Dragon Mining Limited — Interim / Quarterly Report 2008

Jan 4, 2008

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Interim Report 2007/2008

The board of directors (the “Board”) of Samson Paper Holdings Limited (the “Company”) is pleased to announce the unaudited condensed consolidated interim results of the Company and its subsidiaries (the “Group”) for the six months ended 30 September 2007 together with comparative figures for the corresponding period in 2006, and the unaudited condensed consolidated balance sheet of the Group as at 30 September 2007 with audited comparative figures as at 31 March 2007. The unaudited interim financial report has been reviewed by the Company’s audit committee, and the Company’s auditors, PricewaterhouseCoopers, in accordance with the Statement of Review Engagements 2410 “Review of interim financial information performed by the independent auditor of the entity” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The auditors, on the basis of their review, concluded that nothing has come to their attention that causes them to believe that the interim financial report is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34, “Interim Financial Reporting”.

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

Notes Turnover 2 Cost of sales Gross profit Other gains and income Selling expenses Administrative expenses Other operating expenses Operating profit 3 Finance costs Share of profits less losses of associated companies Profit before taxation Taxation 4 Profit for the period Attributable to: Equity holders of the Company Minority interests Earnings per share for profit attributable to the equity holders of the Company — Basic 5 Interim dividend per share Interim dividends 6	Unaudited Six months ended 30 September 2007 2006 HK$’000 HK$’000 1,949,218 1,686,671 (1,769,233) (1,538,614) 179,985 148,057 10,775 12,258 (60,856) (53,653) (55,195) (39,428) (4,142) (10,111) 70,567 57,123 (27,575) (27,956) 618 303 43,610 29,470 (7,734) (4,761) 35,876 24,709 35,766 24,462 110 247 35,876 24,709 HK 8.3 cents HK 5.7 cents HK 2.5 cents HK 1.5 cents 10,731 6,439	Unaudited Six months ended 30 September 2007 2006 HK$’000 HK$’000 1,949,218 1,686,671 (1,769,233) (1,538,614) 179,985 148,057 10,775 12,258 (60,856) (53,653) (55,195) (39,428) (4,142) (10,111) 70,567 57,123 (27,575) (27,956) 618 303 43,610 29,470 (7,734) (4,761) 35,876 24,709 35,766 24,462 110 247 35,876 24,709 HK 8.3 cents HK 5.7 cents HK 2.5 cents HK 1.5 cents 10,731 6,439
		148,057 12,258 (53,653) (39,428) (10,111)
		57,123 (27,956) 303
		29,470 (4,761)
		24,709
		24,462 247
		24,709
		HK 5.7 cents
		HK 1.5 cents
		6,439

Interim Report 2007/2008

1

CONDENSED CONSOLIDATED BALANCE SHEET

As at 30 September 2007

Notes Non-current assets Property, plant and equipment 7 Construction in progress 7 Prepaid premium for land leases 7 Investment property Intangible assets 8 Interest in associated companies Deferred tax assets Finance lease receivables Current assets Inventories Trade and other receivables 9 Other financial assets at fair value through profit or loss Restricted bank deposits Bank balances and cash Current liabilities Trade and other payables 10 Trust receipt loans 11 Taxation payable Other financial liabilities at fair value through profit or loss Borrowings 11 Net current assets Total assets less current liabilities Equity Share capital 12 Reserves Proposed dividend Equity attributable to shareholders of the Company Minority interests Total equity Non-current liabilities Borrowings 11 Deferred tax liabilities	Unaudited 30 September 2007 HK$’000 128,776 1,886 48,192 51,679 41,962 64,170 5,093 489 342,247 445,366 1,422,005 21,262 54,928 362,477 2,306,038 875,794 561,246 5,267 100 337,367 1,779,774 526,264 868,511 42,926 672,683 10,731 726,340 7,879 734,219 128,169 6,123 134,292 868,511	Audited 31 March 2007 HK$’000 118,411 — 48,785 51,679 32,414 57,976 4,055 1,518
		314,838
		352,225 1,122,076 34,446 14,095 337,529
		1,860,371
		649,967 389,509 2,348 406 262,953
		1,305,183
		555,188
		870,026
		42,926 646,334 10,731
		699,991 6,872
		706,863
		157,159 6,004
		163,163
		870,026

2

Samson Paper Holdings Limited

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 September 2007

Net cash (outflow)/inflow from operating activities Net cash (outflow)/inflow from investing activities Net cash inflow/(outflow) from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 April Effect of change in foreign exchange rate on bank and cash balances Cash and cash equivalents at 30 September Analysis of balances of cash and cash equivalents Bank balances and cash Bank overdrafts	Unaudited Six months ended 30 September 2007 2006 HK$’000 HK$’000 (139,319) 44,613 (15,127) 4,217 173,735 (19,527) 19,289 29,303 336,562 307,798 3,011 — 358,862 337,101 362,477 337,101 (3,615) — 358,862 337,101	Unaudited Six months ended 30 September 2007 2006 HK$’000 HK$’000 (139,319) 44,613 (15,127) 4,217 173,735 (19,527) 19,289 29,303 336,562 307,798 3,011 — 358,862 337,101 362,477 337,101 (3,615) — 358,862 337,101
		29,303 307,798 —
		337,101
		337,101 —
		337,101

3

Interim Report 2007/2008

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2007

At 1 April 2006 Profit for the period Share of reserve of an associated company Currency translation difference Proposed 2005–2006 final dividend Proposed 2006–2007 interim dividend At 30 September 2006 At 1 April 2007 Profit for the period 2006–2007 final dividend Currency translation difference Capital injection by a minority shareholder Proposed 2007–2008 interim dividend At 30 September 2007	Share capital HK’000 42,926 — — —	Share premium HK’000 96,293 — — —	Assets revaluation reserve HK’000 26,408 — — —	Capital reserve HK’000 33,311 — — —	Unaudited Exchange fluctuation reserve HK’000 1,658 — (1,031) (2,467)	Retained earnings HK’000 433,373 24,462 — 19	Sub-total HK’000 633,969 24,462 (1,031) (2,448)	Minority interests HK’000 3,930 247 — —	Total HK’000 637,899 24,709 (1,031) (2,448)
	42,926 — —	96,293 — —	26,408 — —	33,311 — —	(1,840) — —	447,123 4,292 6,439	644,221 4,292 6,439	4,177 — —	648,398 4,292 6,439
	42,926 42,926 — — — —	96,293 96,293 — — — —	26,408 38,528 — — — —	33,311 33,311 — — — —	(1,840) 15,424 — — 1,314 —	457,854 473,509 35,766 (10,731) — —	654,952 699,991 35,766 (10,731) 1,314 —	4,177 6,872 110 — 217 680	659,129 706,863 35,876 (10,731) 1,531 680
	42,926 —	96,293 —	38,528 —	33,311 —	16,738 —	487,813 10,731	715,609 10,731	7,879 —	723,488 10,731
	42,926	96,293	38,528	33,311	16,738	498,544	726,340	7,879	734,219

4 Samson Paper Holdings Limited

Notes

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

These unaudited condensed consolidated interim financial statements for the six months ended 30 September 2007 have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” and other relevant HKAS and Interpretations, the Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants, and the applicable requirements of Appendix 16 of the Rules (the “Listing Rule”) Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

These condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 March 2007.

The accounting policies and methods of computation used in the preparation of these condensed interim financial statements are consistent with those used in the annual financial statements for the year ended 31 March 2007 and with the adoption of certain new or revised HKFRS and HKAS, which are mandatory for the year ending 31 March 2008, among which the following will have disclosure impacts on the 2008 annual financial statements:

• HKFRS 7 Financial instruments: Disclosure; and

• HKAS 1 (Amendment) Amendment to capital disclosures

The adoption of these accounting standards has no material effect on the Group’s results of operations.

2. SEGMENT INFORMATION

(a) Primary reporting format — Business segments

As at 30 September 2007, the Group is organised on a worldwide basis into four main business segments:

• (1) Trading and marketing of paper products;

• (2) Provision of logistics services;

• (3) Trading and marketing of aeronautic parts and services;

• (4) Provision of marine services to marine, oil and gas industries.

Interim Report 2007/2008

5

The segment results for the period ended 30 September 2007 are as follows:

Total segment revenue Inter-segment revenue Revenue Segment result Finance costs Share of profits less losses of associated companies Profit before taxation Taxation Profit for the period	Paper HK$’000 2,045,903 (204,360) 1,841,543 68,510 618	Logistics services HK$’000 51,347 (22,464) 28,883 (1,479) —	Unau Aeronautic parts HK$’000 42,000 — 42,000 4,116 —	dited Marine services HK$’000 36,792 — 36,792 1,309 —	Unallocated HK$’000 — — — (1,889) —	Group HK$’000 2,176,042 (226,824)
						1,949,218
						70,567 (27,575) 618
						43,610 (7,734)
						35,876

The segment results for the period ended 30 September 2006 are as follows:

Total segment revenue Inter-segment revenue Revenue Segment result Finance costs Share of profits less losses of associated companies Profit before taxation Taxation Profit for the period	Paper HK$’000 1,859,035 (232,649) 1,626,386 58,238 303	Logistics services HK$’000 33,803 (1,424) 32,379 (2,570) —	Unau Aeronautic parts HK$’000 27,906 — 27,906 1,817 —	dited Marine services HK$’000 — — — — —	Unallocated HK$’000 — — — (362) —	Group HK$’000 1,920,744 (234,073) 1,686,671 57,123 (27,956) 303 29,470 (4,761) 24,709

6 Samson Paper Holdings Limited

(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.

An analysis of the Group’s turnover for the period by geographical segment is as follows:

Hong Kong Mainland China Others	Unau Six months ende 2007 HK$’000 788,496 956,527 204,195 1,949,218	dited d 30 September 2006 HK$’000 729,373 764,572 192,726
		1,686,671

3. OPERATING PROFIT

Operating profit is stated after crediting and charging the following:

Crediting Interest income Provision for impairment on receivables written back Net dilution gain on interest in an associated company Charging Depreciation of property, plant and equipment Amortisation of prepaid premium for land leases Provision for impairment on inventory Provision for impairment on receivables	Unau Six months ende 2007 HK$’000 4,606 1,023 3,719 7,491 649 3,275 3,317	dited d 30 September 2006 HK$’000 7,752 3,547 —
		3,325 983 274 15,654

4. TAxATION

Hong Kong profits tax has been provided for at the rate of 17.5% (2006:17.5%) on the estimated assessable profit for the period. Taxation on overseas profit has been calculated on the estimated assessable profit at the applicable rates of taxation prevailing in the countries in which the Group operates, based on existing legislation, interpretation and practices in respect thereof.

Hong Kong profits tax Overseas taxation Deferred taxation	Unau Six months e 2007 HK$’000 4,235 2,580 919 7,734	dited nded 30 September 2006 HK$’000 3,763 1,737 (739)
		4,761

Interim Report 2007/2008 7

5. EARNINGS PER SHARE

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 period.

Profit attributable to equity holders of the Company Weighted average number of ordinary shares in issue Basic earnings per share (HK cents)	Unau Six months ende 2007 HK$’000 35,766 429,258 8.3	dited d 30 September 2006 HK$’000 24,462
		429,258
		5.7

6. INTERIM DIvIDENDS

		Unaudited
		Six months ended 30 September
		2007	2006
		HK$’000	HK$’000
Proposed, of HK$0.025	(2006: HK$0.015) per share	10,731	6,439

Note: This proposed interim dividend is not reflected as a dividend payable in these condensed consolidated financial statements, but will be reflected as an appropriation of retained earnings for the year ending 31 March 2008.

7. CAPITAL ExPENDITURE

Six months ended 30 September 2006 Opening net book amount at 1 April 2006 Currency translation differences Additions Disposals Depreciation / amortisation Closing net book amount at 30 September 2006 Six months ended 30 September 2007 Opening net book amount at 1 April 2007 Currency translation differences Additions Disposals Depreciation / amortisation Closing net book amount at 30 September 2007	Property, plant and equipment HK$’000 81,137 (4) 4,416 (2,230) (3,325) 79,994 118,411 1,280 17,069 (493) (7,491) 128,776	Unaudited Prepaid premium for land leases HK$’000 71,415 — — — (983) 70,432 48,785 56 — — (649) 48,192	Construction in progress HK$’000 — — — — —
			—
			— — 1,886 — —
			1,886

8 Samson Paper Holdings Limited

8. INTANGIBLE ASSETS

Six months ended 30 September 2006 Opening and closing net book amount at 1 April 2006 and 30 September 2006 Six months ended 30 September 2007 Opening net book amount at 1 April 2007 Currency translation differences Additions Closing net book amount at 30 September 2007	Unaudited HK$’000 —
	32,414 2,052 7,496
	41,962

Additions during the interim period represent the acquisition of interest in land use right grant contract in respect of a piece of land located at 中國江蘇 ������������ (South Side of Tong Gang Road, Gangzha Area, Nantong City, Jiangsu Province, the People’s Republic of China (the “PRC”)) and costs incurred for such acquisition.

9. TRADE AND OTHER RECEIvABLES

Trade receivables — net Other receivables, deposits and prepayments Finance lease receivables Finance lease receivables — non current portion	Unaudited 30 September 2007 HK$’000 1,274,224 145,247 3,023 1,422,494 (489) 1,422,005	Audited 31 March 2007 HK$’000 962,301 156,870 4,423
		1,123,594 (1,518)
		1,122,076

The ageing analysis of trade receivables is as follows:

Current to 60 days 61 to 90 days Over 90 days	Unaudited 30 September 2007 HK$’000 925,387 197,001 151,836 1,274,224	Audited 31 March 2007 HK$’000 693,075 134,820 134,406
		962,301

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

Interim Report 2007/2008 9

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	Unaudited 30 September 2007 HK$’000 505 (16) 489 2,725 (191) 2,534 Unaudited 30 September 2007 HK$’000 2,725 505 3,230 (207) 3,023 2,534 489 3,023	Audited 31 March 2007 HK$’000 1,583 (65)
		1,518
		3,246 (341)
		2,905
		Audited 31 March 2007 HK$’000 3,246 1,583
		4,829 (406)
		4,423
		2,905 1,518
		4,423

10. TRADE AND OTHER PAYABLES

Trade and bills payables Accrued expenses and other payables Loan from a minority shareholder Amounts due to related companies Dividend payable	Unaudited 30 September 2007 HK$’000 742,352 107,108 1,563 14,040 10,731 875,794	Audited 31 March 2007 HK$’000 543,748 93,809 1,563 10,847 —
		649,967

10 Samson Paper Holdings Limited

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

Current to 60 days 61 to 90 days Over 90 days BORROWINGS Non-current Bank loans — unsecured Bank loans — secured Finance lease liabilities Current Trust receipt loans — unsecured Trust receipt loans — secured Bank loans — unsecured Bank loans — secured Bank overdrafts Finance lease liabilities Total borrowings	Unaudited 30 September 2007 HK$’000 628,725 28,122 85,505 742,352 Unaudited 30 September 2007 HK$’000 86,364 35,034 6,771 128,169 283,981 277,265 314,194 13,875 3,615 5,683 898,613 1,026,782	Audited 31 March 2007 HK$’000 444,611 12,578 86,559
		543,748
		Audited 31 March 2007 HK$’000 131,212 19,063 6,884
		157,159
		219,527 169,982 245,022 11,250 967 5,714
		652,462
		809,621

11. BORROWINGS

At 30 September 2007, the Group’s bank loans and overdrafts and trust receipt loans were repayable as follows:

Within one year In the second year In the third to fifth years inclusive	Bank loans a Unaudited 30 September 2007 HK$’000 331,684 105,273 16,125 453,082	nd overdrafts Audited 31 March 2007 HK$’000 257,239 100,947 49,328 407,514	Trust receipt loans Unaudited Audited 30 September 31 March 2007 2007 HK$’000 HK$’000 561,246 389,509 — — — — 561,246 389,509	Trust receipt loans Unaudited Audited 30 September 31 March 2007 2007 HK$’000 HK$’000 561,246 389,509 — — — — 561,246 389,509
				389,509

The effective interest rate at the balance sheet date on bank loans and trust receipt loans were 5.8% per annum (31 March 2007: 5.3% per annum).

The carrying amount of bank loans and trust receipt loans approximates their fair value.

Interim Report 2007/2008

11

Finance lease liabilities

Gross finance lease liabilities — minimum lease payments : Not later than 1 year Later than 1 year but not later than 5 years Later than 5 years Future finance charges on finance leases Present value of finance lease liabilities The present value of finance lease liabilities is as follows : Not later than 1 year Later than 1 year and no later than 5 years Later than 5 years	Unaudited 30 September 2007 HK$’000 6,050 7,200 127 13,377 (923) 12,454 Unaudited 30 September 2007 HK$’000 5,683 6,649 122 12,454	Audited 31 March 2007 HK$’000 5,876 7,266 178
		13,320 (722)
		12,598
		Audited 31 March 2007 HK$’000 5,714 6,714 170
		12,598

At the balance sheet date, the carrying amount of finance lease liabilities approximates their fair value.

12. SHARE CAPITAL

Authorised: At the beginning and the end of period/year Issued and fully paid: At the beginning and the end of period/year	Number of shares of HK$0.10 each Unaudited Audited 30 September 31 March 2007 2007 800,000,000 800,000,000 429,258,039 429,258,039	Share capital Unaudited Audited 30 September 31 March 2007 2007 HK$’000 HK$’000 80,000 80,000 42,926 42,926	Share capital Unaudited Audited 30 September 31 March 2007 2007 HK$’000 HK$’000 80,000 80,000 42,926 42,926
			42,926

The shareholders of the Company adopted a share option scheme to comply with the requirements of Chapter 17 of the Listing Rules. As at 30 September 2007, no option was granted or outstanding.

12 Samson Paper Holdings Limited

13. BANK GUARANTEES

As at 30 September 2007, the Company continued to provide corporate guarantees on the banking facilities granted to the Group’s subsidiaries. The amount of such facilities utilised by the subsidiaries as at 30 September 2007 amounted to HK$1,014,328,000 (31 March 2007: HK$797,023,000).

14. COMMITMENTS

(a) Capital commitments

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

Property, plant and equipment, contracted but not provided for Prepaid premium for land leases, contracted but not provided for Intangible assets, contracted but not provided for	Unaudited 30 September 2007 HK$’000 171,681 18,638 3,071 193,390	Audited 31 March 2007 HK$’000 1,500 — 3,832
		5,332

(b) As at 30 September 2007, the subsidiaries of the Company had commitment in respect of the injection of capital into certain subsidiaries in the PRC amounted to approximately HK$278,969,000 (31 March 2007: HK$90,754,000).

(c) Operating lease commitments

As at 30 September 2007, the Group had total future aggregate minimum lease payments under non-cancellable operating leases in respect of land and buildings as follows :

No later than one year Later than one year and not later than five years Later than five years	Unaudited 30 September 2007 HK$’000 21,496 13,871 2,734 38,101	Audited 31 March 2007 HK$’000 7,382 5,717 —
		13,099

15. CHARGE OF ASSETS

As at 30 September 2007, trust receipt loans of HK$277,265,000 (31 March 2007: HK$169,982,000) and bank loans of HK$48,909,000 (31 March 2007: HK$30,313,000) were secured by legal charges on the Group’s properties in Hong Kong with net book amount of approximately HK$134,785,000 (31 March 2007: HK$135,813,000).

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Interim Report 2007/2008

16. 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 and customers of the Group are as follows:

(a) Sale to and purchase from related parties (i) Rental income from an associated company (ii) Rental expense paid to associated company (iii) Purchase from associated companies	Unau Six months ende 2007 HK$’000 631 931 26,934	dited d 30 September 2006 HK$’000 870
		—
		33,069

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

(b) Period-end balances arising from sales/purchase of goods (i) Payables to associated companies (ii) Receivables from associated companies	Unaudited 30 September 2007 HK$’000 14,040 730	Audited 31 March 2007 HK$’000 12,626
		8,975

Balance of receivables from associated companies is included in trade receivables.

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

		Unaudited
		Six months ended 30 September
		2007	2006
		HK$’000	HK$’000
(c)	Key management compensation
	Key management compensation	6,138	5,730

14 Samson Paper Holdings Limited

MANAGEMENT DISCUSSION AND ANALYSIS

The Economy

In the six months ended 30 September 2007, the Hong Kong economy continued to enjoy robust growth with GDP rising at a rate of 9.8% in the third quarter compared to 8.7% for the second quarter of 2007. In the PRC, the economy maintained phenomenal growth, with GDP up 11.5% for the first nine months of 2007.

The Paper Industry

According to the Hong Kong Census and Statistics Department, the total export value of printed matters was HK$10,306 million during the review period, up 8.6% against the same period last year. The Territory’s import of printed matters was valued at HK$6,286.6 million, up 10.7% compared with the same period last year.

Operations Review

During the review period, the Group achieved remarkable results, with growing turnover and improving of gross profit margin. Turnover increased by 15.6% to HK$1,949 million as compared with the same period last year. Gross profit increased by 21.6% to HK$180 million, with gross profit margin improved to 9.2% (2006/07: 8.8%). Operating profit increased by 23.5% to HK$70.6 million. Profit attributable to shareholders rose sharply, up by 46.2% to HK$35.8 million. Net profit margin also improved, from 1.5% in the corresponding period last year to 1.8% this review period. Earnings per share were HK8.3 cents (2006/07: HK5.7 cents).

By business segment, paper products, consumable aeronautic parts/services, marine services, and logistics services accounted for 94.5%, 2.1%, 1.9%, and 1.5% of the Group’s turnover respectively.

Paper Business

The encouraging growth of the Group’s paper business reflected the Group’s continuous effort and success in broadening its sales network in the PRC. Increasing market demand for paper products driven by the booming economy also pushed up the average prices of book printing papers and packaging boards by approximately 10% and 5% respectively and in turn the turnover of the Group’s paper products benefited. The Group’s shift of strategic focus on to serving quality customers as a means of combating the effects of intense competition in the paper industry and controlling credit risk also proved to be successful. Provision for doubtful debts after taking into account the provision written back significantly decreased from 0.7% to 0.1% of total turnover from paper product sales during the review period.

All these factors together contributed to the business achieving turnover of HK$1,841.5 million, representing a rise of 13.2% when compared with the corresponding period last year. In terms of operating profit, HK$68.5 million was recorded representing a rise of 17.6%.

The PRC market continued to be the main growth driver of the segment’s business. Paper product sales in the market increased by 24.9% to HK$951.8 million, making up 51.7% of the Group’s total turnover from paper business. The Group sold 11.7% more paper products in tonnage through its extensive sales network in the PRC.

Interim Report 2007/2008

15

Hong Kong is the Group’s second key market accounted for 41.5% of its total paper product sales. It achieved turnover of HK$764.3 million, or a rise of 9.3% against the same period last year. As the Group has been consolidating its businesses in other Asian countries, such as Malaysia, to control credit risks and enjoy more healthy growth in the long run, paper sales from these regions for the review period dropped by 23.9% to HK$125.4 million, accounting for 6.8% of total turnover from paper product sales.

Regarding the Group’s paper manufacturing arm, the Singapore-listed United Pulp & Paper Company Limited (“UPP”), it achieved a net gain of S$1.1 million (2006/07: S$0.4 million). The improved performance was the result of higher paper product prices and UPP’s successful switch from using fuel oil to natural gas for powering its production plant. The change in fuels was implemented in September 2006 and has since been translating into significant savings for the operation particularly when oil prices have been on the rise.

Sales contribution by product was maintained at a stable level. Book printing papers and packaging boards accounted for 50.5% and 33.2% of the Group’s total turnover of paper products respectively.

Consumable Aeronautic Parts / Services Business

The Group has successfully diversified its business in recent years to cover also consumable aeronautic parts/services. This segment continued to generate increasing revenue for the Group, up by 50.5% to HK$42.0 million, with operating profit up by 126.5% to HK$4.1 million.

Logistics Services Business

The Group has sought to consolidate its logistics services business by focusing more on key profit centres such as transportation and warehousing services as reflected in its ongoing expansion in the Yangtze River Delta region. Accordingly, turnover from logistics services decreased by 10.8% to 28.9 million, but operating loss was reduced by 42.5% to HK$1.5 million (2006/07: operating loss of HK$2.6 million).

Marine Services Business

Hypex Holdings Limited, the wholly-owned subsidiary of the Group acquired in December 2006, provides corrosion prevention services to the marine, oil and gas industries in Singapore. The corrosion prevention services comprise blasting (hydro and grit) and painting work. It recorded turnover of HK$36.8 million and operating profit of HK$1.3 million during the period under review.

Prospects

The management team is optimistic about the Group’s business prospects. The anticipated steady rise in price of paper products in the coming months will bode well for the Group. To strengthen its presence and capture the enormous business opportunities in the PRC, the Group has opened a new office in Xiamen and will open offices in Shenyang, Naning and Nanjing in the second half of the financial year, expanding its sales office network currently covering Beijing, Shanghai, Chongqing, Tianjin, Guangzhou, Foshan, Shenzhen and Wuxi.

16 Samson Paper Holdings Limited

Moreover, the Group believes that by building a vertically integrated operation, it will be assured of stable supply of raw material and be able to improve overall profit margin. Thus, it signed an agreement to acquire the entire share capital of Kingsrich Group Limited on 13 July 2007, which has given it 99% holding in Universal Pulp and Paper (Jiangsu) Co. Ltd. (UPP(JS)) (formerly known as Jiangsu Yuan Tong Paper Co. Ltd), a Sino-foreign equity joint venture specializing in the manufacture and sale of kraftliner board and corrugated medium.

UPP(JS) is planning to build a paper mill in Nantong, Jiangsu with completion scheduled for the second quarter of 2009. The designed total production capacity of the paper mill is 250,000 tonnes per annum – 150,000 tonnes kraftliner board and 100,000 tonnes corrugated medium. The Group has already ordered the core units of a kraftliner board and corrugated medium production line to be installed in the paper mill. The construction work of the plant is expected to begin in mid December 2007.

Between 2002 and 2006, consumption of containerboard products in the PRC had consistently exceeded domestic production. This phenomenon is expected to continue in the next 10 years according to RISI projection. However, containerboard products only accounted for less than 5.0% of the total volume of paper products sold by the Group in 2006. This translates into growth potential for the Group with an over 1,000-strong regular client base in the Asia Pacific Region and strong reputation in the PRC printing and packaging industry as leverage. The Group is confident of securing orders for the new paper mill and expanding the containerboard business in the next few years to bring better returns to shareholders.

Looking ahead, the Group will strive to strengthen its position in the paper industry and expand its business by moving upstream, aiming to become one of the leading paper industry players in the PRC.

INTERIM DIvIDEND

The Board has resolved to declare the payment of an interim dividend of HK2.5 cents (2006: HK1.5 cents) per share for the six months ended 30 September 2007. The interim dividend will be payable to all shareholders of the Company whose names appear on the register of members of the Company on Friday, 4 January 2008. The interim dividend will be paid on or about Friday, 11 January 2008.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from Wednesday, 2 January 2008 to Friday, 4 January 2008 (both days inclusive), during which period no transfers of shares of the Company will be registered. In order to qualify for the interim dividend, all transfers of shares accompanied by the relevant share certificates must be lodged with the Company’s branch registrar, Computershare Hong Kong Investor Services Limited at Suite 1712–16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration no later than 4:30 pm on Monday, 31 December 2007.

EMPLOYEES AND REMUNERATION POLICIES

As at 30 September 2007, the total number of the Group’s employees was 934. The Group’s remuneration policies are primarily based on prevailing market levels and salaries are reviewed with reference to the performance of the Group and the individual employee concerned. In addition to salary payment, other staff benefits including performance bonus, education subsidies, provident fund, medical insurance and share option are offered to reward our high-calibre staff. Training on strategic planning and implementation, sales and marketing disciplines are offered to various management levels on a regular basis.

Interim Report 2007/2008

17

LIQUIDITY AND FINANCIAL RESOURCES

The Group’s short term deposits and bank balances and bank borrowings as at 30 September 2007 amounted to approximately HK$417 million (including restricted bank deposits of HK$55 million) and HK$1,014 million respectively. As at 30 September 2007, its gearing ratio, measured on the basis of the Group’s long term debt over the Group’s shareholders’ funds was 17.6% (31 March 2007: 22.5%). With bank balances and other current assets of approximately HK$2,306 million as well as available banking and trade facilities, the directors of the Company (the “Directors”) believe the Group has sufficient working capital to meet its present requirement.

The Group’s foreign currency purchases were mainly denominated in United States dollars and RMB. Foreign exchange contracts and options were used, if necessary, to hedge the Group’s foreign currency exposure. As the Group relied on the RMB banking finances to fund the operation in the PRC, which provides a natural hedge against currency risks, the appreciation of RMB does not have much impact on the Group.

DIRECTORS’ AND CHIEF ExECUTIvES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 30 September 2007, the interests and short positions of each Director and chief executive of the Company and their associates in the shares, underlying shares and debentures of the Company or any of 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 for Securities Transactions by Directors of Listed Companies (the “Model Code”) were as follows:

(a) Long position in ordinary shares of HK$0.10 each in the Company (the “Shares”)

			Number	of ordinary	shares beneficially held	shares beneficially held
		Personal	Corporate	Family	Other
	Capacity	interest	interest	interest	interest	Total	Percentage
Mr. LEE Seng Jin	Beneficial owner	60,344,000	—	16,712,556	219,620,000	296,676,556	69.11%
	& beneficiary				(Note)
	of trust
Ms. SHAM Yee Lan,	Beneficial owner	572,556	16,140,000	60,344,000	219,620,000	296,676,556	69.11%
Peggy	& beneficiary				(Note)
	of trust
Mr. CHOW	Beneficial owner	540,000	—	—	—	540,000	0.13%
Wing Yuen

Note:

Shares were held by Quinselle Holdings Limited, acting in its capacity as trustee of a private unit trust. HSBC International Trustee Limited, acting in its capacity as trustee of a family trust holds all the units in the private unit trust. The objects of the family trust include Mr. Lee Seng Jin and Ms. Sham Yee Lan, Peggy.

Save as disclosed above, as at 30 September 2007, none of the Directors and chief executives of the Company had any interest or short position in the shares or 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 corporations (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

18 Samson Paper Holdings Limited

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 of the Company also hold shares of certain subsidiaries of the Company solely for the purpose of ensuring that the relevant subsidiary has more than one member.

At no time during the period was the Company, its holding company, its subsidiaries or its associated companies a party to any arrangement to enable any Director or chief executives 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.

(c) Share option scheme

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. As at 30 September 2007, no option was granted under the Option Scheme. A summary of the 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% in 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 Share available for issue under the Option Scheme is 42,925,803 as at the date of this report.

19

Interim Report 2007/2008

• (4) Maximum entitlement of each Participant

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

• (5) Time of exercise of option

An option may be exercised in accordance with the terms of the Option Scheme at any time during the period to be notified by the Board to each grantee of the option at the date of grant provided that such period shall not exceed the 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.

20 Samson Paper Holdings Limited

SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES OF THE COMPANY

As at 30 September 2007, the interests and short positions of the shareholders of the Company other than a Director or chief executives of the Company and their associates, 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 were as follows:

Long position in the Shares

		Approximate
		percentage of interest
		to total issued share
Name of shareholder	Number of Shares	capital of the Company
Quinselle Holdings Limited	219,620,000	51.16%
HSBC International Trustee Limited_(Note)_	219,620,000	51.16%

Note : Quinselle Holdings Limited holds the 219,620,000 Shares in its capacity as trustee of a private unit trust. HSBC International Trustee Limited, acting in its capacity as trustee of a family trust, holds all units in the private unit trust.

Save as disclosed above, the register which was required to be kept under Section 336 of the SFO showed that the Company had not been notified of any interests or short positions in the shares or underlying shares of the Company as at 30 September 2007.

CONTINGENT LIABILITIES

The Company provided corporate guarantees on the banking facilities granted to its subsidiaries. The amount of such facilities utilized by the subsidiaries as at 30 September 2007 amounted to HK$1,014,328,000 (31 March 2007: HK$797,023,000).

CHARGE OF ASSETS

As at 30 September 2007, trust receipt loans of HK$277,265,000 (31 March 2007: HK$169,982,000) and bank loans of HK$48,909,000 (31 March 2007: HK$30,313,000) were secured by legal charge on certain properties of the Group in Hong Kong.

AUDIT COMMITTEE

The Audit Committee of the Company (the “Committee”) was set up to review and provide supervision of the Group’s financial reporting process and internal controls. The Committee has reviewed the Group’s unaudited interim report for the six months ended 30 September 2007 before it was tabled for the Board’s approval. The review of the unaudited interim financial statements was conducted in conjunction with the Group’s external auditors.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the six months ended 30 September 2007, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

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Interim Report 2007/2008

MODEL CODE FOR SECURITIES TRANSACTIONS

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

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

In the opinion of the Directors, the Company was in compliance with the Code of Corporate Governance Practices as set out in Appendix 14 of the Listing Rules during the six-month period ended 30 September 2007 except that the non-executive Directors were not appointed for a specific term but are subject to retirement by rotation and re-election at the Company’s annual general meetings in accordance with the bye-laws of the Company.

BOARD OF DIRECTORS

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

By Order of the Board SHAM Kit Ying Chairman

Hong Kong, 12 December 2007

22 Samson Paper Holdings Limited