2007 Annual Report - Sappi

Notes to the group annual financial statements continued
for the year ended September 2007
14. Joint ventures and associates continued
The Limited Liability Company Agreement dated 04 May 2001 between Sappi and the unrelated investor has been revised
as follows:
– a waiver has been granted for any administrative breach in respect of past distributions to the extent that they may have
violated return of capital restrictions; and
– an allowance was made for the distribution to the members, prior to 04 May 2007 of amounts received by the company
in respect of the bond that was due in February 2007.
The SPE may not be liquidated prior to repayment of the bonds it issued. The first tranche of the bonds matured on
11 February 2007. The SPE distributed to the limited liability company the net proceeds (US$6 million) for the first repayment
of the notes receivable (US$71 million) and the bonds (US$65 million). The limited liability company distributed these proceeds
to its members. The remaining bonds mature in two further tranches on 11 February 2009, and 11 February 2011. Sappi
may not redeem its investment in the SPE (via its ownership interest in the limited liability company) prior to complete
repayment of the bonds issued by the SPE and our investment has a subordinate interest to the payment of the outstanding
bonds. We have not guaranteed the obligations of the SPE and the holders of the notes payable issued by the SPE have no
recourse to us.
The financial statements of Timber IV are to 30 September of each year which is the year end of our associate. The results
are unaudited.
The directors believe that the book values of the joint ventures and associates equates to market values.
Where the year ends of joint ventures and associates are different to Sappi’s, the management accounts are used for the
periods to Sappi’s year end.
US$ million 2007 2006
15. Other non-current assets
Loans to the Sappi Limited Share Incentive Trust participants 8 8
Financial assets* 25 31
Post-employment benefits – pension asset (refer note 28) 118 18
Other loans 14 4
165 61
* Details of investments are available at the registered offices of the respective companies.
16. Inventories
Raw materials 145 138
Work in progress 58 53
Finished goods 328 346
Consumable stores and spares 181 162
712 699
Included in the above are raw materials of US$1 million (September 2006: US$12 million), work in progress of US$1 million
(September 2006: US$9 million), finished goods of US$27 million (September 2006: US$47 million) and consumable stores
of US$121 million (September 2006: US$98 million) which have been written down to net realisable value. The amount of
inventories written down to net realisable value to the income statement amounted to US$12 million (2006: US$19 million).
An amount of US$1 million (September 2006: US$1 million) in respect of the finished goods inventory write-down for the prior
year was reversed in the current year due to changing market conditions.
The cost of inventories recognised as an expense and included in cost of sales amounted to US$4,150 million (September
2006: US$3,984 million).
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