SAPPI LIMITED

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The principal quantitative and qualitative disclosures about market risks (that are, the risk of loss arising from adverse changes in market rates and prices) to which Sappi is exposed are: Market Risk Interest rate risk. We are exposed to interest rate risk as we borrow funds at both fixed and floating interest rates. Currency risk. We are exposed to economic, transaction and translation currency risks. Commodity price risk. We are exposed to commodity price risk from price volatility and threats to security of our raw material supply and other inputs to the production process. See note 29 to our Group Annual Financial Statements included elsewhere in this Annual Report. Credit Risk Credit risk. We are exposed to credit risk in relation to trade receivables, cash deposits and financial investments. See note 29 to our Group Annual Financial Statements included elsewhere in this Annual Report. Liquidity Risk Liquidity risk. We are exposed to liquidity risk in that we may be unable to meet our current and future financial obligations as they fall due. See note 29 to our Group Annual Financial Statements included elsewhere in this Annual Report. Other Risks Plantation risk. We are exposed to fair value fluctuations on plantations, as well as to fire, hazardous weather, disease and other damages to our plantations. See ‘‘Item 5—Operating and Financial Review and Prospects—Critical Accounting Policies and Estimates’’. Discount rates. We are exposed to the discount rate fluctuations in the calculation of post employment benefit liabilities. See ‘‘Item 5—Operating and Financial Review and Prospects— Critical Accounting Policies and Estimates’’. For additional descriptions of these risks, see notes 2, 10, 16, 20, 27 to our Group Annual Financial Statements included elsewhere in this Annual Report. Commodity Price Risk The selling prices of the majority of products manufactured and purchase prices of many raw materials used generally fluctuate in line with commodity cycles. Prices of chemical cellulose generally follow those of paper pulp, although the cycle is generally less volatile. As a result, the sale of chemical cellulose also tends to act as a natural hedge for paper pulp. Our total pulp production capacity is approximately 95% of our total pulp requirements. However, there are differences between the types of pulp required in our paper making operations and the grades of pulp we produce, as well as regional differences. We are therefore a buyer as well as a seller of paper pulp. For a description of our level of pulp integration, see ‘‘Item 4—Information on the Company—Business Overview’’, ‘‘Item 4—Information on the Company—Sappi Fine Paper North America, Sappi Fine Paper Europe and Sappi Southern Africa’’. Despite our present relatively high level of pulp integration on a Group-wide basis, in the event of significant increases in the prices of pulp on a Group-wide basis, our non-integrated and partially 156
integrated operations could be adversely affected if they are unable to raise paper prices by amounts sufficient to maintain margins. For a description of our markets see ‘‘Item 5—Operating and Financial Review and Prospects—Markets’’. We are exposed to commodity price risk from price volatility and threats to security of supply of our raw materials and other inputs to the production process. A combination of contract and spot deals are used to manage price volatility and contain supply costs. Contracts are limited to the Group’s own use requirements. For details on commodity price deals see note 29 to our Group Annual Financial Statements included elsewhere in this Annual Report; and for a description of our supply requirements see ‘‘Item 4—Information on the Company—Supply Requirements’’. 157
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As filed with the Securities and Ex
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Item 7. Major Shareholders and Rela
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References to ‘‘NBSK’’ are
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PART I ITEM 1. IDENTITY OF DIRECTOR
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Risk Factors In addition to other i
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For further information, see ‘‘
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terms of the debt being refinanced.
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The inability to recover increasing
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A large percentage of our employees
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merge or consolidate with other com
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we operate. The transaction was app
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currencies as we can benefit from i
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Major Product Categories Pulp: Desc
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for coated mechanical paper decline
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The chart below represents our oper
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The following table sets out the ap
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The following table sets forth sale
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Kangas. As a direct result of the g
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Customers Sappi Fine Paper sells it
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The following chart sets forth cert
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Construction on the expansion proje
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lease extendable to 2089. The locat
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North America Wood In connection wi
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Pulp Sappi Fine Paper Europe produc
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ENVIRONMENTAL AND SAFETY MATTERS En
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and management of forests are all r
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ORGANIZATIONAL STRUCTURE Sappi Limi
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Approximate Secured / Location Use
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than we use. By region, the South A
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‘‘—Markets’’ for a furthe
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'000 metric tonnes 8,000 7,000 6,00
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The price of NBSK and Bleached Hard
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ZAR/US$ 16.00 14.00 12.00 10.00 8.0
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The fiscal period average three-mon
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employees from the beginning of 200
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The Sappi Southern Africa reportabl
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Movements in operating profit and o
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Operating profit in fiscal 2009 was
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Sappi Southern Africa Key figures:
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Comparing fiscal 2010 with fiscal 2
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This comparison includes the closur
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African operations into the US doll
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Sappi Fine Paper North America Comp
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Taxation 2010 2009 (US$ million) 20
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elation to inventory levels and rec
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Capital expenditure by region is as
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Over the past three years the relat
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Group’s securitization programs,
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Credit Facility terminate on May 31
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quarters ending from January 2012 t
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As no default event has occurred, n
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In addition, Sappi Fine Paper North
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areas where our South African busin
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Recoveries in equity markets couple
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Impairment of assets other than goo
Page 111 and 112: The gains or losses, which are reco
Page 113 and 114: The Group’s policy is to recogniz
Page 115 and 116: ITEM 6. DIRECTORS, SENIOR MANAGEMEN
Page 117 and 118: Deenadayalen (Len) Konar Sappi boar
Page 119 and 120: Mohammed Valli (Valli) Moosa Other
Page 121 and 122: Rudolf Thummer Sappi board committe
Page 123 and 124: Executive Officers The Executive Di
Page 125 and 126: companies have to comply with domes
Page 127 and 128: average more than 45% of the employ
Page 129 and 130: For a detailed description of the S
Page 131 and 132: Pursuant to the Companies Amendment
Page 133 and 134: Post transaction shareholding struc
Page 135 and 136: Dividends We consider dividends on
Page 137 and 138: ITEM 9. THE OFFER AND LISTING Offer
Page 139 and 140: ITEM 10. ADDITIONAL INFORMATION Mem
Page 141 and 142: holder of the beneficial interest i
Page 143 and 144: Voting Rights Subject to any rights
Page 145 and 146: provision of the New Act by any oth
Page 147 and 148: South African Companies Act, 2008 A
Page 149 and 150: state securities laws. The securiti
Page 151 and 152: documents are the agent for the new
Page 153 and 154: Dividends There are no restrictions
Page 155 and 156: STC STC is imposed on South African
Page 157 and 158: with any connected persons) held mo
Page 159 and 160: of our ordinary shares or ADSs, as
Page 161: of gain recognized on a sale or oth
Page 165 and 166: PART II ITEM 13. DEFAULTS, DIVIDEND
Page 167 and 168: (d) Changes in Internal Control ove
Page 169 and 170: PART III ITEM 17. FINANCIAL STATEME
Page 171 and 172: 4.13 Credit Agreement, dated August
Page 173 and 174: SIGNATURES The registrant hereby ce
Page 175 and 176: REPORT OF THE INDEPENDENT REGISTERE
Page 177 and 178: SAPPI GROUP STATEMENT OF COMPREHENS
Page 179 and 180: SAPPI GROUP CASH FLOW STATEMENT for
Page 181 and 182: SAPPI NOTES TO THE GROUP ANNUAL FIN
Page 209 and 210: 10. PLANTATIONS SAPPI NOTES TO THE
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SAPPI NOTES TO THE GROUP ANNUAL FIN
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22. PROVISIONS SAPPI NOTES TO THE G
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SAPPI CONDENSED SAPPI LIMITED COMPA
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SAPPI NOTES TO THE CONDENSED SAPPI
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SAPPI LIMITED

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