2006 20-F - Sappi

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The present exchange control system in South Africa is used principally to control capital movements. South African companies are generally not permitted to export capital from South Africa or to hold foreign currency or foreign assets without the approval of the South African exchange control authorities. Foreign investment by South African companies is also restricted. As a result, a South African company’s ability to raise and deploy capital outside the Common Monetary Area is restricted. The granting of loans from outside South Africa to Sappi Limited or its South African subsidiaries and their ability to borrow from non-resident sources is regulated. Further, where 75% or more of a South African company’s capital, assets, earnings, voting securities, voting power, power of control or earnings are directly or indirectly controlled by or vested in non-residents of South Africa, the company is designated an “affected person” and certain restrictions are placed on its ability to obtain local financial assistance. The South African authorities have expressed a commitment to a phased liberalisation of exchange controls and have relaxed certain exchange controls over recent years. Some of the more salient recent changes to the South African exchange control regulations regarding South African corporations are as follows: • South African corporations wishing to establish new approved foreign ventures are now permitted to transfer funds abroad for this purpose. There is no limit to the amount of funds which may be transferred except that, the foreign investment may only be acquired and such funds may only be transferred abroad once Excon has approved the type of foreign investment, which it will only do if the foreign investment accords with its foreign investment criteria (applicable at the relevant time), and with regard to larger foreign investments Excon may require capital outflows to be staggered in order to manage the potential impact on the foreign exchange market. Excon approved investments into Africa no longer require the South African investor to exercise control (namely 50% plus one share) over the foreign investment into Africa. • South African corporations which have been granted approval to transfer funds abroad for purposes of acquiring an approved foreign investment, will now be entitled to retain abroad foreign dividends which relate to the operation of the approved foreign investment and any foreign dividend which may have been repatriated to South Africa after 26 October 2004, may thereafter be transferred abroad again, at any time and for any purpose other than for purposes of a non-resident (which is directly or indirectly controlled by a South African resident) using such funds to reinvest into the South African market. • South African corporations wishing to invest abroad may apply for permission to use corporate assets or share swaps and share placement transactions to finance approved foreign investments. The latter mechanism entails the placement of the locally quoted company’s shares with long term overseas holders who, in payment for the shares, provide the foreign currency abroad which the company then uses to acquire the target investment. Since February 2001, institutional investors are no longer entitled to make use of the asset swap mechanism but are, however, entitled to acquire foreign portfolio investments of either 20% or 25% of total assets, depending on the type of institutional investor. Controls on current account transactions, with the exception of certain discretionary expenses, have been abolished and are now dealt with by authorised dealers in terms of the Exchange Control Rulings. Authorised dealers in foreign exchange may, against the production of suitable documentary evidence, provide forward cover to South African residents in respect of fixed and ascertained foreign exchange commitments covering the movement of goods. It is not possible to predict whether existing exchange controls will be abolished, continued or modified by the South African Government in the future. For further information, see “Item 10—Additional Information—Exchange Controls”. 89
Environmental Matters We operate in an industry subject to extensive environmental regulations. Typically, we do not separately account for environmental operating expenses but do not anticipate any material expenditures related to such matters. We do separately account for environmental capital expenditures. See note 34 to our Group annual financial statements included elsewhere in this Annual Report for a discussion of these matters. For further information, see “Item 4 Information on the Company—Environmental and Safety Matters”. Research and Development, Patents and Licenses, etc. Our research and development efforts focus on the improvement of product quality and production processes as well as the development of new products. Research and development is managed at a number of regional technology centres. These “centres of excellence” provide the basis to leverage unique sets of skills and provide customer focused product development. We spent approximately US$24 million and US$27 million on research and development activities during fiscal 2006 and fiscal 2005, respectively. North America Sappi Fine Paper North America’s research and development activities are centred at Westbrook. This centre has a proud history of product innovation; for example, it developed both one- and two-sided coated paper. In addition, Sappi Fine Paper North America has a number of proprietary technologies, including the on-line finishing technology and its Ultracast® electron-beam technology. Sappi Fine Paper North America on-line finishing technology is used in its production of coated paper at Somerset and Muskegon. Sappi Fine Paper North America’s Ultracast® technology is utilised in speciality papers such as release papers used in the production of high fidelity imitation leather and other surfaces. Europe Sappi Fine Paper Europe maintains research and development centres at its Maastricht and Gratkorn sites. These facilities work closely with the research facility at Sappi Fine Paper North America in order to achieve efficiencies and ensure rapid implementation of improvements. Sappi Fine Paper Europe’s research and development centres have concentrated on developing new paper qualities. The research and development effort has developed coated fine paper of outstanding quality. The paper which was developed satisfies the demands of modern high performance printing machines, while maintaining a consistent quality between the paper produced at the various Sappi mills. The Maastricht research and development centre also has overseen the introduction of triple coating through the use of its triple blade coating concept. More recently, the research and development centres have concentrated on optimising product characteristics in relation to various types of paper machines at each mill, in order to improve efficiencies and quality of production. In 1990, the Alfeld mill became the first mill to produce coated fine paper using 100% totally chlorine-free (TCF) pulp. Southern Africa Sappi Forest Products focuses upon developing technology related to plantation forestry, pulping, bleaching and related environmental technology and chemical cellulose (dissolving pulp) technology. In the 1970s, we patented the Sapoxal oxygen bleaching process and licensed the technology in major pulp and paper manufacturing countries. This process facilitates the reduction or elimination of elemental chlorine in pulp bleaching. Oxygen bleaching has subsequently become an industry standard. At our 90
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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
Page 43 and 44: PROPERTY, PLANT AND EQUIPMENT For a
Page 45 and 46: ITEM 5. OPERATING AND FINANCIAL REV
Page 47 and 48: ) Movement in market prices for our
Page 49 and 50: The recent price history for benchm
Page 51 and 52: Demand from all of the market segme
Page 53 and 54: Raw Material and Other Input Costs
Page 55 and 56: The exchange rate impact on raw mat
Page 57 and 58: Our South African businesses have f
Page 59 and 60: • Any debtors or creditors not in
Page 61 and 62: Year Ended September 2006 Compared
Page 63 and 64: US$28 million. Decreased selling pr
Page 65 and 66: enefit of the reversal of the Usutu
Page 67 and 68: accounting mismatch, as a result of
Page 69 and 70: South African residents, who are na
Page 71 and 72: The increase of US$11 million in fi
Page 73 and 74: June 2010. The OeKB A tranche and t
Page 75 and 76: impact on liquidity varies accordin
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 85 and 86: increases, health care cost trends,
Page 87 and 88: alance sheet date. Risks, uncertain
Page 89 and 90: If the Group had applied IFRS 3 ret
Page 91 and 92: IFRS. The Group did not apply the e
Page 93: Where BEE equity credentials are ob
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 105 and 106: Levies Act, was paid via Internal R
Page 107 and 108: Pursuant to the Companies Amendment
Page 109 and 110: on Restitution of Land Rights and a
Page 111 and 112: (“the Depositary”) with respect
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Page 115 and 116: Voting Rights Subject to any rights
Page 117 and 118: equest not less than one-twentieth
Page 119 and 120: Financial Assistance The Bill enhan
Page 121 and 122: At the Annual General Meeting of Sh
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Page 127 and 128: Distributions. The gross amount of
Page 129 and 130: US Federal Income Tax Consequences
Page 131 and 132: PART II ITEM 13. DEFAULTS, DIVIDEND
Page 133 and 134: the controls may become inadequate
Page 135 and 136: ITEM 16E. PURCHASES OF EQUITY SECUR
Page 137 and 138: 4.10 Credit Facility, dated May 7,
Page 139 and 140: SAPPI Group Annual Financial Statem
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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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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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