SAPPI LIMITED

Dividends
We consider dividends on an annual basis. Taking into account factors at the time, including the
rights offer to shareholders and the macro economic and global financial market conditions, the Sappi
Board decided in November 2008 to rebase the dividend which for fiscal 2007 had been 32 US cents per
ordinary share. On November 6, 2008, we announced a dividend in respect of ordinary shares of 16 US
cents per share for fiscal 2008. The dividend was paid on all ordinary shares in issue on November 28,
2008 and paid on December 2, 2008, which was prior to the completion of the rights offer to
shareholders. South African shareholders were paid the Rand equivalent of the US dollar denominated
declaration. Taking into account the macro economic and global financial market conditions, our
performance in fiscal 2010 as well as our priority to reduce indebtedness and preserve liquidity, the
Board of Directors decided on November 6, 2009 and November 8, 2010 not to declare a dividend for
fiscals 2009 and 2010 respectively.
Our ability to pay dividends is restricted by the terms of the Revolving Credit Facility, the OeKB Term
Loan Facility and the 2014 Bonds. Under the Revolving Credit Facility and the OeKB Term Loan Facility,
we cannot declare or pay any cash dividends in, among others, the following circumstances:
(a) an event of default has occurred and is continuing;
(b) the aggregate amount of such dividends would exceed 50% of the net aggregate profits of the
Group (after adjusting for the tax effect of special items);
(c) the ratio of net debt to EBITDA calculated on a pro-forma basis exceeds 4.00:1.
Under the 2014 Bonds, we are restricted from making restricted payments (which term includes
cash dividend payments) except if:
(a) no event of default has occurred and is continuing (or would occur as a result of such
payment); and
(b) after giving pro forma effect to the payment and certain other transactions, the ratio of
consolidated EBITDA to fixed charges (net finance costs) is greater than 2.00:1; and
(c) the aggregate amount of restricted payments (including the contemplated restricted payment)
since the issue date of the 2014 Bonds is less than the sum of 50% of consolidated net income
(or if a deficit, 100% of such deficit) from the issue date of the 2014 Bonds to the end of the most
recent quarterly reporting period, 100% of cash equity contributions and certain other amounts
since the issue date of the 2014 Bonds.
The restrictions summarized above are subject to various exceptions, certain of which are
significant. Terms used above have the meaning ascribed to them in the relevant agreements. For the full
terms of the restrictions on dividend distributions and exceptions thereto, see ‘‘Item 19—Exhibits—
Exhibit 4.10, Exhibit 4.13, and Exhibit 4.18’’.
In accordance with South African common law, dividends may be declared only out of distributable
profits. Under the South African Companies Act the payment of dividends (or any other distribution) is
subject to the Company meeting the solvency and liquidity requirements of the Act. Holders of American
Depositary Receipts (ADRs) on the relevant record date will be entitled to receive any dividends payable
in respect of the shares underlying the ADSs, subject to the terms of the Deposit Agreement among us,
The Bank of New York Mellon and the ADR holders (the ‘‘Deposit Agreement’’). There is no restriction
under South African exchange control regulations on the free transferability of cash dividends to
non-resident shareholders or ADS holders (provided the necessary endorsements are obtained). See
‘‘Item 10—Additional Information—Exchange Controls’’.
We are not currently obliged to withhold any form of tax on dividends paid to non-residents of South
Africa. South African companies pay Secondary Tax on Companies (‘‘STC’’) at the flat rate of 10% in
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