2007 Annual Report - Sappi

Notes to the group annual financial statements continued
for the year ended September 2007
US$ million 2007 2006
28. Post-employment benefits – pensions continued
The discount and salary increase rates can have a significant effect on the amounts
reported. To illustrate, increasing the discount rate by 1% would decrease the
projected benefit obligation by US$175 million and increasing the salary increase
rate by 1% would increase the projected benefit obligation by US$35 million.
Decreasing the discount rate by 1% would increase the projected benefit obligation
by US$213 million and decreasing the salary increase rate by 1% would decrease
the projected benefit obligation by US$43 million.
Pension plan liability is presented on the balance sheet as follows:
Pension liability (refer note 22) 144 246
Pension asset (refer note 15) (118) (18)
Pension liability (included in other payables) 35 39
61 267
In determining the expected long term return assumption on plan assets, Sappi considers the relative weighting of plan
assets to various asset classes, the historical performance of total plan assets and individual asset classes and economic
and other indicators of future performance. Peer data and historical returns are reviewed to check for reasonableness and
appropriateness. In addition, Sappi may consult with and consider the opinions of financial and other professionals in
developing appropriate return benchmarks.
Plan fiduciaries set investment policies and strategies for the local trusts. Long-term strategic investment objectives include
preserving the funded status of the trust and balancing risk and return while keeping in mind the regulatory environment in
each region. The plan fiduciaries oversee the investment allocation process, which includes selecting investment managers,
setting long-term strategic targets and rebalancing assets periodically. Target versus actual weighted average allocations
(by region) are shown below:
2007 2006
Southern Europe North Southern Europe North
Africa (incl UK) America Africa (incl UK) America
Target asset allocation
by region % % % % % %
Equity 40.0 20.0-25.0 48.0 40-55 20.0-35.0 48.0
Debt Securities 44.0 50.0-70.0 22.0 15-30 60.0-75.0 22.0
Real Estate – 0.0-5.0 – – 0.0-5.0 –
Other 16.0 10.0-20.0 30.0 5-20 0.0-5.0 30.0
Actual asset allocation by region
Equity 55.0 22.8-24.0 38.2 49.0 19.0-35.0 47.6
Debt Securities 30.0 49.0-67.7 23.2 33.0 59.0-77.0 23.5
Real Estate – 0.0-7.0 – – 0.0-6.0 –
Other 15.0 9.5-20.0 38.6 18.0 0.0-4.0 28.9
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sappi limited | 07 | annual report