Dragon Mining Limited — Interim / Quarterly Report 2010

Nov 24, 2010

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

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

(Incorporated in Bermuda with limited liability)

(Stock Code: 731)

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010

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 2010 together with comparative figures for the corresponding period in 2009, and the unaudited condensed consolidated balance sheet of the Group as at 30 September 2010 with audited comparative figures as at 31 March 2010 as follows:

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

Note Revenue 2 Cost of sales Gross profit Other gains and income, net Selling expenses Administrative expenses Other operating expenses Operating profit 3 Finance costs Share of loss of an associated company Profit before taxation Taxation 4 Profit for the period	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 2,303,948 1,791,733 (2,075,718) (1,592,515) 228,230 199,218 15,252 10,907 (86,780) (75,919) (84,183) (69,689) (3,887) (6,332) 68,632 58,185 (24,483) (17,876) — (1,186) 44,149 39,123 (10,440) (8,955) 33,709 30,168

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Note Attributable to: Equity holders of the Company Non-controlling interests Earnings per share for profit attributable to the equity holders of the Company — Basic 5 — Diluted 5 Interim dividend per share Interim dividends 6	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 34,701 30,143 (992) 25 33,709 30,168 HK6.9 cents HK6.0 cents HK5.5 cents HK4.7 cents HK1.0 cent HK1.0 cent 6,366 6,348	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 34,701 30,143 (992) 25 33,709 30,168 HK6.9 cents HK6.0 cents HK5.5 cents HK4.7 cents HK1.0 cent HK1.0 cent 6,366 6,348
		30,168
		HK6.0 cents
		HK4.7 cents
		HK1.0 cent
		6,348

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Profit for the period Other comprehensive income Currency translation differences Other comprehensive income for the period, net of tax Total comprehensive income for the period Total comprehensive income attributable to: — Equity holders of the Company — Non-controlling interests	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 33,709 30,168 26,137 11,758 26,137 11,758 59,846 41,926 60,456 41,827 (610) 99 59,846 41,926	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 33,709 30,168 26,137 11,758 26,137 11,758 59,846 41,926 60,456 41,827 (610) 99 59,846 41,926
		41,926

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As at 30 September 2010

CONDENSED CONSOLIDATED BALANCE SHEET

Note Non-current assets Property, plant and equipment Land use rights Investment properties Intangible assets Deferred tax assets Current assets Inventories Accounts receivable, deposits and prepayments 7 Financial assets at fair value through profit or loss Taxation recoverable Restricted bank deposits Bank balances and cash Non-current asset held for sale Current liabilities Accounts payable and accruals 8 Trust receipt loans Taxation payable Borrowings Net current assets Total assets less current liabilities	Unaudited 30 September 2010 HK$’000 986,453 41,972 115,000 43,672 7,258 1,194,355 738,456 1,452,565 22,578 1,553 165,967 518,224 2,899,343 — 2,899,343 1,235,650 746,042 19,775 323,203 2,324,670 574,673 1,769,028	Audited 31 March 2010 HK$’000 (restated) 773,918 41,884 115,000 41,280 4,956 977,038 696,455 1,388,730 15,197 1,441 129,792 463,614 2,695,229 60,745 2,755,974 1,299,176 795,680 17,285 254,171 2,366,312 389,662 1,366,700

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Note Equity Equity attributable to owners of the parent Share capital 9 Reserves Proposed dividend Non-controlling interests Total equity Non-current liabilities Borrowings Deferred tax liabilities	Unaudited 30 September 2010 HK$’000 63,657 1,005,628 6,366 1,011,994 1,075,651 10,187 1,085,838 647,688 35,502 683,190 1,769,028	Audited 31 March 2010 HK$’000 (restated) 63,585
		951,030 12,731
		963,761 1,027,346 10,797 1,038,143 300,143 28,414 328,557 1,366,700

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Notes

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

These unaudited condensed consolidated interim accounts for the six months ended 30 September 2010 have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants.

These unaudited condensed consolidated interim accounts should be read in conjunction with the annual consolidated accounts for the year ended 31 March 2010, which have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”).

Except as described below, the accounting policies adopted are consistent with those of the annual consolidated accounts for the year ended 31 March 2010, as described in those annual consolidated accounts.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following amendment to standard is mandatory for the first time for the financial year beginning 1 April 2010 and adopted by the Group.

HKAS 17 (amendment) “Lease” deletes specific guidance regarding classification of leases of land, so as to eliminate inconsistency with the general guidance on lease classification. As a result, leases of land should be classified as either finance or operating lease using the general principles of HKAS 17, i.e. whether the lease transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee. Prior to the amendment, land interest which title is not expected to pass to the Group by the end of the lease term was classified as operating lease under “Land use rights”, and amortised over the lease term.

HKAS 17 (amendment) has been applied retrospectively for annual periods beginning 1 April 2010 in accordance with the effective date and transitional provisions of the amendment. The Group has reassessed the classification of unexpired leasehold land and land use rights as at 1 April 2010 on the basis of information existing at the inception of those leases, and recognised the leasehold land in Hong Kong as finance lease retrospectively. As a result of the reassessment, the Group has reclassified certain leasehold land from operating lease to finance lease.

The effect of the adoption of this amendment is as below:

			As at	As at	As at
			30 September	31 March	1 April
			2010	2010	2009
			HK$’000	HK$’000	HK$’000
Decrease	in	land use rights	(19,955)	(20,229)	(20,777)
Increase	in	property, plant and equipment	19,955	20,229	20,777

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2. SEGMENT INFORMATION

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

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

At 30 September 2010, the Group is organised on a worldwide basis into three main business segments:

• (1) Paper trading: trading and marketing of paper products;

• (2) Paper manufacturing: manufacturing of paper products;

• (3) Others: including trading and marketing of aeronautic parts and provision of related services and the provision of marine services to marine, oil and gas industries and provision of logistics services.

Segment assets consist primarily of property, plant and equipment, land use rights, investment properties, intangible assets, interest in an associated company, inventories, receivables, financial assets at fair value through profit or loss, non-current asset held for sale and operating cash. They exclude deferred tax assets and taxation recoverable.

The segment information for the six months ended 30 September 2010 and as at 30 September 2010 are as follows:

SEGMENT RESULTS Total segment revenue Inter-segment revenue Revenue from external customers Reportable segment results Corporate expenses Operating profit Finance costs Profit before taxation Taxation Profit for the period OTHER PROFIT AND LOSS ITEMS Depreciation Amortisation charges	Six Paper Trading HK$’000 2,055,275 (33,381) 2,021,894 52,687 3,699 352	Unaudited months ended 30 September 2010 Paper Manufacturing Others Group HK$’000 HK$’000 HK$’000 318,566 56,611 2,430,452 (91,212) (1,911) (126,504) 227,354 54,700 2,303,948 20,115 1,189 73,991 (5,359) 68,632 (24,483) 44,149 (10,440) 33,709 6,808 4,019 14,526 6 36 394

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Unaudited As at 30 September 2010 Paper Trading Paper Manufacturing Others HK$’000 HK$’000 HK$’000 SEGMENT ASSETS Reportable segment assets 2,907,316 925,648 236,652 Corporate assets Taxation recoverable Deferred tax assets Total assets	Group HK$’000 4,069,616 15,271 1,553 7,258
	4,093,698

The segment information for the six months ended 30 September 2009 and as at 31 March 2010 are as follows:

SEGMENT RESULTS Total segment revenue Inter-segment revenue Revenue from external customers Reportable segment result Corporate expenses Operating profit Finance costs Share of loss of an associated company Profit before taxation Taxation Profit for the period OTHER PROFIT AND LOSS ITEMS Depreciation Amortisation charges	Unaudited Six months ended 30 September 2009 Paper Trading Paper Manufacturing Others Group HK$’000 HK$’000 HK$’000 HK$’000 1,596,328 200,023 71,482 1,867,833 (10,548) (63,195) (2,357) (76,100) 1,585,780 136,828 69,125 1,791,733 48,918 11,898 4,109 64,925 (6,740) 58,185 (17,876) (1,186) — — (1,186) 39,123 (8,955) 30,168 3,727 3,425 4,695 11,847 348 — 31 379

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Audited As at 31 March 2010 Paper Trading Paper Manufacturing Others HK$’000 HK$’000 HK$’000 SEGMENT ASSETS Reportable segment assets 2,658,420 825,112 241,879 Corporate assets Taxation recoverable Deferred tax assets Total assets	Group HK$’000 3,725,411 1,204 1,441 4,956
	3,733,012

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

An analysis of the Group’s revenue for the period by geographical areas is as follows:

Hong Kong The PRC_(note)_ Singapore Korea Malaysia	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 887,363 680,564 1,226,163 902,600 50,112 64,573 113,513 120,380 26,797 23,616 2,303,948 1,791,733	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 887,363 680,564 1,226,163 902,600 50,112 64,573 113,513 120,380 26,797 23,616 2,303,948 1,791,733
		1,791,733

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

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3. OPERATING PROFIT

Operating profit is stated after crediting and charging the following:

Crediting Interest income Provision for impairment on receivables written back Charging Depreciation and amortisation of property, plant and equipment Amortisation of land use rights Amortisation of intangible assets Provision for impairment on inventories Provision for impairment on receivables	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 (restated) 3,543 1,711 7,382 7,983 14,526 11,847 119 113 275 266 2,263 6,332 4,559 10,073	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 (restated) 3,543 1,711 7,382 7,983 14,526 11,847 119 113 275 266 2,263 6,332 4,559 10,073
		11,847 113 266 6,332 10,073

4. TAXATION

Hong Kong profits tax has been provided for at the rate of 16.5% (2009: 16.5%) on the estimated assessable profit for the period. Taxation on overseas profits has been calculated on the estimated assessable profit for the period at the rates of taxation prevailing in the countries in which the Group operates.

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

Hong Kong profits tax Overseas taxation Deferred taxation relating to origination and reversal of temporary differences	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 4,085 2,693 1,569 1,843 4,786 4,419 10,440 8,955	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 4,085 2,693 1,569 1,843 4,786 4,419 10,440 8,955
		8,955

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5. 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 period.

Profit attributable to shareholders_(HK$’000) Weighted average number of ordinary shares in issue(‘000)_ Basic earnings per share	Unaudited Six months ended 30 September 2010 2009 34,701 30,143 504,330 502,779 HK6.9 cents HK6.0 cents	Unaudited Six months ended 30 September 2010 2009 34,701 30,143 504,330 502,779 HK6.9 cents HK6.0 cents
		502,779
		HK6.0 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 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 (2009: Nil) has been granted under the scheme. For the period ended 30 September 2010, the warrants expired on 4 June 2010 and the exercise of warrants for the period ended 30 September 2009 does not have any dilutive effect, therefore both of them are not included in the calculation of diluted earnings per share.

Profit attributable to shareholders_(HK$’000) Weighted average number of ordinary shares in issue(‘000) Adjustment for: — Assumed conversion of preference shares(‘000) Weighted average number of shares for diluted earnings per share(‘000)_ Diluted earnings per share	Unaudited Six months ended 30 September 2010 2009 34,701 30,143 504,330 502,779 132,065 132,065 636,395 634,844 HK5.5 cents HK4.7 cents	Unaudited Six months ended 30 September 2010 2009 34,701 30,143 504,330 502,779 132,065 132,065 636,395 634,844 HK5.5 cents HK4.7 cents
		502,779 132,065
		634,844
		HK4.7 cents

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6. INTERIM DIVIDENDS

Proposed — HK$0.01 (2009: HK$0.01) per ordinary share Proposed — HK$0.01 (2009: HK$0.01) per preference share	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 5,045 5,027 1,321 1,321 6,366 6,348	Unaudited Six months ended 30 September 2010 2009 HK$’000 HK$’000 5,045 5,027 1,321 1,321 6,366 6,348
		6,348

At a meeting held on 24 November 2010, the Directors proposed an interim dividend of HK$0.01 per share. This proposed dividend is not reflected as a dividend payable in these condensed accounts, but will be reflected as an appropriation of retained earnings for the year ending 31 March 2011.

7. ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS

Trade receivables, net of provision Other receivables, deposits and prepayments Amount due from a minority shareholder	Unaudited 30 September 2010 HK$’000 1,131,450 318,552 2,563 1,452,565	Audited 31 March 2010 HK$’000 1,032,742 352,957 3,031
		1,388,730

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	Unaudited 30 September 2010 HK$’000 829,821 168,746 132,883 1,131,450	Audited 31 March 2010 HK$’000 824,317 121,262 87,163
		1,032,742

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.

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8. ACCOUNTS PAYABLE AND ACCRUALS

Trade and bills payables Accruals and other payables Dividend payable	Unaudited 30 September 2010 HK$’000 1,082,725 140,194 12,731 1,235,650	Audited 31 March 2010 HK$’000 1,114,062 185,114 — 1,299,176

The carrying values of the gross accounts payable and accruals approximate their fair values.

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

Current to 60 days 61 to 90 days Over 90 days	Unaudited 30 September 2010 HK$’000 786,148 141,229 155,348 1,082,725	Audited 31 March 2010 HK$’000 904,833 104,888 104,341 1,114,062

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9. SHARE CAPITAL

Authorised: Ordinary shares At the beginning and the end of period/year Convertible non-voting preference shares At the beginning and the end of period/year Total Issued and fully paid: Ordinary shares At the beginning of period/year Conversion from preference shares Exercise of bonus warrants At the end of period/year Convertible non-voting preference shares At the beginning of period/year Convert to ordinary shares At the end of period/year Total	Number of shares of HK$0.10 each Unaudited Audited 30 September 2010 31 March 2010 1,456,913,987 1,456,913,987 143,086,013 143,086,013 1,600,000,000 1,600,000,000 503,779,117 491,758,039 — 11,021,078 726,329 1,000,000 504,505,446 503,779,117 132,064,935 143,086,013 — (11,021,078) 132,064,935 132,064,935 636,570,381 635,844,052	Share capital Unaudited Audited 30 September 2010 31 March 2010 HK$’000 HK$’000 145,691 145,691 14,309 14,309 160,000 160,000 50,378 49,176 — 1,102 72 100 50,450 50,378 13,207 14,309 — (1,102) 13,207 13,207 63,657 63,585

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 2010 and 31 March 2010, no share option was granted or outstanding.

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MANAGEMENT DISCUSSION AND ANALYSIS

The Economy

During the period under review, the economies underwent satisfactory growth both in the Hong Kong Special Administrative Region (“Hong Kong”) and the People’s Republic of China (the “PRC”). In particular the robust expansion in the PRC propelled its GDP past Japan’s for the first time during the second quarter of 2010, ranking the country as the second largest economy in the world after the US. For the first three quarters in 2010, its GDP growth reached 10.6%. We are optimistic that we would see consistent growth of the domestic economy in the PRC.

In Hong Kong, during the first three quarters of 2010, GDP expanded 7.1%. Considering a potential moderate decline in the fourth quarter, the GDP growth for the entire year is expected to reach 6.5%. Buttressed by the prosperous development in the PRC, the local economy is likely to grow steadily in the mid to long term.

The Printing and Paper Industry

The economic recovery has been considerably stronger in the developing world, such as the PRC, and this upturn has boosted demand for paper and board products. Separately, panic over the prospect of paper shortages following a massive earthquake in Chile in February 2010, led to a sharp increase in prices from February 2010 to May 2010. However, as Chilean pulp exports restarted a couple of months later, customers found themselves with adequate stocks and the market calmed down, resulting in stabilized paper prices during the second quarter of the financial year. Despite increases in material and energy costs, the demand for paper remained solid owing to rising consumption. In particular, the climb in demand in the PRC is expected to support the Group’s business in the future.

Operations Review

Financial Performance

For the six months ended 30 September 2010, the Group recorded a satisfactory performance against the reviving economy and greater domestic consumption created by the favourable economic policies in the PRC. Turnover and profit attributable to shareholders increased notably. The former grew 28.6% from HK$1,792 million to HK$2,304 million, while the latter rose by 16.7% from HK$30 million to HK$35 million. In light of the increasing material and energy costs as well as the early calmed down of the market in the second quarter of the financial year, the Group’s gross profit margin and net profit margin were 9.9% and 1.5% respectively. Earnings per share were HK6.9 cents (2009/10: HK6.0 cents), a gain of 15.0%.

The Group continued to maintain a healthy financial position. During the period under review, cash and bank balance amounted to HK$684 million. Current ratio rose to 1.25 times (2009/10: 1.16 times), with a gearing ratio at a healthy level of approximately 48.7%. Provision for doubtful debts dropped from 0.6% in the same period last year to 0.2% of the Group’s total revenue.

By business segment, paper trading, paper manufacturing and other business accounted for 87.8%, 9.9% and 2.3% of the Group’s total turnover respectively.

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Paper Business

Riding on over 40 years of experience in operating paper trading business and its extensive and solid sales network in the PRC and Hong Kong, the Group started to develop its own paper manufacturing business in the PRC in 2007. The vertically integrated business model has brought huge synergies to the Group. Facing the increasing demand for paper products in the PRC, turnover of the Group’s paper products increased by 30.5% from HK$1,723 million in the same period last year to HK$2,249 million. Operating profit was HK$73 million, a growth of 19.7% from HK$61 million in the same period last year. In terms of volume, the Group sold 365,420 metric tonnes of paper products during the period under review, a rise of 5.1% when compared with the last corresponding period.

The Group’s efforts to expand the PRC market have shown notable results. The PRC market continued to be the Group’s largest market, accounting for 54.4% of the Group’s total turnover of paper products. Hong Kong, the Group’s second largest market, has been growing steadily and accounted for approximately 39.4% of the Group’s turnover of paper products.

Paper Trading

The Group’s sales network covers more than 13 cities in the PRC, which enables it to fully capture the opportunities arising from the increasing demand for paper products from different localities in the PRC. The paper trading business has achieved satisfactory results during the period under review, with turnover up 27.5% from HK$1,586 million in the same period last year to HK$2,022 million. Sales tonnage increased by 2.0% as compared to the same period last year. The Group continued to expand its sales network by opening a sales office in Harbin during the period. This sales office will serve as the base for the Group to develop North-eastern districts in the PRC.

Paper Manufacturing

The paper manufacturing business is the Group’s main growth driver. Turnover surged by 59.3% to HK$319 million, including inter-company sales. In terms of sales tonnage, it increased by 17.7% as compared to the same period last year. Entering the third year of operating the paper manufacturing business, the Group has benefited from improved operational efficiency. Its operating profit grew 66.6% year-on-year to HK$20 million, with its operating profit margin rising from 8.7% in the same period last year to 8.8%. To meet the strong market demand for paper products, the utilisation rate of the production equipment of the Group’s Shandong mill met the Group’s expectation during the period under review.

Other Businesses

The aeronautic parts and services business and marine services business recorded turnover of HK$18,768,000 and HK$31,343,000 respectively and the operations were not yet fully recovered from the impact of the worldwide financial crisis.

Prospects

In the 12th Five-Year Plan passed in October 2010, the PRC Government proposed to create mechanisms to boost domestic demand and increase the income of urban and rural residents to unleash their spending power, presenting promising development potential for the PRC

– 16 –

economy. Looking ahead, the PRC, with sound fundamentals for economic development, is expected to continuously create long-term demand for paper products and drive the price of paper products to rise steadily.

For the paper manufacturing business, the Group’s paper mill in Zaozhuang City, Shandong Province, boasts a geographic advantage, enabling the Group to tap the huge demand for paper products in various industrial zones near the Yangtze River Region and the Beijing and Tianjin municipalities near areas such as Jiangsu and the Bohai Economic Zone. The above site also allows the paper mill easy access to coal for power generation. The new production line (“PM5”) installed by the Group recently has commenced trial runs in the third quarter of the financial year and is going to begin full operation by the last quarter of this financial year. The additional production line would be able to produce 200,000 metric tonnes of kraftliner boards and corrugated medium and more than double the total production capacity of the Group to 370,000 metric tonnes. As the Shandong paper mill has sufficient land to support further development for a total production capacity exceeding 1,000,000 metric tonnes, the Group will carefully monitor the market and decide to increase production facilities as appropriate to boost its capacity for meeting market demand.

For its paper trading business, the Group plans to set up several new sales offices in the inland areas of the PRC during the second half year, with the aim to generate greater synergies to its existing sales network and enhance the market penetration of its business in the country.

To optimise the promising prospects of the PRC, the Group will continue to enhance its competitiveness, reinforce its existing foundation and consistently expand business to maximise returns to its shareholders.

INTERIM DIVIDEND

The Board has resolved to declare the payment of an interim dividend of HK1 cent (2009: HK1 cent) per share for the six months ended 30 September 2010. The interim dividend will be payable to all shareholders of the Company whose names appear on the register of members of the Company on 7 January 2011. The interim dividend will be paid on or about 20 January 2011.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from 5 January 2011 to 7 January 2011 (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 Shop 1712–16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration no later than 4: 30 pm on 4 January 2011.

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EMPLOYEES AND REMUNERATION POLICIES

As at 30 September 2010, the Group employed 1,792 staff members, 151 of whom are based in Hong Kong and 1,341 are based in the PRC and 300 are based in other Asian countries. The Group’s remuneration policies are primarily based on prevailing market salary levels and the performance of the Group and of the individuals concerned. In addition to salary payments, other staff benefits include performance bonuses, education subsidies, provident fund, medical insurance and the use of 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 30 September 2010, short term deposits plus bank balances and bank borrowings amounted to HK$684 million (including restricted bank deposits of HK$166 million) and HK$1,717 million respectively.

As at 30 September 2010, the Group’s gearing ratio was 48.7% (31 March 2010: 42.2%), calculated as net debt divided by total capital. Net debt of HK$1,033 million is calculated as total borrowings of HK$1,717 million (including trust receipt loans, short term and long term borrowings) less cash on hand and restricted deposits of HK$684 million. Total capital is calculated as total equity of HK$1,086 million plus net debt. The current ratio (current assets divided by current liabilities) was 1.25 times (31 March 2010: 1.16 times).

With bank balances and other current assets of approximately HK$2,899 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.

FOREIGN EXCHANGE RISK

The Group’s transaction currencies are principally denominated in Renminbi, United States dollars 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 loan which provide a natural hedge against currency risks. As at 30 September 2010, bank borrowings in Renminbi amounted to HK$248 million (31 March 2010: HK$84 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 30 September 2010, the Group has no outstanding interest rate swap contracts (31 March 2010: Nil).

CONTINGENT LIABILITIES

The Company provided corporate guarantees on the banking facilities granted to its subsidiaries. The amount of facilities utilised by the subsidiaries as at 30 September 2010 amounted to HK$1,714,000,000 (31 March 2010: HK$1,345,000,000).

– 18 –

CHARGE OF ASSETS

As at 30 September 2010, trust receipt loans of HK$234,550,000 (31 March 2010: HK$238,092,000) and bank loans of HK$136,787,000 (31 March 2010: HK$46,523,000) were secured by legal charge on certain properties of the Group.

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 2010 before it was tabled for the Board’s approval.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the six months ended 30 September 2010, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

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 2010 except that the non-executive Directors were not appointed for a specific term but are subject to retirement by rotation and re-election at the Company’s annual general meetings in accordance with the bye-laws of the Company.

PUBLICATION OF INTERIM RESULTS ANNOUNCEMENT AND DESPATCH OF INTERIM REPORT

The interim results announcement is published on the websites of the Company (www.samsonpaper.com) and the Stock Exchange (www.hkexnews.hk). The 2010/11 interim report will be despatched to the shareholders of the Company and available on the same websites in due course.

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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, 24 November 2010

• for identification purpose only

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