SAPPI LIMITED

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chemical cellulose has ranged from a high of approximately US$ 1,400 per tonne in the third fiscal quarter of 2010 (second calendar quarter), to a low of US$ 470 per tonne in the second quarter of 2002. During fiscal 2008, prices of VSF grade chemical cellulose strengthened in line with NBSK prices, but fell sharply in fiscal 2009 as a result of the weaker economic conditions, the falling NBSK prices and the decline in demand for chemical cellulose, declining to a low of US$ 590 per tonne in March 2009. As from the third fiscal quarter of 2009, demand for chemical cellulose showed an improvement and continued to improve throughout both 2009 and 2010. In line with the improved demand and the rising NBSK prices, the VSF grade price of chemical cellulose increased during the second half of fiscal 2009 and into 2010, reaching highs of around US$ 1,400 per tonne in some instances. Prices of the higher purity chemical cellulose used in applications other than for VSF products tend to be more stable and are largely unrelated to the price of NBSK. The market price for chemical cellulose in some of the other market businesses such as acetate flake, microcrystalline cellulose and ethers, is set by competitive forces within these specific markets, and have increased to levels of US$ 1,500 per tonne and above in fiscal 2010. Timber Products Our timber products operations are concentrated in South Africa and consist of sawn timber for the building industry and components for the furniture and packaging industry. Business Review The Group’s reportable segments are Sappi Fine Paper North America, Sappi Fine Paper Europe and Sappi Southern Africa. Sappi Fine Paper which is comprised of the Group’s Sappi Fine Paper North America and Sappi Fine Paper Europe reportable segments, is our largest operating business, accounting for approximately 76% of our sales volume in fiscal 2010 and approximately 78% of our sales volume in fiscal 2009. Sappi Fine Paper has an aggregate annual paper production capacity of 5.4 million tonnes at 12 paper and related paper pulp mills in North America and Europe. Sappi Southern Africa is an integrated pulp, fine paper, packaging paper and timber products producer. In fiscal 2010 and fiscal 2009, Sappi Southern Africa accounted for approximately 24% and 22% respectively, of our sales volume. It has an aggregate annual production capacity of 1.1 million tonnes of paper and 1.8 million tonnes of pulp in southern Africa. As of fiscal 2010, our southern African fine paper operations, which had previously been part of our Sappi Fine Paper business, have been incorporated with our former Sappi Forest Products business to form our Sappi Southern Africa segment. Unless otherwise indicated, operational data for fiscal 2009 presented in this Annual Report has been adjusted to retroactively reflect this reorganization. We also operate a trading network for the international marketing and distribution of our products outside our core operating regions of North America, Europe and southern Africa. Our trading operation, which we refer to as Sappi Trading, co-ordinates our shipping and other logistical functions for exports from North America, Europe and southern Africa. All sales and costs associated with Sappi Trading are allocated to the three reportable segments. The markets for our pulp and paper products are significantly affected by changes in industry capacity and output levels and by cyclical changes in the world economy. For further information, see ‘‘Item 5—Operating and Financial Review and Prospects—Principal Factors Impacting on our Group Results’’, ‘‘Item 5—Operating and Financial Review and Prospects—Markets’’ and ‘‘Item 4—Business Overview’’. 22
The chart below represents our operational rather than the legal or ownership structure as of September 2010. Units shown are not necessarily legal entities. Sappi Fine Paper North America Sappi Fine Paper Sappi Limited Sappi Fine Paper Europe Sappi Southern Africa Sappi Chemical Cellulose Sappi Paper and Paper Packaging Sappi 6DEC201012475159 Forests The following tables set forth certain information with respect to our operations for, or as of the end of, fiscal 2010. Sappi Fine Paper Sappi Unallocated North Southern and America Europe Africa Eliminations Total (US$ million) (tonnes ’000) Sales volume (tonnes) ..................... 1,354 3,796 2,744 — 7,894 Sales ................................. 1,373 3,638 1,561 — 6,572 Operating profit ......................... 180 72 112 (23) 341 Operating profit excluding special items ........ 124 76 134 5 339 23
Page 1 and 2: As filed with the Securities and Ex
Page 3 and 4: Item 7. Major Shareholders and Rela
Page 5 and 6: References to ‘‘NBSK’’ are
Page 7 and 8: PART I ITEM 1. IDENTITY OF DIRECTOR
Page 9 and 10: Risk Factors In addition to other i
Page 11 and 12: For further information, see ‘‘
Page 13 and 14: terms of the debt being refinanced.
Page 15 and 16: The inability to recover increasing
Page 17 and 18: A large percentage of our employees
Page 19 and 20: merge or consolidate with other com
Page 21 and 22: we operate. The transaction was app
Page 23 and 24: currencies as we can benefit from i
Page 25 and 26: Major Product Categories Pulp: Desc
Page 27: for coated mechanical paper decline
Page 31 and 32: The following table sets out the ap
Page 33 and 34: The following table sets forth sale
Page 35 and 36: Kangas. As a direct result of the g
Page 37 and 38: Customers Sappi Fine Paper sells it
Page 39 and 40: The following chart sets forth cert
Page 41 and 42: Construction on the expansion proje
Page 43 and 44: lease extendable to 2089. The locat
Page 45 and 46: North America Wood In connection wi
Page 47 and 48: Pulp Sappi Fine Paper Europe produc
Page 49 and 50: ENVIRONMENTAL AND SAFETY MATTERS En
Page 51 and 52: and management of forests are all r
Page 53 and 54: ORGANIZATIONAL STRUCTURE Sappi Limi
Page 55 and 56: Approximate Secured / Location Use
Page 57 and 58: than we use. By region, the South A
Page 59 and 60: ‘‘—Markets’’ for a furthe
Page 61 and 62: '000 metric tonnes 8,000 7,000 6,00
Page 63 and 64: The price of NBSK and Bleached Hard
Page 65 and 66: ZAR/US$ 16.00 14.00 12.00 10.00 8.0
Page 67 and 68: The fiscal period average three-mon
Page 69 and 70: employees from the beginning of 200
Page 71 and 72: The Sappi Southern Africa reportabl
Page 73 and 74: Movements in operating profit and o
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Page 77 and 78: 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
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The gains or losses, which are reco
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The Group’s policy is to recogniz
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ITEM 6. DIRECTORS, SENIOR MANAGEMEN
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Deenadayalen (Len) Konar Sappi boar
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Mohammed Valli (Valli) Moosa Other
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Rudolf Thummer Sappi board committe
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Executive Officers The Executive Di
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companies have to comply with domes
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average more than 45% of the employ
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For a detailed description of the S
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Pursuant to the Companies Amendment
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Post transaction shareholding struc
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Dividends We consider dividends on
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ITEM 9. THE OFFER AND LISTING Offer
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ITEM 10. ADDITIONAL INFORMATION Mem
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holder of the beneficial interest i
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Voting Rights Subject to any rights
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provision of the New Act by any oth
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South African Companies Act, 2008 A
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state securities laws. The securiti
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documents are the agent for the new
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Dividends There are no restrictions
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STC STC is imposed on South African
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with any connected persons) held mo
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of our ordinary shares or ADSs, as
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of gain recognized on a sale or oth
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integrated operations could be adve
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PART II ITEM 13. DEFAULTS, DIVIDEND
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(d) Changes in Internal Control ove
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PART III ITEM 17. FINANCIAL STATEME
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4.13 Credit Agreement, dated August
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SIGNATURES The registrant hereby ce
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REPORT OF THE INDEPENDENT REGISTERE
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SAPPI GROUP STATEMENT OF COMPREHENS
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SAPPI GROUP CASH FLOW STATEMENT for
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SAPPI NOTES TO THE GROUP ANNUAL FIN
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10. PLANTATIONS SAPPI NOTES TO THE
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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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