SAPPI LIMITED

SAPPI
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued)
for the year ended September 2010
28. SHARE-BASED PAYMENTS (Continued)
The following assumptions were utilised to determine the fair value of the ‘‘A’’ Ordinary shares
granted:
Base price for hurdle rate price .................... 32.50
Share price hurdle rate .......................... 9.1%
Hurdle rate price ............................... 75.34
Dividend yield (unadjusted) ....................... 3.0%
Volatility ..................................... 40.0%
Dividend payout ............................... Straight-line vesting
Straight-line dividend payout rate ................... 50.0%
Employee turnover (annual) ....................... 7.8%
Management turnover (annual) .................... 11.3%
Model used to value ............................ Black Scholes Model
The ESOP and MSOP trusts have been set up with rules that detail the way in which the shares are
allocated and how they are forfeited.
The vesting schedule for the MSOP and ESOP is illustrated below:
Incremental Cumulative
vesting of vesting of
entitlements entitlements
(%)
Completed months of service after effective date
0–35 ...................................... — —
36–48 ..................................... 40 40
49–60 ..................................... 10 50
61–72 ..................................... 10 60
73–84 ..................................... 10 70
85–96 ..................................... 10 80
97–108 .................................... 10 90
109—Termination Date .........................
Refer to note 17 for further details regarding the ‘‘A’’ ordinary shares.
10 100
29. FINANCIAL INSTRUMENTS
The group’s financial instruments consist mainly of cash and cash equivalents, accounts receivable,
certain investments, accounts payable, borrowings and derivative instruments.
Introduction
The principal risks to which Sappi is exposed through financial instruments are:
a) market risk (the risk of loss arising from adverse changes in market rates and prices), arising
from:
– interest rate risk
– currency risk
F-85