2006 20-F - Sappi

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SAPPI NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued) 13. GOODWILL AND INTANGIBLE ASSETS for the year ended September 2006 Goodwill 2006 2005 Licence fees Patents Total Goodwill Licence fees Patents Total US$ million Cost net of accumulated amortisation and impairment at beginning of year ......................... 4 2 3 9 4 2 5 11 Amortisation...................... — — (2) (2) — — (2 ) (2) Translation difference.............. — 1 — 1 — — — — 4 3 1 8 4 2 3 9 Cost (gross carrying amount) . . . . . . . . 4 3 21 28 4 2 21 27 Accumulated amortisation and impairment..................... — — (20) (20) — — (18 ) (18) Net carrying amount............... 4 3 1 8 4 2 3 9 14. EQUITY INVESTMENTS 2006 2005 US$ million Cost of equity investments....................................................... 104 102 Share of post-acquisition (loss) profit, net of dividends received ...................... (1 ) 2 Foreign currency translation effect................................................ — 1 103 105 Summarised financial information in respect of the Group’s equity investments is set out below: Total assets.................................................................... 564 549 Total liabilities ................................................................. 315 299 Net assets...................................................................... 249 250 Group’s share of equity investments net assets...................................... 103 105 Sales.......................................................................... 331 154 (Loss) profit for the period....................................................... (4 ) 3 Group’s share of equity investments’ (loss) profit for the period ...................... (1 ) 2 Joint ventures and associates* Jiangxi Chenming During the 2005 year Sappi acquired 34% of Jiangxi Chenming Paper Company Limited (“Jiangxi Chenming”) in a joint venture arrangement. Jiangxi Chenming is established in the People’s Republic of * 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. F-56
SAPPI NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued) for the year ended September 2006 14. EQUITY INVESTMENTS (Continued) China and is principally engaged in the manufacturing and sales of paper and paper products. The financial statements of Jiangxi Chenming are to the 31 December of each year which was the reporting date when the company was established. The last audited financials were to the 31 December 2005. Umkomaas Lignin (Pty) Ltd Joint venture agreement between Sappi and Borregaard for the construction and operation of a lignin plant at Umkomaas and the development, production and sale of products based on lignosulphates in order to build a sustainable lignin business. The financial statements of Umkomaas Lignin (Pty) Ltd are to the 31 December of each year which is the year end of Borregaard. The last audited financials were to the 31 December 2005. Sapin S.A. A joint venture agreement for the buying and selling of wood and wood chips to Sappi and other paper manufacturers. The financial statements of Sapin S.A. are to the 31 December of each year which is the year end of Sapin S.A. The last audited financials were to the 31 December 2005. VOF Warmtekracht A Joint venture agreement between Sappi and Essent for a co-generation electricity and steam producing plant. The financial statements of VOF Warmtekracht are to the 31 December of each year which is the year end of VOF Warmtekracht. The last audited financials were to the 31 December 2004. Timber IV In 1998, our interests in timberlands located in Maine and certain equipment and machinery were sold to a third party timber company, Plum Creek Timberlands LLP, in exchange for cash of US$3 million and three promissory notes receivable in the aggregate amount of $171 million. In 1999, Sappi contributed these promissory notes to a special purpose entity (“SPE”). The promissory notes were pledged as collateral for the SPE to issue bonds to investors in the amount of US$156 million. In 2001, Sappi contributed its interest in the SPE to a limited liability company in exchange for 90% of the outstanding limited liability membership interest. All voting control of the limited liability company is controlled by an unrelated investor that has significant capital at risk and therefore has not been consolidated by Sappi in its financial statements. The SPE may not be liquidated prior to repayment of the bonds it issued, which mature in three tranches on February 11, 2007, February 11, 2009, and February 11, 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 SPE is bankruptcy remote and serves to protect the investors in the notes from any credit risk relating to Sappi Limited by isolating cash flows from the Plum Creek notes receivable. The structure was set up to raise funding using the promissory notes as collateral in a manner that would not result in either F-57
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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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impact on liquidity varies accordin
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Contractual Obligations We have var
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mill is located in Nanchang, the ca
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product pricing, raw material costs
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flows of the related underlying exp
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increases, health care cost trends,
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alance sheet date. Risks, uncertain
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If the Group had applied IFRS 3 ret
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IFRS. The Group did not apply the e
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Where BEE equity credentials are ob
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Environmental Matters We operate in
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Klaas de Kluis (70) (independent).
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Mark Richard Thompson (54) BCom, BA
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Audit Committee An Audit Committee
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estructuring initiatives that occur
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Levies Act, was paid via Internal R
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Pursuant to the Companies Amendment
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on Restitution of Land Rights and a
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(“the Depositary”) with respect
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• any proposal concerning the ado
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Voting Rights Subject to any rights
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equest not less than one-twentieth
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Financial Assistance The Bill enhan
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At the Annual General Meeting of Sh
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African shareholders will be paid t
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purpose of Capital Gains Tax in Sou
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Distributions. The gross amount of
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US Federal Income Tax Consequences
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PART II ITEM 13. DEFAULTS, DIVIDEND
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the controls may become inadequate
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ITEM 16E. PURCHASES OF EQUITY SECUR
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4.10 Credit Facility, dated May 7,
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SAPPI Group Annual Financial Statem
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SAPPI GROUP INCOME STATEMENT for th
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SAPPI NOTES TO THE GROUP ANNUAL FIN
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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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