2006 20-F - Sappi

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A double taxation treaty between South Africa and the United States came into effect during 1997 and was promulgated under Government Notice R. 1721 (Government Gazette 18553) on December 15, 1997. United States Introduction This section, which represents the views of Cravath, Swaine & Moore LLP, our US counsel, summarises the material US Federal income tax consequences to holders of our ordinary shares and ADSs as of the date of this Annual Report. The summary applies to you only if you hold our ordinary shares or ADSs, as applicable, as a capital asset for tax purposes (that is, for investment purposes). The summary does not cover US state or local or non-US law. This summary is based in part upon representations of the Depositary made to Sappi and the assumption that each obligation in the Deposit Agreement and any related agreements will be performed in accordance with its terms. In addition, this summary does not apply to you if you are a member of a class of holders subject to special rules, such as: • a dealer in securities or currencies; • a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings; • a bank; • a life insurance company; • a tax-exempt organisation; • a person that holds our ordinary shares or ADSs as part of a straddle or a hedging, integrated, constructive sale or conversion transaction for tax purposes; • US holder (as defined below) whose functional currency for tax purposes is not the US dollar; • a person liable for alternative minimum tax; or • a person that owns, or is treated as owning, 10% or more of any class of our ordinary shares. For purposes of the discussion below, you are a “US holder” if you are a beneficial owner of our ordinary shares or ADSs who or which is: • an individual US citizen or resident alien; • a corporation, or entity taxable as a corporation, that was created under US law (federal or state); or • an estate or trust whose worldwide income is subject to US Federal income tax. If you are not a US holder, you are a “non-US holder” and the discussion below titled “-US Federal Income Tax Consequences to non-US Holders” will apply to you. If a partnership holds our ordinary shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner of a partnership holding our ordinary shares or ADSs, you should consult your tax advisor. US Federal Income Tax Consequences to US Holders ADSs. In general, for US Federal income tax purposes, US Holders of ADSs will be treated as the beneficial owners of the ordinary shares underlying those ADSs. 121
Distributions. The gross amount of any distribution (other than in liquidation), including the fair market value of all distributions of ordinary shares whenever a holder may elect to receive cash distributions in lieu of ordinary share distributions, that you receive with respect to our ordinary shares or ADSs (before reduction for South African income tax, if any, withheld from such distributions) generally will be included in your gross income on the day on which you, in the case where you own ordinary shares, or the Depositary, in the case where you own ADSs, receive the distribution. This distribution will be taxed to you as a dividend (that is, ordinary income) to the extent such distribution does not exceed our current or accumulated earnings and profits, as calculated for US Federal income tax purposes (“E&P”). Dividends received by an individual US holder during taxable years before 2011 will generally be taxed at a maximum rate of 15%, provided certain holding period requirements and other conditions are satisfied. Dividends received by an individual US holder for taxable years after 2010 will be subject to tax at ordinary income rates. To the extent any distribution exceeds our E&P, the distribution will first be treated as a taxfree return of capital to the extent of your adjusted tax basis in our ordinary shares or ADSs, as applicable, and will be applied against and reduce such basis on a dollar-for-dollar basis (thereby increasing the amount of gain and decreasing the amount of loss recognised on a subsequent disposition of such ordinary shares or ADSs). To the extent that such distribution exceeds your adjusted tax basis, the distribution will be taxed as gain recognised on a sale or exchange of our ordinary shares or ADSs, as applicable. See “-Sale or Other Disposition of Company Ordinary Shares and ADSs”, below. Because we are not a US corporation, no dividends-received deduction will be allowed to a corporate US holder with respect to dividends paid by us. Distributions on the ordinary shares and ADSs are expected to be made by us in US dollars, to the extent necessary. In the event that distributions on the ordinary shares and ADSs are made by us in Rand, any dividends paid in Rand generally will be included in your gross income in a US dollar amount calculated by reference to the exchange rate in effect on the day you, in the case of ordinary shares, or the Depositary, in the case of ADSs, receive the dividend. It is anticipated that the Depositary will, in the ordinary course, convert Rand received by it as distributions on the ADSs into US dollars. To the extent that the Depositary does not convert the Rand into US dollars at the time that you are required to take the distribution into your gross income for US Federal income tax purposes, you may recognise foreign exchange gain or loss, taxable as ordinary income or loss, on the later conversion of the Rand into US dollars. The gain or loss recognised will generally be based upon the difference between the exchange rate in effect when the Rand are actually converted and the “spot” exchange rate in effect at the time the distribution is taken into account and any such gain or loss will generally be treated as United States source income for US foreign tax credit purposes. Dividends paid by us will generally be treated as foreign source income for US foreign tax credit limitation purposes. Subject to certain limitations, US holders may elect to claim a foreign tax credit against their US Federal income tax liability for South African tax withheld (if any) from dividends received in respect of our ordinary shares or ADSs, as applicable. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, for taxable years ending prior to January 1, 2007, dividends paid by us in respect of our ordinary shares or ADSs, as applicable, generally will be “passive income” or, in the case of certain types of US holders, “financial services income” and therefore any US tax imposed on these dividends cannot be offset by excess foreign tax credits that you may have from foreign source income not qualifying as passive income or financial service income, respectively. Under the revised foreign tax credit limitation rules effective for taxable years ending after December 31, 2006, any such dividend income generally will be “passive income” or, in the case of certain types of US holders, “general income.” Additional limitations on the credit apply to individual US holders receiving dividends if the dividends are eligible for the 15% maximum tax rate on dividends described above. US holders that do not elect to claim a foreign tax credit may instead claim a deduction for South African tax withheld (if any). 122
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As filed with the Securities and Ex
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OUR USE OF TERMS AND CONVENTIONS IN
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FORWARD-LOOKING STATEMENTS In order
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2 Year Ended September 2006 2005 (U
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Risk Factors In addition to other i
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New technologies or changes in cons
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Several customers account for a sig
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Maintain a global presence. One of
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Major Product Categories Descriptio
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market share was negatively affecte
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The chart below represents the oper
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The following table sets forth appr
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Paper North America’s on-line fin
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of 860,000 metric tonnes of triple-
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a capacity of 60,000 metric tonnes
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customers use our products in the p
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(1) The following table sets forth
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The mill markets paper and excess p
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Pulp Sappi Fine Paper North America
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equired for its operations. Sappi F
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• The National Environmental Mana
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PROPERTY, PLANT AND EQUIPMENT For a
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ITEM 5. OPERATING AND FINANCIAL REV
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) Movement in market prices for our
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The recent price history for benchm
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Demand from all of the market segme
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Raw Material and Other Input Costs
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The exchange rate impact on raw mat
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Our South African businesses have f
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• Any debtors or creditors not in
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Year Ended September 2006 Compared
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US$28 million. Decreased selling pr
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enefit of the reversal of the Usutu
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accounting mismatch, as a result of
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South African residents, who are na
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The increase of US$11 million in fi
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June 2010. The OeKB A tranche and t
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Page 77 and 78: Contractual Obligations We have var
Page 79 and 80: mill is located in Nanchang, the ca
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Page 97 and 98: Klaas de Kluis (70) (independent).
Page 99 and 100: Mark Richard Thompson (54) BCom, BA
Page 101 and 102: Audit Committee An Audit Committee
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Page 137 and 138: 4.10 Credit Facility, dated May 7,
Page 139 and 140: SAPPI Group Annual Financial Statem
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SAPPI NOTES TO THE GROUP ANNUAL FIN
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4.2 Employee cost SAPPI NOTES TO TH
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SAPPI CONDENSED COMPANY BALANCE SHE
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SAPPI CONDENSED COMPANY STATEMENT O
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5. OTHER INCOME 2006 2005 ZAR milli
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2006 20-F - Sappi

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