SAPPI LIMITED

under the Act are more onerous than the current standards. The FRSC must ensure that financial
reporting standards accord with IFRS and promote issued and consistent accounting practices.
Under the Act, a public company and each of its directors or officers who knowingly is a party to the
preparation, approval, dissemination or publication of any financial statements (including annual
financial statements) which are materially false or misleading or which fail in a material way to comply
with the requirements set out in the Act, will be guilty of an offence. It is also an offense for any person to
be a party to the preparation, approval, publication, issue or supply of a financial report that is false or
misleading in a material respect if such person knows or ought reasonably to suspect that it is false or
misleading.
Material Contracts
On September 29, 2008 Sappi entered into an agreement with M-real Corporation to acquire their
coated graphics paper business for e 750 million. See ‘‘Item 4—Information on the Company—Business
Overview’’; and ‘‘Item 19—Exhibit 4.15’’.
On September 29, 2008 Sappi entered into a vendor loan note agreement with M-real Corporation
for e 220 million to partly finance the acquisition of the coated graphics paper business acquired from
M-real Corporation. The vendor loan notes were issued at the time of the closing of the acquisition. See
‘‘Item 5—Operating and Financial Review and Prospects—Mill Closures, Acquisitions, Dispositions and
Impairment; and Joint Venture’’; and ‘‘Item 19—Exhibit 4.18’’. In August 2009, Sappi redeemed all its
outstanding e 220 million vendor loan notes issued to M-real at a discount of 13.5% of their principal
amount (approximately US$ 41 million).
In November and December 2008, Sappi conducted a renounceable rights offer of 286,886,270
new ordinary shares of ZAR 1.00 each to qualifying Sappi shareholders recorded in the shareholders
register at the close of business on Friday November 21, 2008, at a subscription price of ZAR 20.27 per
rights offer share in the ratio of 6 rights offer shares for every 5 Sappi shares held. The rights offer was
fully subscribed and the shareholders received their shares on December 15, 2008. The rights offer
raised ZAR 5,815,184,693 (approximately US$ 575 million) which was used to partly finance the
Acquisition and to pay related costs.
In June 2009, Sappi Southern Africa (Pty) Ltd (previously Sappi Manufacturing (Pty) Ltd) combined
its ZAR 3 billion (US$ 437 million) Domestic Medium Term Note Programme established in June 2006
(the ‘‘Initial Program’’) with its commercial paper program established in November 2003 (‘‘Initial CP
Program’’), into a new ZAR 5 billion Domestic Medium Term Note Programme (the ‘‘DMTN Program’’)
which supersedes and replaces the Initial Program and the Initial CP Program in their entirety without
affecting any notes issued under the Initial Program and Initial CP Program. Notes issued under the
DMTN Program are not subject to any minimum or maximum maturity. On June 30, 2009, Sappi
Southern Africa issued ZAR 325 million (US$ 41 million) and on July 13, 2009, issued ZAR 175 million
(US$ 21 million) Senior Unsecured Fixed Rate Notes (collectively the ‘‘Third Tranche’’) under the DMTN
Program at a fixed interest rate of 12.13%, payable semi-annually on June 30 and December 30 of each
year, commencing on June 30, 2009. The securities issued under the Third Tranche mature on June 30,
2012. Sappi Southern Africa has also agreed to observe certain undertakings with respect to the
securities including limitations on encumbrances (other than permitted encumbrances) over its assets.
Should a change of control event (more than 50% of the voting rights of Sappi Southern Africa be
acquired by any party other than a subsidiary of Sappi Limited) and a negative rating event (a
downgrade of Sappi Manufacturing’s national credit rating) in respect of the change of control occur,
then the holders of the securities may, within 30 days after the negative rating event, require the
redemption of the notes by way of an extraordinary resolution. The offering of the securities, which are
listed on the Bond Exchange of South Africa, was not registered under the Securities Act or any U.S.
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