2008 Annual report - Sappi

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Corporate governance // continued resources and financial forecasts. The group’s results are reviewed prior to submission to the board as follows: • All four quarters and financial year end – by the disclosure committee and audit committee; and • Interim and final quarters – by the group’s external auditors. Internal controls The board is responsible for the group’s systems of internal financial and operational control. The group’s internal controls and systems are designed to provide reasonable assurance as to the integrity and reliability of external financial reports, that assets are adequately safeguarded against material loss and that transactions are properly authorised and recorded. Such controls are based on established written policies and procedures which are monitored throughout the group and are applied by trained, skilled personnel with an appropriate segregation of duties through clearly defined lines of accountability and delegation of authority. The control system includes comprehensive reporting and analysis of actual results against approved standards and budgets. All employees are required to maintain the highest ethical standards in ensuring that the company’s business practices are conducted in a manner which in all reasonable circumstances is above reproach. As part of an ongoing process, reviews were undertaken across the group of the effectiveness of various elements of the group’s internal controls, procedures and systems. Where potential improvements are identified, they are being addressed. The reviews enabled management to further strengthen the group’s controls and the results of the reviews did not indicate any material breakdown in the functioning of these controls, procedures and systems during the year under review. A material breakdown is defined as a critical weakness in process or financial systems which could result in a material loss, contingency or uncertainty requiring disclosure in the published annual financial statements. Section 404 of the US Sarbanes- Oxley Act requires companies listed on the NYSE to complete a comprehensive evaluation and report on the effectiveness of their internal controls over financial reporting. Sappi has conducted its third evaluation at the end of fiscal 2008 and will include its section 404 report in its Form 20-F to be filed with the United States Securities and Exchange Commission. Disclosure controls Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the group in the reports that it files or submits is accumulated and communicated to the group’s management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. The group has implemented disclosure controls and procedures as deemed appropriate by management. The disclosure committee meets to review all Sappi Limited external financial reports prior to their release. On occasion, these meetings are held jointly with the audit committee. Internal audit The group’s internal audit department has a current complement of 20 persons, of which 15 are experienced and qualified and five are in training. It has a specific mandate from the audit committee and independently appraises the adequacy and effectiveness of the group’s systems, financial internal controls and accounting records, reporting its findings to local and divisional management, the external auditors as well as the respective audit committees. The head of internal audit reports to the audit committee on a functional basis and to the chief financial officer on a daily operational basis and has direct access to the chief executive officer. The internal audit coverage plan is based on a risk assessment performed for each operating unit. This incorporates risks identified by management during the group risk assessment process as well as the results of audit work performed. This process ensures that the audit coverage is focused on identified high risk areas. During 2008 internal audit focused on expanding the IT audit scope to provide additional assurance to management in the IT security audit area, application control reviews and forensic IT audit. Internal Audit also started to focus more resources on operational audits and the inclusion of the top risks per region in the determination of the audit coverage plan. Internal audit meets privately with the audit committee and individual board members on a regular basis. The report submitted by Internal Audit to the audit committee includes amongst other things an overview of hotline allegations and forensic activities, a summary of potentially significant control issues identified, audit risk assessments, audit coverage plans, actual performance against planned activities, the periodic evaluation of the system of internal controls and details of any scope restrictions as well as audit resource developments. Company secretary All directors have access to the advice and services of the company secretary and are entitled and authorised to seek independent and professional advice about affairs of the group at the group’s expense. The company secretary is responsible for the duties set out in section 268G of the South African Companies Act of 1973. Specific responsibilities include the provision of guidance to directors as to how to discharge their duties in the best interests of the company as well as arranging for the induction of new directors. Code of ethics Sappi requires its directors and employees to act with the utmost good faith and integrity in all transactions and with all 68
sappi stakeholders with whom they interact. This commitment is reflected in the group’s code of ethics that commits the company and employees to sound business practices and compliance with legislation. (‘Hotlines’) have been implemented for all the regions in which the group operates. This service, operated by various independent companies, enables employees to report anonymously; environmental, safety, ethics, accounting, auditing, control issues or other concerns. All reported matters are followed up by group internal audit, resolved appropriately and reported to the audit committee. Of all complaints reported to the hotlines since inception none included fraudulent financial reporting. As the company is listed on the NYSE and has securities registered under the US Securities Exchange Act of 1934, it is subject to the US Foreign Corrupt Practices Act (FCPA). The company has ensured that all aspects of the FCPA have been addressed in its policies. As part of continuous improvement the company completed a review of the wording of the code and communicated a new and revised version to all employees during 2008. The revised code is also available on the company website. Legal compliance programme A legal compliance programme designed to increase awareness of, and enhance compliance with, applicable legislation is in place. This programme involves the delegation of responsibility for compliance with country specific legislation to designated people throughout the organisation and includes a quarterly selfassessment process. The self-assessment process includes a review of any changes in legislation and the impact of these changes on the business. The group compliance officer reports quarterly to the group audit committee. Information technology (IT) governance The need for strong IT governance has been recognised within Sappi and as such the group is actively involved in reviewing its IT governance structures. IT governance represents one of the pillars of the IT strategy and Sappi adheres to industry recognised best practices as laid down by the IT governance Institute and more specifically the new standard for governance ISO/IEC 38500. Interest in contracts The group has a policy regulating disclosure of interest in contracts. The policy dictates that all employees disclose any interest in contracts to assess any possible conflict of interest. The policy also dictates that directors and senior officers of the group must disclose any interest in contracts as well as other appointments to assess any conflict of interest in fiduciary duties. During the year under review, save as disclosed in the financial statements, no directors had a significant interest in any material contract or arrangement entered into by the company or its subsidiaries. Insider trading The company has a code of conduct for dealing in company securities. No employee of Sappi in possession of material nonpublic information in respect of Sappi Limited or any of its subsidiaries, nor any member of his/her family or household may, at any time, buy or sell securities of Sappi Limited or its subsidiaries, or engage in any other action to take advantage of such information. All officers, directors and employees who have access to unpublished price-sensitive information are precluded from trading in Sappi Limited securities during ‘closed periods’, which apply from the end of the financial quarters in March, June, September and December respectively, until two full business days after the release of the results for the respective quarters. Prior to dealing in Sappi Limited securities (even outside closed periods); clearance is required from the Sappi Limited chairman through the Sappi Limited group secretary. In practice, the chairman clears the transactions of directors of Sappi Limited and its subsidiaries and the chairman himself requires the clearance of the audit committee chairman for his own transactions. Fraud and illegal acts The group does not engage in or accept or condone the engaging in of any illegal acts in the conduct of its business. The directors’ policy is to actively pursue and encourage prosecution of perpetrators of fraudulent or other illegal activities should they become aware of any such acts. The group has im ple - mented hotlines to facilitate reporting any fraudulent, illegal acts or unethical behaviour which are externally managed and administered. Communication The board is responsible for presenting a balanced and understandable assessment of the company’s position in reporting to stakeholders. The reporting addresses material matters of significant interest and is based on principles of openness and substance over form. We recognise that the reporting and communication is made in the context that society now demands greater transparency and accountability from companies regarding non-financial matters. The board strives to ensure that reports present a comprehensive and objective assessment of the activities of the company so that stakeholders with a legitimate interest in the company’s affairs can obtain full, fair and honest information regarding its performance. The board takes cognisance of the communities in which it operates when communicating to its stakeholders. For further details of our communication activities please refer to the sustainability report on page 6 to 9. // 2008 Annual report 69
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annual report 2008
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sappi Our report in overview In pro
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sappi Our performance The group’s
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sappi Target Target Net debt to tot
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sappi Our score on the DJSI World D
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sappi People continued Our commitme
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sappi Our business structure Johann
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sappi Pulp Paper pulp is the main r
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sappi Ideas that matter Print remai
Page 19 and 20: sappi Objectives for 2009 Meaningf
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Page 35 and 36: sappi Transaction funding overview
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Page 42 and 43: Risk management Our top risks These
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Page 46 and 47: Chief financial officer’s report
Page 60 and 61: Five year review Not restated for I
Page 62 and 63: Share statistics at September 2008
Page 64 and 65: Corporate governance We are committ
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Page 72 and 73: Compensation report Compensation co
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Page 76 and 77: Directors’ approval The directors
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Page 80 and 81: Group income statement for the year
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Condensed Sappi Limited company inc
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Condensed Sappi Limited company cas
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Notes to the condensed Sappi Limite
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Glossary General definitions bleach
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Glossary // continued Non-GAAP fina
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Notice to shareholders // continued
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Notice to shareholders // continued
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Shareholder’s diary Annual genera
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Notes to proxy The form of proxy mu
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Notes 1. To be effective, this form
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Notes 1. To be effective, this form
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www.sappi.com
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2008 Annual report - Sappi

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