york timbers – annual report 2011 - sharedata · fenced funds. this responsibility is backed up...

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COMPANY PROFILE

York is an integrated plantation owner and a primary manufacturer of timber related products. Ourmain markets are in the building and construction sector, the production of clean energy, furniture andpellets products. York is further one of the biggest private suppliers of biomass to the pulp and paperand particle board industries.

York strives to achieve optimal cost conversion and be recognised as a key player in the developmentof improved genetic material.

The investment in a biological asset provides a natural hedge against market cycles. In a downturn,plantations are left to grow and in the process accumulate future potential income. York’s currentplantation age class distribution will give the highest volume growth over the next few years furtherenhancing the income generation ability.

The use of biodegradable products from sustainable practices is part of responsible consumerism andYork’s strategy is to assist the development of these markets.

Design, Layout and Print by Copperleaf Graphic Design 013 750 1915

york cover 2011 21/9/11 09:00 Page 3

Chairman’s Report 2

Board of Directors 4

Chief Executive Officer’s Report 6

Chief Financial Officer’s Report 8

Sustainability Report 14

Corporate Governance Report 26

King III Application and our approach to Integrated reporting 35

Remuneration Report 39

Consolidated annual financial statements 43

C O N T E N T S

The year under review has been filled with directional changeswithin the organisation and in the market it operates.

Shareholders’ expectations after the rights issue were high andthe company had to prove that it has the ability to producesustainable levels of income whilst it enhances the quality of itsassets. This set of results demonstrated that the companyachieved this balance in 2011.

The global timber industry has made some major stridestowards reinventing itself and York had to adjust to thischallenging environment. Operations are being benchmarkedagainst these international players and this has steered Yorkinto becoming more efficient and adopting the correct coststructures. The company has made progress in some of thesecompetitive areas and is set to handle the clear challenges of thetimber industry.

The financial position of the organisation is sound and wemanaged to meet all financial obligations under relativelychallenging market conditions.

The company is considering the best optimal capital structurefor the business to ensure sustainable growth of theorganisation.

With a weak economic outlook, York developed a detailed growthstrategy and the company is set to further enhance currentoperations and diversify into other product and market channels.

To this end, the company will proactively address and manage itsrisks whilst seeking innovative approaches to mitigating them. Toensure these risks are addressed at the correct organisational

level, a Risk and Innovation Board sub-committee has beenconstituted. It works jointly with the Audit and Remuneration andCommittees and is also mandated to give due attention to thestrategic opportunities.

The composition of the York Board of Directors is powerful andgives a dynamic approach to the leadership of the organisation.The diverse experience of the board members complements themanagement team which has the specialist skills required todrive the business forward.

York will comply to the regulations of the new companies act andin future report more comprehesively in terms of intergratedreporting to stakeholders.

Dr Azar Jammine was appointed to the Board as an independentnon-executive director on 5 October 2010. Mr Paul Botha andMr Shakeel Meer were reappointed to the Board at the annualgeneral meeting on 16 November 2010.

On behalf of the Board, I would like to extend appreciation to theCompany's employees shareholders, customers and suppliers fortheir continued support and York looks forward to mutuallybeneficial relationships.

I would like to extend my appreciation to the employees andmanagement of York for their high performance approach toensuring the success of the business in this financial year.

Jim Myers

Chairman

J im MyersCha i rman o f the Board

C H A I R M A N ’ S R E P O R T

PAGE 2 Y o r k T i m b e r s – A n n u a l R e p o r t 20 1 1

“It is with pleasure that I present York's

latest results for the twelve month

period to June 2011.”

Jim Myers

Y o r k T i m b e r s – A n n u a l R e p o r t 2 0 1 1

B O A R D O F D I R E C T O R S


PAUL BOTHA (48) – Non-Executive Director

JIM MYERS (71) (US CITIZEN) – Non-Executive Chairman

PIETER VAN ZYL (48) – Chief Executive Officer

Pieter holds a BSc Agric and BSc Agric Economics (Hons) degrees from the University of Pretoria

and completed his MBL through UNISA. Having held the positions of Managing Director of HHM

Timber Limited, Director of Klein Karoo International and a Senior Business Analyst for the IDCC's

Wood Paper and Forestry division, Pieter is a highly experienced figure in the solid wood processing

industry. His diverse skills in manufacturing, marketing, change management, investment bankinng,

people and strategy development, provide a solid platform for the development of the organizatioon.

Chairman, Blackstar Managers. Directorships: Spescom Software Inc., Econet Wireless Global, AMB

Holdings, American Chamber of Commerce (SA) and President of American Chamber of Commerce.

Jim has over 25 years experience in the telecommunications industry, with recent focus on the African

continent. Jim's wide ranging experience includes the definition, development and implementation of

management systems for the finance, engineering and production disciplines. Additionally he was the

advisor to the successful empowerment shareholder in Second Network Operator and was the

principal driver behind the establishment and promotion of the consortium that acquired the

SBC/Telekom Malaysia equity stake in Telkom SA; the incumbent telecommunications operator in

South Africa. Jim was appointed Non-Executive Director of York in February 2007. He holds a

Bachelors Degree in Mathematics, a Masters in Applied Mathematics and a PhD in Industrial

Engineering/ Operations Research.

Paul is a practicing attorney and notary public having been in private practice since 1986. Paul

carried out a substantial amount of cross-border mergers and acquisitions work throughout Africa

until 1997 when he established an advisory business for Brait, an international investment banking

business. Paul was the CEO of Brait Advisory from 1998 to 2003. Currently, Paul is a founder and

CEO of Metier Investment & Advisory Services (Pty) Ltd, a niche corporate finance and investment

house. He is also a principal in the Lereko Metier Capital Growth Fund. Under the name of Paul

Botha & Associates, Paul provides commercial lawyering and corporate advice. He serves on the

boards of numerous businesses and has acted as an adviser on more than 140 transactions,

including private equity and Stock Exchange related transactions. His qualifications include BA LLB,

HDip Company Law, HDip Tax, Notary Public. Paul was appointed Non-Executive Director in 2007.

Y o r k T i m b e r s – A n n u a l R e p o r t 20 1 1

SHAKEEL MEER (49) – Non-Executive Director

GAVIN TIPPER (46) – Non-Executive Director

DR AZAR JAMMINE (49) – Non-Executive Director

Azar did a BSc Honours in Mathematical Statistics at the University of the Witwatersrand. Durring

the period 1970-75 he was employed as Investment Analyst at Senbank and subsequentlyy at

Stockbrokers Martin & Co, now JP Morgan, during which time he completed a B.A. Honourss in

Economics Cum Laude, part-time at Wits. In 1976, Dr Jammine completed his M.Sc in Econommics

at the London School of Economics, followed by his PhD at the London Business School after whhich

he was awarded a two-year Post-Doctoral Fellowship at the Centre for Business Strategy of the

School. In December 1985 he took up the position of Director and Chief Economist of Economettrix.

Dr Jammine has recently been appointed to the National Advisory Council on Innovation.

Gavin completed his articles with KPMG in 1987 and went on to hold the position of Technnical

Partner before joining Coronation Holdings Ltd in 2001 as Chief Operating Officer. He is curreently

an Executive Director of its successor company CIT, dealing in various financial instruments and

long-term equity investments. Gavin holds directorships with AVI Limited, Interwaste Holdings

Limited, Coronation Investments and Trading Limited, Redefine International Limited and Wichfford

Plc, a London Listed company. He holds BCom and BAcc degrees from Wits University and a MMBA

from the University of Cape Town. Gavin is a Chartered Accountant and was appointed a NNon-

Executive Director in 2010.

Shakeel is a member of the IDC's Executive Management with overall responsibility foor IDC

investments in the Metals, Wood and Paper, Chemicals, Textiles and clothing and Constrruction

related sectors. In addition, he has overall responsibility for managing off-balance sheet annd ring-

fenced funds. This responsibility is backed up by his previous experience in mechanical enginneering

including the design and maintenance of systems, due diligence and project development in vvarious

sectors through his previous position as head of Agro Industries Strategic Business Unnit and

Corporate Strategy and Portfolio Management at the IDC. Shakeel holds a BSc Mechhanical

Engineering from the University of KwaZulu Natal, Developing Strategy for Value Creation froom the

London Business School, Senior Management Development Programme with Euromoney and a MBL

from UNISA. Shakeel was appointed Non-Executive Director in 2007.

DUNCAN ERSKINE (38) – Chief Financial Officer

A specialist in the financial management of forestry and sustainable timber processing companies,

Duncan completed his articles at PricewaterhouseCoopers following completion of his B.Comm wwith

Honours at the University of KwaZulu Natal. Duncan qualified as a Chartered Accountant in 1999,

thereafter holding an Audit Management position for five years at PwC. He has solidified this wwide

ranging knowledge of the industry through holding the position of Financial Manager at HM Timber

Limited. Duncan’s technical financial skills enables him to steer the organisation through the higghly

controlled listed environment.

A successful rights issue was completed with our

shareholders supporting a restructuring plan built around

seven key areas; cost optimisation, resource optimisation,

maximisation of cash flow, sustained improvement of the

biological asset, maintaining market share, investment in

human capital and development of a strategic growth plan

for the business. I am pleased to report that we have made

significant progress in all seven areas and have delivered a

firm set of results for 2011.

York's primary markets are the building and construction

industry and in the year under review business confidence

towards this sector remained weak. Global lumber sales

however, started to increase from a low base due to the

rebuilding of earthquake striken countries. Financial

institutions continued to be exceptionally risk averse and

government spending on infrastructure and residential

developments stalled. These, being key drivers for York's

business, created a challenging and highly competitive

environment in which to operate.

Global demand for softwood lumber increased by about

18 percent following a year where worldwide consumption

was at its lowest in almost 50 years. This upward trend in

consumption continued in the early part of 2011, with the

total volume consumed, approximately 20 percent higher

than the same period in early 2010.

In the period under review, the volume sold in the South

African Lumber market grew by 3%, while York achieved an

increase in volume sales of 11%. Pricing remained similar to

previous year's levels.

York changed its plantation valuation method from net

standing value to discounted cashflow (DCF) in the year

ended 30 June 2010 and the value increased by R14.7

million (2010: R183 million).

York continued to plant more hectares than harvested and

subscribed to best forestry operating practices. The

biological asset is managed on a sustainable basis and in an

environmentally responsible manner. All of York's plantations

are Forest Stewardship Council (FSC) certified.

The persistent focus on cost competitiveness resulted in

increased gross profit margins from 39% to 44% compared

to the previous reporting period. York reduced costs on a

sustainable basis and continues to seek ways to improve

efficiencies across the group. York benchmarks its cost

structures internationally. The group is working towards

inclusion in the category of the 25th percentile of lowest cost

producers.

York is well placed to drive production efficiencies and

address constraints innovatively to extend profits and cash

flows. There are a number of capital projects in progress

which will improve operating costs through technological

advancements.

P i e ter van Zy lCh ie f E xecu t i ve O f f i cer

C H I E F E X E C U T I V EO F F I C E R ’ S R E P O R T

“In the 2010 financial year a restructuring plan

for the business was presented to shareholders

that aimed to restore the balance sheet and

return York to a viable and healthy organisation.”

P A G E 6 Y o r k T i m b e r s – A n n u a l R e p o r t 20 1 1


The interest rate swap hedging arrangement has matured

and this should positively affect earnings going forward. The

cost associated with York's debt continues to increase and

as a result York is considering restructuring or replacing its

current debt package.

“The solid profit performance during the yearunder review augurs well for the future”

• R53,3m pre-tax profit for the year

• 11% increase in sales volumes

• 5,5% growth in revenue

• 4% reduction in cost of sales

• 12% reduction in administration and selling expenses

Future plans and the implementation thereof, are better

begun on the back of the solid profit performance during the

year under review.

York invests substantially towards the social upliftment of the

communities in and around the areas of its operations. This

is one of our focus areas going forward and we work closely

with local authorities to improve service delivery and living

conditions.

York has a BEE rating of Level 4 and is working towards

improving this rating.

Instilling a performance driven culture was one of the key

contributors to the success of York in this financial year.

York staff showed dedication and resilience under

demanding market conditions. Their consistent focus on the

key deliverables and their efforts to achieve high

performance standards through difficult trading conditions

has been a tremendous experience.

The dynamism of the York Board has been a crucial

component to the success of York. They successfully

steered the organisation through the restructuring

processes. York is fortunate to have such strong leadership

in the organisation.

My thanks to the Chairman, the Board, my Management

Team as well as every employee of York. Every single person

had a role to play and is valued by me.

Pieter van Zyl

Chief Executive Officer

Pi t Z l

FINANCIAL OVERVIEW

R’000 Audited 2011 Audited 2010 % Change

Group revenue 959 143 909 361 5%

Gross profit 420 912 350 117 20%

Gross profit margin 43.9% 38.5% 14%

Operating profit before insurance proceeds and impairment of assets 161 897 69 264 134%

Net profit before finance costs 163 459 235 121 -30%

Net cash finance costs (89 533) (127 554) -30%

Net cash flow from operating activities 97 624 (24 092) 505%

Biological assets 1 936 398 1 921 674 1%

Interest bearing liabilities (614 225) (681 970) -10%

Net working capital 113 460 115 060 1%

Earnings per share (cents) 12 30 -60%

Net asset value per share (cents) 612* 594* 3%

* Using currently in issue number of shares (not weighted average)

In the period under review York produced a significantly improved operating profit (460% increase). Cash generated increased by

R85 million. York's restructuring plans are now fully implemented and through cost optimisation and supply chain management,

margins were improved despite soft product prices.

Highlights for the period under review are as follows:

• volumes have increased by 11%,

• Gross profit margin increased from 39% to 44%,

• An operating profit of R162 million compared to R35 million a year ago,

P A G E 8 Y o r k T i m b e r s – A n n u a l R e p o r t 20 1 1

Duncan Ersk ineCh ie f F i nanc ia l O f f i cer

C H I E F F I N A N C I A LO F F I C E R ’ S R E P O R T

• Cash generation of R187 million from operations compared to R102 million in the comparative period,

• Forestry practices have improved over the period under review resulting in the plantation asset value increasing, and

• Net asset value increased from 594 cents to 612 cents per share.

YORK'S PLANTATION ASSET

Investors are reminded of the adoption of the discounted cashflow method (DCF) for plantation valuation at June 2010. This

method incorporates forward looking assumptions to determine the underlying plantation value on a normalised basis. The

biological asset value for 2011 has increased by an amount of R14.7 million (2010: R183 million).

INCOME STATEMENT SUMMARY


Revenue 959 143 909 361 5%

Gross profit 420 912 350 117 20%

Gross profit margin 43.9% 38.5% 14%

Selling, general and administration costs

(including other operating income) (259 015) (280 853) -8%

Normalised operating profit 161 897 69 264 234%

Insurance proceeds - 8 519 -100%

Impairment of assets - (42 598) -100%

Operating profit 161 897 35 185 460%

Restructuring - (333) -100%

Loss on non-current assets held for sale (13 362) - 100%

Fair value adjustments 14 924 200 269 -93%

Profit before finance costs 163 459 235 121 -30%

Revenue has increased by 5.5%, with volumes sold increasing by 11% in lumber products and 12% in plywood products. Product

pricing remained under pressure with the average selling price increasing only marginally.

Total annual cost has reduced by 5.4% year on year when measured at the normalised operating profit level. This was achieved

through the cost optimisation strategies implemented during the previous financial period that have been further refined during

the current financial period. As a result, both the gross margin and operating profit margins have improved.

Unlike the comparative financial year, this year is not characterised by unusual or non-recurring adjustments to earnings.

At June 2010, the discounted cash flow method of biological asset valuation was adopted. This method incorporates forward

looking assumptions to determine the underlying plantation value on a normalised basis. As a consequence of this increase adopted

in the biological asset carrying value, the goodwill associated with the plantation asset upon acquisition, required a portion of

impairment at June 2010.

During the period under review certain material items affected the results:

PAGE 9Y o r k T i m b e r s – A n n u a l R e p o r t 2 0 1 1

• The fair value adjustment of the biological asset amounted to R14.7 million. On closer inspection:

• Total standing volume decreased year on year by ca 110,000 cubic metres or 2%,

• Saw log and pulp log prices remained significantly the same year on year

• Forestry costs rose on the back of inflationary pressures, but remain under control;

• The interest rate swap entered into at the commencement of the debt raising (hedging derivative). Although lower than the

comparative year, the charges to profit and loss remain significant. This hedging arrangement matures in July 2011 and

further losses are likely to be limited.

FINANCE COSTS


Finance Expense 112 362 177 361 -37%

Finance costs excluding hedge 78 866 107 978 -27%

Hedge interest expense (actually paid) 21 504 16 791 28%

Hedge interest released from equity

(on settlement of derivative interest rate swap) - 29 577 -100%

Hedge interest expense (ineffective portion) 11 992 23 015 -48%

Total finance income (2 217) (2 810) -21%

Net finance expense 110 145 174 551 -37%

Approximately 40% of the existing debt balance was settled with the rights issue proceeds at December 2009. With this in mind,

the reduction of the interest charge of 27% is in line with expectation.

The interest rate swap derivative York entered into at the commencement of the debt raised in 2007 will mature in July 2011.

From December 2008, hedge accounting was adopted and since then the ineffective portion has required release on a systematic

basis from equity. The final charge of R5.9 million will be released in the 2012 financial year.

The cash effect of the interest rate swap is that York's effective interest rate was fixed at approximately 4% higher than daily traded

interbank rates.

From August 2011 York will be subject to variable interest rates. Further hedging options are presently being investigated within

the company's risk management structure.

C H I E F F I N A N C I A L O F F I C E R ’ S R E P O R T C O N T I N U E D

PA GE 10 Y o r k T i m b e r s – A n n u a l R e p o r t 20 1 1

PA GE 1 1Y o r k T i m b e r s – A n n u a l R e p o r t 2 0 1 1

WORKING CAPITAL AND CASH FLOWS


Inventories 148 807 138 040 8%

Trade and other receivables 124 595 104 334 19%

Trade and other payables (159 942) (127 314) 26%

Net working capital 113 460 115 060 -1%

% of Sales 11.8% 12.7% -7%

• Net working capital is relatively unchanged but is lower than the prior year when compared to revenue on a percentage basis.

• Product inventory volumes have increased by 6% and account for the increase in value.

• Trade receivables have increased by 10%, largely as a result of a successful June 2011 sales month. Trade receivable days

have remained under control at 38 days. Other receivables for 2011 include a prepayment for certain insurance premiums,

which accounts for the increase.

• Payables include the financing arrangement associated with the above mentioned insurance premium as well as increases in

provisions associated with employees. Trade creditors have increased in line with the limited increased cost structures.

SOURCE AND APPLICATION OF FUNDS FOR THE PERIOD UNDER REVIEW


Cash generated by operations 197 290 94 747 108%

Movement in working capital (10 051) 7 121 -241%

Cash generated by operating activities 187 239 101 868 84%

Proceeds from share issue — 491 107 -100%

Funds sourced by York 187 239 592 975 68%

Application of funds:

Net finance cost paid (89 533) (127 554) -30%

Debt capital settled (59 601) (494 855) -88%

Capital expenditure (18 887) (17 095) 10%

Other (227) 6 600 -103%

Net cash generated / (utilised) 18 991 (39 929) 148%

Cash generated by operations has substantially improved, a direct result of improved profitability.

Unlike the comparative financial year, no further funds were sourced.

The funds sourced were utilized as follows:

• Interest, albeit 30% less than the comparative period.

• Settlement of debt capital, although significantly less than last year as a result of the debt paydown of December 2009.

• Capital expenditure.

The net result is that in contrast with the previous year, net cash was generated year on year.

CAPITAL STRUCTURE

Effective Fixed

Interest rate at Effective

reporting date Variable

(fixed by interest Interest rate

rate swap as at reporting

R’000 Audited 2010 Audited 2009 appropriate) date

RMB Senior Term A 63 836 80 300 12.83% 8.83%

RMB Senior Term B 126 822 156 980 12.98% 8.98%

RMB Senior Term C 124 257 124 353 13.33% 9.33%

RMB Mezzanine Facility 269 535 269 456 18.58% 14.58%

Loan raising fees (14 404) (19 030)

Derivative - interest rate swap 6 328 22 237

Fixed rate borrowings 576 375 634 296

Finance leases and instalment sales 14 132 17 955 8.83% 8.83%

Other 23 718 29 719 8.50% 8.50%

Variable rate borrowings 37 850 47 674

Total borrowings 614 225 681 970

% of Debt % of Debt

Weighted average fixed interest rate 94% 93%

Weighted average variable interest rate 6% 7%

Debt reduced in line with the continued amortising of Tranches A and B as well as the finance leases, instalment sale and other

debt. As per the debt profile, both Tranche C and Mezzanine debt are to be settled in bullet payments during July 2014 and

July 2015 respectively.

C H I E F F I N A N C I A L O F F I C E R ’ S R E P O R T C O N T I N U E D


As of July 2011, all debt will be subject to variable interest rates, upon the maturity of the interest rate swap taken out in July 2007

at the inception of the debt being raised. The immediate impact of this will be that the blended effective interest rate will reduce by

some 4%.

During February 2011, York successfully negotiated a covenant relaxation with the consortium of lenders. The result is that for a

period of one year from 1 April 2011, York would in return for a margin increase of 0.5% on senior debt and 1% on mezzanine,

receive a relaxation on the net debt to EBITDA covenant.

The cost associated with York's current debt package will continue to increase as the senior debt is repaid and the more expensive

mezzanine structures remain. As a result York is considering restructuring or replacing its current debt package.

CONCLUSION

York has sustained and improved on the good results for the second six months of the 2010 financial year. Volumes sold have

improved, and through sustained cost optimisation, margins have been enhanced.

Cash generation through operations was a key objective at the commencement of the 2011 financial year and with a 505%

increase in net cash flow from operations, York has been successful in achieving this goal.

The asset underpin of the Group has improved to 612 cents per share.

Duncan Erskine

Chief Financial Officer


York is committed to contributing towards resolving

sustainable development challenges that face our country

and will continue to strive to:

• Sustain our ecosystems and use resources sustainably

• Invest in creating sustainable communities

• Enhance systems for integrated planning and

implementation

• Build capacity for sustainable development of the

organisation

To ensure we achieve this, we have aligned the company

culture to key sustainability principles.

The York culture is shaped by three distinct values that

enable it to achieve its mission of excellent performance

standards, sustainable development and competitive

innovation. The company's values are embodied in York

being Energetic, Connected and Progressive.

Energetic means that York's strength and ambition

inspires employees to feel and be empowered to do great

things for the business, the communities and the

employees themselves as individuals.

Progressive means that York employees have the courage

to keep exploring new ideas and making new discoveries

which will constantly set the benchmark in and out of our

industry.

Connected means that we are down to earth and operate

with honesty, humility and integrity. We act responsibly

towards each other, our environment and the communities

within which we work.

S U S T A I N A B I L I T Y R E P O R T

OUR MARKET PLACE

York produces a variety of products that are used in a wide

range of applications. The focus of the sawmills is to produce

products based on market requirements. Structural products

are applied primarily in the manufacturing of roof trusses and

are the highest in demand. Marketing priority is to ensure

reliable delivery of certified structural timber in a variety of

dimensions and lengths. Other products classed as

Appearance and Utility products are less in demand and

prices in general are slightly lower. The Sales & Marketing

division focuses on ensuring that processing plants produce a

product range that the market demands.

The total lumber market is approximately 1.4 million cubic

metres, of which York has a 20% annualised market share in

2011. The key drivers for the demand in the building market

are continually monitored and these include Interest Rate,

Buildings Plans Passed, Cement Sales, Stock build within the

industry and at retailers, the exchange rate and the rate of

imports.

The lumber market services a range of end uses categorised

into local building, furniture manufacturing and packaging for

local export. Overseas export of lumber products from South

Africa is minimal.


LUMBER SALES BY END-USE: JANUARY 2001 - JULY 2011 (M33)(Source: Crickmay & Associates, BMI-BRSCU Workings)

Lumber sales in local building and packaging appears to have stabilised, however lumber sales for furniture manufacturing is

decreasing.

S U S T A I N A B I L I T Y R E P O R T C O N T I N U E D

P A G E 1 6 Y o r k T i m b e r s – A n n u a l R e p o r t 20 1 1

LUMBER SALES BY END-USE: LOCAL BUILDING: JANUARY 2001 - JULY 2011 (M33)(Source: Chickmay & Associates, BMI-BRSCU Workings)

LUMBER SALES BY END-USE: LOCAL FURNITURE: JANUARY 2001 - JULY 2011 (M33)

Local building lumber sales appear to be closely correlated to the total building plans passed, giving the industry a lead indicator of

potential growth or decline.


The Building Material market in 2009 was reported as being worth R103.4 billion. BMI-BRSCU research shows that of total

building material sales, the roof truss market constitutes 2.5% or R2.625 billion. The roof truss market is where a majority of

lumber products are utilised.

LUMBER SALES BY END-USE: LOCAL PACKAGING & OTHER: JANUARY 2001 - JULY 2011 (M33)

CUM Y/Y% CHANGE: LOCAL BUILDING LUMBER SALES (M33) VS TOTAL BBP (M22):JANUARY 2002 - JULY 2011

(Source: Crickmay Associates, BMI-BRSCU Workings)



Of the total lumber market, 69% is reported as being used as building material. Dependent on the classification of the residentialbuilding (either formal or informal), a different grade of lumber is used in the roof truss. Formal residential dwellings build their rooftrusses out of SABS certifiedlumber. Informal dwellingstypically seen in the ruralareas tend to use uncertifiedtimber.

Structural timber in formalbuildings is also subject toregional demand and re-quirements. Gauteng andWestern Cape being thelargest markets.

O O G O C G O S 2009THE MARKET FOR MAJOR BUILDING PRODUCT GROUPS BY VALUE: 2009(Source: Crickmay Associates, BMI-BRSCU Workings)

M33*1000(Source: StatsSA,

BMI-BRSCU Workings)

4.9%

1.4%

8.1%

1.5%

1.52%

6.98%

14.29%

7.15%

14.94%

3.35%

2.91%

1.73%

2.11%

2.21%

1.31%

0.37%

3.17%

3.28%

0.97%

0.28%

7.19%

9.21%

1.12%

Although pricing in the lumber market is consistently under pressure, prices rallied since the drop in 2009. Pricing now appears

to be flattening off and is expected to pick up again.

Pricing appears to move in cycles and despite the tough times that we have been experiencing, lumber pricing is running at the

same level as the building industry and CPI.


O C C ( ) O S C G S 2002 20PRODUCER PRICE INDEX (PPI) OF SELECTED BUILDING MATERIALS: JAN 2002 - APRIL 2011

PRICE MOVEMENT OF CEMENT AND SA PINE KILN DRIED VS BUILDING AND CONSTRUCTION AND CPI:JANUARY 2001 – APRIL 2011 (Source: StatsSA; BMI-BRSCU Workings)

The three pillars which underpin York's sustainability are its

plantations, its people and the broader communities in which

it operates.

OUR OPERATIONS

As a responsible steward of the environment, York is

committed to practicing sustainable forestry, conserving

natural resources and energy whilst continually improving its

environmental practices.

A measure of this is the maintenance of the Forest

Stewardship Council (FSC) certification for both the York

plantations and sawmills. This certification assures

stakeholders that products resulting from the York

operations meet the social, economic and ecological needs of

present and future generations.

York is committed to the continual improvement of the air

quality, water and waste treatment processes at all sawmills

whilst ensuring full compliance with current legislation. In this

financial year, York completed further work towards the co-

generation plant. The co-generation plant is intended to

consume biomass products to reduce reliance on external

energy sources.

All of York's products are manufactured from sustainable

sources, and being fully bio-degradable has no adverse affect

on the environment.

York's water usage is within the prescribed legal limits and

the impact on the environment is within acceptable norms as

prescribed in the National Water Act.

Long-term forest sustainability is determined through a

process known as normalisation of the growing stock. This is

impacted not by the clearfell quantity, but by the area planted

each year. The purpose of normalising the growing stock is to

ensure an even age-class distribution, which in turn facilitates

a regulated annual clearfell quantity.

York actively promotes biodiversity by setting aside (29 093

hectares, approximately one-third of the landholding) and

managing areas suitable for rare animals and plant species

and conserving representative samples of the various

habitats and eco-systems that naturally occur in the

particular areas.

Each forestry estate has an integrated weed control

programme governed by management principles for both

commercial and protected areas. A guiding principle is the

reduction in the usage of the quantity of pesticides, all of which

comply with the approved chemicals list issued by the FSC. All

employees have access to an environmental guideline for

York's biodiversity values.

York owns and manages a total of 1,100 hectares of

indigenous forest within these protected habitats. Indigenous

forests are protected in terms of the National Forest Act, Act

No 84 of 1998 and are considered High Conservation Value

Forests by the FSC.

Each area's management plan includes a species list which

highlights the occurrence of threatened or endangered

species. York uses the international convention of the IUCN

to classify the level of threat. The formal monitoring

programme for these and other important areas such as

water quality is undertaken by independent specialists.

York protects and manages seven Natural Heritage Sites,

which are registered under the South African National

Heritage Programme. This is due to their historical

significance or ecological importance in the national context.

York has South African Timber Auditing Services (SATAS)

certification for all its processed structural products including

upgrading of finger-jointed timber to the structural certified

grade. Ongoing compliance entails regular system audits and

product inspections according to set standards and permit




conditions. Additionally, the Plywood plant is audited by SATAS

for their compliance to the Certification Europe Standard by

the British Standards Institute (BSI) This certification has

been incorporated into the ISO 9001 system to ensure

process efficiencies.

Through the FSC certification, the processing sites are

certified for Chain of Custody (COC) and Forestry is certified

for both Forest Management (FM) and Controlled Wood

(CW). An accredited certification body audits these

certificates annually.

Memberships in associations, projects and committees

Sawmilling South Africa (SSA)

South African Wood Preservers Association (SAWPA)

Forestry South Africa (FSA)

CAMCORE - a non-profit, international program that

works for the conservation of tropical and subtropical

forest tree species

Institute for Commercial Forestry Research (ICFR)

Sirex Working Group

Timber Industry Pesticide Working Group

Forest Engineering South Africa (FESA)

Food and Agricultural Bio-Technology Institute (FABI)

South African Institute of Forestry

Baboon Damage Working Group

Lowveld Chamber of Business and Tourism (LCBT)

Sabie Chamber of Commerce and Tourism

Council for Scientific and Industrial Research (CSIR)

Tree Breeding Platform

Lowveld and Escarpment Fire Protection Association

(LEFPA)

Mpuluzi Fire Protection Association

International Forest Stewardship Council (FSC)

Economic Chamber Representative of National Initiative

South African Bureau of Standards (SABS)

Technical Committee

Grassland Stewardship Programme

Seedling Growers Association of South Africa

OUR PEOPLE

With the organisation poised to take on a variety of growth

initiatives; the right person for the right role and deliverables,

a culture of performance excellence and ensuring a clear

understanding of the vision, mission and values of the

company has become an ever more important objective over

the last year.

Through the provision of clear leadership, challenging career

opportunities and a dynamic working environment requiring

high performance standards, York continues to attract and

retain highly skilled individuals to take on key positions within

the organisation. This allows York to take on the challenges

for the future.

The Human Capital Strategy for this year focused on the

implementation of a talent management system to retain and

develop identified talent within the organisation in the form of

a leadership coaching programme. In addition, the

performance management system was further developed to

support the creation of a culture of performance excellence.

In June 2011, York was pioneering in launching a

performance based pay increase for salaried staff, which is

monitored and managed on a quarterly basis.

Every single employee continues to be treated with dignity and

fair and transparent practices ensuring that they can work in

an environment free of harassment and discrimination.

2 363 employees received training in this financial year, within

an investment of R2.6 million overall in learning and

development activities.



Aprenticeships

Leaderships

Management Development

Mill processing

Contractorr (Safety, Quality)

CComputer Literacy

Forestry

Skills De opment veloProgramme

ctionHigher EducegreesDiplomas/De

ABET

Bursaries

pmentMobile Equip

Safety

Artisan Development

Black WomentDevelopment

Basic Supervisory Skills

TRAINING EVENTS

TRAINING EVENTS BY RACE

y

The apprenticeship training programme to ensure high

potential candidates are selected from the outset has

proved successful with 4 candidates retained following their

apprenticeships.

In the year under review, York employed 4 313 employees,

made up of 2 499 (58%) direct employees and 1 814 (42%)

employed through our contractor relationships. When

compared with the population density of the province as a

whole, York proactively contributes to the development of

Broad Based Black Economic Empowerment.

Mpumalanga Economically

York Active Population

Black 95% 92%

Coloured 0.4% 1%

Indian 0.22% 0.38%

White 4.25% 7%

A significant focus was placed on managing overtime in this

financial year. With an overtime task team being created to

understand the drivers and create parameters measuring

necessary overtime to create a return for the business and

eradicate unnecessary overtime.

Approximately 68.69% of York's workforce belongs to trade

unions CEPPWAWU as the biggest union, represents 66.8%

of the York waged employees.

For 2010, a 9% increase was negotiated across the normal

time basic wage employees. In the continued implementation

of the five year plan for aligning the conditions of service of ex-

York and GFP employees, a further adjustment was made in

this financial period totaling 1.8%

York is a signatory to the Forestry Charter and attained a BEE

rating of Level 4 during this financial year. York believes in

ensuring equity in the workplace whilst maintaining a level of

performance excellence. This is achieved through ensuring

that employees can compete for job opportunities based on

merit and a track record of adding value rather than solely on

the representation of different racial groups.

As a part of York's focus on ensuring a safe working

environment, the NOSA 5 Star System is deployed at all York's


TRAINING EVENTS BY GENDER

processing sites. This involves procedures and guidelines

that comply with both statutory requirements and safety

standards. York only works with contractors that are using

the NOSA 3 Star system. The following table shows the

continued success in managing York's employees' exposure

to injuries on duty:

2010/2011 2009/2010

Total Injury on duty 244 302

Lost Time Injuries 41 44

Fatalities 0 0

The process of planning and implementing development

interventions is designed to equip the company with the

necessary skills to achieve desired work efficiencies, to equip

talent for the future, and to obtain maximum support from the

SETA.

Adult Basic Education and Training (ABET) and Learnerships

are important to the organisation for the long term

development of employees as they progress through the

accredited certificate levels.

Safety Training is an important training component.

Training and development activities for wage staff are

conducted in-house, by dedicated training officers.

Management development is conducted by Senior Managers

as well as consultants and external facilitators including

executive coaching for leadership development as well as

technical development courses.

York is proud to provide occupational and primary health

services through its clinics at all processing plants. Each of

the clinics are staffed by a qualified and experienced

Occupational Health and Primary Health Care Registered

Nurse, and regularly visited by a Registered Health

Practitioner. These clinics provide primary care to all

employees that do not have medical aid cover. Consulting

with an average of 150 patients per day, they also provide

treatment for any injuries on duty and medication is also

dispensed at the clinic in accordance with the Occupational

Health and Safety Act No 84 of 1993. This enables a

continued healthy workforce, with a minimum in lost working

time due to illness. Each of the clinics also provide care to the

families of employees as well as the surrounding

communities.

OUR COMMUNITIES

Externally, York continues to work with communities through

a focused Land Claims Handling Strategy and Corporate

Social Responsibility Programme.

The joint Land Claims Strategy developed in conjunction with

the Mpumalanga Land Claims Commission continues to prove

successful. No claim was settled last financial year. Gazetted

land claims affect approximately 38% of York's land holdings.

These still require research and verification by the LCC.

York continues to manage business relationships with

communities that are in the process of obtaining land with

plantations through the land restitution process. These

communities are not York's land claimants. Most of the

communities are in the process of receiving their land. The

main aim of working closely with these communities is to

ensure that York increases its prospects of obtaining raw

material supply.

York's Corporate Social Investment Strategy was responsible

for facilitating and investing in CSI projects for over R1.6m.

York endeavours to make a meaningful contribution towards

health, education, local economic development and sports

related activities in the communities in which York’s business

operations are situated.

The social responsibility programmes contribute towards

sustainable development and complement rather than replace




government and community initiatives. Most programmes are

implemented as a result of engagement with local government

departments, in a spirit of partnership.

The programmes focus on facilitating and supporting the

beneficiaries to take the initiative, rather than relying on the

organisation to act on their behalf. York, therefore, believes in

empowering communities with knowledge, information and

support in order for the communities to plan, implement and

sustain projects, such as:

• Organising and hosting a range of Career Days at local

schools.

• Directly assisting local emerging entrepreneurs during the

infancy stage of their businesses when entering the world of

small business.

• Equipping local emerging entrepreneurs with the

necessary skills to develop viable products for their

businesses.

• Training and developing 165 pre-selected individuals in

business skills with the assistance of SEDA. A variety of

emerging entrepreneurs were assisted with the

establishment of businesses by purchasing the raw

materials and equipment required; and marketing their

products.

The Boletus mushroom project took place on the Highveld. All

communities in the villages located on the plantations were

encouraged to participate. Rothsay and Mavimbela took the

lead with a total of 1609kg mushrooms harvested within 20

days.

The company committed to purchasing the mushrooms, pay

the pickers directly to a community fund. The community fund

is used to build an extension to the crèche at Rothsay. The

project is currently being established in other areas, including

the Escarpment.

York embarked on a project to assist retrenched workers from

both York and Merensky with alternative work, to enable these

individuals to generate an income. This initiative trains

individuals in Cabinet making and Upholstery skills as well as

basic business management skills to enable them to start small

businesses.

• 195 beneficiaries received Cabinet Making

Training and Upholstery Training.

• Unemployed caterers were used to cater for the

195 beneficiaries and their facilitators.

• All learners on the project were assisted with

opening bank accounts.

York has made their buildings and facilities available to a

number of organisations including the Child Welfare Centre,

Siyaphambili Longtom Canon and local NGO's for various

functions and ongoing use.

Further, York has donated various items to different concerns.

This includes second hand building materials from dismantled

villages, as well as off cut timber donations for building and

furniture manufacturing projects.

York is also one of the main sponsors for the Mlilo Fire

Awareness Programme which conducts fire awareness and

career workshops in schools, as well as facilitating land care

projects.

Sustainability is the cornerstone of our way of working. As a

local company and a responsible corporate citizen at the

gateway to Africa, we continuously seek ways to promote and

maintain the future of our environment and the well-being of

our employees.

The business model of York is to maintain and grow

mutually beneficial business relationships by ensuring that

the Company provides its customers with quality and

relevant products at market related prices, enabling them

to make a fair profit or achieve a fair return on investment.

York values fair trading which encompasses the values of

accountability, transparency and integrity. Therefore,

York's commitment to good corporate governance is not

simply compliance driven, it is the framework of the

Company's organisational culture and drives its business

strategies. It is a dynamic commitment, which is responsive

to the expectations of the Company's stakeholders and

infuses York's stance as a responsible corporate citizen.

York maintains the highest standards of ethical behaviour

in the way that it conducts its business. This value system

is intended to guide the standard of behaviour that York

applies in its interactions with all stakeholders, placing a

special emphasis on its interactions with each other, its

customers, its shareholders, its suppliers and the

communities in which York operates.

STATEMENT OF COMPLIANCE

York is subject to the ongoing disclosure, corporate

governance and other requirements imposed by the

Companies Act of South Africa, 1973 (Companies Act of

1973), the Companies Act of South Africa, 2008

(Companies Act of 2008) (collectively, the Companies Act),

the Listing Requirements of the JSE Limited (Listings

Requirements) and the King III Code of Governance

Principles for South Africa (King III).

C O R P O R A T E G O V E R N A N C E R E P O R T

York has adhered to the statutory duties and responsibilities

imposed by the Companies Act and the Listings

Requirements. Our Board recognises the need to conduct

the business according to the principles of King III. These

principles include discipline, independence, responsibility,

fairness, social responsibility, transparency and accountability

of directors to all stakeholders. A number of these principles

are reflected in the Group's internal controls and policy

procedures.

In 2010 we conducted a review to ascertain the Group's

compliance with King III by establishing a working group to

conduct a governance assessment, making use of the tools

provided by the Institute of Directors of Southern Africa.

The Board is satisfied that every effort has been made to

comply in all material aspects with King III. Refer to page

35 to 38 for a summary of York's assessment of its

application of King III Code.

BOARD OF DIRECTORS

The Board is the primary custodian of the Group's corporate

governance system. York has a balanced Unitary Board

collectively mandated to set the long term strategic direction

and business plan for York. There is a clear division of

responsibility at Board level to ensure a balance of power and

authority such that no one individual has unfettered powers of

decision making. The Board monitors progress towards

achievement of its objectives set against the economic,

environmental and social issues that pertain to York and

ensures the integrity of the financial statements to fairly

present the state of affairs of the Company and the Group.

This is achieved through the maintenance and management

of an effective risk management system, internal controls and

the highest standard of corporate governance.

BOARD CHARTER

A Board Charter, which regulates how business is to be

conducted by the Board in accordance with the principles of

good corporate governance, is in the process of being revised

to consider the guidelines in the King III Code.

BOARD COMPOSITION

The Board comprised of seven (7) directors at year-end,

namely:

• Independent non-executive director and chairman: Jim

Patrick Myers

• Independent non-executive directors: Gavin Robert Tipper

and Dr Azar Paul Jammine

• Non-executive directors: Shakeel Ahmed Unus Meer and

Paul Christopher Botha

• CEO: Pieter Prins van Zyl

• CFO: Duncan James Erskine

The roles of the Chairman and the CEO remained separate

throughout the year under review. The composition of the

Board is based on competency carrying equal weight to

independence in respect to York's affairs. The directors bring

a wide range of expertise, commercial, technical and business

acumen allowing them to exercise independent judgment in

Board deliberations and decisions. An evaluation of the

Board's performance is conducted annually and the current

Board was performing in line with and in certain

circumstances, above expectation.

BOARD RESPONSIBILITIES

The Board is accountable to the stakeholders for exercising

leadership, integrity and judgment in directing York to achieve

continued prosperity by obtaining the necessary balance

between entrepreneurship and conformance with best

business and corporate governance practices.

The Board's primary functions include, but are not limited to:

• oversight of the Group's strategic direction;

• ensuring that the Company acts and is seen to be, a

responsible corporate citizen;

• approving major capital projects, acquisitions or

divestments;

• exercising objective judgement on the Group's business

affairs, independent of management;


• ensuring that appropriate governance structures, policies

and procedures are in place;

• ensuring the effectiveness of the Group's internal controls;

• reviewing and evaluating the Group's risks;

• approving the annual budget and operating plan;

• approving the annual and interim financial results and

shareholder communications; and

• approving the senior management structure,

responsibilities and succession plans.

CHAIRMAN

York is led by Mr Jim Myers, an independent non-executive

Chairman, who presides at Board meetings.

The core functions of the Chairman are highlighted as follows:

• he provides overall leadership and sets an ethical tone;

• he sets the Board's work plan;

• he plays an integral part in director induction and ensures

that the directors have a good knowledge of their duties

and responsibilities;

• he ensures good relationships are maintained between

the Company and stakeholders;

• he meets with the CEO and Company Secretary prior to

Board meetings, to discuss important issues as

necessary; and

• he appraises the performance of the CEO and the Board.

Mr Myers is neither a member of the Audit Committee nor

the Risk and Innovation Committee. He does; however, chair

the Remuneration and Nomination Committees.

NON-EXECUTIVE DIRECTORS

All non-executive directors' appointments are formalised

through letters of appointment and re-appointment and is

subject to performance and evaluation. They receive fees

from the Group for their services as directors.

The non-executive directors contribute significantly at

meetings. They are not involved in the day-to-day operations of

York nor are they full time salaried employees.

INDEPENDENT NON-EXECUTIVE DIRECTORS

“Independence is more than anything a state of mind,

requiring a disciplined and challenging approach to the role”

International Corporate Governance Network principle

The following criteria have been confirmed in terms of the

independent non-executive directors and apply to the

respective director:

• the director is not a representative of any shareholder

who has the ability to control or materially influence

management or the Board;

• the director holds less than 6.5% of the total issued share

capital of the Company;

• the directors does not have such an interest which is less

than 5% but which is material to his or her personal

wealth;

• the director was not employed by the Group in any

executive capacity for the preceding three financial years

or has been the designated auditor or a senior legal

advisor for the last three years;

• the director is not a member of the immediate family of an

individual who is, or has been, in any of the past three

financial years, employed by the Group in an executive

capacity;

• the director is not a professional adviser to the Group,

other than in the capacity as a director;

• the director is not a supplier or material supplier to the

Group, or to the clients of the Group;

• the director has no material contractual relationship with

the Group; and

C O R P O R A T E G O V E R N A N C E R E P O R T C O N T I N U E D


• the director is free from any business or other

relationship which could be seen to materially interfere

with the individual's capacity to act in an independent

manner.

The same criteria will be applied in the future appointment of

independent non-executive directors.

EXECUTIVE DIRECTORS

The Board has delegated to the executive directors, the

authority to conduct the day-to-day business of York, whilst

retaining overall accountability and subject to matters

reserved to it. They are full time salaried employees of the

Company with permanent service contracts.

They are held accountable through regular reports to the

Board and are measured against agreed performance

criteria and objectives appropriate to the current stage in the

business cycle and the prospects of each business unit.

BOARD APPOINTMENT PROCESS

Directors are appointed through a formal process. In line with

York's documented procedure, each of the directors must

have been separately identified by the Remuneration and

Nomination Committees as a person with the required skills

and experience to contribute on the strategy, performance,

standard of conduct and resources of the Company. The

Board as a whole, individually considers the nomination and

values of those that will ensure diversity and full and free

exchange amongst Board members. In line with King III, all

proposed candidates will be subject to background screening.

DIRECTOR DEVELOPMENT

Newly appointed directors are subject to a formal induction

programme. Directors receive regular briefings on change in

risks, laws and the environment. The Company is committed

to providing continued professional development training

opportunities to its directors and officers.

ROTATION OF DIRECTORS

The rotation of directors is governed in terms of York's

memorandum of incorporation. One third of the Board

members are required to retire by rotation every year and, if

eligible, are considered for re-appointment at the annual

general meeting. A retiring director shall act as a director

throughout the meeting at which he retires.

The Board as a whole has considered and recommended the

re-election of the directors at the forthcoming annual general

meeting.

BOARD MEETING FREQUENCY AND ATTENDANCE

Board meetings are held at least quarterly and additional

meetings are convened when necessary, should a particular

issue demand the Board's attention. Board meetings are

arranged in advance at the beginning of a calendar year and

convened by formal notice incorporating a detailed agenda

supported by relevant written proposals and comprehensive

reports. Management aims to disseminate meaningful,

relevant and complete information in a timely manner prior to

Board meetings. The Board further receives the reports of

the Chairpersons of the Audit Committee, the Risk and

Innovation Committee and the Remuneration and Nomination

Committee. Where necessary, decisions are taken between

Board meetings by written resolution as provided for in the

Company's memorandum of incorporation.


During the period under review, the following meetings were held and attended as follows:

Board member 13 Sep 2010 16 Nov 2010 9 Mar 2011 23 Jun 2011 Total

Jim Myers (Chair) P P P P 4

Paul Botha P P P P 4

Dr Azar Jammine (1) A P P 2

Shakeel Meer P P P A 3

Gavin Tipper P P P P 4

Pieter van Zyl P P P P 4

Duncan Erskine P P P P 4

(1) Appointed 5 October 2010 Key: P : Present A : Apologies

The director's fee structure remained the same as 2010. Full

details of the emoluments are disclosed in note 29 of the

consolidated annual financial statements.

BOARD SUB-COMMITTEES

York subscribes to a policy of delegated authority. It aids the

important division of responsibilities and enhances the

distribution of power. All sub-committees operate under

Board approved terms of reference, which is updated from

time to time to stay abreast of developments in corporate law

and governance best practice.

All the sub-committees' chairpersons and members have

unfettered access to the Chairperson of the Board and the

Board as a whole. The sub-committees and/or their

respective members may freely meet with any York employee,

manager and/or executive director and appoint independent

consultants to obtain professional advice, at the Company's

expense, to assist with the proper discharge of the sub-

committee's responsibilities.

The Chairperson of each Board sub-committee annually

reports to the Board on the extent and manner in which the

particular Committee has performed its mandate. The sub-

committee is subject to regular evaluation by the Board with

regard to performance and effectiveness.

The following sub-committees were in operation in the

financial year under review:

• Executive Committee;

• Audit Committee;

• Remuneration and Nomination Committee; and

• Risk and Innovation Committee

EXECUTIVE COMMITTEE

The executive committee (Exco) is responsible for managing

the Group operations, developing strategy and policy

proposals for the Board's consideration, and implementing

the Board's directives. It has a properly constituted mandate

and terms of reference. The executive directors meet twice

monthly and regularly interface with senior management to

guide and control the day-to-day management of the business.



The executive committee's responsibilities include:

• leading executives, management and employees;

• developing the annual budget and business plan for the

Board's approval;

• acting as a medium of communication and co-ordination

between operating divisions and the Board and

• developing, implementing and monitoring policies and

procedures, internal controls, governance, risk

management, ethics and authority levels.

The current members of the executive committee are:

• Pieter van Zyl, the CEO (Chairman of Exco);

• Duncan Erskine, the CFO;

• Samantha Beresford, the Chief Sales and Marketing

Officer;

• Kirsten Coetzee, the Chief Human Capital Officer; and

• Sean Pretorius, the Executive Business Analyst.

AUDIT COMMITTEE

The report from the Audit Committee's chairman is available

on pages 47 to 48

REMUNERATION AND NOMINATION COMMITTEE

The report from the Remuneration and Nomination

Committee's chairman is available on pages 39 to 41.

RISK AND INNOVATION COMMITTEE

During the 2011 reporting year, the Board constituted a Risk

and Innovation Board sub-committee to ensure that the

Company's strategic risks are identified, their potential impact

reviewed and satisfactorily addressed. The sub-committee

should also give attention to strategic opportunities.

The current members of the Risk and Innovation Committee

are:

• Paul Botha (Chairman);

• Eric Droomer;

• Jim Myers; and

• Pieter van Zyl.

During the period under review the Risk and Innovation

Committee have satisfied its responsibilities in compliance

with its Board approved terms of reference.

The committee hold sufficient scheduled meetings to

discharge all its duties as set out in the approved terms of

reference, but subject to a minimum of two meetings per

year. Meetings are further attended by invitees, who are not

entitled to vote. During the period under review, the following

meetings were held and attended as follows:

22 Feb 9 May

2011 2011 Total

Paul Botha (Chair) P P 2

Eric Droomer P P 2

Jim Myers P P 2

Pieter van Zyl P P 2

Key: P : Present

The Risk and Innovation Committee's responsibilities include:

RISK MANAGEMENT

Ensuring York has implemented and maintains contextual and

effective strategies as well as formalised, policies, structures

and plans for risk management that will enhance York's ability

to achieve its strategic objectives and, that the disclosure

regarding business risks (operational and financial) is

comprehensive, timely and relevant and, at the least, perform

the following functions in relation thereto:

• identifying and ensuring an appropriate risk management

framework, risk management methodology and policy

together with an annual review of the risk management

plan is submitted for approval to the Board;

• overseeing that the risk management plan is widely

disseminated throughout the York and integrated in the

day-to-day activities of the Group and monitoring

implementation thereof by means of risk management

systems and processes;

• making recommendations to the Board concerning the

levels of tolerance and appetite, and monitoring that risks

are managed within the levels of tolerance and appetite as

approved by the Board;

PAGE 31Y o r k T i m b e r s – A n n u a l R e p o r t 20 1 1

• ensuring that risk assessments and risk monitoring are

performed on a continuous basis in a manner that will

enhance risk management maturity and that

implementation of frameworks and methodologies

increase the possibility of anticipating unpredictable risks;

• liaising closely with the Audit Committee to exchange

information relevant to risk;

• expressing the Committee's formal opinion to the Board

on the effectiveness and maturity of York's system and

process of risk management and as part of York's

reporting, review York's risk management in a manner

that is timely, comprehensive and relevant in order to

provide the necessary assurance to stakeholders that the

Board has meaningfully addressed the major risks faced

by the Company; and

• enquiring after, researching and developing new ideas and

directions in all areas that are not at the time regarded as

operational. This will include, amongst others, stratagems

for new markets, new products, new geographic locations

and new processes.

INFORMATION TECHNOLOGY (IT)

Maintaining an effective, appropriate and applicable IT

governance framework (in respect of both information and

technology) that delivers value and mitigates IT risks in a

manner that enhances York's ability to incorporate IT into its

operations, general technological advancement including the

strategy and framework for the protection of York's

intellectual property and, at the least performing the following

functions in relation thereto:

• providing assurance to the Board that York's IT is aligned

and integrated at operational level with the performance

and sustainability objectives of York and how it should be

used in assisting York in the managing of its risk and

compliance frameworks;

• ensuring that there is a robust process in place to identify

and take advantage of opportunities to improve York's

performance and sustainability through the use of IT

systems;

• ensuring that management implements the structures,

processes and mechanisms to give effect to the IT

governance framework in a manner that is effective

appropriate, timely and accurate in terms of IT

management, security, privacy and security; and

• monitoring and evaluating the resilience arrangements for

disaster recovery and that IT risks are adequately

addressed through the risk management framework.

OPERATIONAL AND COMMERCIAL INNOVATION

Developing an understanding of and supporting

documentation for, capital expenditure programmes, projects

and/or resource allocation in relation to York's operational

technology and the advancement thereof including

mechanisation and other labour saving measures to ensure

longer-term sustainability aligned with, and where necessary

changes to, the overall business strategy of York, its

resources, operations and products and, at the least

performing the following functions in relation thereto:

• continuously monitoring and seeking ways in which to

develop York's operational effectiveness and cost

competiveness through technological advancement;

• implementing measures to create an organisational

culture that facilitates development of talent and

entrepreneurship, including the questioning of existing

norms and the development of express and incentives

that respect and encourage thought leadership;

• developing processes and procedures for exploring,

pioneering, considering and implementing insightful

feasibilities that lead to operational improvements in



relation to operational (and internal) processes and

products; and

• making recommendations to the Board in relation to

operational strategy in the broadest sense including

operational and commercial innovation and, together with

the appropriate measurement systems, technology

acquisition that will ensure continued growth.

COMPANY SECRETARY

The Company Secretary performs its duties in accordance

with the Companies Act, the Listings Requirements and

King III code and as such, provides the Board and directors

individually with guidance on the discharge of their

responsibilities and on matters relating to ethics and good

corporate governance.

The Company Secretary is principally responsible for ensuring

compliance with the Companies Act of 2008 and that the

proceedings of the Board and it members, the various Board

Committees, general meetings of shareholders and salient

management proceedings are properly administered and the

appropriate statutory and other records maintained.

Together with the Chairperson of the Board, the Company

Secretary is involved with the flow of information within the

Board and its Committees and between Board and senior

management. Directors and affected persons keep the

Company Secretary advised of dealings in securities of the

Company according to York's Share trading policy and rules

as well as of their material interest in contracts with the

Company.

DEALING IN SECURITIES

During the period under review York's Share trading policy and

rules were adhered to and, when required, the necessary

consent was obtained by directors to trade in the securities of

York. Directors must obtain clearance to deal in York

securities from the Chairman of the Board and in the case of

the Chairman, from the Chairman of the Audit Committee or

alternatively, the majority of the other directors who serve on

the Board.

The Group's directors, executives, employees and the

Company Secretary are prohibited from trading in York

securities during any closed periods and at any time when any

of the directors are aware of unpublished price-sensitive

information and/or if clearance to deal has been refused.

Closed periods are implemented as per the JSE Listing

Requirements.

The policy is freely available to directors and employees from

either the Company Secretary or York's human capital division.

DIRECTORS DISCLOSURES OF CONTRACTUAL

INTERESTS

Directors of the Company are obliged and at every Board

meeting are given the opportunity to disclose any material

interest in contracts with the Company or its subsidiaries in

terms of Section 75 of the Companies Act of 2008. Such

disclosures are noted by the Company Secretary and kept in

a separate register of directors' disclosures. Where

necessary during the period under review, disclosures were

updated.

ORGANISATIONAL INTEGRITY AND CODE OF ETHICS

Directors and employees are required to maintain the highest

ethical standards to ensure that York's stakeholders are

assured of its integrity and good faith in their interaction with


the Company. York has a documented Code of Ethics and

Business Conduct which commits each director and

employee to the vision of growing value for the stakeholders of

York. The code of conduct addresses a broad range of

accepted statuary obligations and best practice

requirements.

FAIR BUSINESS PRACTICES

York subscribes to the principles regulating fair business

practices as set out in the Competition Act No. 89 of 1998

and administered by the Competition Commission of South

Africa. As such, its employees and officers are prohibited

from engaging in any form of anti-competitive practice which

amounts to collusive conduct amongst parties or with other

persons.

CONTINUED GOING CONCERN

The directors believe that the Group's operations will continue

as going concerns in the financial year ahead. More detail

hereon is available in the Audit committee report on pages 47

to 48.

CORPORATE REPORTING, STAKEHOLDER

COMMUNICATION AND RELATIONSHIPS

York regularly provides information to stakeholders through

the JSE Limited's Stock Exchange News Service (SENS), the

Media and its website (www.york.co.za).

York maintains a proactive dialogue with shareholders to

communicate its strategy and activities. This is done through

a planned investor relations program, which includes hosting

investors and analyst sessions nationally as well as briefing

meetings with major institutional shareholders after the

release of its annual results.

Shareholders are furthermore invited and encouraged to

attend the annual general meeting(s) of the Company where

voting is conducted by ballot.

York is involved with several groups and recognised

associations in the timber industry and actively engages

stakeholders on any number of issues affecting the Company

and its interaction with stakeholders in the communities in

which it operates. Details of York's involvement are reported

in the Sustainability report on pages 14 to 25.

Jim Myers

Chairman

Melinda van den Berg

Company Secretary




The King Code of Governance Principles (King III) was issued in 2009. The King III code became effective from 1 March 2010 and

it has also been included in the JSE listing requirements. Companies need to explain their deviations from the recommended

principles.

Apply Partially Under review/

apply Do not apply

ETHICAL LEADERSHIP AND CORPORATE CITIZENSHIP

The Board provides effective leadership based on an ethical foundation �

York is a responsible corporate citizen �

Effective management of company's ethics �

BOARDS AND DIRECTORS

The Board is the focal point for and custodian of corporate governance �

Strategy, risk, performance and sustainability are inseparable �

Directors act in the best interest of the company �

The Chairman of the Board is an independent non-executive director �

Appointed a chief executive officer �

Framework for the delegation of authority has been established �

The Board comprises a balance of power, with a majority of non-executive directors �

The majority of the non-executive directors are independent �

Directors are appointed through a formal process �

Formal induction and on-going training and development of directors is conducted �

The Board is assisted by a competent, suitably qualified and

experienced company secretary �

Regular performance evaluations of the Board, its committees

and the individual directors �

Appointment of well-structured committees and oversight of key functions �

An agreed governance framework between the Group

and its subsidiary Boards is in place �

K I N G I I I A P P L I C A T I O N A N DO U R A P P R O A C H T O I N T E G R A T E D R E P O R T I N G



apply Do not apply

BOARDS AND DIRECTORS CONTINUED

Directors and executives are fairly and responsibly remunerated �

Remuneration of directors and certain senior executives is disclosed �

The Company's remuneration policy is approved by shareholders �(1)

AUDIT COMMITTEE

Effective and independent �

Suitably skilled and independent non-executive directors �

Chaired by an independent non-executive director �

Oversees integrated reporting �

A combined assurance model is applied to improve

efficiency in assurance activities �

Satisfies itself on the expertise, resources and experience of the

company's finance function �

Oversees internal audit �

Integral to the risk management process �

Recommending the appointment of the external auditor �

Oversees the external audit process �

Reports to the Board and Shareholders on how it has discharged its duties �

GOVERNANCE OF RISK

The Board is responsible for the governance of risk and

setting levels of risk tolerance �

The risk and innovation committee assists the Board in carrying

out its risk responsibilities �

The Board delegates the process of risk management to management �

K I N G I I I A P P L I C A T I O N A N D

O U R A P P R O A C H T O I N T E G R A T E D R E P O R T I N G C O N T I N U E D



apply Do not apply

The board ensures that risk assessment and monitoring is

performed on a continual basis �

Frameworks and methodologies are implemented to increase the

probability of anticipating unpredictable risk �

Management implements appropriate risk responses �

The Board receives assurance on the effectiveness of the risk management process �

Sufficient risk disclosure to stakeholders �

INTERNAL AUDIT

Effective risk-based internal audit �

Written assessment of the effectiveness of the company's system

of internal controls and risk management �

COMPLIANCE WITH LAWS, CODES, RULES AND STANDARDS

The Board ensures that the company complies with applicable laws and

considers adherence to non-binding rules, codes and standards �

The Board and directors have a working understanding of the

relevance and implications of non-compliance �

The Board has delegated to management the implementation of an

effective compliance framework and process �

GOVERNANCE OF INFORMATION TECHNOLOGY (IT)

The Board is responsible for IT governance �

IT is aligned with the performance and sustainability objectives of the company �

Management is responsible for the implementation of an IT governance framework �

The Board monitors and evaluates significant IT investments and expenditure �

IT is an integral part of the company's risk management �

IT assets are managed effectively �

The risk and innovation committee as well as the audit committee

assist the Board in carrying out its IT responsibilities �

K I N G I I I A P P L I C A T I O N A N D

O U R A P P R O A C H T O I N T E G R A T E D R E P O R T I N G C O N T I N U E D



apply Do not apply

GOVERNING STAKEHOLDER RELATIONSHIP

Appreciation that stakeholders' perception affect a company's reputation �

Management proactively deals with stakeholder relationships �

There is an appropriate balance between its various stakeholder

groupings, in the best interests of the company �

Equitable treatment of stakeholders �

Transparent and effective communication to stakeholders �

Disputes are resolved effectively, efficiently and timeously �

INTEGRATED REPORTING AND DISCLOSURE

Ensures the integrity of the company's integrated report �

Sustainability reporting and disclosure is integrated with

the company's financial report � (2)

Sustainability report and disclosure is independently assured � (2)

NOTE (1)

The Company’s remuneration policy in the Remuneration Report has been approved by the Board of Directors and is reviewed

annually by the Remuneration and Nomination sub-committee. Shareholder approval has been obtained in terms of its long-term

incentive schemes. The Company has included its remuneration policy in the Remuneration report on pages 39 to 41 which has

been tabled to shareholders for a non-binding advisory vote at the forthcoming annual general meeting.

NOTE (2)

King III recommends a company should report on its performance in terms of both finances and sustainability as part of its

integrated reporting in the Annual Report.

The principles of Integrated Reporting are already entrenched in the company and we will endeavour to report more

comprehensively on these principles to our stakeholders in future. York established a management task team and acquired the

services of KPMG Advisory to perform a gap analysis in terms of these principles.

The Board of Directors acknowledges that it will take York some time to fully report on all principles and elements of Integrated

Reporting.


This report explains York's remuneration policy for non-executive and executive directors as well as York's employees.

REMUNERATION AND NOMINATION COMMITTEE

The current members of the Committee are:• Jim P Myers (Chairman);• Dr Azar Jammine and• Shakeel Unus Meer.

The Committee meets at least twice a year. Meetings arefurther attended by invitees, including the Chief ExecutiveOfficer, who is not entitled to vote. None of the executivedirectors participate in discussions regarding their ownremuneration. The Company Secretary acts as theCommittee Secretary.

In the period under review, meetings were held and attendedas follows:

6 May2011 Total

Jim P Myers P 1

Dr Azar Jammine P 1

Shakeel Meer A 0

Key: P : Present

ROLE OF THE COMMITTEE

The Committee has an independent role, operating as anoverseer and a maker of recommendations to the Board forits consideration and final approval. The Board remainsultimately responsible for the Group's remuneration policy.

The Committee has satisfied its responsibilities in compliancewith the terms of reference approved by the Board. Theterms of reference are reviewed regularly.

The Committee's roles and responsibilities include:

• developing and regularly reviewing the remunerationstrategy and policy to promote the achievement ofstrategic objectives and encourage individualperformance,

• ensuring the Board has the appropriate composition for itto execute its duties effectively,

• ensuring that directors and other senior employees areappointed through a formal process,

• induction and on-going training and development ofdirectors,

• addressing issues relating to the performancemanagement policies of York,

• ensuring York remunerates directors and executives fairlyand responsibly,

• ensuring the disclosure of director's remuneration isaccurate, complete and transparent, and

• ensuring formal succession plans for the Board, chiefexecutive officer and senior management appointmentsare in place.

EXTERNAL ADVISORS

The Committee discharges its responsibilities with theassistance of independent remuneration consultants andtheir reports based on industry comparatives. The followingcompanies were used during the year:

• 21st Century Pay Solutions Group

• PE Corporate Services

• PwC

KEY DEVELOPMENTS

During the period under review, the Committee completed thefollowing:

• approved increases for executives, senior managementand all other employees,

• approved the fee levels for non-executive directors,

• approved the short term incentive scheme,

• approved the long term incentive scheme's award levels,and

• devised a performance based remuneration systembased on quarterly performance reviews forimplementation in the 2012 reporting year.

The Board is satisfied that the Remuneration and NominationCommittee has acted in terms of its reference and performedits responsibilities for the period under review.

R E M U N E R A T I O N R E P O R T

REMUNERATION POLICY FOR EXECUTIVE DIRECTORS

AND ALL EMPLOYEES

York aims to attract, retain and reward staff of the highest

calibre, ensuring their remuneration rewards the complexity

of their jobs, is equitable for the role they perform and in line

with the shareholder interests.

The purpose of the company's remuneration policy is to

achieve the following outcomes:

• Staff is fairly and equitably remunerated for their roles

within the organisation,

• Staff members' performance and contribution to the

achievement of York's goals are recognised and rewarded

appropriately,

• Unnecessary loss of skills due to avoidable staff turnover

resulting from remuneration matters is minimised,

• Key positions are easier to fill because the company's

remuneration structure is competitive in the external

market, and

• All remuneration procedures specified are fully compliant

with labour and employment legislation.

York strives to be the employer of choice in the forestry and

timber industry. Remuneration and reward play a critical role

in the attraction, motivation and retention of high-

performance individuals from diverse backgrounds. They also

reinforce the efforts of staff to achieve, and surpass, York's

business objectives.

The company's remuneration policy is underpinned by the

following principles and values:

• Internal and external equity,

• Affordability and sustainability,

• Value for money,

• Development orientation and recognition of individual and

team contributions,

• Ensuring that the income gap is narrowed,

• Performance management, and

• Administrative excellence.

SUMMARY OF REMUNERATION STRUCTURE

The following are York's key remuneration components:

• guaranteed total cost to company package,

• performance management reviews,

• short term team incentives,

• long term incentives for strategic high performers, and

• stimulating work environment that provides an excellentcontext for growth and development.

The contents, requirements and expected outputs of all jobsin the company will be properly described and graded in termsof established procedures. All jobs are benchmarked annuallyusing external remuneration surveys specific to the forestryand timber industry.

New appointees are offered remuneration at the appropriateentry level of the Paterson pay grade. Remuneration levelsare adjusted annually with consideration given to inflation andmarket movements and benchmarks reflected in theremuneration survey as well as the company's financialsituation.

YORK IS ADDRESSING THE INCOME GAP

York acknowledges that the income gap in South Africa is oneof the largest in the world and aims to address it pro-actively.

York's remuneration and nomination committee hasapproved the remuneration increase for the 2012 year. Lowearning employees received an increase of 9.0% whereashigher earning employees received an increase of 5.5%. Anadditional R500 000 was made available to address wageanomalies for individuals who fall outside of the remunerationrange of the industry and province.

Further work towards addressing this gap takes the form oftraining and development initiatives which increase the valueof the skills the employees offer the Company, and thereforeallows them to attract more highly paid remuneration.

GUARANTEED TOTAL COST TO COMPANY PACKAGE

All staff are remunerated based on an all-inclusiveremuneration package (Total cost to company package);encompassing cash as well as benefits. Contributions toretirement and insured benefits are included in theguaranteed total cost to company package.


R E M U N E R A T I O N R E P O R T C O N T I N U E D


PERFORMANCE MANAGEMENT REVIEWS

Salaried employees' overall contribution, performance and

leadership behaviours were evaluated over the last twelve

months by the senior management as well as Exco members.

During the 2011 year, this assessment was done twice -

during August 2010 and February 2011. A short term

incentive was paid based on these assessments (refer below).

The Remuneration and Nomination committee have approved

a quarterly performance review for the 2012 year. York

intends to fully entrench the culture of performance and value

creation linked to remuneration, through strengthening each

manager's ability to set and measure key performance

indicators.

The salary increases for next year will be implemented on the

basis of base increase plus a performance related

component. This component will be determined by quarterly

performance reviews for each individual. Performance

reviews will be verified by a pool of assessors to ensure that

the process is fair and transparent.

SHORT TERM INCENTIVE (STI)

The STI, a cash bonus, aims to provide an annual incentive to

key staff, based on merit and based on the team having

exceeded expectations.

Nominations and motivations of high performing employees

are made by senior management. Nominees are then

considered and debated by the Exco against leadership

behaviour criteria. These employees are awarded based on

these analyses.

LONG TERM INCENTIVE (LTI)

The objective is to implement a performance-based

compensation programme which effectively links pay with

performance while keeping key high performers motivated

and engaged. Maintaining remuneration competitiveness,

creating a sense of ownership and motivating employee

performance are the most important concerns when

designing a system for equity pay.

Performance-based share appreciation rights are widelyrecognised as an excellent vehicle for ensuring goal alignmentbetween key managers and the organisation.

High performers who are integral to the succession andtalent management process were selected for awards. Thiswas done scoring each individual in the Paterson D band usinga leadership behaviour matrix. The matrix defines specificdemonstrated behaviour and requires a score based onevidence of the behaviour over the preceding twelve monthperiod.

More disclosure relating to York's LTI are contained in note14 to the annual financial statements.

CRITICAL AND SCARCE SKILLS

Jobs, occupations or individual cases designated as “criticalor scarce skills” may be rewarded in one of the following ways:

• A scarce skills allowance to bring total package to a levelnot higher than 20% penetration of the pay scale for thenext higher grade, or

• Increase of the total package, to the maximum of the payscale for that job grade.

REMUNERATION POLICY FOR NON-EXECUTIVEDIRECTORS

Non-executive directors are paid a yearly fee for their serviceson the Board and sub-committees as well as a fee formeetings attended.

Non-executive directors do not receive STI’s or LTI’s. TheRemuneration and Nomination committee reviews their feesin line with market benchmarks and recommends fee levels tothe Board. These fees are subject to the approval of theshareholders of York's annual general meetings.

In the case that non-executive directors are requested toresign, there is no contractual compensation for loss of office.

PAYMENTS TO EXECUTIVE DIRECTORS, NON-EXECUTIVEDIRECTORS AND DISCLOSED EMPLOYEES

Refer to page 97 - 98 of this report.

INDEX

The reports and statements set out below comprise the consolidated financial statements presented to the shareholders:

Independent auditor's report 45

Directors' responsibilities and approval 46

Certificate by company secretary 46

Audit committee's report 47 - 48

Directors' report 49 - 50

Shareholders' profile 51

Statement of comprehensive income 52

Statement of financial position 53

Statement of changes in equity 54

Statement of cash flows 55

Accounting policies 56 - 71

Notes to the consolidated financial statements 72 - 107

C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SF O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1


York Timber Holdings Limited

Registration number: 1916/004890/06

JSE Share code: YRK

ISIN: ZAE000133450

REGISTERED ADDRESS

York Corporate Office

3 Main Road

Sabie

1260

South Africa

PO Box 1191

Sabie

1260

Tel: +27 (0) 13 764 9200

Fax: +27 (0) 13 764 1164

E-mail: [email protected]

www.york.co.za

INVESTOR RELATIONS

Samantha Beresford (CS&MO)

Tel: +27 (0) 13 764 9200

COMPANY SECRETARY

Fusion Corporate Secretarial Services

represented by Melinda van den Berg

Tel: +27 (0) 87 550 1123

43 Sovereign Road

Route 21 Corporate Park

Nellmapius Drive

Irene, Pretoria

PO Box 68528

Highveld

0169

TRANSFER SECRETARIES

Computershare Investor Services (Pty) Ltd

Ground floor

70 Marshall Street

Johannesburg

2001

PO Box 61051

Marshalltown

2001

CORPORATE SPONSOR

One Capital

17 Fricker Road,

Illovo

2196

PO Box 784573

Sandton

2146

REPORTING ACCOUNTANTS AND AUDITORS

KPMG Incorporated

Registered Auditors

Chartered Accountants (SA)

Suite 501, The Pinnacle

1 Parkin Street

Nelspruit

1200

Private Bag X11255

Nelspruit

1200

A D M I N I S T R A T I O N D E T A I L S

York T imbers – Annua l Report 20 11York T imbers – Annua l Report 20 1 1 PAGE 45

I N D E P E N D E N T A U D I T O R ' S R E P O R Tt o t h e S h a r e h o l d e r s o f Y o r k T i m b e r H o l d i n g s L i m i t e d

We have audited the consolidated annual financial statements of York Timber Holdings Limited, which comprise the statement offinancial position at 30 June 2011, and the statements of comprehensive income, changes in equity and cash flows for the yearthen ended, and the notes to the financial statements which include a summary of significant accounting policies and otherexplanatory notes, and the directors' report, as set out on pages 49 to 107.

DIRECTORS' RESPONSIBILITY FOR THE FINANCIAL STATEMENTSThe company's directors are responsible for the preparation and fair presentation of these financial statements in accordance withInternational Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internalcontrol as the directors determine is necessary to enable the preparation of the financial statements that are free from materialmisstatement, whether due to fraud or error.

AUDITOR'S RESPONSIBILITYOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordancewith International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement ofthe financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internalcontrol. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINIONIn our opinion, these financial statements present fairly, in all material respects, the consolidated financial position of York TimberHoldings Limited at 30 June 2011, and its consolidated financial performance and consolidated cash flows for the year then endedin accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa.

KPMG Inc.

Registered Auditor

Per Heinrich MansChartered Accountant (SA) Suite 501, The PinnacleRegistered Auditor 1 Parkin StreetDirector Nelspruit 1200

20 September 2011

Per Heinrich Mans


D I R E C T O R S ’ R E S P O N S I B I L I T Y S T A T E M E N T

The directors are responsible for the preparation and fair presentation of the consolidated annual financial statements of York

Timber Holdings Limited, comprising the statement of financial position at 30 June 2011, and the statements of comprehensive

income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which include a

summary of significant accounting policies and other explanatory notes, and the directors' report, in accordance with International

Financial Reporting Standards, and the requirements of the Companies Act of South Africa.

The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of

financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate

accounting records and an effective system of risk management.

The directors have made an assessment of the ability of the company and its subsidiaries to continue as going concerns and have

no reason to believe that the company and its subsidiaries will not be going concerns in the year ahead.

The auditor is responsible for reporting on whether the consolidated annual financial statements are fairly presented in accordance

with the applicable financial reporting framework.

APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS

The consolidated annual financial statements of York Timber Holdings Limited, as identified in the first paragraph, were approved

by the board of directors on 20 September 2011 and are signed by:

Jim P Myers Pieter P van Zyl

Chairman of the Board Chief Executive Officer

I certify that the requirements as stated in section 33 of the Companies Act of South Africa have been met and that all returns,

as are required of a public company in terms of the aforementioned Act, have been submitted to the Registrar of Companies and

that such returns are true, correct and up to date.

Melinda van den Berg

Fusion Corporate Services (Pty) Ltd

Company secretary

20 September 2011

C E R T I F I C A T E B Y C O M P A N Y S E C R E T A R Y

Jim P Myers Pi P Z l


MANDATE AND TERMS OF REFERENCE

The Group's Audit Committee has adopted a mandate and terms of reference that have been approved by the Board.

The Audit Committee's responsibilities include:

• Reviewing the Group's consolidated interim results and annual financial statements;

• Monitoring compliance with statutory and JSE Listings Requirements;

• Reporting to the Board on the quality and acceptability of the Group's accounting policies and practices;

• Considering the appointment and/or termination of the external auditors, including their audit fee, independence and objectivityand determining the nature and extent of any non-audit services; and

• Receiving and dealing appropriately with any complaints (internally and externally) relating to accounting practices, internal auditor to the content or auditing of all entities within the Group's annual financial statements, or related matters.

MEMBERSHIP

The members of the Audit Committee are as follows:

• Gavin Tipper (Independent Chairman) and

• Paul C Botha, and

• Dr Azar Jammine

The Board nominated Dr Azar Jammine, an independent non-executive director, to the Audit Committee, subsequent to year end.

In terms of Section 94 (2) of the Companies Act, the Company must elect an Audit Committee comprising of at least threemembers. The Audit Committee is no longer a committee of the Board, but a committee elected by the shareholders at eachannual general meeting.

The current members of the Audit Committee have the necessary academic qualifications and experience.

The Chief Executive Officer and Chief Financial Officer attend Audit Committee meetings by invitation, as does the head of internalaudit and the external auditors.

The internal and external auditors have unlimited access to the Chairman of the Audit Committee. The internal audit departmentreports directly to the Audit Committee and is also accountable to the Chief Financial Officer on day-to-day administrative matters.

Two Audit Committee meetings are scheduled per financial year. Additional committee meetings may be convened whennecessary.

During the 2011 financial year, two committee meetings were convened, and all the Audit Committee members attended thesemeetings.

A U D I T C O M M I T T E E R E P O R T


A U D I T C O M M I T T E E R E P O R T C O N T I N U E D

STATUTORY DUTIES

In terms of Section 94 of the Companies Act, the Audit Committee discharged all of those functions delegated to it in terms of theAudit Committee mandate, the Act and the JSE Listings Requirements.

The Audit Committee:

• Nominated the external auditors for appointment for the 2011 and 2012 financial year;

• Considered and satisfied itself that the external auditors are independent;

• Determined the fees to be paid to the external auditors as well as the terms of engagement for the 2011 financial year;

• Ensured that the appointment of the external auditors complied with the Act;

• Determined the nature and extent of the non-audit services which the external auditors may provide;

• Pre-approved any proposed agreement with the external auditors for the provision of non-audit services during the year underreview;

• Approved the internal audit plan for the year;

• Held separate meetings with management and the external auditors to discuss any reserved matters;

• Considered and satisfied itself with the appropriateness and experience of the Chief Financial Officer as required by the JSEListings Requirements; and

• Reviewed the consolidated annual financial statements of York Timber Holdings Limited.

INTERNAL CONTROL

Internal controls comprise methods and procedures adopted by management to provide reasonable assurance of safeguardingassets, prevention and detection of error, accuracy and completeness of accounting records, and reliability of annual financialstatements of all entities within the Group.

The internal audit function serves management and the Board by performing independent evaluations of the adequacy andeffectiveness of the Group's controls, financial reporting mechanisms and records, information systems and operations, andprovides additional assurance in regard to safeguarding of assets and the integrity of financial information.

Management has concluded that the internal control over financial reporting as at 30 June 2011 was effective.

INTEGRATED REPORTING

During the year under review, management commenced with the implementation of integrated reporting.

RECOMMENDATION OF GROUP FINANCIAL STATEMENTS

Based on the information provided to the Audit Committee by management and considering the report of the external auditors,the committee was satisfied that the Group complies in all material respects with the requirements of the International FinancialReporting Standards (IFRS) and the AC500 standards as issued by the Accounting Practices Board (APB), the ListingsRequirements of the JSE Limited and the Companies Act of South Africa 2008 (as amended) and the Companies Regulations2011. After agreeing that the going concern promise was appropriate, the Committee has recommended the adoption of theconsolidated annual financial statements by the Board at a meeting held on 1 September 2011. These consolidated annualfinancial statements will be open for discussion at the forthcoming annual general meeting.

ppChairman of the Audit CommitteeGavin Tipper


The directors submit their report for the year ended 30 June 2011.

1. REVIEW OF ACTIVITIES

The Group is engaged in commercial forestry, softwood sawmilling, plywood manufacture and trade in timber products and

operates principally in South Africa.

The Group produced a net profit of R38.3 million (2010: R64.6 million). The operating results and state of affairs of the Group

are fully set out in the attached consolidated annual financial statements and do not in our opinion require any further

comment.

2. GOING CONCERN

The consolidated annual financial statements have been prepared on the basis of accounting policies applicable to a going

concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and

settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

3. EVENTS AFTER THE REPORTING PERIOD

The directors are not aware of any material matter or circumstance arising since the end of the financial year.

4. AUTHORISED AND ISSUED SHARE CAPITAL

No changes were made to share capital during the year.

5. BORROWING LIMITATIONS

In terms of the existing Memorandum of Incorporation of the Company, the directors may exercise all the powers of the

Company to borrow money, as they consider appropriate. York and its subsidiaries' borrowings are not limited by their

respective memorandums. The Company is in the process of aligning it’s memorandums with the new requirements of the

Companies Act and will file them in due course.

The Group is subject to externally imposed capital requirements as a result of the debt:equity ratio required by the RMB loan

facilities (refer note 16 to the group financial statements). The Group is required to have a gearing ratio of less than 90%.

The gearing ratio decreased to 20.0% from 23.0% at the previous year end.

6. DIVIDENDS

In the light of the current market conditions, the directors regard it as prudent not to declare a dividend. No dividends were

paid to shareholders during the year.

7. DIRECTORS

The directors of the Company during the year and to the date of this report are as follows:

Executive directors

Erskine, Duncan James Chief Financial Officer

Van Zyl, Pieter Prins Chief Executive Officer

D I R E C T O R S ' R E P O R T


D I R E C T O R S R E P O R T C O N T I N U E D

Non-executive directors

Myers, Jim P * (Chairman) (USA)

Botha, Paul C

Dr Jammine, Azar * ( Appointed 5 October 2010)

Meer, Shakeel AU

Tipper, Gavin *

* Independent

8. DIRECTORS' SHAREHOLDINGS

The interests of the directors in the ordinary share capital of the Company in terms of paragraph 3.83 and 8.63(d) of the

JSE Limited Listing Requirements are listed below. There were no changes to the directors' shareholdings subsequent to the

financial year and to the date of approval of these group financial statements.

Direct beneficial interest

2011 2010

Name ('000) % ('000) %

Erskine, Duncan J 46 0.01% 43 0.01%

Tipper, Gavin 37 0.01% 37 0.01%

Van Zyl, Pieter P 131 0.04% 89 0.03%

9. SECRETARY

Fusion Corporate Services (Pty) Ltd, represented by Melinda van den Berg.

10. INTEREST IN SUBSIDIARIES

Details of the Company's investment in subsidiaries are set out in note 28.

11. SPECIAL RESOLUTIONS

During the year no special resolutions were passed by York Timber Holdings Limited.

12. AUDITORS

KPMG Incorporated will continue as external auditors of the Group.


The shareholders' profile as at 30 June 2011 was the following:

Number of shareholders % Number of shares %

Shareholder analysis1 - 1,000 shares 258 27.86 114 638 0.031,001 - 10,000 shares 334 36.07 1 457 597 0.4410,001 - 100,000 shares 214 23.11 7 868 364 2.38100,001 - 1,000,000 shares 86 9.29 28 903 884 8.731,000,001 shares and over 34 3.67 292 896 114 88.42

926 100.00 331 240 597 100.00

Distribution of shareholdersBanks/ Brokers 8 0.86 631 088 0.19Close corporations 14 1.15 192 283 0.06Empowerment 4 0.43 94 221 980 28.45Endowment funds 9 0.97 1 203 556 0.36Individuals 675 72.89 12 549 534 3.79Insurance companies 7 0.76 4 813 489 1.45Investment companies 1 0.11 95 136 513 28.72Medical aid schemes 9 0.97 990 176 0.30Mutual funds 62 6.70 66 932 715 20.21Nominees and trusts 48 5.18 6 431 262 1.94Other corporations 7 0.76 57 076 0.02Private companies 23 2.48 3 674 275 1.11Private equity funds 1 0.11 21 673 398 6.54Public companies 4 0.43 98 170 0.03Retirement funds 53 5.72 22 586 882 6.82Share trust 1 0.11 48 200 0.01

926 100.00 331 240 597 100.00

Non-public / Public shareholdersNon-public shareholders 9 0.97 189 620 716 57.25• Directors of the Company 3 0.32 214 023 0.06• Share trust 1 0.11 48 200 0.01• Empowerment 4 0.43 94 221 980 28.45• Strategic holdings (more than 10%) 1 0.11 95 136 513 28.72

Public shareholders 917 99.03 141 619 881 42.75

926 100.00 331 240 597 100.00

Beneficial shareholders holding 5% or moreIndustrial Development Corporation 95 136 513 28.72Lereko Metier Capital Growth Fund 53 449 188 16.14Corolife Special Opportunities Portfolio 37 266 701 11.25Bridge Creek Trading 10 (Pty) Ltd 29 356 410 8.86Corocapital Ltd - Private Equity 21 673 398 6.54

236 882 210 71.51

S H A R E H O L D E R S ’ P R O F I L E


2011 2010Notes R'000 R'000

Revenue 20 959 143 909 361Cost of sales (538 231) (559 244)

Gross profit 420 912 350 117Other operating income 5 802 19 962Selling, general and administration expenses (264 817) (300 815)

Operating profit before separately disclosed items 161 897 69 264Insurance proceeds — 8 519Impairment of operating assets — (42 598)

Operating profit 21 161 897 35 185Restructuring costs — (333)Loss on non-current assets held for sale (13 362) —Fair value adjustments 24 14 924 200 269

Profit before finance costs 163 459 235 121Investment income 22 2 217 2 810Finance costs excl. hedge interest expense 23 (78 866) (107 978)Hedge interest expense paid 23 (21 504) (16 791)Hedge interest expense (ineffective portion) 23 (11 992) (23 015)Hedge interest expense (due to early settlement) 23 — (29 577)

Profit before taxation 53 314 60 570Taxation 25 (14 997) 4 056

Profit for the year 38 317 64 626

Other comprehensive income/(loss):Available-for-sale financial assets adjustments (341) 716Effects of cash flow hedges 28 756 52 499Taxation related to components of other comprehensive income 25 (8 005) 10 273

Other comprehensive income for the year,net of taxation (subtotal) 20 410 63 488

TOTAL COMPREHENSIVE INCOME 58 727 128 114

EARNINGS PER SHAREBasic and diluted earnings per share (cents) 34 12 30

S T A T E M E N T O F C O M P R E H E N S I V E I N C O M E


2011 2010Notes R'000 R'000

ASSETSNON-CURRENT ASSETSBiological assets 2 1 616 363 1 562 936Investment property 3 24 940 24 740Property, plant and equipment 4 404 665 420 184Goodwill 5 565 442 565 442Intangible assets 6 3 275 2 691Other financial assets 7 1 004 1 345

TOTAL NON-CURRENT ASSETS 2 615 689 2 577 338

CURRENT ASSETSBiological assets 2 320 035 358 738Instalment sale receivables 8 — 606Inventories 9 148 807 138 040Trade and other receivables 10 124 595 104 334Cash and cash equivalents 11 103 484 84 493Current tax receivable 3 524 3 503

TOTAL CURRENT ASSETS 700 445 689 714

TOTAL ASSETS 3 316 134 3 267 052

EQUITY AND LIABILITIESEQUITYShare capital 12 16 562 16 562Share premium 12 1 505 352 1 505 352Reserves (5 826) (26 236)Retained income 510 180 471 863

TOTAL EQUITY 2 026 268 1 967 541

LIABILITIESNON-CURRENT LIABILITIESCash settled share based payments 14 6 497 2 104Deferred tax 15 432 451 409 510Loans and borrowings 16 539 657 626 479Provisions 17 54 643 55 496Retirement benefit obligation 18 21 454 22 463

TOTAL NON-CURRENT LIABILITIES 1 054 702 1 116 052

CURRENT LIABILITIESCurrent tax payable 369 369Loans and borrowings 16 74 568 55 491Provisions 17 285 285Trade and other payables 19 159 942 127 314

TOTAL CURRENT LIABILITIES 235 164 183 459

TOTAL LIABILITIES 1 289 866 1 299 511

TOTAL EQUITY AND LIABILITIES 3 316 134 3 267 052

S T A T E M E N T O F F I N A N C I A L P O S I T I O N


Fair valueadjustment

assets- Share basedShare Hedging available-for payment Retained TOTAL

Share premium reserve - sale reserve reserve income EQUITYcapital R’000 R’000 R'000 R’000 R'000 R'000

BALANCE AT 1 JULY 2009 3 919 1 026 888 (89 545) (179) 1 286 407 237 1 349 606Profit for the year — — — — — 64 626 64 626Other comprehensive incomeChange in fair value of cash

flow hedge, net of tax — — 62 872 — — — 62 872Change in fair value of available-

for-sale financial assets, net of tax — — — 616 — — 616

Total other comprehensive income — — 62 872 616 — — 63 488

Total comprehensive incomefor the year — — 62 872 616 — 64 626 128 114

Transactions with ownersrecorded directly in equity

Contributions by anddistributions to owners

Issue of shares throughrights issue 12 500 487 500 — — — — 500 000

Share issue costs written off against share premium — (12 844) — — — — (12 844)

Increase in share basedpayment reserve — — — — 9 160 — 9 160

Reversal of share premium dueto disposal of treasury shares — (24 266) — — — — (24 266)

Conversion of preferenceshares into ordinary shares 143 28 074 — — (10 446) — 17 771

Total transactions with owners 12 643 478 464 62 872 616 (1 286) 64 626 489 821

BALANCE AT 30 JUNE 2010 16 562 1 505 352 (26 673) 437 — 471 863 1 967 541

Profit for the year — — — — — 38 317 38 317Other comprehensive incomeChange in fair value of cash

flow hedge, net of tax — — 20 704 — — — 20 704Change in fair value of available-

for-sale financial assets,net of tax — — — (294) — — (294)

Total other comprehensive income — — 20 704 (294) — — 20 410

Total comprehensive income forthe year and total transactions with owners — — 20 704 (294) — 38 317 58 727

BALANCE AT 30 JUNE 2011 16 562 1 505 352 (5 969) 143 — 510 180 2 026 268

Notes 12 12 13 7

S T A T E M E N T O F C H A N G E S I N E Q U I T Y


2011 2010Notes R'000 R'000

CASH FLOWS FROM OPERATING ACTIVITIESCash receipts from customers 1 166 643 1 050 337Cash paid to suppliers and employees (979 404) (948 469)

Cash generated from operations 26 187 239 101 868Investment income 2 217 2 111Finance costs (91 750) (129 665)Tax (paid)/received 27 (82) 1 594

NET CASH FLOWS FROM OPERATING ACTIVITIES 97 624 (24 092)

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment (18 887) (17 095)Proceeds from disposal of property, plant and equipment 601 933Purchase of intangible assets (1 352) (457)Withdrawal from self-insurance fund — 3 282

NET CASH FLOWS FROM INVESTING ACTIVITIES (19 638) (13 337)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds on share issue — 12 643Increase in share premium — 491 308Share issue cost deducted from share premium — (12 844)Loans and borrowings paid (59 601) (494 855)Instalment sale receivables receipts 606 1 248

NET CASH FLOWS FROM FINANCING ACTIVITIES (58 995) (2 500)

TOTAL CASH MOVEMENT FOR THE YEAR 18 991 (39 929)Cash at the beginning of the year 11 84 493 124 422

CASH AT THE END OF THE YEAR 11 103 484 84 493

S T A T E M E N T O F C A S H F L O W S


REPORTING ENTITY

York Timber Holdings Limited (York or the Company) is a company domiciled and incorporated in The Republic of South Africa.

The financial statements of the Group for the year ended 30 June 2011 comprise the Company and its subsidiaries (collectivelyreferred to as the Group and individually as Group entities). The core business activities of the Group comprise commercial forestry,softwood sawmilling, plywood manufacture and trade in timber products.

BASIS OF PREPARATION

Statement of compliance

The group financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) andthe AC 500 standards as issued by the Accounting Practices Board (APB), the Listings Requirements of the JSE Limited and theCompanies Act of South Africa, 2008 (as amended) and the Companies Regulations, 2011.

The group financial statements were approved by the Board of Directors on 1 September 2011.

The individual responsible for the preparation of group financial statements is Duncan James Erskine, the Chief Financial Officer.

Basis of measurement

The group financial statements have been prepared on the historical cost basis except for the following material items in thestatement of financial position:• derivative financial instruments are measured at fair value;• financial instruments at fair value through profit or loss are measured at fair value;• available-for-sale financial assets are measured at fair value;• biological assets are measured at fair value less costs to sell;• investment property is measured at fair value;• liabilities for cash-settled share-based payment arrangements are measured at fair value; and• the retirement benefit obligation is recognised as the net total of the unrecognised past service cost and unrecognised

actuarial losses, less unrecognised actuarial gains and the present value of the defined benefit obligation.

Functional and presentation currency

The group financial statements are presented in Rand, which is the Company's functional currency. All financial informationpresented has been rounded to the nearest thousand.

Significant judgements and sources of estimation uncertainty

The preparation of group financial statements in conformity with IFRS requires management to make judgements, estimates andassumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.Actual results may differ from these estimates.

These judgements and estimates are reviewed annually by management. Revisions to accounting estimates are recognised in theperiod in which the estimate is revised and in any future periods affected.

For details of judgements and estimates that have a significant effect on the group financial statements, see:• note 2 - Biological assets• note 3 - Investment property• note 4 - Property, plant and equipment• note 5 - Goodwill• note 10 - Trade and other receivables• note 18 - Retirement benefits

A C C O U N T I N G P O L I C I E S


The accounting policies have been applied consistently to all periods presented in these financial statements, except as explainedbelow.

CHANGES IN ACCOUNTING POLICIES

The Group changed its accounting policies in the following areas:

• Related party disclosure

• Impairment of assets

• Accounting for group cash settled share based payments

• Disclosure of operating segments

• Deferred taxation on investment property

IAS 24 (revised) Related parties disclosure

The Group applied IAS 24 (revised) as from 1 July 2010. The definition of a related party was amended for government-relatedentities.

No new related party relationships were identified due to the adoption of the revised definition.

Consequently, the change in accounting policy had no impact on assets, profits or earnings per share.

IAS 36 (amendment) Impairment of assets

The Group adopted the amendments to IAS 36 as from 1 July 2010. Under the amendment, the Group is required to determinethe largest cash generating unit to which goodwill can be allocated for purposes of impairment testing to be the applicableoperating segment as defined by IFRS 8, before applying the aggregation criteria.

The Group has always identified its forestry segment as the applicable operating segment for the purposes of impairment testing.The forestry segment is a separate segment.


IFRS 2 (amendment) Group Cash-settled Share-based Payment

The Group adopted the amendments to IFRS 2 as from 1 July 2010.

The amendments expanded the scope of IFRS 2 to include group cash-settled share-based payments. Arrangements that aresettled in cash or other assets based on the price or value of the entity or another group entity's equity instruments should beaccounted for as share-based payments.

An entity that receives the goods or services (receiving entity) will be required to account for the share-based payment in itsseparate financial statements, even if it has no obligation to settle the transaction. This entity will classify the share-based paymentsas equity-settled if it has an obligation to transfer its own equity instruments or if it does not have an obligation to settle thetransaction. Any other share-based payment will be classified as cash-settled.

The entity that has the obligation to settle the transaction (settling entity) will account for the arrangement as equity-settled if it hasto settle in its own equity instruments. Any other settlement arrangement will be accounted for as cash-settled.

No changes were identified due to amendments to IFRS 2 in the consolidated financial statements.


S I G N I F I C A N T A C C O U N T I N G P O L I C I E S


IFRS 8 (amendment) Operating segments

The Group adopted the amendment to IFRS 8, which became effective 1 July 2010. The amendment clarified the segmentinformation to be disclosed in the financial statements.

Information on total assets is required only if such information is regularly reported to the chief operating decision maker (CODM).

Since this information is not regularly reported to the CODM, no disclosure relating to total assets was made in the segment report.

The change in accounting policy only impacts presentation aspects and there is no impact on earnings per share.

IAS 12 (amendment) Deferred tax: Recovery of underlying assets

The Group adopted the amendment to IAS 12, as from 1 July 2010.

The amendments introduce an exception to the general measurement requirements of IAS 12 in respect of investment propertiesmeasured at fair value. The measurement of deferred tax assets and liabilities is based on a rebuttable presumption that thecarrying amount of the investment property will be recovered entirely through sale. The presumption can be rebutted only if theinvestment property is depreciable and held within a business model whose objective is to consume substantially all of the asset'seconomic benefits over the life of the asset.

The Group previously determined the deferred tax assets and liabilities arising from investment property to be recovered throughuse and not through sale.

The amendment was applied prospectively as the financial impact was assessed as being immaterial. The change in accountingpolicy had the financial impact as disclosed in note 15.

ACCOUNTING POLICIES

1. Basis of consolidation

1.1 Business combination

Business combinations are accounted for under the acquisition method.

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from itsactivities. In assessing control, the Group takes into consideration potential voting rights that currently areexercisable. The acquisition date is the date on which control is transferred to the acquirer. Judgement is applied indetermining the acquisition date and determining whether control is transferred from one party to another.

Acquisitions on or after 1 July 2009

For acquisitions on or after 1 July 2009, the Group measures goodwill as the fair value of the considerationtransferred including the recognised amount of any non-controlling interest in the acquiree, less the net recognisedamount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of theacquisition date.

Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the Group to theprevious owners of the acquiree, and equity interests issued by the Group. Consideration transferred also includesthe fair value of any contingent consideration and share-based payment awards of the acquiree that arereplaced mandatorily in the business combination (see below). If a business combination results in the terminationof pre-existing relationships between the Group and the acquiree, then the lower of the termination amount, ascontained in the agreement, and the value of the off-market element is deducted from the consideration transferredand recognised in other expenses.

S I G N I F I C A N T A C C O U N T I N G P O L I C I E S C O N T I N U E D


When share-based payment awards exchanged (replacement awards) for awards held by the acquiree's employees(acquiree's awards) relate to past services, and then a part of the market-based measure of the awards replaced isincluded in the consideration transferred. If they require future services, then the difference between the amountincluded in consideration transferred and the market-based measure of the replacement awards is treated as post-combination compensation cost.

A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a presentobligation and arises from a past event, and its fair value can be measured reliably. The Group measures any non-controlling interest at its proportionate interest in the identifiable net assets of the acquiree. Transaction costs thatthe Group incurs in connection with a business combination, such as finder's fees, legal fees, due diligence fees, andother professional and consulting fees are expensed as incurred.

Acquisitions prior to 1 July 2009

For acquisitions prior to 1 July 2009, the Group measures goodwill as the excess of the cost of the acquisition overthe Group's interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingentliabilities of the acquiree. When the excess was negative, a bargain purchase gain was recognised immediately inprofit or loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurredin connection with business combinations were capitalised as part of the cost of the acquisition.

1.2 Non-controlling interests

Acquisition of additional non-controlling equity interests in subsidiaries are accounted for as equity transactions.Disposals of equity interests while retaining control are also accounted for as equity transactions. No goodwill isrecognised as a result of such transactions.

When control of an investee is lost, the resulting gain or loss relating to the transaction is recognised in profit orloss, including any re-measurement to fair value of the retained equity interest. All cash flows relating to thesetransactions form part of cash flow from financing activities on the basis that these transactions are equitytransactions.

Losses in a subsidiary are allocated to the non-controlling interest even if doing so causes the non-controlling interestto be in a deficit position.

1.3 Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financialand operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential votingrights that are presently exercisable are taken into account. The financial statements of subsidiaries are included inthe consolidated financial statements from the date that control commences until the date that control ceases. Theaccounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by theGroup.

1.4 Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-grouptransactions, are eliminated in preparing the consolidated financial statements.


2. FOREIGN CURRENCY

Transactions in foreign currencies are translated to the functional currency of the Group at the rate of exchange ruling onthe transaction date.

Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at rates ofexchange ruling at the reporting date (spot rate). The foreign currency gain or loss on monetary items is the difference betweenamortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments duringthe period, and the amortised cost in the foreign currency translated at the exchange rate at the end of the period.Any foreign exchange differences are recognised in comprehensive income in the year in which the difference occurs.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to thefunctional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreigncurrency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction.Foreign currency differences arising on retranslation are recognised in profit or loss.

3. FINANCIAL INSTRUMENTS

3.1 Non derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables,cash and cash equivalents, loans and borrowings, and trade and other payables.

The group recognises a financial instrument when it becomes a party to the contractual provisions of the contract. Thegroup derecognises a financial asset when the contractual rights to the cash flows of the asset expires or is transferred.The group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value throughprofit and loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financialinstruments are measured as described below.

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position,when and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or torealise the asset and settle the liability simultaneously.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demandand form an integral part of the Group's cash management are included as a component of cash and cash equivalentsfor the purpose of the statement of cash flows. Cash and cash equivalents are measured subsequently at amortisedcost using the effective interest method.

Available-for-sale financial assets

The Group's investments in equity securities and certain debt securities are classified as available-for-sale financialassets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairmentlosses, foreign exchange gains and losses on available-for-sale monetary items, as well as interest using the effectiveinterest method recognised in profit and loss, are recognised directly in other comprehensive income. When aninvestment is derecognised, the cumulative gain or loss in equity is transferred to profit and loss.

Other loans and receivables

Included in other loans and receivables are trade and other receivables, trade and other payables, loans, including loansto and from group companies as well as finance lease obligations and receivables. Other non-derivative financialinstruments are measured at amortised cost using the effective interest method, less any impairment losses.


York T imbers – Annua l Report 20 11York T imbers – Annua l Report 20 1 1 PA GE 6 1

Determination of fair value

The fair value of financial assets at fair value through profit or loss and available-for-sale financial assets isdetermined with reference to their quoted market bid price at the reporting date.

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted atthe market rate of interest at reporting date.

The fair value of non-derivative financial liabilities, which is determined for disclosure purposes, is calculated basedon the present value of future principal and interest cash flows. These payments are discounted at the market rateof interest at the reporting date. In respect of the liability component of convertible notes, the market rate of interestis determined by reference to similar liabilities that do not have a conversion option. For finance leases the marketrate of interest is determined by reference to similar agreements.

3.2 Derivatives

All derivative instruments are classified as financial assets or financial liabilities at fair value through profit or loss.

Derivatives are initially recognised at fair value with directly attributable transaction costs being recognised in profitor loss. Derivatives are subsequently re-measured at their fair value. Fair values are obtained from quoted marketprices in active markets, including recent market transactions and valuation techniques, including discountedcash flow models and options pricing models, as appropriate. All derivatives are carried as assets when fairvalue is positive and as liabilities when fair value is negative.

The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as ahedging instrument, and if so, the nature of the item being hedged.

Cash flow hedges

Changes in the fair value of a derivative hedging instrument designated as a cash flow hedge are recognised in othercomprehensive income to the extent that the hedge is effective. To the extent that the hedge is ineffective, changesin fair value are recognised in profit or loss.

On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s)and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction,together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makesan assessment, both at the inception of the hedge relationship as well as on an on-going basis, whether the hedginginstruments are expected to be “highly effective" in offsetting the changes in the fair value or cash flows of therespective hedged items during the period for which the hedge is designated, and whether the actual results of eachhedge are within a range of 80-125%. For a cash flow hedge of a forecast transaction, the transaction should behighly probable and should present an exposure to variations in cash flows that could ultimately affect reported netincome.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminatedor exercised, the hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognisedin equity remains there until the forecast transaction occurs. When the hedged item is a financial asset the amountrecognised in equity is transferred to profit or loss in the same period as the hedged item affects profit and loss.

Derivatives not designated for hedge accounting

Certain derivative instruments are not designated for hedge accounting. Changes in the fair value of these derivativeinstruments are recognised immediately in profit and loss.

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.


The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market priceis not available, the fair value is estimated by discounting the difference between the contract forward price andcurrent forward price for the residual maturity of the contract using a risk free interest rate.

4. PROPERTY, PLANT AND EQUIPMENT

4.1 Owned assets

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulatedimpairment losses.

The cost of self-constructed assets includes the cost of materials, direct labour, and any other costs directlyattributable to bringing the asset to a working condition for its intended use. The cost of self-constructed andacquired assets includes:

• the initial estimate at the time of installation and during the period of use, when relevant, of the costs ofdismantling and removing the items and restoring the site on which they are located; and

• changes in the measurement of existing liabilities recognised for these costs resulting from changes in thetiming or outflow of resources required to settle the obligation or from changes in the discount rate.

Property that is being constructed or developed for future use as investment property is accounted for at fair value.When parts of an item of property, plant and equipment have different useful lives, those components are accountedfor as separate items of property, plant and equipment.

4.2 Subsequent costs

The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing partof such an item if it is probable that the future economic benefits embodied within the item will flow to the Group andthe cost of the item can be measured reliably. The replaced part is subsequently derecognised. All other costs arerecognised in profit or loss as an expense as incurred.

4.3 Depreciation

Depreciation is recognised in profit or loss on a straight line basis over the estimated useful lives of each part of anitem of property, plant and equipment. Land is not depreciated. Depreciation of an item of property, plant andequipment commences when it is available for use and ceases at the earlier of the date it is classified as held forsale or the date it is derecognised upon disposal. The gain or loss on disposal of an item of property, plant andequipment is determined by comparing the proceeds from disposal with the carrying amount of the property, plantand equipment and is recognised net within other income/ other expenses in profit or loss.

The residual values, depreciation methods and useful lives are reassessed annually at the reporting date.

The current estimated useful lives are as follows:

Class Average useful lifeLand IndefiniteBuildings 10 - 49 yearsRoads 40 yearsPlant and machinery 8 - 12 yearsOther assets 3 - 15 years



4.4 Leased assets

Finance leases

Leases that transfer substantially all of the risks and rewards of ownership of the underlying asset to the Group areclassified as finance leases.

Finance leases where the Group is the lessee

Assets acquired in terms of finance leases are measured at the lower of fair value and the present value of theminimum lease payments at inception of the lease. The capital element of future obligations under the leases isincluded as a liability in the statement of financial position.

Lease payments are allocated using the effective interest method to determine the lease finance cost, which isrecognised as a finance cost over the lease period, and the capital repayment, which reduces the liability to the lessorsubsequent to initial recognition. The assets under finance leases are treated in the same manner as owned assets.

Finance leases where the Group is the lessor

Assets disposed of under finance leases are derecognised at the carrying value on the date of disposal. Any profitor loss due to the disposal is recognised in profit or loss during the period in which the asset was sold.

The receivable under the finance lease is recognised in the statement of financial position as an amount equal to thenet investment in the lease. Finance income is recognised on a pattern reflecting a constant periodic rate of returnon the lessor's net investment in the finance lease and included as part of finance income.

Operating leases

Leases where the lessor retains the risk and rewards of ownership of the underlying asset are classified asoperating leases. In the instance where the Group is the lessee, no asset is recognised when a lease is classified asan operating lease. Payments made under operating leases are recognised in profit or loss on a straight line basisover the period of the lease.

5. INVESTMENT PROPERTY

Investment property is property which is held either to earn rental income or for capital appreciation or both.Investment property is measured at fair value.

Any gain or loss arising from a change in fair value is recognised in profit or loss. An external, independent valuationcompany, having an appropriate recognised professional qualification, and recent experience in the location and categoryof property being valued, values the portfolio on a three year cycle. The fair values are based on market values, being theestimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willingseller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudentlyand without compulsion.

Rental income from investment property is accounted for as described in accounting policy 14.

When an item of property, plant and equipment is transferred to investment property following a change in its use, anydifferences arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fairvalue is, to the extent that the remeasurement of an investment property on the date of classification results in a gain, suchgain first reduces any impairment loss that was previously recognised in profit or loss and the remaining increase isrecognised in other comprehensive income. Upon disposal of the item the gain is transferred to retained earnings. Any lossarising in this manner is recognised immediately in profit or loss.


If an investment property becomes owner occupied, it is reclassified as property, plant and equipment and its fair value atthe date of reclassification becomes its cost for accounting purposes.

When the Group begins to redevelop an existing investment property for continued future use as investment property, theproperty remains an investment property, which is measured in terms of the fair value model, and is not reclassified asproperty, plant and equipment during the redevelopment.

6. BIOLOGICAL ASSETS

Biological assets are measured at fair value less cost to sell, with any resultant gain or loss recognised in profit and loss.Costs to sell are the incremental costs directly attributable to the disposal of the asset.

Biological assets that are expected to be consumed in the next 12 months have been disclosed under current assets.Biological assets are transferred to inventory upon harvesting.

7. INTANGIBLE ASSETS

7.1 Goodwill

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets (Refer to accounting policy 1.1).

Acquisitions of non-controlling interests

Acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity asequity holders and therefore no goodwill is recognised as a result of such transactions.

Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses.

7.2 Other intangible assets

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

Useful life

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is noforeseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is notprovided for these intangible assets. For all other intangible assets, amortisation is provided on a straight line basisover their useful life commencing when the asset is available for use and ceasing when the asset is disposed of orno longer generates benefits to the entity. The amortisation period and the amortisation method for intangibleassets are reviewed at each reporting date.

Reassessing the useful life of an intangible asset with a definite useful life after it was classified as indefinite, is anindicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carryingamount is amortised over its useful life.

Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge andunderstanding, is recognised in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products andprocesses. Development expenditure is capitalised only if development costs can be measured reliably, the productor process is technically and commercially feasible, future economic benefits are probable, and the Group intends toand has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised



includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset forits intended use, and capitalised borrowing costs. Other development expenditure is recognised in profit or loss asincurred.

Subsequent measurement

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specificasset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, isrecognised in profit or loss as incurred.

Amortisation

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values asfollows:

Item Average useful lifePatents and development expenditure IndefiniteComputer software 5 years

8. INVENTORIES

Raw materials, work in progress and finished goods of timber and timber related products and consumable stores aremeasured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinarycourse of business less the estimated costs of completion and selling expenses. The cost comprises all costs of purchase,conversion, and other costs incurred in bringing the inventories to their present location and condition. The cost ofinventories is based on the weighted average cost method.

The cost of harvested timber is its fair value less estimated point of sale costs at the date of harvest, determined inaccordance with the accounting policy for biological assets. Any change in value at the date of harvest is recognised in profitor loss.

9. IMPAIRMENT

9.1 Financial assets

A financial asset, other than financial assets through profit and loss, is assessed at each reporting date to determinewhether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objectiveevidence indicates that one or more events have had a negative effect on the estimated future cash flows of thatasset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the differencebetween its carrying amount, and the present value of the estimated future cash flows discounted at the originaleffective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by referenceto its current fair value.

Individually significant financial assets at amortised cost are tested for impairment on an individual basis. Theremaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financialasset recognised previously in equity is transferred to profit or loss.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquencyby a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise,indications that a debtor or issuer will enter bankruptcy; or the disappearance of an active market for a security. Inaddition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost isobjective evidence of impairment.


An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairmentloss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that aredebt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equityinstruments, the reversal is recognised in other comprehensive income.

9.2 Non-financial assets

The carrying amounts of the Group's non-financial assets other than biological assets, investment property,inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indicationof impairment. If there is any indication that an asset may be impaired, its recoverable amount is estimated. Forgoodwill, the recoverable amount is estimated at each reporting date.

The recoverable amount is the higher of its fair value less costs to sell and its value in use. In assessing value in use,the expected future cash flows from the asset are discounted to their present value using a post-tax discount ratethat reflects current market assessments of the time value of money and the risks specific to the asset.

When an asset does not generate cash inflows that are largely independent from other assets, its recoverableamount is determined by assessing the recoverable amount of the cash-generating unit to which the asset belongs.

For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date,be allocated to each of the acquirer's cash generating units that are expected to benefit from the synergies of thecombination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groupsof units. Each unit or group of units to which goodwill is so allocated shall represent the lowest level within the entityat which the goodwill is monitored for internal management purposes. Impairment losses recognised in terms ofcash generating units are allocated first to reduce the carrying value of any goodwill allocated to the cash generatingunit and then to reduce the carrying amount of the other assets in the cash generating unit on a pro rata basis. Animpairment loss is recognised in profit or loss whenever the carrying amount of the cash generating unit exceedsits recoverable amount.

Goodwill arising on a business acquisition and intangible assets with an indefinite useful life are tested annually forimpairment. An impairment loss in respect of goodwill is not reversed.

In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date forany indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been achange in the estimates used to determine the recoverable amount. An impairment loss is reversed only to theextent that the asset's carrying amount does not exceed the carrying amount that would have been determined, netof depreciation or amortisation, if no impairment loss had been recognised.

10. NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarilythrough sale rather than through continuing use, are classified as held for sale. Immediately before classification as held forsale, the assets, or components of a disposal group, are remeasured in accordance with the Group's accounting policies.

Thereafter, generally the assets or disposal group are measured at the lower of their carrying amount and fair value lesscost to sell. Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilitieson a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefitassets, investment property and biological assets, which continue to be measured in accordance with the Group'saccounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses onremeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.



11. SHARE CAPITAL

Ordinary share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and shareoptions are recognised as a deduction from equity, net of any tax effects.

Dividends

Dividends are recognised as a deduction in equity and a liability in the period in which they are declared.

12. EMPLOYEE BENEFITS

12.1 Short-term employee benefits

The cost of all short-term employee benefits is recognised in the period in which the employee renders the relatedservice.

The accrual/liability for employee entitlements to wages, salaries and annual leave represent the amount which theGroup has a present obligation to pay as a result of employees' services provided up to the reporting date. Theprovisions have been calculated at undiscounted amounts based on expected wage and salary rates.

12.2 Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into aseparate entity and has no legal or constructive obligation to pay further amounts.

Obligations for contributions to defined contribution plans are recognised as an expense in profit and loss asincurred.

12.3 Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.

The Group's policy is not to provide post-retirement medical aid benefits to its employees. The provision is made fora closed group of existing and former employees.

The Group's net obligation in respect of a defined benefit medical plan is calculated by estimating the amount offuture benefits that employees have earned in return for their service in the current and prior periods; that benefitis discounted to determine its present value. This value is then reflected as a liability in the group financialstatements with the cost thereof being allocated to the profit or loss. The calculation is performed every three yearsby a qualified actuary using the projected unit credit method. Any resulting actuarial gains and losses are recognisedin profit and loss for the period.

12.4 Share-based payment transactions

Equity settled transactions

The grant date fair value of options granted to employees is recognised as an employee expense, with acorresponding increase in equity, over the period that the employees become unconditionally entitled to the options.The amount recognised as an expense is adjusted to reflect the actual number of share options that vest.

Cash settled transactions

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash,is recognised as an expense, with a corresponding increase in liabilities, over the period that the employees becomeunconditionally entitled to payment. The liability is re-measured to fair value at each reporting date and at settlementdate. Any changes in the fair value of the liability are recognised as personnel expense in profit or loss.


13. PROVISIONS

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can beestimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisionsare determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessmentsof the time value of money and the risks specific to the liability. The unwinding of discount is recognised as a finance cost.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract arelower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the presentvalue of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.

In accordance with the Group's published environmental policy and applicable legal requirements, a provision for siterestoration in respect of contaminated land, and the related expense, is recognised when the land is contaminated.

14. REVENUE

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns orallowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards ofownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possiblereturn of the goods can be estimated reliably, and there is no continuing management involvement with the goods.

When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised isthe net amount of commission made by the Group.

Rental income from investment property is recognised in profit or loss on a straight line basis over the term of the lease.

15. INCOME TAX

Income tax expense for the year comprises current and deferred tax. Income tax expense is recognised in profit and lossexcept to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it isrecognised in equity or other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enactedat the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carryingamounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognised for the following temporary differences:

• the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neitheraccounting nor taxable profit;

• differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable thatthey will not reverse in the foreseeable future and the Group is able to control the timing of the reversal; and

• taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse,based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilitiesare offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxeslevied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current taxliabilities and assets on a net basis or their tax assets and liabilities will be raised simultaneously.



A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against whichthe temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to theextent that it is no longer probable that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to paythe related dividend is recognised.

16. FINANCE INCOME AND EXPENSE

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividendincome, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair valuethrough profit and loss, gains on hedging instruments that are recognised in profit and or loss and interest income earnedon finance leases.

Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the datethat the Group's right to receive payment is established, which in the case of quoted securities is the ex- dividend date.

Finance expenses comprise interest expense on borrowings, interest expense on finance leases, unwinding of discount onthe provisions, dividends on preference shares classified as liabilities, changes in the fair value of financial assets at fair valuethrough profit or loss, impairment losses recognised on financial assets and losses on hedging instruments that arerecognised in profit or loss.

17. BORROWING COSTS

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets arecapitalised as part of the cost of that asset. All other borrowing costs are expensed (refer note 16).

18. SEGMENT REPORTING

The Group determines and presents operating segments based on the information that internally is provided to the Group'schief operating decision maker (CODM).

An operating segment is a component of the Group that engages in business activities from which it may earn revenuesand incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components.An operating segment's operating results are reviewed regularly by the CODM to make decisions about resources to beallocated to the segment and assess its performance and for which salient financial information is available.

Segment results that are reported to the CODM include items directly attributable to a segment as well as those that canbe allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses, and incometax assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment andintangible assets other than goodwill.

The Group changed its accounting policy relating the disclosure of information on total assets. Refer to the change inaccounting policies for further details.

19. EARNINGS PER SHARE

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated bydividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinaryshares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinaryshareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potentialordinary shares, which comprise convertible notes and share options granted to employees.


20. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS IN ISSUE THAT ARE NOT YET EFFECTIVE

There are new or revised Accounting Standards and Interpretations in issue that are not yet effective. These standards willbe applied retrospectively, subject to transitional provisions.

The following Standards and Interpretations are applicable to the business of the Group and may have an impact on futurefinancial statements:

IFRS 9 Financial Instruments

IFRS 9 will be adopted by the Group for the first time for its financial reporting period ending 30 June 2014. The standardwill be applied retrospectively, subject to transitional provisions.

IFRS 9 (2009) addresses the initial measurement and classification of financial assets and will replace the relevant sectionsof IAS 39.

Under IFRS 9 (2009) there are two options in respect of the classification of financial assets, namely, financial assetsmeasured at amortised cost or at fair value. Financial assets are measured at amortised cost when the business model isto hold assets in order to collect contractual cash flows and when they give rise to cash flows that are solely payments ofprincipal and interest on the principal outstanding. All other financial assets are measured at fair value. Embeddedderivatives are no longer separated from hybrid contracts that have a financial asset host.

IFRS 9 (2010) adds the requirements related to the classification and measurement of financial liabilities, and derecognitionof financial assets and liabilities to IFRS 9 (2009).

It also includes those paragraphs of IAS 39 dealing with how to measure fair value and accounting for derivatives embeddedin a contract that contains a host that is not a financial asset, as well as the requirements of IFRIC 9 Reassessment ofEmbedded Derivatives.

The impact on the financial statements for the Group has not yet been estimated.

IFRS 10 Consolidated Financial Statements

IFRS 10 will be adopted by the Group for the first time for its financial reporting period ending 30 June 2014.

IFRS 10 introduces a new approach to determining which investees should be consolidated and provides a single model tobe applied in the control analysis for all investees.

Under IFRS 10 an investor controls an investee when it is exposed or has rights to variable returns from its involvementwith that investee; it has the ability to affect those returns through its power of the investee; and there is a link betweenpower and returns. Control is reassessed as facts and circumstances change.


IFRS 11 Joint agreements


IFRS 11 focuses on the rights and obligations of joint arrangements, rather than the legal form (as is currently the case).It distinguishes joint arrangements between joint operations and joint ventures and always requires the equity method forjointly controlled entities that are now called joint ventures.

The Group does not currently have any joint arrangements and therefore IFRS 11 will not have an impact on the Group'sfinancial results.



IFRS 12 Disclosure of interests in other entities


IFRS 12 contains the disclosure requirements for entities that have interests in subsidiaries, joint arrangements, associatesand/or unconsolidated structured entities. This additional disclosure's aim is to provide information to enable users toevaluate:

• The nature of, and risks associated with, an entity's interest in other entities; and

• The effects of those interests on the entity's financial position, financial performance and cash flows.

IFRS 12 will impact the disclosure relating to interest in other entities and will have no financial impact.

IFRS 13 Fair value measurement


IFRS 13 replaces the fair value measurement guidance contained in individuals IFRSs with a single source of fair valuemeasurement guidance. It defines fair value, establishes a framework for measuring fair value and sets out disclosurerequirements for fair value measurements. It explains how to measure fair value when it is required or permitted by otherIFRSs. However, it does not introduce new requirements to measure assets or liabilities at fair value, nor does it eliminatethe practicability exceptions to fair value measurements that currently exist in certain IFRSs.



1. OPERATING SEGMENTS

The Group has two reportable segments, as described below, which are the Group's strategic divisions. Management hasidentified the segments based on the internal reports reviewed monthly by the Group's chief operating decision maker(CODM). The CODM at the reporting date is the Executive Committee. The responsibility of the Executive Committee is toassess performance and to make resource allocation decisions related to the individual operations of the Group. TheExecutive Committee is the CODM as the Committee is the highest level of management that performs these functions. Thesegment financial information provided to and used by the CODM forms the basis of the segment information disclosure inthese financial statements.

The business is considered from an operating perspective based on the products cultivated or produced and sold. Theoperating segments comprise:

• Timber products: The Group has aggregated three divisions. All 3 of these divisions produce and/or sell timber relatedproducts and have therefore been assessed as one segment by management.

– Sawmilling: 5 Sawmills located in close proximity to Sabie, Graskop, White River, Ermelo and Amsterdam, whichproduce and sell a broad range of structural and industrial sawn timber products.

– Plywood: A plywood plant in Sabie which manufactures and sells plywood timber products.

– Warehousing: A warehouse located in Pretoria which sells timber related products from the sawmills and theplywood plant.

• Forestry: The Group owns plantations in the Mpumalanga Province on which it grows pine and eucalyptus trees thatare cultivated and managed on a rotational basis. The segment sells its products to its processing segment andexternal customers.

The Group operates in one geographic segment, namely countries within the Southern Africa Development Community(SADC). Refer to note 33's section on credit risk for disclosure on major customers.

Performance is measured based on earnings before interest, taxation, depreciation and amortisation (EBITDA), as includedin the internal management reports. Management believes that such information is the most relevant in evaluating theresults of the segments relative to other entities that operate within the industry. Sales between the segments are on anarm's length basis.

The amounts included in the internal management reports are measured in a manner consistent with that of the financialstatements.

N O T E S T O T H E C O N S O L I D A T E DF I N A N C I A L S T A T E M E N T S


The segment information provided to the Committee for the reportable segments for the year ended 30 June 2011 is asfollows:

Timber products Forestry Total2011 2010 2011 2010 2011 2010R'000 R'000 R'000 R'000 R'000 R'000

Revenue: external sales 897 556 872 741 60 897 34 747 958 453 907 488Revenue: inter-segment sales — 55 683 429 894 375 104 429 894 430 787

Total revenue 897 556 928 424 490 791 409 851 1 388 347 1 338 275

Depreciation & amortisation (27 818) (22 307) (5 255) (4 374) (33 073) (26 681)Reportable segment profit* 30 086 1 550 165 103 103 255 195 189 104 805

Material non-cash items:Fair value adjustment tobiological assets — — 14 724 183 302 14 724 183 302

Capital expenditure 10 236 10 364 7 440 5 360 17 676 15 724

* being the earnings before interest, taxation, depreciation & amortisation (EBITDA)

2011 2010Reconciliation of reportable segment revenues and profit R'000 R'000

RevenueTotal revenue for reportable segments 1 388 347 1 338 275Other revenue 690 1 873Elimination of inter-segment revenue (429 894) (430 787)

Consolidated revenue 959 143 909 361

ProfitTotal EBITDA for reportable segments 195 189 104 805Depreciation, amortisation and impairment (33 163) (66 093)Unallocated amounts: corporate office (129) (3 527)

Operating profit 161 897 35 185


2. BIOLOGICAL ASSETS

2011 2010Reconciliation of biological assets R'000 R'000

Opening balance 1 921 674 1 738 371Fair value adjustment:- Increase due to growth and enumerations (definition below) 312 530 326 846- Decrease due to harvesting (358 167) (308 633)- Adjustment to standing timber values to reflect fair value less cost to sell at year end 60 361 165 090

Closing balance 1 936 398 1 921 674

Classified as non-current assets 1 616 363 1 562 936Classified as current assets * 320 035 358 738

* Being the biological assets to be harvested and sold in the 12 months after year end.

Quantities of biological assets Hectares Hectares

Pine 52 579 52 447Eucalyptus 4 081 4 018Temporary unplanted areas 4 235 4 314Additional areas with planting permits 4 000 4 000Conservancy areas 29 093 29 209

93 988 93 988

Cubic CubicReconciliation of volume of trees in the plantations metres metres

Opening balance 5 318 004 5 269 062Increase due to growth 674 354 744 827Increase due to enumerations * 93 326 133 473Decrease due to harvesting (879 780) (829 358)

Closing balance 5 205 904 5 318 004

* Enumerations refer to updates that are made to the merchandising model's data due to more accurate information beingcollected from the trees in the plantations.

Methodology and assumptions used in determining fair value

• Volumes: The expected yields per log class are calculated with reference to growth models relevant to the nominalplanted area. The growth models are derived from actual trial data that has been measured annually since 1976. Amerchandising model, using the modelled tree shape at various ages, is used to split the trees into predefinedproducts.

• Volume adjustment factor: Due to the susceptibility of the plantations to the environment, an adjustment factor is usedto reduce the volumes obtained from the merchandising model. This percentage is mainly based on factors such asbaboon damage and damage due to the natural elements such as wind, rain, hail, droughts and fires. An adjustmentfactor of 10% (2010: 10%) has been used.

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S C O N T I N U E D


• Log prices: The price per cubic metre is based on current and future expected market prices per log class. It wasassumed that prices would increase marginally over the short term and at 6% * (2010: 6%) over the long term.

• Operating costs: The costs are based on unit cost of the forest management activities required to enable the trees toreach the age of felling. The costs include the current and future expected costs of harvesting, maintenance and riskmanagement, as well as an appropriate amount of fixed overhead costs. The costs exclude the costs necessary to getthe asset to the market. A long term inflation rate of 5.5% * (2010: 6%) was used.

• Discount rate: The Group used its after-tax weighted average cost of capital (WACC) applied to the after taxation netcash flow.

* The Group believes that as a result of the anticipated shortage in local log supply and forecast long term demand, the longterm revenue inflation will be greater than cost inflation.

Key assumptions used for the calculation of the discount rate 2011 2010

Risk free rate (R157 bond) 7.5% 8.0%Cost of equity 13.0% 13.0%Pre-tax cost of debt 10.0% 10.0%Target debt: equity ratio 30:70 30:70After-tax weighted average cost of capital 11.3% 11.3%

The following sensitivity analysis shows how the value of the standing timber would be affected if the key valuationparameters were attributed other values than those that form the basis of the current valuation. A decrease by the samepercentage would have the opposite effect on the valuation.

2011 2010Variable R'000 R'000

1% increase in the current log prices 32 346 30 8040.25% increase in forecasted log prices 78 633 85 2580.25% increase in forecasted cost inflation rate (23 570) (23 727)0.5% increase in the pre-tax cost of debt (25 884) (25 532)0.25% increase in discount rate (59 219) (58 405)1% increase in projected volumes 35 023 35 081

The Group is exposed to a number of risks related to its commercial tree plantations, namely:

• Regulatory and environmental risk: The Group has established environmental policies and procedures aimed atcompliance with environmental legislation. Management performs regular reviews to identify environmental risks andto ensure that the management systems in place are adequate. The Group manages its plantation in compliance withthe International Forest Stewardship Council's (FSC) requirements for sustainable forestry.

• Supply and demand risks: The Group is exposed to risks arising from fluctuations in the price and sales volumes of logproducts. Where possible the Group manages this risk by aligning its harvest volume to the market and the Group'ssupply and demand. Management performs regular industry trend analyses to ensure that the Group's pricingstructure is in line with the market and to ensure that projected harvest volumes are consistent with the expecteddemand on a sustainable basis.


2. BIOLOGICAL ASSETS CONTINUED

• Climate and other risks: The Group's pine plantations are exposed to the risk of damage from climatic changes,diseases, forest fires and other natural forces. The Group has extensive processes in place aimed at monitoring andmitigating those risks. The Group subscribes to various national fire prevention associations which use various weatherconditions to indicate fire risk. The Group insures itself against natural disasters such as fires and floods.

Pledged as security

Land holdings, include those on which the plantations are planted and the fixed property referred to in note 4, areencumbered in favour of Micawber 558 (Pty) Ltd as security for the loans as per note 16 and amount to 93,988(2010: 93,988) hectares.

3. INVESTMENT PROPERTY

2011 2010R'000 R'000

Opening balance 24 740 5 020Transfers from property, plant and equipment (note 4) — 2 753Fair value adjustments 200 16 967

Closing balance 24 940 24 740

During 2010, investment property has been reclassified from property, plant and equipment as the Group has changed theuse of its properties from housing of employees to generating of rental income.

Lease agreements for investment properties are at market related rentals and are renewed annually.

Pledged as security

Investment property with a carrying value of R4.9 million (2010: R4.7 million) is subject to a mortgage bond in favour ofNedbank Limited. Refer to note 16.

A register containing the detailed information is available for inspection at the registered office of the Company.

Details of valuation

One of the investment properties was revalued during the current financial year. The effective date of that revaluation was1 July 2010 (2010: 30 June 2010). Revaluation was performed by independent valuators. These valuators are notconnected to the Group and have recent experience in location and category of the investment property being valued. Thevaluation was based on the open market value for existing use.

2011 2010Amounts recognised in profit and loss for the year: R'000 R'000

Rental income from investment property 3 055 1 348Direct operating expenses on rental generating property (1 524) (797)



4. PROPERTY, PLANT AND EQUIPMENT

Plant & Land Buildings Machinery Other * Total

R'000 R'000 R'000 R'000 R'000

COSTOpening balance 2009 145 559 122 110 232 579 32 351 532 599Additions 477 6 256 4 746 5 616 17 095Disposals — (530) (1 320) (2 474) (4 324)Transfers (3 153) 3 153 2 679 (2 679) —Transfers to investment property (note 3) (2 753) — — — (2 753)

Closing balance 2010 140 130 130 989 238 684 32 814 542 617

Additions — 2 514 3 947 12 426 18 887Disposals — (46) (4 541) (3 075) (7 662)Transfers (25 842) 25 842 — — —Transfers to inventory — — (1 712) — (1 712)

Closing balance 2011 114 288 159 299 236 378 42 165 552 130

ACCUMULATED DEPRECIATION AND IMPAIRMENTOpening balance 2009 — (18 481) (75 386) (9 276) (103 143)Disposals — 512 1 309 1 636 3 457Depreciation — (6 369) (13 387) (6 175) (25 931)Impairment reversal — — 3 184 — 3 184

Closing balance 2010 — (24 338) (84 280) (13 815) (122 433)

Disposals — 53 4 543 2 767 7 363Depreciation — (6 227) (19 279) (6 799) (32 305)Transfers — (9 401) 9 401 — —Impairment — — — (90) (90)

Closing balance 2011 — (39 913) (89 615) (17 937) (147 465)

NET CARRYING VALUE30 June 2010 140 130 106 651 154 404 18 999 420 184

30 June 2011 114 288 119 386 146 763 24 228 404 665

* Other refers to furniture and fittings, motor vehicles, computer equipment, work in progress and spare parts. They havebeen grouped together as the total net carrying value for these assets is less than 6% of the total net carrying value. (Refernote 32)


4. PROPERTY, PLANT AND EQUIPMENT CONTINUED

Pledged as security

The freehold land and buildings including the plantations referred to in note 2 are encumbered in favour ofMicawber 558 (Pty) Ltd as security for the loans as per note 16.

Capitalised leased assets are encumbered in terms of finance lease and instalment sale agreements.

2011 2010Instalment sale agreements R'000 R'000

The Group entered into instalment sale agreements with Stannic and Wesbank for plant,equipment and vehicles. Refer note 16.Present value of minimum lease payments due at year end: 915 2 432

Carrying amount of assets subject to instalment sale liabilities:Plant and machinery — 3 780Other assets 830 1 167

830 4 947

2011 2010Finance lease obligations R'000 R'000

The Group entered into finance lease agreements with Wesbank for plant, equipment and vehicles. Refer note 16.

Present value of minimum lease payments due at year end: 13 217 15 523

Carrying amount of assets subject to finance lease agreements:Plant and machinery 453 589Other assets 3 040 3 698

3 493 4 287

Certain impairments of assets were reversed during the previous financial period due to the assets' cash generating powerbeing higher than their current net asset value. The impairment loss was reversed only to the extent that the assets'carrying amount did not exceed the carrying amount that would have been determined, net of depreciation or amortisation,if no impairment loss had been recognised.

5. GOODWILL

2011 2010R'000 R'000

COST 610 352 610 352

ACCUMULATED IMPAIRMENTOpening balance (44 910) —Impairment loss recognised — (44 910)

Closing balance (44 910) (44 910)

CARRYING VALUE 565 442 565 442



Goodwill arose from the business combination that took place during July 2007 and represents the difference between thefair value of assets purchased and the acquisition price.

The Group's goodwill is tested for impairment at each year end. For the purpose of impairment testing, goodwill has beenallocated to the forestry segment. The Group's assets are compared to the present value of the future cash flow (value inuse) that is expected to flow from group sales.

The value in use was determined based on management's past experience and is based on the assumptions detailed below.The cash flows have been based on the approved budget for the 2012 financial year as well as a forecast until 2028 usinga long term inflation rate of 5.5% (2010: 6.0%). The period is longer than would normally be the case due to the nature ofthe underlying assets. The plantations are managed in rotation based on a clearfell age for pine of between 21 and 25years. The plantations are managed on a sustainable basis so that all harvested areas are replanted. The temporaryunplanted areas are managed to be approximately 2 500 hectares per annum in 3 years' time.

2011 2010Results of impairment testing R'000 R'000

Carrying amount of segment assets 2 178 730 2 236 450Present value of segment's future cash flows 2 307 749 2 191 540

Net result: (no impairment)/ amount to impair (129 019) 44 910

Key assumptions used for the calculation of the discount rate 2011 2010

• Risk free rate (R157 bond) 7.5% 8.0%• Cost of equity 13.0% 13.0%• Pre-tax cost of debt 10.0% 10.0%• Target debt:equity ratio 30:70 30:70• After-tax weighted average cost of capital 11.3% 11.3%

The following sensitivity analysis shows how the present value of the segment's future cash flows would be affected if thekey valuation parameters were attributed other values than those that form the basis of the current valuation of thesegment's future cash flows. A decrease by the same percentage would have the opposite effect on the valuation.

Variable R'000 R'000

1% increase in the current log prices * 54 751 57 0540.25% increase in forecasted log prices * 99 422 100 4080.25% increase in forecasted cost inflation rate (84 175) (76 454)0.5% increase in the pre-tax cost of debt (57 866) (52 487)0.25% increase in discount rate (130 482) (118 370)1% increase in projected volumes 45 999 54 062

* When comparing the sensitivity analysis above to note 2, one needs to consider the key differences in the valuationmethodologies used. The valuation above reflects the forestry segment as a stand-alone business with the plantations onrotation and therefore includes a residual period. The fair valuation done for the biological assets (note 2) is calculated onthe assumption that no replanting of the plantations is done and is therefore for a finite period.


6. INTANGIBLE ASSETS

Patents anddevelopment Computerexpenditure software Total

R'000 R'000 R'000

COSTOpening balance 2009 8 868 3 662 12 530

Additions — 457 457

Closing balance 2010 8 868 4 119 12 987Additions — 1 352 1 352

Closing balance 2011 8 868 5 471 14 339

ACCUMULATED AMORTISATION AND IMPAIRMENT LOSSESOpening balance 2009 (8 868) (678) (9 546)

Amortisation — (750) (750)

Closing balance 2010 (8 868) (1 428) (10 296)Amortisation — (768) (768)

Closing balance 2011 (8 868) (2 196) (11 064)

NET CARRYING VALUE30 June 2010 — 2 691 2 691

30 June 2011 — 3 275 3 275

7. OTHER FINANCIAL ASSETS

2011 2010Listed shares R'000 R'000

Opening balance 1 345 629Additions 111 —Fair value adjustments (452) 716


The listed shares are classified• as available-for-sale financial assets and• non-current assets.



Refer to note 33 on risk management for the credit risk relating to and valuation of other financial assets.

Spot price Spot priceListed shares comprise of: 30 June 2011 30 June 2010

40 540 ordinary shares in FirstRand Limited R19.85 R31.202 276 ordinary shares in Discovery Holdings Limited R38.55 R35.056 842 ordinary shares in MMI Holdings Limited R16.99 —

York received the shares in MMI Holdings Limited through the unbundling of FirstRand's investment in MMI Holdings toFirstRand shareholders recorded as such in the shareholders register of FirstRand on 10 December 2010. The unbundlingratio was 16.8766 shares in MMI Holdings for every 100 FirstRand shares held on the record date.

8. INSTALMENT SALE RECEIVABLES

2011 2010R'000 R'000

Gross investment in lease due within one year — 630Less: Unearned finance income — (24)

Present value of minimum lease payments due within one year — 606

This instalment sale receivable bore interest at prime rate of 9.0% (2010: 10.0%) per annum and was receivable over alease term of four years in instalments of R0.1 million which ended on 31 January 2011.

All the risks associated with ownership were transferred to the purchaser on delivery of the assets.

9. INVENTORIES

2011 2010R'000 R'000

Raw materials 21 388 22 287Work in progress 46 496 28 937Timber products 61 686 79 712Consumables 24 700 19 706

154 270 150 642Write-down to net realisable value:• attributable to timber products (676) (8 980)• attributable to consumables (4 787) (3 622)

148 807 138 040

Pledged as security

Inventory is encumbered under a General Notarial Bond in favour of Micawber 558 (Pty) Ltd.


10. TRADE AND OTHER RECEIVABLES

2011 2010R'000 R'000

Gross trade receivables 129 191 117 341Allowance for impairment (15 363) (15 264)

Net trade receivables 113 828 102 077Employee costs paid in advance — 421Prepayments 8 693 424Deposits 397 390Loans to employees and managers 563 321Other receivables 1 114 701

124 595 104 334

Pledged as security

The trade receivables of the Group have been ceded to First Rand Bank Limited as security for the banking facilities madeavailable to the Group (refer note 11) and loan facilities (refer note 16).

Refer to note 33 on risk management for more disclosure relating to the credit risk associated with trade and otherreceivables and the management thereof.

11. CASH AND CASH EQUIVALENTS

2011 2010R'000 R'000

Cash on hand 58 67Bank balances 103 426 84 426

103 484 84 493

The banking facility granted by First Rand Bank Limited is secured by a cession of trade receivables (refer note 10) andcross-suretyship within the Group as well as the assets financed under the asset based facility. The general banking facilityis available to all companies across the group.

2011 2010R'000 R'000

Total general banking facility and guarantees 135 000 135 000Guarantees to Eskom Holdings Limited 2 246 —



12. SHARE CAPITAL

2011 2010Authorised R'000 R'000

600 000 000 Ordinary shares of R0.05 each 30 000 30 000

Reconciliation of the number of shares issued ‘000 ‘000

Opening balance 331 241 78 370Issue of shares through rights offer — 250 000Conversion of preference shares into ordinary shares — 2 871


Issued R'000 R'000

331 240 597 Ordinary shares of R0.05 each 16 562 16 562

Share premium (gross) 1 540 051 1 540 051Share issue costs written off against share premium (34 699) (34 699)

Share premium (net) 1 505 352 1 505 352

No movement of shares occurred in the current financial period. During the previous financial period York issued andconverted the following shares:

• 250 million ordinary shares were issued through a rights offer at an issue price of R2 per share. The rights offer wasannounced on 20 November 2009 in the ratio of 307.72792 rights offer shares for every 100 York shares held atthe close of business on 20 November 2009. The rights offer closed at noon on Friday, 11 December 2009. The costof the rights issue was deducted from share premium during the reporting period.

• 2.871 million convertible, non-redeemable cumulative preference shares were converted into ordinary shares on24 June 2010 on a one to one basis.


13. HEDGING RESERVE

2011 2010R'000 R'000

Opening balance (26 673) (89 545)Fair value loss on settlement of 40% of the loan and related hedge — 29 577Fair value adjustment 11 992 23 016Movement in fair value of derivative liability 16 764 (94)Movement in deferred tax related to hedge (8 052) 10 373

(5 969) (26 673)

The Group entered into a variable JIBAR-linked funding transaction. In order to hedge against the risk of interest ratefluctuations on the Group's JIBAR linked debt funding, the Group entered into an interest rate swap agreement with RMB,fixing its future interest settlements in ZAR terms until 29 July 2011. Through this swap agreement the Company pays afixed rate of 9.58% and receives JIBAR. The hedge is classified as a cash flow hedge.

The risk of fluctuations in the variable 3-month JIBAR relating to the JIBAR-linked loans, compared to a fixed ZAR interestrate. To the extent that the changes in the fair value of hedging instrument are effective, the change in the fair value isrecognised in other comprehensive income. To the extent the hedge is ineffective; the change in fair value is recognised inprofit or loss. Refer to note 16 for the fair value of the hedge.

14. SHARE BASED PAYMENTS

The Group offers its key employees an employee share appreciation rights scheme. This incentive will be achieved throughcertain employees being afforded the right to receive a cash payment over the vesting period. This cash payment will bebased on the appreciation in the value of the shares over a five year period.

During the first portion of its life (the vesting period), the option cannot be exercised and is forfeited should the employeeleave the employment of York. After the vesting date, the employees have the option to exercise their rights in tranches of33.3% at the end of years 3, 4 and 5 respectively. The option expires at the end of year 6.

The payoff that a beneficiary of the share appreciation right scheme will receive, at the end of the lock in period, is thedifference between the spot price on the exercise date and the 30 day volume weighted average price on grant date.

The scheme is treated as a cash settled scheme. Cash settled schemes are valued at the reporting date in terms of IFRS2 Share Based Payment. Any changes in the cash settled liability are recognised as part of employee costs.

2011 2010Reconciliation of the movement in share appreciation rights '000 '000

Opening balance 8 428 —Rights conditionally awarded in year 5 695 8 428Rights forfeited due to resignation from the Group (1 827) —


Two allotments of these appreciation rights were made, the first on 17 November 2009 (“LTI-1”) and the second on 1 July 2010 (“LTI-2”). A notice of allocation was sent to beneficiaries. The transaction constitutes a call option with a termof six years from the grant date in the hands of the employees.



The details of the allotments are as follows:

LTI-1 LTI-2

Grant date 17 Nov 2009 1 Jul 2010Outstanding at year end ('000) 6 601 5 695Weighted exercise price R2.74 R3.19Vesting portions in 3 equal trenches annually commencing on 17 Nov 2012 1 Jul 2013Maturity/expiry date 17 Nov 2015 1 Jul 2016

The outstanding appreciation rights have the following exercise date profile:

Within one year — —One to five years 6 601 5 695More than five years — —

Fair value was determined using the Black-Scholes model. The following inputs were used:

Key assumptions used 2011 2010

• Closing share price at period end (R) R3.60 R3.07• Expected forfeitures per annum (%) 0% 0%• Expected exercise date At vesting At vesting• Expected volatility (%) 36 - 49% 39 - 50%• Dividend yield (%) 0% 0%• Bootstrapped zero coupon perfect fit swap curve (%) 6.12 - 7.38% 6.89 - 7.81%

• Expected volatility was calculated using the equally weighted standard approach, by making use of the availablehistorical share price data, for a period equal to the term to maturity of the scheme. Smoothing of the share pricevolatility was done to exclude the effects of the rights issues made by York on the volatility.

• The risk-free interest rate was sourced from the Bond Exchange of South Africa. The bootstrapped zero coupon perfectfit swap curve as at year end was used.

2011 2010R'000 R'000

The movement in valuation recognised as part of employee costs 4 393 2 104Carrying amount of the liability arising from the share appreciation rights 6 497 2 104


15. DEFERRED TAX LIABILITY

2011 2010R'000 R'000

Reconciliation of deferred tax liabilityOpening balance (409 510) (414 974)

Charges to profit or loss: (14 936) (5 424)

(Increase)/decrease in tax losses available for set off against future taxable income (14 949) 77 928Originating temporary differences (2 022) (83 352)Overprovision of deferred taxation in prior periods (659) —Movement due to change in accounting policy for investment property 2 694 —

Charges to the other comprehensive income (8 005) 10 888

Closing balance (432 451) (409 510)

The balance comprises the following items:Capital allowances (3 626) (4 564)Biological assets (534 506) (530 383)Provisions 14 123 13 902Estimated assessed loss 88 260 103 676Recognised in other comprehensive income 2 294 515Other items 1 004 7 344

(432 451) (409 510)

16. LOANS AND BORROWINGS

2011 2010R'000 R'000

Held at amortised cost Rand Merchant Bank Senior term loan A 63 836 80 300Rand Merchant Bank Senior term loan B 126 822 156 980Rand Merchant Bank Senior term loan C 124 257 124 353Rand Merchant Bank Mezzanine loan 269 535 269 456Loan raising fees (14 404) (19 030)Nedbank mortgage bond 900 1 053Wesbank capital loan 22 818 28 666Finance lease obligations 13 217 15 523Instalment sale liabilities 915 2 432

Total loans and borrowings held at amortised cost 607 896 659 733Held at fair value

Derivative: interest rate swap 6 329 22 237

Total loans and borrowings 614 225 681 970

Classified as non-current liabilities 539 657 626 479Classified as current liabilities 74 568 55 491



The Rand Merchant Bank (“RMB”) senior term loan and Mezzanine loan facilities were incurred on 12 July 2007.The information of these facilities is as follows:

Term Term Term Mezzanineloan A loan B loan C loan

Interest is compounded monthly and payments are made quarterly. The interest rate is 3.25% 3.40% 3.75% 9.00%based on a 3 month JIBAR plus a margin of: (2010: 3.00%) (2010: 3.10%) (2010: 3.50%) (2010: 8.25%)

The nominal annual rate compounded (“NACM”) 8.83% 8.98% 9.33% 14.58%monthly at year end was: (2010: 9.60%) (2010: 9.75%) (2010: 10.10%) (2010: 14.85%)

The principal amount is payable: Quarterly since Quarterly since Bullet on Bullet on31 Jan 2008 31 Oct 2009 13 July 2014 13 July 2015

The next payment to be made on R5.5m R11.0m R2.8m R9.6m29 July 2011 will be (in Million) (2010: R4.7m) (2010: R9.3m) (2010: R3.1m) (2010: R9.7m)

Final payment will be on 13 July 2014 13 July 2014 13 July 2014 13 July 2015

These facilities are secured in favour of Micawber 558 (Pty) Ltd by cessions and pledges of all shares in subsidiaries andby mortgage bonds, special notarial and general notarial bonds over all of the Group's assets, immovable properties andmovable property and effects.

The Group has to comply on a regular basis with the following loan covenants in respect of these facilities:

• Senior debt service cover ratio

• Debt: equity ratio

• Senior interest cover ratio

• Net debt to EBITDA ratio and

• Cumulative total debt service cover ratio.

The Group complied with all the covenants and no defaults occurred during the financial period.

Loan raising fees: RMB loan raising fees amortised over the period of the loan (seven years). The amortised amountis included in finance expense (refer note 23).

Nedbank mortgage facility: This loan is secured by a first mortgage bond over freehold land and buildings with a carryingvalue of R4.9 million (2010: R4.7 million), (refer note 4), bears interest at 8.5% (2010: 9.5%) per annum and is repayablein monthly instalments of R14 000 (2010: R14 000). The last payment is due on 30 September 2020.

Wesbank capital loan: This loan bears interest at an effective rate of 8.25% (2010: 9.25%) per annum and is payable in4 (2010: 7) payments of R4.1 million (2010: R4.2 million) every 6 months. The final balance will be settled with a bulletpayment of R9.7 million on 31 December 2013.


16. LOANS AND BORROWINGS CONTINUED

Finance lease obligations

Within 1 year 1 to 5 years After 5 years Total2011 R'000 R'000 R'000 R'000

Minimum lease payments due 4 044 11 413 — 15 457Less: Future finance charges (1 019) (1 221) — (2 240)

Present value of minimum lease payments due 3 025 10 192 — 13 217

2010Minimum lease payments due 4 191 15 049 — 19 240Less: Future finance charges (1 913) (1 804) (3 717)

Present value of minimum lease payments due 2 278 13 245 — 15 523

These liabilities consist of 8 (2010: 9) capitalised finance leases, payable over a period of six years at an effective interestrate of 8.83% (2010: 9.51%) per annum. These liabilities are secured by plant and equipment and motor vehicles with acarrying value of R3.5 million (2010: R4.3 million), refer to note 4. These leases have no escalation clause. Repaymentsare based on the outstanding debt and the prevailing interest rate.

On expiry of the initial lease period, the leases will be automatically renewed on the same terms and conditions as theexisting agreements. The annual rental for the first year of renewal is specified in the existing agreements. The asset canbe disposed after renewal of the lease by either the Group or the lessor. The Group is entitled to a rebate of rentalsequivalent to the net amount realised by such a sale.

The Group's obligations under finance leases are secured by the lessor's charge over the leased assets. Refer note 4.

Instalment sale liabilities

Within 1 year 1 to 5 years After 5 years Total2011 R'000 R'000 R'000 R'000

Minimum lease payments due 482 541 — 1 023Less: Future finance charges (61) (47) — (108)

Present value of minimum lease payments due 421 494 — 915

2010Minimum lease payments due 1 663 1 032 — 2 695Less: Future finance charges (148) (115) — (263)

Present value of minimum lease payments due 1 515 917 — 2 432

These liabilities consist of 7 (2010: 11) instalment sale agreements with Stannic and Wesbank and are payable over aperiod of 2 to 6 years at an effective interest rate of 8.73% (2010: 9.27%) per annum. These liabilities are secured by plantand equipment and motor vehicles with a carrying value of R0.8 million (2010: R 4.9 million). Refer note 4.



Derivative: Interest rate swapIn order to hedge against the risk of interest rate fluctuations on the JIBAR linked debt funding, the Group entered into aninterest rate swap agreement with RMB, fixing its future interest settlements in ZAR terms until 29 July 2011.The fair value represents the discounted value to be settled on 29 July 2011. The Group pays a fixed rate of 9.58% (2010:9.58%) and receives JIBAR. Refer to note 13 for the movement in the fair value of the hedge recognised in equity.

Refer to note 33 on risk management for more disclosure relating to the interest rate and liquidity risk associated withloans and borrowings and the management thereof as well as the fair value of loans and borrowings.

17. PROVISIONS

Environmental Onerousliability contract TotalR'000 R'000 R'000

Opening balance 2009 54 643 — 54 643Additions — 1 138 1 138

Closing balance 2010 54 643 1 138 55 781Paid during the year — (853) (853)

Closing balance 2011 54 643 285 54 928

2011 2010The provisions are: R'000 R'000

classified as non-current liabilities 54 643 55 496classified as current liabilities 285 285

54 928 55 781

Environmental liability

This amount was calculated in terms of IFRS 3 Business Combinations. The expected timing of the outflow of economicbenefits will be the next 1 to 3 years.

Onerous contract

A subsidiary within the Group moved from its previous leased premises. The lease cannot be cancelled and continues forthe next year. A portion of the warehouse is sublet to a third party with the lessor's consent and the rental income is usedto reduce the liability.


18. RETIREMENT BENEFIT OBLIGATION

Defined benefit plan

The Group's policy is not to provide post-retirement medical aid benefits to its employees. However, a provision is made fora closed group of current and former employees in respect of legacy post-retirement medical scheme contributionsubsidies. Independent actuaries determine the value of this obligation and the annual costs of such benefits. Theassumptions used are consistent with those adopted by the actuaries in determining pension costs and in addition includelong term estimates of the increases in medical costs and appropriate discount rates. An actuarial valuation was carriedout at year end.

2011 2010R'000 R'000

Opening balance 22 463 20 200Net expense recognised in profit or loss 291 3 554

- Service cost 55 100- Interest cost 2 067 1 791- Actuarial (gain)/losses (1 831) 1 663

Benefits paid to members (1 300) (1 291)


The closing balance is the present value of the defined benefit obligation and is wholly unfunded. There is no asset-fundingplan in place.

ObligationAmounts for the current and previous four periods are as follows: R'000

- 2007 15 874- 2008 17 431- 2009 20 200- 2010 22 463- 2011 21 454

Key assumptions used 2011 2010

Discount rate (estimated corporate bond yield) (%) 8.6% 9.2%Medical contribution inflation rate (%) 6.6% 7.2%Active number of members 36 40Retired number of members 39 42Total number of members 75 82Average expected remaining working lifetime (years) 6.87 9.02



Sensitivity analysis:

Assumed healthcare cost trend rates have a significant effect on the amount recognised in profit and loss. A 1% change in the medical 2011 2010inflation rate would have the following effects: R'000 R'000

1% increase: Aggregate of the service cost and interest cost 226 4411% increase: Defined benefit obligation 2 516 2 638

Defined contribution plan: Retirement fund

The Group has three provident schemes, York Timbers Provident Fund, ROL Provident Fund and the Hospitality and GeneralProvident Fund, for all employees. Pensioners under these schemes have had their pensions bought by means of annuitiesfrom insurers and there is no on-going liability for the schemes. The schemes are governed by the Pensions Fund Act, 1956,as amended.

The number of members of each scheme at year end:

2011 2010

ROL Provident Fund 224 216Hospitality and General Provident Fund 915 977York Timbers Provident Fund 1 390 1 327

Defined contribution plan: Pension fund

The Group has two pension funds, the number of members of each scheme at year end:

2011 2010

ROL Pension Fund 5 8Liberty Pension fund 32 39

Defined contribution plan: Medical aid fund

The Group contributes to a defined medical aid scheme for the benefit of its permanent employees and their dependants.In terms of the Group's policy there is no post-retirement medical aid obligation for current or retired employees, other thanthe closed group referred to above. The Group is under no obligation to cover any unfunded benefits.

Contribution towards defined contribution funds:

2011 2010R'000 R'000

ROL Provident Fund 6 885 9 282Hospitality and General Provident Fund 3 186 1 222York Timbers Provident Fund 8 193 4 964

18 264 15 468


19. TRADE AND OTHER PAYABLES

2011 2010R'000 R'000

Trade payables 98 404 90 039Value added taxation payable 4 141 2 410Operating lease payables 50 81Deposits received 317 479Other payables and accruals 57 030 34 305

159 942 127 314

Trade and other payables are measured at amortised cost.

20. REVENUE

2011 2010R'000 R'000

Sale of goods 958 453 907 488Rental income 690 1 873

959 143 909 361



21. OPERATING PROFIT

2011 2010Operating profit for the year is stated after the following: R'000 R'000

Operating lease charges:- Premises (693) (4 234)- Equipment (1 134) (1 572)Profit on sale of property, plant and equipment 302 66Loss on sale of non-current assets held for sale (13 362) —Profit on disposal of SPEs — 10 867Reversal of impairment/(Impairment) of:- Property, plant and equipment (90) 3 184- Trade and other receivables (99) (872)Foreign exchange gain/(loss) 5 (92)Depreciation and amortisation (recognised in profit or loss):- Property, plant and equipment (32 305) (25 931)- Intangible assets (768) (750)Employee costs: Short term benefits (194 478) (181 477)Employee costs: Post-employment benefits (18 264) (15 468)Directors' emoluments (6 816) (6 587)Share-based payment expenses (4 393) (2 054)Restructuring costs — 333Research and development costs (257) (384)Distribution and selling expenses (80 418) (95 040)Insurance proceeds from fire damage — 8 165Auditors' remuneration- Fees (2 626) (3 681)- Consulting (392) (8)

22. INVESTMENT INCOME

2011 2010R'000 R'000

Dividend revenue- Listed shares 38 15Interest revenue- Interest income on bank deposits 2 118 1 645- Interest charged on trade and other receivables 1 1- Other 60 1 149

2 217 2 810

All interest revenue generated was generated from the loans and receivables class of financial assets.


23. FINANCE COSTS

2011 2010R'000 R'000

Bank — 1 866Fair value of equity share based payment — (10 446)Interest on loans and borrowings held at amortised cost 72 582 109 569Loan raising fees (refer note 16) 4 626 4 896Trade and other payables 10 1 338Other interest paid 1 648 755

Finance cost excluding hedge interest expense 78 866 107 978Hedge interest expense paid 21 504 16 791Hedge interest expense (ineffective portion) 11 992 23 015Hedge interest expense (due to early settlement) — 29 577

112 362 177 361

24. FAIR VALUE ADJUSTMENTS

2011 2010R'000 R'000

Biological assets (refer note 2) 14 724 183 302Investment property (refer note 3) 200 16 967

14 924 200 269

25. TAXATION

2011 2010Major components of the tax expense: R'000 R'000

CurrentLocal income tax: current period 61 324Local income tax: prior periods — (10 476)DeferredDeferred tax: current period 16 971 6 096Deferred tax: change in accounting policy regarding investment property (2 694) —Deferred tax: prior periods 659 —

14 997 (4 056)



Reconciliation of the applicable tax rate and average effective tax rate % %

Applicable tax rate 28.0 28.0Disallowable charges 10.9 10.0Tax losses utilised against future taxable income (10.8) (31.5)Prior year under provision in current tax — (13.3)

28.1 (6.7)

The income tax rate of 28% remains unchanged.

2011 2010Taxation related to components of other comprehensive income/(loss): R'000 R'000

Available-for-sale financial assets adjustments 47 (100)Effects of cash flow hedges (8 052) 10 373

(8 005) 10 273

26. CASH GENERATED FROM OPERATIONS

2011 2010R'000 R'000

Profit before taxation 53 314 60 570Adjustments for:

Depreciation, amortisations and impairments 33 159 65 493Profit on sale of assets (302) (10 933)Loss on sale of non-current assets 13 362 —Loss/(profit) on foreign exchange 5 (120)Investment income (2 217) (2 810)Finance costs 112 362 177 361Fair value adjustments (14 924) (200 269)Movements in retirement benefit obligation (1 009) 2 263Share-based payments 4 393 2 054Movements in provisions (853) 1 138

Changes in working capitalInventories (9 056) 88 427Trade and other receivables (20 261) 16 577Trade and other payables 19 266 (97 883)

187 239 101 868


27. TAX (PAID)/REFUNDED

2011 2010R'000 R'000

Opening balance (3 134) (5 424)Current tax expense for the year (61) 10 152Closing balance (3 155) (3 134)

(82) 1 594

28. RELATED PARTIES

Relationships:Directors: Refer to note 29

Holding and voting powerSubsidiaries 2011 2010

Forestry, sawmilling, plywood manufacturing and timber tradingYork Timbers (Pty) Ltd 100% 100%Timber tradingAgentimber (Pty) Ltd 100% 100%Management and investmentInland Realty Ltd* 100% 100%Property holdingBeth Warehouse (Pty) Ltd* 100% 100%Longbogen (Pty) Ltd 100% 100%Pretoria Amalgamated Transport Ltd 100% 100%Sonrach Properties (Pty) Ltd 100% 100%DormantBonheur 50 Investments (Pty) Ltd** 70% 70%Global Forest Products (Pty) Ltd* 100% 100%Global Sawmills Ltd 100% 100%Madiba Forest Products (Pty) Ltd 100% 100%Madiba Timbers (Pty) Ltd 100% 100%South African Plywood (Pty) Ltd* 100% 100%York Timbers Chile Ltda 100% 100%

All of the companies are incorporated and domiciled in the Republic of South Africa, except for York Timbers Chile Ltdawhich is incorporated and domiciled in Chile.

* The company has a direct investment in these companies. All other companies are indirect investments.

** Non-controlling Interest in the subsidiary amounts to 30% (equivalent to the amount of R30). Non-controlling Interestis not disclosed in the Group's consolidated financial statements as this amount is less than one thousand Rand.

Transactions between York Timber Holdings Limited and the respective subsidiaries, which are related parties, have beeneliminated on consolidation and are not disclosed in this note.



29. DIRECTORS EMOLUMENTS

Payments to executive directors and disclosed employees

These payments were made by York Timbers (Pty) Ltd, a wholly owned subsidiary of York Timber Holdings Limited

Annual Pension and Other cashBasic salary cash bonus life cover benefits Total

2011 R'000 R'000 R'000 R'000 R'000

DJ Erskine 1 101 492 147 117 1 857

PP van Zyl 1 735 1 500 265 207 3 707

Employee A 1 034 12 61 135 1 243

Employee B 819 85 59 232 1 195

Employee C 831 69 53 138 1 090

5 520 2 158 585 829 9 092

2010

DJ Erskine 1 077 — 127 98 1 302

TG Mokoena * 666 — 92 167 925

PP van Zyl 2 183 — 113 191 2 487

3 926 — 332 456 4 714

* Resigned 24 March 2010

Share appreciation right awards granted

Awards held Awards Awards held Total valueat beginning granted at the end at the end

Type of of the year during the year of the year Strike price of the year2011 award '000 '000 '000 R R'000

DJ Erskine LTI1 1 995 — 1 995 2.73 1 303

LTI2 — 1 070 1 070 3.19 410

PP van Zyl LTI1 3 225 — 3 225 2.73 2 107

LTI2 — 3 113 3 113 3.19 1 195

Employee B LTI1 1 381 — 1 381 2.73 902

LTI2 — 123 123 3.19 142

Employee C LTI1 — — — 2.73 —

LTI2 — 1 143 1 143 3.19 438

6 601 5 449 12 050 6 497

The strike dates, valuation method and assumptions applied to the share appreciation right awards are disclosed in note14 of the annual financial statements.


29. DIRECTORS EMOLUMENTS CONTINUED

Payments to non-executive directors

2011 2010Non-executive directors fees paid by the Company R'000 R'000

AD Bonamour* (Resigned 5 October 2009) — 12

PC Botha* 229 234

R Claunch (Resigned 24 March 2010) — 184

A Jammine (Appointed 5 October 2010) 96 —

S Meer* 157 154

TJ Modise (Resigned 24 March 2010) — 212

G Motau (Resigned 5 October 2009) — 43

S Murray (Resigned 5 October 2009) — 58

JP Myers 678 845

PB Odendaal (Resigned 24 March 2010) — 105

G Tipper* 193 26

1 353 1 873

* Directors' fees paid to these non-executive directors were paid to the companies represented by them.

30. COMMITMENTS

2011 2010R'000 R'000

Authorised capital expenditureAlready contracted, but not provided for:• Property, plant and equipment 2 651 2 900Not yet contracted:• Property, plant and equipment 5 459 5 894

This committed expenditure relates to plant and equipment and will be financed by existing cash resources, available bankfacilities and funds generated internally.

Capital commitments are based on capital projects approved to date and the budget approved by the Boards. Major capitalprojects still require further approval before they commence.

31. CONTINGENCIES

Suretyship

The Group participates in a pooled banking facility granted by First Rand Bank Limited. As such, the Group has provided anunlimited suretyship in favour of First Rand Bank Limited in respect of its obligations to the bank.



32. COMPARATIVE FIGURES

The Group previously disclosed furniture and fittings, motor vehicles, computer equipment, work in progress and spareparts separately in the notes to the financial statements. They have been grouped together and are called “other” as thetotal net carrying value for these assets is less than 6% of the total net carrying value. The effects of the grouping of lineitems are as follows:

Accumulateddepreciation Net

and carryingCost impairment value

As presented at 30 June 2010 R'000 R'000 R'000

Furniture and fittings 1 087 (619) 468Motor vehicles 19 720 (7 630) 12 090Computer equipment 9 987 (5 566) 4 421Work in progress 463 — 463Spare parts 1 557 — 1 557

Total disclosed in note 4 as Other 32 814 (13 815) 18 999

The Group previously disclosed other financial liabilities, finance lease obligations and instalment sale liabilities separately onthe face of the statement of financial position. During the current reporting period these categories were consolidated andpresented as loans and borrowings. The effects of the reclassification of line items are as follows:

Non-current Currentliabilities liabilities

As presented at 30 June 2010 R'000 R'000

Other financial liabilities 612 317 51 698Finance lease obligation 13 245 2 278Instalment sale liability 917 1 515

Total disclosed as loans and borrowings 626 479 55 491


33. RISK MANAGEMENT

The Group is exposed to certain financial risks in the normal course of its operations:

• Market risk (including currency risk, interest rate risk and price risk);

• Liquidity risk; and

• Credit risk.

This note presents information about the Group's financial risk management framework, objectives, policies and processesfor measuring and managing risk, the Group's exposure to these financial risks, and the Group's management of capital.Furthermore, quantitative disclosures are included throughout these consolidated financial statements.

Financial risk management framework, objectives and policies

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk managementframework. The Group's executive is responsible for developing and monitoring the Group's risk management policies. TheGroup's executive reports regularly to the Board of Directors on its activities.

The Group's risk management policies are established to identify and analyse the risks faced by the Group, to setappropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systemsare reviewed regularly to reflect changes in market conditions and the Group's activities. The Group, through its training andmanagement standards and procedures, aims to develop a disciplined and constructive control environment in which allemployees understand their roles and obligations.

During the current financial year, the Group established a Risk and Innovation Committee to oversee how managementmonitors compliance with the Group's risk management policies and procedures, and reviews the adequacy of the riskmanagement framework in relation to the risks faced by the Group. This function was previously performed by the AuditCommittee. The Risk and Innovation Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakesboth regular and ad hoc reviews of risk management controls and procedures.

The Group monitors its forecast financial position on a regular basis. The Group's executive meets regularly and considerscash flow projections for the following 12 months in detail, taking into consideration the impact of market conditions. TheGroup's executive also receives reports from independent consultants and receives presentations from advisors on currentand forecast economic conditions.

The Group's forecast financial risk position with respect to key financial objectives and compliance with treasury practiceare regularly reported to the Board.

From time to time, the Group uses derivative financial instruments to hedge certain identified risk exposures, as deemednecessary by the Group's executive. Generally, the Group seeks to apply hedge accounting in order to manage volatility inprofit or loss. The Group does not acquire, hold or issue derivative instruments for trading purposes.

The Group's objectives, policies and processes for managing risks arising from financial instruments have not changed fromthe previous reporting period.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, market prices andequity prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market riskmanagement is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Currency risk

The Group operates in one geographical segment, namely countries within the Southern African Development Community(SADC). All transactions with customers in the SADC countries are denominated in SA Rand and do not expose the Groupto currency risks.



Future commitments as well as recognised assets and liabilities that are denominated in a currency that is not thefunctional currency, expose the Group to currency risks. Most of the group's purchases are denominated in SA Rand.However, certain engineering machinery and equipment denominated in US Dollars or Euros was purchased during theyear. This exposed the subsidiary companies to changes in the foreign exchange rates. To manage this risk, the Groupmakes use of forward contracts, transacted by Group treasury. This is done on an ad-hoc basis, as deemed appropriate orwhen required by the supplier. A net profit of R5 000 (2010: loss of R92 000) was realised. At reporting date, no forwardexchange contracts or balances to foreign creditors were outstanding.

All the Group's subsidiaries are local, except for York Timbers Chile Ltda, which is incorporated and domiciled in Chile. TheGroup has not hedged this investment.

The Group's borrowings and cash deposits are all denominated in SA Rand and have no currency risk exposure.

No sensitivity analysis has been prepared as at reporting date, no balances were denominated in another currency than thefunctional currency at reporting date. No sensitivity analysis has been prepared for transactions during the year as thepotential fluctuations are immaterial to the group.

Interest rate risk

Interest rate risk is the risk that the Group's financial position will be adversely affected by movements in interest rates.

The Group's interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group tocash flow interest rate risk, while borrowings issued at fixed rates expose the Group to fair value interest rate risk. TheGroup used an interest rate swap to hedge its interest rate risk. The Group does not have a policy to hedge and will onlymake use of hedging to reduce the short term sensitivity of the Group to interest rate changes.

Below is an analysis of fixed and variable interest rate dependent financial assets and liabilities:

2011 2010R'000 R'000

Fixed interest rateLoans and borrowings (576 375) (681 992)

Variable interest rateLoans and borrowings (37 850) (19 008)Instalment sale receivables — 606

Total variable interest rate dependent financial instruments (37 850) (18 402)

For the year ended 30 June 2011, the majority (94% (2010: 97%)) of the Group's debt was covered by a fixed interestrate swap; therefore no interest rate sensitivity analysis has been performed for the current financial year. The final paymentrelating to the fixed interest rate swap will be made on 29 July 2011.

Market price risk

Market price risk is the risk that the Group's financial position will be adversely affected by movements in market prices.

The Group owns investments in equity securities (refer to note 7), which expose the Group to securities market price risk.To manage this risk, the Group reviews the investments on a regular basis. The Group is not allowed to make any otherinvestments without the prior approval of its primary lender, RMB.

Other components of equity would increase/decrease as a result of gains/losses on equity securities classified as available-for-sale. Therefore a change in market prices at reporting date would not affect profit or loss and no sensitivity analysis hasbeen performed.


33. RISK MANAGEMENT CONTINUED

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting its obligations associated with its financial liabilitiesthat are settled by delivering cash or other financial assets. The Group's approach to managing liquidity is to ensure, as faras possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressedconditions, without incurring unacceptable losses or risking damage to the Group's reputation.

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of fundingthrough an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamicnature of the underlying businesses, Group treasury maintains flexibility in funding by maintaining availability undercommitted credit lines. Refer to note 11.

The Group's liquidity risk is a result of the funds available to cover future commitments. The Group manages liquidity riskthrough an on-going review of future commitments and credit facilities. Cash flow forecasts are prepared and adequateutilised borrowing facilities are monitored.

The table below analyses the Group's financial liabilities and net-settled derivative financial liabilities into relevant maturitygroupings based on the remaining period at the statement of financial position to the contractual maturity date. Theamounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal theircarrying balances as the impact of discounting is not significant.

Within 1 year 1 to 5 years After 5 years TotalNon-derivative financial liabilities R'000 R'000 R'000 R'000

2011Loans and borrowings 72 568 549 733 — 622 301Trade and other payables 159 942 — — 159 942

232 510 549 733 — 782 243

2010Loans and borrowings 50 652 380 273 270 075 701 000Trade and other payables 127 314 — — 127 314

177 966 380 273 270 075 828 314

Derivative financial liabilities

2011Interest rate swap used for hedging 6 329 — — 6 329

2010Interest rate swap used for hedging 18 154 4 083 — 22 237

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantlydifferent amounts.



Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet itscontractual obligations and arises principally from the Group's receivables from customer and investment securities.

Trade receivables comprise a widespread customer base. The Group's exposure to credit risk is influenced mainly by theindividual characteristics of each customer. Approximately 32% (2010: 31%) of the Group's revenue is attributable to salestransactions with 3 (2010: 3) multinational customers.

2011 2010Customer R'000 R'000

A 12% 9%B 12% 16%C 8% 6%

Total 32% 31%

Management has established a centralised receivables department and a credit policy. Under the credit policy, each newcustomer is analysed individually for creditworthiness before the Group's standard payment and delivery terms andconditions are offered. The Group's review includes external ratings, when available, and in some cases bank references.Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account itsfinancial position, past experience and other factors. Individual risk limits are set based on internal or external ratings inaccordance with limits set by the Board.

The utilisation of credit limits is regularly monitored. Customers that fail to meet the Group's benchmark creditworthinessmay transact with the Group only on a prepayment basis. The Group does not require collateral in respect of trade and otherreceivables.

Credit guarantee insurance is purchased from Credit Guarantee Insurance Corporation of Africa Ltd (CGIC). The total creditlimit guaranteed by CGIC is R351 million, with a deductible annual aggregate of R1.5 million, and 15% of each claimthereafter.

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade andother receivables based on historic default rates done on a customer by customer basis.

2011 2010R'000 R'000

Ageing of trade receivables (net of impairment)Current 88 030 78 92330 days 20 217 20 30360 days and over 5 581 2 851

113 828 102 077

Reconciliation of allowances for impairment on trade receivablesOpening balance 15 264 18 176Increase/(decrease) in allowance for impairment 99 (2 912)



All other receivables are neither past due nor impaired.

The Group only has 3 investments in equity securities, all of which are listed on the Johannesburg Stock Exchange. Cash isdeposited at reputable financial institutions of high quality credit standing within the Republic of South Africa.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit riskat the reporting date was:

2011 2010Financial instrument R'000 R'000

Other financial assets 1 004 1 345Instalment sale receivables — 606Trade and other receivables 124 595 104 344

125 599 106 285

Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and tosustain future development of the business. Capital consists of share capital, non-redeemable preference shares, retainedearnings and non-controlling interests of the Group. The Board of Directors monitors the demographic spread ofshareholders, the return on capital as well as the level of dividends to ordinary shareholders.

The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowingsand the advantages and security afforded by a sound capital position. The Group does not have a defined share buyback plan.

There were no changes in the Group's approach to capital management during the year. The Group is subject to externallyimposed capital requirements as a result of the debt: equity ratio required by the RMB loan facilities (refer note 16), whichrequires a gearing ratio of less than 90%. The Group was in compliance throughout the financial period.

The capital structure of the Group also consists of debt. Consistent with others in the industry, the Group monitors capital onthe basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as totalborrowings (including current and non-current borrowings' as shown in the statement of financial position) less cash and cashequivalents. Total capital is calculated as equity as shown in the statement of financial position plus net debt. The Group'sstrategy is to maintain a gearing ratio of between 15% to 30%.

The gearing ratio at reporting date was as follows:

2011 2010R'000 R'000

Loans and borrowings 614 225 681 970Less: Cash and cash equivalents (103 484) (84 493)

Net debt 510 741 597 477Total equity 2 026 268 1 967 541

Total capital 2 537 009 2 565 018

Gearing ratio 20% 23%

No dividends were paid during the reporting period. The Board maintains a policy of balancing returns to shareholders withthe need to fund growth.


Y o r k T i m b e r s – A n n u a l R e p o r t 20 1 1P A G E 1 0 4


Financial assets by category

2011 2010R'000 R'000

Loans and receivables- Instalment sale receivables — 606- Trade and other receivables 124 595 104 334- Cash and cash equivalents 103 484 84 493

228 079 189 433Available-for-sale financial assets- Other financial assets 1 004 1345

Total financial assets 229 083 190 778

Financial liabilities by category

2011 2010R'000 R'000

Financial liabilities at amortised cost- Loans and borrowings 607 896 659 733- Trade and other payables 159 942 127 314

767 838 787 047Financial liabilities at fair value through profit or loss- Loans and borrowings 6 329 22 237

Total financial liabilities 774 167 809 284

No reclassification of a financial instrument was done during the reporting period.

Fair value of financial assets and financial liabilities

Loans and receivables, including trade and other receivables, are measured at amortised cost using the effective interestrate method, less any impairment losses. These values do not differ materially from the fair value, which is estimated as thepresent value of future cash flows discounted at the market rate of interest at reporting date.

Financial assets at fair value through profit or loss and available-for-sale financial assets are carried at fair value, which isdetermined with reference to their quoted market bid price at the reporting date.

The fair value of a financial asset or a financial liability is the amount at which the asset could be exchanged or liability settledin a current transaction between willing parties in an arm's length transaction.

All financial assets and financial liabilities recognised in the financial statements approximate their respective net fair values.

P A G E 1 0 6 Y o r k T i m b e r s – A n n u a l R e p o r t 20 1 1


Valuation of financial instruments

The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used inmaking the measurements:

• Level 1: Quoted prices (unadjusted) in active markets for identical instruments.

• Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: Valuation techniques using significant unobservable inputs (i.e. market data).

The table below analyses financial instruments measured at fair value at the end of the reporting period, by the level inthe fair value hierarchy into which the fair value measurement is categorised:

Level 1 Level 2 Level 3 TotalR'000 R'000 R'000 R'000

2011Other financial assets 1 004 — — 1 004Derivative liability * — (6 329) — (6 329)

2010Other financial assets 1 345 — — 1 345Derivative liability * — (22 237) — (22 237)

* included in loans and borrowings

During the reporting period, no transfers have been made between the hierarchy levels. No change occurred from the priorreporting period in the valuation techniques applied to financial instruments.

Interest rates used for determining fair value

The interest rates used to discount estimated cash flows, when applicable, are based on the SA Rand swap zero couponyield curve of 7.5% (2010: 6.23%) at the reporting date.



34. EARNINGS PER SHARE

The calculation of basic earnings per share is based on:

2011 2010R'000 R'000

Basis earnings attributable to ordinary shareholders 38 317 64 626

Reconciliation of weighted average number of ordinary shares '000 '000

Issued number of shares 331 241 78 370Effect of shares issued in December 2009 — 138 356Effect of conversion of preference shares — 55

Weighted average number of ordinary shares 331 241 216 781

Earnings per share (cents) 12 30

There were no instruments that had a dilutive effect.

35. HEADLINE EARNINGS PER SHARE

The calculation of headline earnings per share is based on:

2011 2010Reconciliation of basic earnings to headline earnings R'000 R'000

Basic earnings attributable to ordinary shareholders 38 317 64 626Profit on sale of assets and liabilities (net of tax) (217) (7 872)Loss on non-current assets held for sale 13 362 —Fair value adjustment on investment property (net of tax) (172) (12 216)Impairment of plant, equipment and vehicles (net of tax) 65 (2 292)Impairment of goodwill — 44 910

Headline earnings for the year 51 355 87 156

Weighted average number of ordinary shares ('000) 331 241 216 781

Headline earnings per share (cents) 16 40

P A G E 1 0 8 Y o r k T i m b e r s – A n n u a l R e p o r t 20 1 1

COMPANY PROFILE

York is an integrated plantation owner and a primary manufacturer of timber related products. Ourmain markets are in the building and construction sector, the production of clean energy, furniture andpellets products. York is further one of the biggest private suppliers of biomass to the pulp and paperand particle board industries.

York strives to achieve optimal cost conversion and be recognised as a key player in the developmentof improved genetic material.

The investment in a biological asset provides a natural hedge against market cycles. In a downturn,plantations are left to grow and in the process accumulate future potential income. York’s currentplantation age class distribution will give the highest volume growth over the next few years furtherenhancing the income generation ability.

The use of biodegradable products from sustainable practices is part of responsible consumerism andYork’s strategy is to assist the development of these markets.

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