,000) and HK$6,044,000 (2008: HK$7,091,000) respectively were pledged as securities for bank borrowings made available to the Group (note 35).

As at 31 March 2009, the aggregate net book amount of machinery and equipment held by the Group under finance leases was HK$11,945,000 (2008: HK$14,559,000). The net book amount of motor vehicles held by the Group under finance leases was HK$5,806,000 (2008: HK$6,170,000).

Depreciation expenses of HK$17,312,000 has been charged in selling and administrative expenses and HK$3,409,000 has been included in inventories and construction in progress.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

15 PREPAID PREMIUM FOR LAND LEASES

The Group’s interests in leasehold land and land use rights represent prepaid operating lease payments and their net book value are analysed as follows:

In Hong Kong, held on: Leases of between 10 to 50 years Outside Hong Kong, held on: Leases of between 10 to 50 years At 1 April Exchange differences Additions Transfer to investment properties (note 16) Amortisation At 31 March	Group	Group
	2009 HK$’000 20,777 42,483 63,260 64,146 501 — — (1,387) 63,260	2008 HK$’000 21,324 42,822
		64,146
		48,785 1,568 36,610 (21,249) (1,568)
		64,146

At 31 March 2009, prepaid premium for land leases situated in Hong Kong with carrying value amounted to approximately HK$20,777,000 (2008: HK$21,324,000) were pledged as securities for bank borrowings made available to the Group (note 35).

Amortisation expenses of HK$781,000 has been charged in selling and administrative expenses and HK$606,000 has been included in inventories.

16 INVESTMENT PROPERTIES

At 1 April Transfer from property, plant and equipment (note 14) Transfer from prepaid premium for land leases (note 15) Fair value (losses)/gains At 31 March	Group	Group
	2009 HK$’000 117,000 — — (2,000) 115,000	2008 HK$’000 51,679 33,086 21,249 10,986
		117,000

The investment properties were revalued at 31 March 2009 by independent, professionally qualified valuers Centaline Surveyors Limited. Valuations were based on current prices in an active market for the properties.

ANNUAL REPORT 2009

Notes to the Accounts

16 INVESTMENT PROPERTIES (continued)

The Group’s interest in investment properties at its book values is analysed as follows:

In Hong Kong, held on: Leases of between 10 to 50 years	Group	Group
	2009 HK$’000 115,000 115,000	2008 HK$’000 117,000
		117,000

At 31 March 2009, the investment properties situated in Hong Kong with carrying value of HK$115,000,000 (2008: HK$117,000,000) were pledged as a security for bank borrowings made available to the Group (note 35).

17 INTANGIBLE ASSETS

INTANGIBLE ASSETS
At 1 April 2007 Cost Net book amount Year ended 31 March 2008 Opening net book amount Exchange differences Closing net book amount Year ended 31 March 2009 Opening net book amount Addition Amortisation Exchange differences Closing net book amount Year ended 31 March 2009 Cost Accumulated amortisation Net book amount		Group
	Computer software HK$’000 — — — — — — 5,354 (86) — 5,268 5,354 (86) 5,268	Goodwill HK$’000 32,414 32,414 32,414 4,518 36,932 36,932 — — (3,569) 33,363 33,363 — 33,363	Total HK$’000 32,414
			32,414
			32,414 4,518
			36,932
			36,932 5,354 (86) (3,569)
			38,631
			38,717 (86)
			38,631

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

17 INTANGIBLE ASSETS (continued)

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.

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

Gross margin	35%
Growth rate	0%
Discount rate	10%

Goodwill is associated with the marine services in Singapore.

The Directors are of the opinion that there was no impairment of goodwill as at 31 March 2009.

18 INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost (note (a)) Amounts due from subsidiaries (note (b))	Company	Company
	2009 HK$’000 249,897 290,990	2008 HK$’000 249,897
		142,578

Notes:

(a) Particulars of the Company’s principal subsidiaries at 31 March 2009 are set out in note 38 to the accounts.

(b) Amounts due are unsecured, interest free and repayable on demand.

ANNUAL REPORT 2009

Notes to the Accounts

19 INTEREST IN AN ASSOCIATED COMPANY

								Group	Group
								2009	2008
								HK$’000	HK$’000
Share of net assets								57,179	66,662
Goodwill								2,961	3,008
								60,140	69,670
Details of the Group’s associated company are as follows:
	Particulars
	of issued		Country of	Total	Total			Interest
Name	shares held		incorporation	assets	liabilities	Revenue	Profit	held	Principal activity
				HK$’000	HK$’000	HK$’000	HK$’000	%
2009
United Pulp & Paper Company	34,456,000 shares		Singapore	581,497	154,944	345,095	2,767	14.44%	Manufacture and
Limited (note i) (Listed in		of S$0.25 each							sale of paper and
Singapore)									paper products
2008
United Pulp & Paper Company	34,456,000 shares		Singapore	777,880	288,847	487,663	11,703	14.67%	Manufacture and
Limited (note i) (Listed in		of S$0.25 each							sale of paper and
Singapore)									paper products

(i) United Pulp & Paper Company Limited has a financial accounting year end of 31 December which is not conterminous with the Group.

(ii) United Pulp & Paper Company Limited is regarded as an associated company of the Group. The Group has director representation in United Plup & Paper Company Limited in which the Group can exercise significant influence over its financial and operating policies.

(iii) United Pulp & Paper Company Limited is listed on Singapore Exchange. The market value of the securities held by the Group as at 31 March 2009 is approximately HK$11,411,000 (2008: HK$54,413,000).

20 INVENTORIES

Merchandise and finished goods Raw materials	Group	Group
	2009 HK$’000 396,201 39,549 435,750	2008 HK$’000 521,139 1,905
		523,044

The cost of inventories recognised as expenses and included in cost of sales amounted to HK$3,280,592,000 (2008: HK$3,323,242,000).

As at 31 March 2009, inventories of the Group are stated at the lower of cost and net realisable value. The inventories for the Group are stated after a provision for inventories of approximately HK$17,995,000 (2008: HK$14,352,000).

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

21 ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS

Trade receivables — net of provision Other receivable, deposits and prepayments Finance lease receivables Finance lease receivables — non-current portion	Group	Group
	2009 HK$’000 715,510 261,344 — 976,854 — 976,854	2008 HK$’000 1,169,897 206,563 1,658
		1,378,118 (45)
		1,378,073

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

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

The ageing analysis of trade receivables is as follows:

Current to 60 days 61 to 90 days Over 90 days	Group	Group
	2009 HK$’000 505,951 101,404 108,155 715,510	2008 HK$’000 855,745 164,803 149,349
		1,169,897

There was no concentration of credit risk with respect to trade receivables as the Group had a large number of customers, which were widely dispersed within Hong Kong, the PRC and other countries.

Trade receivables that are less than 90 days past due are not considered impaired. As of 31 March 2009, trade receivables of HK$50,678,000 (2008: HK$44,035,000) were past due 90 days but not impaired. These related to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

91 — 120 days Over 120 days	Group	Group
	2009 HK$’000 3,151 47,527 50,678	2008 HK$’000 13,866 30,169
		44,035

As of 31 March 2009, trade receivables of HK$96,916,000 (2008: HK$89,515,000) were considered impaired. The individually impaired receivables mainly related to customers which are in unexpected difficult economic situations.

ANNUAL REPORT 2009

Notes to the Accounts

21 ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS (continued)

The movement of the provision for impairment of trade receivables is as follows:

At 1 April Exchange difference Net provision At 31 March	Group	Group
	2009 HK$’000 89,515 (3,278) 10,679 96,916	2008 HK$’000 72,484 1,536 15,495
		89,515

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.

Finance lease receivables

Non-current Finance leases — gross receivables Unearned finance income Current Finance leases — gross receivables Unearned finance income Gross receivables from finance leases: Not later than 1 year Later than 1 year and not later than 5 years Unearned future finance income on finance leases Net investment in finance leases The net investment in finance leases may be analysed as follows: Not later than 1 year Later than 1 year and not later than 5 years	Group	Group
	2009 2008 HK$’000 HK$’000 — 48 — (3) — 45 — 1,679 — (66) — 1,613 Group	2008 HK$’000 48 (3)
		45
		1,679 (66)
		1,613
	2009 HK$’000 — — — — — — — —	2008 HK$’000 1,679 48
		1,727 (69)
		1,658
		1,613 45
		1,658

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

22 NON-CURRENT DEPOSIT

The balance as at 31 March 2008 mainly represents payments to vendors for the purchase of paper manufacturing assets. Following a public auction held by the auctioneer in Shandong province, the PRC on 10 January 2008, the Group entered into an Assets Transfer Contract (the “Contract”) with the receivers of Shandong Huacai Paper Co. Ltd. (“Huacai”) and Shandong Huazhong Paper Co. Ltd. (“Huazhong”) to acquire production assets of both Huacai and Huazhong at a consideration of RMB385 million (approximately HK$414.9 million) on 20 February 2008. As at 31 March 2008, a security deposit of RMB100 million (approximately HK$107 million) was paid to the auctioneer pursuant to the Contract. The remaining consideration shall be settled upon the transfer of titles of all production assets.

23 FINANCIAL ASSETS/(LIABILITIES) AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets/(liabilities) at fair value through profit or loss Listed/quoted securities outside Hong Kong, at fair value Unlisted securities outside Hong Kong, at fair value Derivative financial assets Derivative financial liabilities	Group	Group
	2009 HK$’000 11,152 — 11,152 282 11,434 (356) 11,078	2008 HK$’000 13,853 2,779
		16,632 1,185
		17,817 (4,715)
		13,102

The fair value of listed/quoted equity securities is based on their current bid prices in an active market. Derivative financial instruments represent foreign exchange contracts entered into by the Group.

The notional principal amounts of the outstanding foreign exchange contracts at 31 March 2009 were HK$239,790,000 (2008: HK$312,037,000).

The notional principal amount of the outstanding interest rate swap contracts at 31 March 2009 were nil (2008: HK$50,000,000).

24 RESTRICTED BANK DEPOSITS

	Group
	2009	2008
	HK$’000	HK$’000
Pledged as securities for banking facilities	70,046	60,235

Restricted bank deposits earn interest at a fixed rate of 1.36% per annum (2008: 3.78% per annum).

The restricted bank deposits were denominated in Renminbi.

ANNUAL REPORT 2009

Notes to the Accounts

25 BANK BALANCES AND CASH

Cash at bank and in hand Short–term bank deposits	Group 2009 2008 HK$’000 HK$’000 460,597 249,201 134,107 31,867 594,704 281,068	Company	Company
	2009 HK$’000 460,597 134,107 594,704	2009 HK$’000 89 — 89	2008 HK$’000 69 —
			69

The effective interest rate on short-term bank deposits was 0.21% per annum (2008: 2.63% per annum). These deposits had an average maturity of 14 days (2008: 14 days).

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

Bank balances and cash	Group	Group
	2009 HK$’000 594,704 594,704	2008 HK$’000 281,068
		281,068

26 ACCOUNTS PAYABLE AND ACCRUED CHARGES

Trade and bills payables Accrued expenses and other payables Loan from a minority shareholder Amounts due to an associated company	Group	Group
	2009 HK$’000 703,948 232,472 999 9,373 946,792	2008 HK$’000 903,381 94,153 1,563 15,439
		1,014,536

The carrying values of the gross accounts payable and accrued charges approximated their fair values.

The loan from a minority shareholder and the amounts due to associated companies were unsecured, interest free and repayable on demand.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

26 ACCOUNTS PAYABLE AND ACCRUED CHARGES (continued)

The ageing analysis of trade and bills payables is as follows:

Current to 60 days 61 to 90 days Over 90 days BORROWINGS Non-current Bank loans — unsecured Bank loans — secured (note 35) Finance lease liabilities Total non-current borrowings Current Trust receipt loans — unsecured Trust receipt loans — secured (note 35) Bank loans — unsecured Bank loans — secured (note 35) Finance lease liabilities Total current borrowings Total borrowings	Group	Group
	2009 2008 HK$’000 HK$’000 513,811 766,492 157,187 48,915 32,950 87,974 703,948 903,381 Group	2008 HK$’000 766,492 48,915 87,974
		903,381
	2009 HK$’000 341,640 46,222 5,901 393,763 362,255 160,805 523,060 123,698 23,959 5,305 152,962 676,022 1,069,785	2008 HK$’000 131,515 71,055 10,724
		213,294
		215,659 227,164
		442,823
		339,007 21,375 7,303
		367,685
		810,508
		1,023,802

27 BORROWINGS

ANNUAL REPORT 2009

Notes to the Accounts

27 BORROWINGS (continued)

At 31 March 2009, the Group’s bank loans and trust receipt loans were repayable as follows:

Within one year In the second year In the third to fifth years inclusive		Group	Group
	Bank 2009 HK$’000 147,657 153,073 234,789 535,519	loans 2008 HK$’000 360,382 159,945 42,625	Trust receipt loans 2009 2008 HK$’000 HK$’000 523,060 442,823 — — — — 523,060 442,823
		562,952

The effective interest rate at the balance sheet date on bank loans and trust receipt loans was 2.3% per annum (2008: 3.0% per annum).

The carrying amounts of bank loans and trust receipt loans approximated their fair values.

The Group had undrawn borrowing facilities of HK$992,759,000 (2008: HK$452,938,000). All of the Group’s facilities were at floating rates.

The carrying amounts of total bank borrowings and trust receipt loans are denominated in the following currencies:

Hong Kong dollar Renminbi Singapore dollar	Group 2009 2008 HK$’000 HK$’000 1,001,421 888,535 42,975 100,343 14,183 16,897 1,058,579 1,005,775
	2009 HK$’000 1,001,421 42,975 14,183 1,058,579

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 Future finance charges on finance leases Present value of finance lease liabilities	Group	Group
	2009 HK$’000 5,676 6,379 12,055 (849) 11,206	2008 HK$’000 7,978 11,831
		19,809 (1,782
		18,027

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

27 BORROWINGS (continued)

Finance lease liabilities (continued)

The present value of finance lease liabilities is as follows: Not later than 1 year Later than 1 year and no later than 5 years	Group	Group
	2009 HK$’000 5,305 5,901 11,206	2008 HK$’000 7,303 10,724
		18,027

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

The effective interest rates at the balance sheet date ranged from 3.2% to 8.6% per annum (2008: 3.3% to 7.2% per annum).

28 SHARE CAPITAL

Authorised: Ordinary shares At the beginning of year Increase in authorised share capital (note (a)) At the end of year Convertible non-voting preference shares At the beginning of year Increase in authorised share capital (note (a)) At the end of year Total Issued and fully paid: Ordinary shares At the beginning of year Exercise of bonus warrants (note (b)) At the end of year Convertible non-voting preference shares At the beginning of year Issuance of preference shares (note (c)) At the end of year Total	Number of shares of HK$0.10 each 2009 2008 800,000,000 800,000,000 656,913,987 — 1,456,913,987 800,000,000 — — 143,086,013 — 143,086,013 — 1,600,000,000 — 429,258,039 429,258,039 62,500,000 — 491,758,039 429,258,039 — — 143,086,013 — 143,086,013 — 634,844,052 429,258,039	Share capital 2009 2008 HK$’000 HK$’000 80,000 80,000 65,691 — 145,691 80,000 — — 14,309 — 14,309 — 160,000 — 42,926 42,926 6,250 — 49,176 42,926 — — 14,309 — 14,309 — 63,485 42,926	Share capital 2009 2008 HK$’000 HK$’000 80,000 80,000 65,691 — 145,691 80,000 — — 14,309 — 14,309 — 160,000 — 42,926 42,926 6,250 — 49,176 42,926 — — 14,309 — 14,309 — 63,485 42,926
			80,000
			— —
			—
			—
			42,926 —
			42,926
			— —
			—
			42,926

ANNUAL REPORT 2009

Notes to the Accounts

28 SHARE CAPITAL (continued)

Notes:

(a) Pursuant to a special resolution passed at the Special General Meeting on 24 October 2008, the authorised share capital of the Company was increased to HK$160,000,000 divided into 1,456,913,987 ordinary shares of HK$0.10 each and 143,086,013 convertible non-voting preference shares (“CP shares”) of HK$0.10 each by the creation of additional 656,913,987 ordinary shares of HK$0.10 each and 143,086,013 CP shares of HK$0.10 each.
(b) On 5 December 2008, the Company issued 95,390,675 warrants on the basis of one warrant for every six existing ordinary shares and CP shares of the Company held by the shareholders (“bonus warrants”). The holders of bonus warrants are entitled to subscribe any time during 5 December 2008 to 4 June 2010 for ordinary shares at a subscription price of HK$0.80 per share. During the year, 62,500,000 ordinary shares of HK$0.10 each were issued upon the exercise of 62,500,000 units of bonus warrants. As at 31 March 2009, 32,890,675 units of bonus warrants remained outstanding.
(c) On 27 October 2008, 143,086,013 CP shares of HK$0.10 each were issued at HK$0.70 each and a total consideration of HK$100,160,000 was received. The rights, privileges and restrictions of the CP shares are set out below:

Dividend

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

Conversion

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

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

Voting rights

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

Transferability

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

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.

(d) The shareholders of the Company adopted a share option scheme to comply with the requirements of Chapter 17 of the Listing Rules. As at 31 March 2009 and 2008, no share option was granted or outstanding.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

29 RESERVES

Group

Group
At 1 April 2007 2006-2007 final dividend paid Profit for the year Surplus on properties revaluation (note 14) Deferred tax on property revaluation Currency translation differences Share of reserves of an associated company 2007-2008 interim dividend paid Reserves Proposed 2007-2008 final dividend At 31 March 2008 At 1 April 2008, as per above 2007-2008 final dividend paid Profit for the year Issuance of preference shares, net of issuance expenses Issuance of ordinary shares Deferred tax charged to equity Currency translation differences Share of reserves of an associated company 2008-2009 interim dividend paid At 31 March 2009	Share premium HK’000 96,293 — — — — — — —	Assets revaluation reserve HK’000 38,528 — — 17,526 (5,047) — — —	Capital reserve (note a) HK’000 33,311 — — — — — — —	Exchange fluctuation reserve HK’000 15,424 — — — — 51,314 72 —	Retained earnings HK’000 473,509 (10,731) 71,564 — — — — (10,731)	Total HK’000 657,065 (10,731) 71,564 17,526 (5,047) 51,314 72 (10,731)
	96,293 —	51,007 —	33,311 —	66,810 —	512,880 10,731	760,301 10,731
	96,293 96,293 — — 83,668 43,750 — — — — 223,711	51,007 51,007 — — — — (2,910) — — — 48,097	33,311 33,311 — — — — — — — — 33,311	66,810 66,810 — — — — — (746) (2,119) — 63,945	523,611 523,611 (10,731) 19,433 — — — — — (5,723) 526,590	771,032 771,032 (10,731) 19,433 83,668 43,750 (2,910) (746) (2,119) (5,723) 895,654

ANNUAL REPORT 2009

Notes to the Accounts

29 RESERVES (continued)

Company

Share premium HK$’000 96,293 — — —	Contributed surplus (note b) HK$’000 249,697 — — —	Retained earnings HK$’000 14,330 (10,731) (10,731) 21,501	Total HK$’000 360,320
			(10,731) (10,731) 21,501

96,293 —	249,697 —	3,638 10,731	349,628 10,731
96,293 96,293 — 83,668 43,750 — — 223,711	249,697 249,697 — — — — — 249,697	14,369 14,369 (10,731) — — (5,723) 5,803 3,718	360,359
			360,359
			(10,731) 83,668 43,750 (5,723) 5,803
			477,126

(a) The capital reserve of the Group represents 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.

(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.

30 OTHER PAYABLE

	Group
	2009	2008
	HK$’000	HK$’000
Purchases financed by a supplier	33,975	—

The amount represents funding provided by a supplier for purchase of machinery parts for the mill in Shandong province, the PRC of the Group.

The effective interest rate at the balance sheet date was 3.0% and repayable in the financial year ending 31 March 2010 and 31 March 2011.

The carrying value of other payable approximated its fair values.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

31 DEFERRED TAXATION

Deferred taxation are calculated in full on temporary differences under the liability method using a principal taxation rate of 16.5% (2008: 17.5%).

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

At 1 April Charged to profit and loss account (note 8) Charged directly to equity (note 29) At 31 March	Group	Group
	2009 HK$’000 9,383 1,050 2,910 13,343	2008 HK$’000 1,949 2,387 5,047
		9,383

Deferred income tax assets are recognised for tax loss carried forwards to the extent that realisation of the related tax benefit through the future taxable profits is probable. The Group has not recognised deferred tax assets of HK$2,461,000 (2008: Nil) in respect of losses that can be carried forward against future taxable income. Losses do not have any expiry date.

The movement in 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 Credited to profit and loss account At 31 March	Group	Group
	Tax losses 2009 2008 HK$’000 HK$’000 5,023 4,055 356 968 5,379 5,023
		5,023

Deferred tax liabilities

At 1 April Charged directly to equity (note 29) Charged/(credited) to profit and loss account At 31 March		Group
	Accelerated tax depreciation 2009 2008 HK$’000 HK$’000 6,468 5,036 — — 1,846 1,432 8,314 6,468	Fair value gains 2009 2008 HK$’000 HK$’000 7,938 968 2,910 5,047 (440) 1,923 10,408 7,938	Total 2009 2008 HK$’000 HK$’000 14,406 6,004 2,910 5,047 1,406 3,355 18,722 14,406
				14,406

ANNUAL REPORT 2009

Notes to the Accounts

31 DEFERRED TAXATION (continued)

The 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
	2009 HK$’000 5,379 (18,722) (13,343)	2008 HK$’000 5,023 (14,406)
		(9,383)

32 CONSOLIDATED CASH FLOW STATEMENT

(a) Reconciliation of operating profit to net cash inflow from operating activities

Operating profit Depreciation of property, plant and equipment Amortisation of prepaid premium for land leases Amortisation of intangible assets Fair value losses/(gains) on investment properties Losses/(gains) on disposal of property, plant and equipment Dilution loss on interest in an associated company Gain on sales of rights issue of an associated company Net losses on investments in financial assets Realised and unrealised (gains)/losses on derivative financial instruments Dividend income Interest income Operating profit before working capital changes Decrease/(increase) in inventories Decrease/(increase) in accounts receivable, deposits and prepayments (Decrease)/increase in accounts payable and accrued charges Effect of changes in exchange rates Net cash inflow generated from operations	Group	Group
	2009 HK$’000 84,469 17,312 781 86 2,000 1,102 948 — 5,399 (3,456) (912) (6,845) 100,884 89,320 399,146 (145,691) 12,918 456,577	2008 HK$’000 145,790 16,568 1,568 — (10,986) (315) — (3,596) 4,976 7,940 (1,389) (10,098)
		150,458 (170,819) (257,289) 364,897 18,863
		106,110

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

32 CONSOLIDATED CASH FLOW STATEMENT (continued)

(b) Analysis of changes in financing during the year

At 1 April Bank loans raised Repayment of bank loans Exchange difference At 31 March	Group	Group
	Bank 2009 HK$’000 562,952 410,563 (440,275) 2,279 535,519	loans 2008 HK$’000 406,547 273,027 (117,642) 1,020
		562,952

33 BANK GUARANTEES

At 31 March 2009, the Company continued to provide corporate guarantees on the banking facilities granted to the Group’s subsidiaries. The amount of facilities utilised by the subsidiaries as at 31 March 2009 amounted to HK$1,059,000,000 (2008: HK$1,006,000,000).

34 COMMITMENTS

(a) Capital commitments

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

Property, plant and equipment and land leases Contracted but not provided for Intangible assets, Contracted but not provided for	75 Group 2009 2008 HK$’000 HK$’000 371,799 492,438 — 1,150 371,799 493,588
	2009 HK$’000 371,799 — 371,799

(b) As at 31 March 2009, the Company had commitment in respect of the injection of capital into wholly-owned subsidiaries in the PRC amounted to approximately HK$148,506,000 (2008: HK$156,696,000).

ANNUAL REPORT 2009

Notes to the Accounts

34 COMMITMENTS (continued)

(c) Operating lease commitments

At 31 March 2009, 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	Group	Group
	2009 HK$’000 22,254 11,219 33,473	2008 HK$’000 34,147 24,907
		59,054

(d) Operating lease receivable

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
	2009 HK$’000 6,159 3,189 9,348	2008 HK$’000 11,557 13,862
		25,419

35 CHARGE OF ASSETS

At 31 March 2009, trust receipt loans of HK$160,805,000 (2008: HK$227,164,000) and bank loans of HK$70,181,000 (2008: HK$92,430,000) were secured by legal charges on the Group’s properties with net book amount of approximately HK$165,616,000 (2008: approximately HK$169,813,000) (notes 14, 15 and 16).

36 RELATED PARTY TRANSACTIONS

Significant related party transactions, which were carried out in the normal course of the Group’s business at prices and terms no less than those charged and contracted with other third party suppliers of the Group are as follows:

(a) Sale to and purchase from related parties (i) Purchase from an associated company (ii) Rental income from an associated company	Group	Group
	2009 HK$’000 21,210 87	2008 HK$’000 51,223 159

All the above transactions were carried out on the basis of the price lists in force with non-related parties.

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

36 RELATED PARTY TRANSACTIONS (continued)

		Group
		2009	2008
		HK$’000	HK$’000
(b)	Year-ended balances arising from sales/purchases of goods
	Payables to an associated company	9,373	15,439
	Receivables from an associated company	—	660

Amounts due were unsecured, interest free and repayable on demand.

37 ULTIMATE HOLDING COMPANY

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

38 PARTICULARS OF PRINCIPAL SUBSIDIARIES

			Particulars of issued
		Place of	and fully paid up share	Percentage
	Name of subsidiary	incorporation	capital/registered capital	holding	Nature of business
				2009 & 2008
	Shares held directly:
1	Samson Paper (BVI)	British Virgin Islands	110,000 ordinary shares	100	Investment holding
	Limited		of HK$1 each
	Shares held indirectly:
	Boardton Consultants	Hong Kong	10,000 ordinary shares	100	Property investment
	Limited		of HK$1 each
	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
1	Foshan NanHai JiaLing	The People’s	Registered capital	100	Processing and trading
	Paper Company	Republic of China	HK$81,380,000		or paper products in
	Limited2				the PRC
	Foundation Paper	Hong Kong	10,000 ordinary shares	100	Export trading of paper
	Company Limited		of HK$100 each		products to the PRC
1	Global Century	British Virgin Islands	1 ordinary share of US$1	100	Property holding
	Investments Limited
	High Flyer Logistics	Hong Kong	1,000,000 ordinary	100	Logistics services
	(Hong Kong) Limited		shares of HK$1 each

ANNUAL REPORT 2009

Notes to the Accounts

38 PARTICULARS OF PRINCIPAL SUBSIDIARIES (continued)

			Particulars of issued
		Place of	and fully paid up share	Percentage
	Name of subsidiary	incorporation	capital/registered capital	holding	Nature of business
				2009 & 2008
1	Shenzhen High	The People’s	Registered capital	80.4	Container transport
	Flyer International	Republic of China	RMB10,000,000		services
	Transportation Co.
	Ltd.2
1	Hypex Holdings	Singapore	2 ordinary shares of	100	Marine services to
	Limited2		US$1 each		shipyards
	Samson Paper	Hong Kong	100 ordinary shares of	100	Trading of paper
	Company Limited		HK$10 each		products
			2,850,000 non-voting	100
			shares of HK$10 each
1	Samson Paper (Beijing)	The People’s	Registered capital	100	Trading of paper
	Company Limited2	Republic of China	HK$16,380,000		products
	Samson Paper (China)	Hong Kong	1,000 ordinary shares of	100	Investment holding
	Company Limited2		HK$10 each
1	Samson Paper (M) Sdn.	Malaysia	2,250,000 ordinary	74.4	Manufacturing & trading
	Bhd.2		shares of RM1 each		of paper products
1	Samson Paper	The People’s	Registered capital	100	Trading of paper
	(Shanghai) Company	Republic of China	RMB61,650,000		products
	Limited2
1	Samson Paper	The People’s	Registered capital	100	Trading of paper
	(Shenzhen) Company	Republic of China	HK$17,000,000		products
	Limited2
	Shun Hing Paper	Hong Kong	7,600 ordinary shares of	100	Trading of paper
	Company		HK$100 each		products
			2,400 non-voting shares	100
			of HK$100 each
	United Aviation	Singapore	2 ordinary shares of	100	Trading of aeronautical
	(Singapore) Pte. Ltd.2		US$1 each		parts
1	Universal Pulp and	The People’s	Registered capital	100	Manufacturing & trading
	Paper (Shandong)	Republic of China	US$30,000,000		of paper products
	Co. Ltd.2

SAMSON PAPER HOLDINGS LIMITED

Notes to the Accounts

38 PARTICULARS OF PRINCIPAL SUBSIDIARIES (continued)

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

Foreign investment enterprises.

All subsidiaries operate in Hong Kong except otherwise stated.

The above table only listed those subsidiaries of the Company which, in the opinion of the Directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particular of excessive length.

ANNUAL REPORT 2009

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 Website: www.samsonpaper.com

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

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

Burotech Limited

4/F, Seapower Industrial Centre 177 Hoi Bun Road, Kwun Tong Kowloon, Hong Kong Customer Service Hotline: (852) 2736 1383 Fax Hotline: (852) 2342 8337

High Flyer Logistics (Hong Kong) Limited

4/F, Seapower Industrial Centre 177 Hoi Bun Road, Kwun Tong Kowloon, Hong Kong Customer Service Hotline: (852) 2191 8208 Fax Hotline: (852) 2191 8378

United Aviation (Singapore) Pte. Ltd.

Block 26, Ayer Rajah Crescent, #03-01/02 Ayer Rajah Industrial Estate Singapore 139944 Customer Service Hotline: (65) 6776 2356 Fax Hotline: (65) 6776 2357

Hypex Engineering Limited

132 Gul Circle, Singapore 629597 General Line: (65) 6897 7090 Fax Hotline: (65) 6897 7130

Shun Hing Paper Company Limited

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

Universal Pulp and Paper (Shandong) Co. Ltd.

Jinhe, Changzhuang Town, Xuecheng District, Zaozhuang City, Shandong Province, China Customer Service Hotline: (86) 632-440 1820 Fax Hotline: (86) 632-440 1830

SAMSON PAPER HOLDINGS LIMITED

AI assistant

Dragon Mining Limited — Annual Report 2009

50109_rns_2009-07-30_af903d61-e556-4d42-bc4d-402602494c11.pdf

Contents

Corporate Information

Board of Directors

Executive Directors

Non-executive Director

Company Secretary

Principal Bankers

Independent Auditor

Registered Office

Head Office and Principal Place of Business

Principal Share Registrar and Transfer Office

Hong Kong Share Registrar and Transfer Office

Financial Highlights

CONSOLIDATED PROFIT AND LOSS ACCOUNT

CONSOLIDATED BALANCE SHEET

Financial Highlights

REVENUE

SHAREHOLDERS’ FUNDS

PROFIT ATTRIBUTABLE TO EQUITY HOLDERS

RETURN ON SHAREHOLDERS’ FUNDS

Chairman’s Statement

The Economy

The Printing and Paper Product Industries

Operations Review

Chairman’s Statement

Paper Trading Business

Paper Manufacturing Business

Consumable Aeronautic Parts and Services Business

Logistics Services Business

Marine Services Business

Others

Prospects

Chairman’s Statement

Appreciation

Management Discussion and Analysis

Sales by Geographical Area

Management Discussion and Analysis

Sales by Geographical Area (continued)

Major Product Analysis

Working Capital and Inventory Management

Employees and Remuneration Policies

Liquidity and Financial Resources

Management Discussion and Analysis

Foreign Exchange Risk

Contingent Liabilities and Charge of Assets

Corporate Governance

Corporate Governance Practices

Board of Directors

Board of Directors (continued)

Chairman and Chief Executive Officer

Non-executive Directors

Remuneration of Directors

Nomination of Directors

Audit Committee

Audit Committee (continued)

Internal Control and Risk Management

Business Planning and Budgeting

Business Planning and Budgeting (continued)

Auditor’s Remuneration

Directors’ Securities Transactions

Financial Reporting

Communication with Shareholders

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 Securities

Share Options

(1) Purpose

(2) Participants

(3) Maximum number of shares

Dragon Mining Limited Annual Report 2009