2006 20-F - Sappi

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SAPPI NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued) 30. SHARE-BASED PAYMENT (Continued) for the year ended September 2006 The following assumptions have been utilised to determine the fair value of the options granted in the financial period. Issue 29 Issue 30 Date of grant...................... 13 December 2004 13 December 2005 Share Price at grant date............ ZAR79.51 US$11.23 Strike Price of share................ ZAR78.00 0.00 Vesting Period .................... 4 years 4 years Vesting conditions................. Proportionately over time Market related—relative to peers Percentage expected to vest......... N/A 33.67% Number of shares offered. . . . . . . . . . . 1,925,400 1,883,400 Volatility ......................... 33.60% 35.00% Risk free discount rate ............. 7.06% (SA yield) 4.33% (US yield) Expected dividend yield ............ 2.50% 2.30% Expected percentage of vesting . . . . . . 95% 95% Model used to value................ Binomial Binomial Fair value of option................ ZAR25.07 ZAR 24.41 Volatility has been determined with reference to the historic volatility of the Sappi share price over the expected period. Share options, allocation shares, restricted shares and performance shares to executive directors, which are included in the above figures, are as follows: Number of options/ shares At beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,343,667 Share options, restricted shares and performance shares granted. . . . . . . . . . . . . . . . . . . . . . . 184,000 Share options and allocation shares exercised/declined ............................... (247,500) Share options and allocation shares forfeited........................................ (341,167) Shares removed on resignation of directors ......................................... (470,000) Shares brought in on appointment of director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,000 At end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633,000 Share options and allocation shares exercised by executive directors during the year had an average exercise price per share of US$6.39 (2005 US$4.17) and an average market price per share of US$12.85 (2005: US$12.17). F-88
SAPPI NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued) 30. SHARE-BASED PAYMENT (Continued) for the year ended September 2006 The following table sets forth certain information with respect to the 633,000 Share Options and Allocation Shares granted by Sappi to executive directors: Issue date Number of options/shares Expiry date Exercise price (ZAR) 21 December 1999.......................... 165,000 21 December 2007 53.85 15 January 2001 ............................ 78,000 15 January 2009 49.00 28 March 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000 28 March 2010 147.20 13 February 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,000 13 February 2011 112.83 14 January 2004 ............................ 30,000 14 January 2012 79.25 30 December 2003.......................... 18,000 30 December 2011 79.25 13 December 2004.......................... 48,000 13 December 2012 78.00 13 December 2004.......................... 18,000 13 December 2008 — 13 December 2005.......................... 66,000 13 December 2009 — 08 August 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 08 August 2010 — 633,000 Refer to note 39 for further information on Directors participation in the Sappi Limited Share Incentive Trust and the Sappi Limited Performance Share Incentive Plan. No new loans have been granted to the executive directors since 28 March 2002. 31. FINANCIAL INSTRUMENTS The group’s financial instruments consist mainly of cash and cash equivalents, accounts receivable, certain investments, accounts payable, borrowings and derivative instruments. 1. Risk management objectives and policies The principal market risks (that is the risk of loss arising from adverse changes in market rates and prices) to which Sappi is exposed through financial instruments are: • interest rates on interest-bearing borrowings; • foreign exchange rates, generating translation and transaction gains and losses; and • credit risk. A treasury committee consisting of senior management of the group meets regularly to review net currency, interest rate, derivative instruments, group funding, credit insurance and monetary investment risks and exposures. Treasury management strategies are also evaluated and revised where necessary. The treasury policy is formally documented and these policies are the guidelines for the decisions that are made by the Treasury Committee. F-89
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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 GROUP CASH FLOW STATEMENT for
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1. BUSINESS SAPPI NOTES TO THE GROU
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SAPPI NOTES TO THE GROUP ANNUAL FIN
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Page 175 and 176: SAPPI NOTES TO THE GROUP ANNUAL FIN
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Page 263 and 264: SAPPI CONDENSED COMPANY BALANCE SHE
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Page 267 and 268: 5. OTHER INCOME 2006 2005 ZAR milli
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2006 20-F - Sappi

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