annual report 2008 - sharedata · profile york is a vertically integrated forest products company...

Annual Report 2008

CONTENTS

1 VISION AND MISSION STATEMENT

2 COMPANY OVERVIEW

4 BOARD OF DIRECTORS

6 CHAIRMAN AND CHIEF EXECUTIVE’S REPORT

12 FINANCIAL REPORT

20 FOREST INDUSTRY REPORT

26 SUSTAINABILITY REPORT

34 CORPORATE GOVERNANCE

42 VALUE ADDED STATEMENT

44 SHAREHOLDERS PROFILE

46 ANNUAL FINANCIAL STATEMENTS

58 NOTES TO ANNUAL FINANCIAL STATEMENTS

112 NOTICE TO SHAREHOLDERS

PROFILE

York is a vertically integrated forest products company listed on the JSE and incorporated in 1916. York owns 61,000 hectares of timber plantations, seven sawmills, a plywood mill and a national distribution network of timber warehouses. The Group employs 3,700 people directly as well as 2,300 indirectly through small contractors.

The value of York is reflected primarily in its biological assets and driven by the efficiencies of its milling and distribution operations. York’s mills convert its plantation harvest into cash thereby generating additional margins for the Group.

The plantations are operated on a perpetual 24 year rotation and are strictly managed in accordance with the principles laid down by the Forestry Stewardship Council. A further 24,000 hectares of York’s land is set aside for natural heritage sites and conservation areas. York’s ongoing growth in the timber industry is driven by the abilities of its people to unequivocally embrace its core values of customer driven operations, safety first, empowerment at all levels, transparency, demographic transformation and environmental sustainability.

1

VISIONGrowing Value for all our stakeholders

MISSION STATEMENTDevelop a hyper-efficient vertically integrated forest products company underpinned by sustainable resources

STRATEGY

Manage York’s plantation resources on a sustainable basis and supply optimal raw materials to each processing unit;

Acquire further plantation assets in order to minimise the fibre purchases from third parties;

Improve the efficiencies of our processing plants by replicating the most successful elements elsewhere in the Group;Foster close interaction between Forestry, Processing, Sales and Warehousing

to maximise profits in the value chain;Become an industry leader in environmental compliance;Expand the international footprint of the business by focussing on import and

export opportunities.

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Annual Report 2008

2 Annual Report 2008

COMPANY OVERVIEW

"The 18-month financial period that spanned January 2007 to June 2008 marked the beginning of a new era in York’s history"

HIGHLIGHTS

Global Forest Products acquired for R1,7 billion in July 2007 and successfully integrated

Revenue climbed 286%, from R394 million to R1,522 billion

Net asset value up from 941c to 2113c

Profit before finance costs grew by 1727%, from R46 million to R832 million

Headline earnings per share up by 280%, from 268,5c to 1019c

Cash generated by operating activities increased 28 fold, from R8 million to R224 million

3

AGENTIMBER(PTY) LIMITED

THE YORK TIMBER ORGANISATION LTD

JSE Listed Holding Company

INLAND REALTYLIMITED

BETH WAREHOUSE(PTY) LIMITED

SA PLYWOOD(PTY) LIMITED

GLOBAL FOREST PRODUCTS

(PTY) LIMITED

MADIBA TIMBERS(PTY) LIMITED

MADIBA FOREST PRODUCTS

(PTY) LIMITED

SONRACHPROPERTIES

(PTY) LIMITED

PRETORIAAMALGAMATED

TRANSPORT LIMITED

GLOBAL SAWMILLSLIMITED

LONGBOGEN(PTY) LIMITED

BONHEUR 50GENERAL TRADING

(PTY) LIMITED

YORK TIMBERS

(PTY) LIMITED

Chief Operating subsidiary

PLYWOOD PLANT SAWMILLING FORESTS

WAREHOUSING

TRADING PROPERTY NON-TRADING


Gay Mokoena (45) Director Corporate ServicesGay is a Development Economist and he holds a B. Admin (Hons) and a Master of Business Leadership (MBL) degrees from Unisa. He has worked in the small business development sector for more than 20 years. He has been on an internship as a Visiting Auditor at the West LB Bank, Düsseldorf, in Germany in 1995. Gay joined the Mpumalanga Provincial Government in 1994 where he assisted with the transformation of the previous governmental structures. He left government at the end of 1998 to start Silulu Investment Services, a private company involved in financial and consulting services for the SMME sector. Silulu specializes in deal-making for BEE consortia. Directorships : Mbombela Economic Development Agency (MEDA) and Greater Nelspruit Utility Company (Pty) Limited. Chairperson of the Mpumalanga Housing Finance Company since its incorporation in 1999 and the Secretary-General of the National African Federated Chamber of Commerce and Industry (NAFCOC) in the Mpumalanga Province. Appointed Executive Director of York in 2007.

Lance Cooper (39)Chief Executive Officer

Lance holds a BLC and LLB. He started his career at York in 1991 as Group Communications Officer. Whilst completing his LLB, he was appointed Company Secretary. In 1997, he was transferred to York Lumber Sawmill where he held the position of General Manager for 2 years. He was promoted to Group General Manager, Sawmilling in 1999. Lance was appointed as Chief Operating Officer in 2003. Appointed Chief Executive Officer in 2007.

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 twenty five years experience in the telecommunications industry, most recently focused on the African continent, and is experienced in defining, developing and implementing management systems in finance, engineering and production. He managed the American Chamber of Commerce from a low-key South African business organization to a strong issue oriented American organization and has been the President for three years. Advisor to the successful empowerment shareholder in Second Network Operator and was the principal driver in establishing and promoting the consortium that acquired the SBC/Telekom Malaysia equity stake in Telkom S.A., the dominant telecommunications operator in South Africa.Appointed Non-Executive Director of York in February 2007.

John Lehman (37)Chief Financial Officer

John Lehman’s qualifications include a BCom (Accounting), BCompt (HON), CTA, CA(SA). John did his articles with BDO and qualified as a Chartered Accountant in 1998. In January 2001 he was appointed as a director and partner with BDO Spencer Steward JHB Inc. John was also appointed as director of Marketing for BDO for 2001 – 2004. In January 2003 John started the BDO Corporate Finance department and led this department for three years until December 2005. John provided consulting advice to York since June 2004 and in January 2006 John joined listed forestry company York as the Financial Director. Appointed Chief Financial Officer in 2007.

BOARD OF DIRECTORS

Andrew Bonamour (36)Non-executive Director

Andrew has extensive experience in the financial services industry. Andrew led the formation of Blackstar Investors Plc, a GBP80 million private equity fund focussed on private equity investment in South Africa, which is listed on AIM, operated by the London Stock Exchange. Andrew heads up Blackstar Managers which advises the funds on behalf of Blackstar Investors Plc. Andrew previously worked at Brait S.A Limited where he held positions in Investment banking, principal investment divisions and Corporate Finance. At Brait Andrew originated and played a leading role in a variety of transactions ranging from leveraged buyouts, mergers and acquisitions, capital replacements and restructurings. Andrew has an in depth knowledge of and experience in corporate finance, private equity and investment banking. Andrew holds a Bachelor of Commerce degree.

Jim Myers (67) (American)Non-executive Chairman

5

Pieter Odendaal (62)Non-executive Director

Pieter holds a MSc in Forestry from the University of Stellenbosch. He started his career with the Indigenous Forest Research Station in the Southern Cape and became involved with forest and mountain catchment planning and management. Pieter served as Director of Forestry in KwaZulu and Regional Director of state forestry in Zululand and Mpumulanga/Limpopo. Became Divisional Director of Forestry in Safcol Ltd and later Chief Executive of MTO Forestry (Pty) Ltd and Amathola Forestry (Pty) Ltd. Currently involved with Forest Stewardship Council certification of forests and plantations internationally. Appointed Non-executive Director of York in 2008.

Tlhopheho Modise (48) Non-executive Director

Currently the CEO of Grandbridge Trading publishers of TRIBUTE, a magazine for black professionals. He is a principal at Aozora. Tlhopheho also serves on the credit committee at the IDC and also served on the board of Global Forest Products companies until July 2007. Tlhopheho spent eight years at PG Bison and held the position of Operations Manager. Tlhopheho was also an Executive Director at The Fedics Group and head of the Industrial catering division, Fedics Food Services (FFS). He has also lectured on Operations Management, Strategy and Human Resources for the following institutions, Henley Management College, Graduate institute of Management and Technology (GIMT) and the International Centre for Management Development. Tlhopheho was also the Plant Director at Tiger Wheels Manufacturing. A graduate of Henley Management College and holds the following qualifications; certificates in Strategic Management and Marketing, Diploma in Management and an MBA, and Wits Graduate School MAP (Managerial Advancement Programme). Appointed to the York board in 2007.

Shakeel Meer (46) Non-executive Director

Shakeel is a member of IDC’s Executive Management with overall responsibility for IDC investments in the Metals, Wood and Paper, Chemicals, Textiles and Clothing and Construction related sectors as well as overall responsibility for managing off-balance sheet and ring-fenced funds. Previous experience - Mechanical engineering – design and maintenance of systems. Due diligences and project development in various sectors (including Wood and Paper). Shakeel was also the Head of Agro Industries Strategic Business Unit and Corporate Strategy and Portfolio Management at IDC. Masters in Business Leadership (UNISA) Bachelor of Science in Mechanical Engineering (University of Natal) Developing Strategy for Value Creation (London Business School) Senior Management Development Programme (Euromoney). Appointed Non-executive Director in 2007.

Paul Botha (45) Non-executive Director

Paul is a practising attorney and notary public having been in private practice since 1986. Paul did a substantial amount of cross-border mergers and acquisition work throughout Africa until 1998 when he established an advisory business for Brait, an international investment banking business. Paul was the CEO of the advisory business of Brait from 1998 to 2003. At present, Paul is the CEO and founder of Metier Investment & Advisory Services (Pty) Ltd, a niche corporate finance and investment house. He also provides commercial lawyering and corporate advice under the name of Paul Botha & Associates. Paul serves on the boards of directors of numerous businesses. He has acted as an adviser on more than 120 transactions, including private equity transactions and Stock Exchange related transactions. Qualifications: BA LLB, HDip Company Law, HDip Tax, Notary Public. Appointed Non-executive Director in 2007.

Dick Claunch (63) (American)Non-executive Director

Richard Claunch graduated from the University of Montana, in the USA in 1969 with a BSc Forest Management (Magna Cum Laude). He was subsequently employed by the Weyerhaeuser Company in the USA where, from 1969 to 2001, he held various positions in its Timberlands Division. His experience ranges from being an entry level logging engineer to an executive manager and primarily being respectively its International Log Marketing Manager and the company’s International Marketing Manager in which positions he was responsible for new market development for the company’s export log business and later managing log exports on behalf of other international companies. Richard is a US citizen with permanent residence in South Africa. Appointed to the York Board in 2007.

Simon Murray (35)Non-executive Director

Simon has been a private equity transactor at RMB Ventures for 7 years. During this time he has been involved in private equity transactions across a wide range of industries and represents RMB Ventures interests on a number of boards. Prior to this he was a transactor at Horizon Equity Partners a small 3rd party private equity fund manager. He holds a BComm from Wits and a CFA.


It is with great pleasure that I present York’s latest set of financial results for the 18-month period from January 2007 to June 2008. The reason for this change at year end is to align the financial year end of the listed holding company with that of the operational companies subsequent to the acquisition of Global Forest Products in July 2007. For this reason, two sets of interim results were published for the period under review, for the six months to June 2007, and for the six months to December 2007.

The 18-month period under review was without doubt one of the most exciting, yet challenging, in York’s history. York became the largest vertically integrated forestry and sawmilling company in Africa following the acquisition of Global Forestry Products (GFP) in July 2007, lifting our share of the Southern African sawn timber market to 19% from the previous 8%. York is now 60% self-sufficient in terms of timber plantations, and owns seven modern and well-managed sawmills, as well as a plywood mill. It is focusing on further acquisitions to increase its ownership of resource. The GFP acquisition was funded partially with debt and partially by way of a R350 million rights offer and a R203 million issue of shares for cash to finance working capital for the merged group. This resulted in the number of ordinary shares in issue increasing to 78 million from 11 million, substantially improving the liquidity of the share.

CHAIRMAN’S STATEMENT

"York is the largest vertically integrated forestry and sawmilling company in Africa following the acquisition of Global Forest Products"

It is with sadness that we mark the passing of Solly Tucker, our former CEO and Chairman, who died after a short illness on 6 August 2008. We remember him as a gracious, flamboyant and often outspoken leader of legendary courage and integrity. He was not afraid to defend York’s rights where he felt these were imperiled. He was known and respected throughout the industry. Our sincere condolences go out to his wife, Marika, his children, grandchildren and countless friends. Solly was deeply dedicated not just to York and its staff, but had a vision that extended to South Africa’s forestry and timber sector, a vision that is well on its way to realisation.

BEE STATUS

In the period, York’s BEE shareholding increased to 39% as a result of the Lereko Metier Capital Growth Fund’s (Lereko Metier) interest in the company having increased from 4% to 14,1%. In a transaction worth R201,3 million, Blackstar Investors Plc sold 8 million ordinary shares in the company at R25,17 a share to Lereko Metier. Blackstar Plc will remain a significant shareholder. We welcome the enhanced BEE shareholding of Lereko Metier, and value their strategic input and participation at board level.

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CHANGES TO THE BOARD

Several changes were made to the York Board during the period under review. Gay Mokoena became Executive Director for Corporate Services, and was therefore no longer designated as a non-executive director. Ivor Tucker, York’s outgoing CEO retired in April 2007 and Lance Cooper was appointed as the new CEO. Sally Motlana, who has served on the Board as a non-executive director since 1997, retired with effect from 30 May 2007. Gavin Tipper and William Marshall-Smith also resigned from the Board during the period. Richard Claunch joined the Board as a non-executive director on 30 May 2007. Several other appointments to the Board were made: Simon Murray, Tlhopheho Modise, Shakeel Meer and Paul Botha. We welcome the new appointees and thank those who no longer serve on the York Board for their dedication and loyal service.

The directors on York’s Board represent a strong skills set capable of providing clear direction to the management of York. There is a co-operative, supportive relationship amongst the directors and with management that ensures optimum results for the shareholders. The Group's executive management is experienced and has demonstrated its ability to run the operations of York effectively and efficiently.

APPRECIATION

I would like to thank our staff and executives for their passion, dedication and loyalty over a very trying trading period, during which they had to contend with a devastating fire, difficult market conditions and the complexities of growth by acquisition. They performed superbly under the circumstances. I would also like to thank our customers and suppliers for their continuing support, without which we would not exist. We look forward to building on these relationships in years to come.

Jim MyersNon-Executive Chairman


CHIEF EXECUTIVE OFFICER'S REPORT

OVERVIEW

The 18-month financial period that spanned January 2007 to June 2008 marked the dawn of a new era in York’s history.

The Company acquired the business of Global Forest Products (GFP) as a going concern with effect from 12 July 2007, transforming York into a vertically integrated forestry company, including 61,000 hectares of plantations, eight timber processing mills and 3,700 employees. The GFP assets were successfully integrated into York, notwithstanding a large plantation fire on 27 July 2007, less than one month after the acquisition date. Management have made meaningful progress towards achieving the Group's three-year synergy plan to unlock additional margins as a result of the merger. The R1,7 billion acquisition of GFP was funded with half debt and half equity. York Directors intend to repay the acquisition debt over an eight-year period with cash generated by the sale of York’s processed timber products. Improved efficiencies in the processing units, combined with a reduction in operating expenses and rapidly rising log prices as a result of a long term shortage, will be harnessed in order to improve margins.

STRATEGY

York’s short-term strategy is to procure further plantations in close proximity to its existing operations and several small plantations are currently under consideration. These acquisitions will provide York investors with upside as log prices rise and improved sustainability as the Group becomes increasingly self sufficient. New acquisitions will be efficiently managed as part of York’s existing plantation portfolio and will be located in close proximity to York’s timber mills. In addition, management will focus on reducing costs and improving efficiencies of the recently acquired GFP operations to bring them in line with the most efficient operations within the Group.

In the period under review, York acquired Goedgeloof plantation from Crocodile Valley Estates (Pty) Limited as a going concern for a consideration of R32,3 million. An amount of R12,3 million was funded from York’s cash resources, with the balance secured by way of long-term funding. Goedgeloof was integrated into York’s adjoining London plantation.

"York is likely to target bigger forestry and processing businesses, both

locally and abroad and will use its track record of improving margins to

enhance future acquisitions"

9

In the medium term, York is likely to target bigger forestry and processing businesses, both locally and abroad. The programme of unlocking efficiency gains at the GFP mills will be replicated by harnessing the collective knowledge of York’s management team. York will use its track record of improving margins in order to enhance future acquisitions.

FINANCIAL HIGHLIGHTS

The substantial improvements in most key financial indicators need to be viewed in the context of an 18-month reporting period, compared to a 12-month prior period and the acquisition of Global Forest Products with effect from 12 July 2007. Notwithstanding these factors, these results are very pleasing and demonstrate that management have successfully consolidated the new enlarged York. York is well positioned to unlock further value through planned future efficiency gains, repayment of acquisition debt and escalating plantation values as the value of raw materials rise as a result of the long-term shortage.

A detailed interpretation of the results is contained in the Chief Financial Officer’s Report on page 12.

"The Group is a year into a three-year efficiency improvement

plan using tried and tested technology in use elsewhere within

the Group and implementation is being handled by a team with

a proven track record of success"


OPERATIONAL REPORT

MARKET CONDITIONS

York’s sawn timber market share increased from 8% of the Southern African market in December 2006 to 19% of the market in June 2008, following the acquisition of GFP. Market conditions were tough during the period under review due to the slowdown in residential construction and a temporary oversupply of timber caused by surplus logs being processed by the industry as a result of fire salvage operations.

Recent wide spread fires in September 2008 are likely to extend the log salvage operations and temporary oversupply deep into 2009 until the last of the recently burnt plantations has been salvaged. These latest fires will however further compound the long-term shortage as many of the trees that were damaged were under 8 years and are not salvageable. A detailed study of supply, demand and import parity is included later in this report.

PROCESSING OPERATIONS

York’s seven sawmills and plywood mill are located adjacent to its plantations in the Escarpment and Highveld regions of the Mpumalanga province and are highly specialised small, medium and large log mills. The mills vary in efficiency from amongst the most efficient in the country to lagging well behind industry averages in the case of some of the recently acquired operations. The Group is a year into a three-year efficiency improvement plan whereby the most successful operations are being used as a blueprint for the least efficient operations introducing tried and tested technology. The implementation of this plan is being handled by management with a proven track record of success. Due to their proximity to the plantations, the eight specialised mills provide an ideal customer base for York’s Forestry division.

The Company’s mills are able to optimally convert the full range of products from the trees into finished products, ranging from expensive pruned butt logs to thinner knotty tree tops.

CHIEF EXECUTIVE OFFICER'S REPORT

"York is 60% self-sufficient from its own timber plantations

and well positioned to meet its objectives"

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During the period under review, industry log prices rose 69% whilst sawn timber prices rose 24%. Processing operations throughout the timber industry experienced margin squeeze and several inefficient mills were forced to close. This is reflected in the Segmental Review, which shows sawmilling margins dropping from 15% to 12,27%. York’s mills were able to absorb a portion of the margin squeeze through increased efficiencies. However, overall margins declined as a result of the inclusion of the lower margin GFP mills from July 2007. Against that, York’s Forestry division benefited from the rising log costs by way of increased operating profits and significant fair value adjustments.York’s recently acquired Driekop sawmill was damaged in the 2007 fire and is currently being rebuilt for commissioning in March 2009. Benefits from the reinstatement of the damaged mill will only be fully evident during the 2010 financial period. Driekop sawmill was insured for asset replacement and business interruption and the results under review include a business interruption claim from the underwriters.

TWO BAD FIRE SEASONS

Forestry operations were disrupted by the worst plantation fires in South Africa’s history in July 2007. Almost 11 000 hectares of York’s plantations were affected by the fires that also destroyed 6,5% of South Africa’s pine sawlog reserves. Once the fires had been contained, the damaged trees were felled and either processed or stored under irrigation. By June 2008, more than half the total burnt area had been replanted. The remainder of the burnt areas will be replanted within the next 12 months.

The effects of the fire negatively impacted York’s operational cashflow during the year under review as a large volume of burnt logs had to be felled and stored under permanent irrigation (SUPI) for processing during the next financial period and replanting of the vast burnt areas is being telescoped into a two-year period to normalise the growing regimes as quickly as possible. On a positive note, the processing of SUPI log stocks during the next 12-month period will result in the cash invested in stored logs being unlocked. The recent 2008 fires damaged approximately 1 600 hectares of pine and 300 hectares of eucalyptus plantations. York’s plantations were insured and management plan to fell the burnt trees in three months and replant by April 2009, by applying the insurance proceeds towards the replanting operation. The total damaged area accross the whole industry in the 2008 fires is estimated at approximately 40 000 hectares at the time of writing and is likely to be recorded as the second worst fire season in the history of the industry in South Africa.

TIMBER WAREHOUSING

This division has operated since 2002 from York’s Cordelfos Warehouse in Pretoria West and has recently been expanded to supply the KwaZulu-Natal and Western Cape markets. The Warehouse operation is geared to supply the smaller retailer, as well as York's larger customers.

The business provides a 24-hour lead time delivery service and offers an attractive alternative to the customer having to order bulk truckloads direct from sawmills. Whilst York’s warehouses purchase most of their timber from suppliers in the Southern African market, the medium-term objective is to warehouse and distribute imported timber to the Group's customer base. The warehouses will enable York to maintain and grow its market share in the sawn timber market once import parity is breached and South Africa is forced to import timber to overcome the forecast long-term timber shortage.

OUTLOOK

Notwithstanding slower trading conditions in 2008, York is well positioned to benefit from the timber shortage and eventual timber imports. The Group is 60% self-sufficient from its own timber plantations, owns seven modern, well-managed sawmills and a plywood mill and is focusing on further acquisitions to increase its ownership of forestry resource. The substantial cost savings being implemented, together with improved efficiencies, will ensure that York is well positioned to meet its objectives during the current market downturn and reap great benefits once the economy begins to improve.

Lance CooperChief Executive Officer


CHIEF FINANCIAL OFFICER'S REPORT

Comparing the pre- and post-merger results from December 2006 to June 2008 is a clear indication of the growth of the Group. All indicators are up substantially as a result of the acquisition of GFP in July 2007.

Headline earnings per share (HEPS) was up 280% to 1 019 cents (2006: 269 cents). Compared to the post-merger 12-month period, HEPS was up 150% to 671 cents. Net Asset Value per share grew 125% to 2 113 cents (2006: 941 cents) and Tangible Net Asset Value per share grew 42%, from 941 cents (2006) to 1 334 cents. Based on HEPS and NAV per share the merger was value enhancing.

The improvement in cash from operating activities was due to more effective working capital management and the collection of insurance receivables.

The biological assets were fair valued using the Net Standing Value Method and have increased 46% in value since they were acquired in July 2007 which contributed R607 million in unrealised profits. The increase arose due to the rise in saw log prices in the South African market which came about due to the shortage in raw material available.

The long-term liability arose mainly due to the acquisition finance raised to purchase GFP. The acquisition of R 1,7 billion was financed with R850 million of equity and R850 million of loans. GFP already had asset based finance loans of R257 million which were part of the net assets acquired.

FINANCIAL OVERVIEW

Audited Audited

2008 2006 %

R'000 18 months 12 months Change

Group revenue 1,521,581 393,975 286%

Profit from operations 224,688 39,824 464%

Net proifit before finance costs 831,996 45,546 1,727%

Net finance costs (93,901) (3,216) 2,820%

Cash flow from operating activities 224,372 8,015 2,699%

Biological assets 1,983,070 18,000 10,917%

Interest bearing liabilities (1,156,816) (36,826) 4,018%

Net working capital 156,032 36,957 322%

Headline earnings per share - cents 1,019 269 280%

Net asset value per share 2,113 941 125%

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INCOME STATEMENT SUMMARY

Proforma

18 months 12 months Unaudited

June December % 1 July 2007

R'000 2008 2006 Change 30 June 2008

Revenue 1,521,581 393,975 286% 1,274,621

Gross profit 951,777 151,494 528% 869,317

GP margin 63% 38% 68%

Other operating income 38,726 6,649 482% 40,659

Restructuring (8,355) 100% (8,355)

Direct cost of fire (25,766) 100% (25,766)

Selling, general and administration costs (731,694) (118,319) 518% (674,332)

Net profit from operations 224,688 39,824 464% 201,523

Biological assets fair value adjustments 607,308 5,722 10,514% 603,308

Profit before finance costs 831,996 45,546 1,727% 804,831

Net finance cost (93,901) (3,216) 2,820% (92,774)

Profit before tax 738,095 42,330 1,644% 712,058

Taxation (199,345) (11,014) (193,819)

Net profit after tax 538,750 31,316 1,620% 518,239

During the period the Group has undergone a material change in ownership, size and financial structure and therefore the results are not comparable. We have separately disclosed the results of the Group for the period 1 July 2007 – 30 June 2008, being the post merger period.

The increase in the gross margin percentage from 38% to 63% is due to the change in the nature of the Group from a mainly manufacturing concern to that of a vertically integrated forestry company with its own manufacturing plants. The direct ownership of the forestry business gives York access to its own raw material.

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

The fair value adjustment of the biological asset of R607 million is largely attributable to rapidly rising log prices. The fair value of biological assets is discussed in detail under a separate paragraph on page 18;

Certain restructuring costs of R8,4 million which relate to the retrenchment cost of senior management as a result of the merger;

Direct costs of R25,8 million relating to the fires in July 2007 of which R3,3 million is related to fire fighting, R5,3 million of roadside stocks destroyed and R17,2 million relating to additional harvesting and re-planting costs; and

The pre- and post-merger differences show a larger proportion of earnings going to lenders which is indicative of the change in the debt equity structure of the Group. The larger debt is secured by the value of the biological assets. The rationale for the increase in gearing was that the Group would have access to its own raw material.

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The acquisition of GFP resulted in a lower proportion of the revenue being generated by sawmilling than in the previous period. The GFP acquisition also brought in the Plywood business contributing 9% of revenues during the period under review. The Forestry revenues contributed 25% during the period (2006: 1%). The majority of the Forestry revenues are inter group as the sawlogs are sold to the Sawmills. The sawlogs are sold at market prices to the Sawmills. The market prices used is the current prevailing Komatiland long term contract price.

The divisional operating margins are defined as the operating profits by division before depreciation, tax and interest and excluding any fair value adjustments.

The operating margins for the 18-month period are compared against the prior period and also against the 12-months ended in December 2007. The Forestry division had an operating margin of 33,2% for the period under review. This is after costs of R25 million were expensed as a result of the July 2007 fires. The decline in operating margin of Sawmilling was mainly due to the newly acquired underperforming GFP operations. The rapid rise in raw material costs also had the effect of reducing margins.

The Plywood business had a difficult operational period for the 6 months to December 2007, posting a loss of R9,6 million. During the six months ended June 2008 the division achieved a substantial turnaround and posted a profit of R3,7 million. Margins in the Warehousing business declined as a result of the slower market and set-up costs incurred for expansion.

Incre

ase

s i

n l

og

pri

ce

% y

/y

Apr2008

Sept2008

0

100

200

300

400

500

700

0

1

1,5

2002

600

2003 2004 2005 2006 2007

10,97,67

17,48

50,94

43,9739,56

0,5

0,054

17,66

Ave

rag

e l

og

pri

ce

pe

r m

Average price of sawlogs

Sawmilling

Revenue by segment

PlywoodMerchandising Forestry

2008

25%

47%

19%

9%

0%

0%

0%

0%

0%

40%

1%

59%

2006

2006

-10

-5

0

5

10

15

20

25

30

35

Dec 07 June 08

Divisional operating margins

% P

erc

en

tag

e

Forestry TotalSawmilling Warehousing Plywood

11

1619

0

15,1

5

28

10

3

-10

33,2

12,27

2,75

-3

15

In order to understand the change in nature and structure of the business, the Headline Earnings per Share was divided up into various components. The headline earnings were shown after a notional tax deduction of 28% to make it comparable with the final headline earnings and based on the weighted average shares in issue. The headline earnings per share from operations was 357c per share (net after tax). This is comparable to the 269c earned from the previous period in which the Company did not have any material debt or plantations. The earnings per share from the fair value adjustment of the biological assets was 838c (net after tax).

R cents per share

Y2006 Reported

Y2008 Reported

Less: Interest

Add: Fair value

Y2008 Operational

Less: Fire effectsand restructuring

Y 2008

Y 2006

357

47

838

130

1 019

269

0 200 400 600 800 1 000 1 200 1 400

Headline earnings vs prior years

ANALYSIS OF HEADLINE EARNINGS PER SHARE (HEPS)

Included in the finance expense is a share-based payment of R10,4 million which relates to the conversion right of the preference

shares issued to York’s Staff and Community Trusts during March 2007. This is a once-off charge to the income statement. The 10 million

ordinary shares issued to the Staff and Community Trusts, funded by the IDC, were issued at fair value and will not attract any share-

based payment charge.

As part of the debt funding raised for the acquisition of GFP, York entered into an interest rate swap transaction of R1,15 billion

to hedge itself against the risk of interest rate increases. In terms of IFRS the swap has to be fair valued. The fair value of the swap

resulted in an unrealised profit of R78,8 million, which was included in total finance income.

FINANCE COSTS

18 months 12 months

June December

R'000 2008 2006

Total Finance Expense 204,322 5,282

Total Finance Income (110,421) (2,066)

Net Finance Expense 93,901 3,216



CASH FLOWS

18 months 12 months

June December

R'000 2008 2006

Cash generated by operations 252,333 38,656

Movement in working capital (27,961) (30,641)

Cash generated by operating activities 224,372 8,015

Net finance cost paid (131,666) (4,029)

Taxation paid (5,704) (1,475)

Net cash from operations 87,002 2,511

Capital expenditure (excluding Forestry acquisition) (37,052) (2,004)

Net cash generated 49,950 507

Cash from operations amounted to R252 million (2006: R39 million). Cash flow generated during the period amounted to R50 million after capital expenditure and before forestry acquisitions. All capital expenditure is currently financed out of own cash resources.

WORKING CAPITAL AND CASH FLOWS

18 months GFP 12 Months

30 June Acquisition 31 December

R'000 2008 2006

Inventories 197,908 106,658 34,724

Trade and other receivables 192,108 121,593 59,909

Trade and other payables (233,984) (209,697) (57,676)

156,032 73,198 36,957

Net working capital as % to sales 6,7% 9,4% 9,4%

Net working capital increased from R36,9 million to R156 million. Net working capital of R73 million was acquired through the acquisition of GFP. Working capital as a percentage of sales reduced to 6,7% as at the end of June 2008 as a result of good working capital management. Included in the debtors are insurance collectables of R14,1 million and forestry roadside stock and wetdeck stocks of R26,6 million, accumulated largely as a result of the fire.

17

LOANS AND BORROWINGS AND FINANCIAL INSTRUMENTS

The net debt after cash amounted to R970 million as at 30 June 2008, which is a reduction of 6% from December 2007. The Group complied with all of its debt covenants during the period under review.

The current debt exposure of the Group of R1,2 billion relative to the value of its biological asset of R2 billion is considered reasonable. When financing a forest purchase using debt it is optimal that the repayment of the loan is made over the life cycle of the forest (24 years). The structure of the debt package was designed to match the life cycle of the forest as close as possible. This results in only 48% of the loan being repaid over 7 years. Included in the total loan facilities of R1,192 million are loans amounting to R630 million for which no capital payments are required until July 2014 (July 2014: R200 million; July 2015: R430 million). These large capital payments could be refinanced at that time.

18 months 12 months 12 months

ended ended ended

30 June 31 December 31 December

R'000 2008 2007 2006

Interest bearing debt

Long-term 1,128,545 1,153,263 32,757

Short-term 64,109 67,027 12,050

Cash (222,538) (189,638) (41,731)

Net debt cash 970,116 1,030,652 3,076

Fixed % 92% 96% 0%

Floating 8% 4% 100%

Net debt as % of biological asset 49% 68% 17%

Debt equity ratio 37% 45% 3%



BIOLOGICAL ASSETS

The total plantable area of the Group's plantations comprise 60,759ha. As at the year-end, the Group had 55,133ha of planted pine and eucalyptus at varying ages and 5,626ha of unplanted areas. The hectares of timber younger than four years was 14,781ha and timber four years and older was 40,352ha. Depending on the age of the trees, a hectare would have an estimated volume (m3) of timber available at any point of time. The current estimated volume of all timber older than four years is 4,489,867m3 of pine and 339,779m3 of eucalyptus, a total of 4,829,647m3. The Group does not estimate a volume for trees that are younger than four years.

Reconciliation of biological assets:

Value

Volume Planted Ha R'000

Opening balance 119,631 1,493 18,000

Purchase of Goedgeloof 147,183 1,786 20,000

Purchase of GFP 5,158,356 54,177 1,321,968

Afforested (planted) Age > 4 years 5,899 34,506

Crop failure (due to July 2007 fire) Age > 4 years (3,520) (18,886)

Clearfell / Harvesting (913,025) (4,946) (301,113)

Harvesting salvage loss (fire effect) (46,410) n/a (15,306)

Growth in trees 611,411 n/a 182,274

Re-mapping of areas (247,499) 244 (44,173)

Increase in selling prices 750,606

Closing balance 4,829,647 55,133 1,947,876

Summary of net standing value:

Total

R'000 R'000 Value

Age < 4 years Age => 4 years R'000

Pine 35,819 1,825,555 1,861,374

Eucalypt 5,669 122,321 127,990

41,488 1,947,876 1,989,364

Less fire damage estimate not yet harvested (34,226)

Add delayed thinnings 15,401

Add timber purchased standing 12,531

Total net standing value 1,983,070

For the timber four years and older and based on the market prices for each m3 of timber, a value is calculated. The timber that is younger than four years is valued at cost incurred (actual planting and maintenance costs). The average price per m3 of timber is R403 after deducting the harvesting costs of approximately R75 per m3 of standing timber.

19

CONCLUSION

The operational earnings of the Group were robust and more than adequate to service the debt burden. The profits from the Fair Value Adjustment in biological assets are unrealized but none the less a reflection of the value of the Group’s assets. The levels of debt are acceptable based on the total asset value of the company and the cash generated by the business.

An investment into the Forestry business is long term in nature, however the Sawmilling and Plywood business are able to generate higher short term cash returns by improved efficiencies. The investment rationale of York remains improving cash flows generated by the Sawmills, with the investment being secured by the Forest values. The de-gearing of the Group over the next few years by capital repayments of loans and growing retained earnings will enhance shareholder value.

The Group is well placed to expand with a cash pile of R222 million and approved unused banking facilities of R180 million (general banking facility of R80 million, working capital facilities of R50 million and undrawn loans of R50 million.) A strong shareholder base with the ability to follow a rights issue for cash further allows the Group to grow in the future.

The last 18 months have projected York into the largest Forestry and Sawmilling business in Africa and has set the foundation to grow further. The results are very satisfactory considering that York had to deal with a substantial fire damage to its plantations and sawmills, the integration of two companies, the restructuring of its balance sheet and the material change in ownership of the Group.

J K H LehmanChief Financial Officer


South Africa’s dry and arid climate means that only a small portion of the country is arable and a fraction of this area is devoted to timber plantations. Of the total South African land area, a mere 0,4% comprises timber plantations that are grown and managed in accordance with the longer and higher quality sawlog regimes, whilst the balance is devoted to the production of short rotation fiber for the paper and particle board industries.

The South African plantation area, which remained static for several decades, has in recent years decreased, large areas of trees having been permanently removed to meet environmental objectives or make way for competing land use. A domestic shortage of timber products was first experienced in 2003 and continues to escalate as demand for timber products grows and timber supplies continue to decline. In 2004, leading timber industry analysts Crickmay and Associates published a report (“The Crickmay Report”) which forecast a significant future shortfall in pine logs. The peak of this shortfall was estimated to be as much as 1 million cubic meters per year, and the shortage was forecast to last for at least 30 years.

The original shortage predicted in The Crickmay Report was exacerbated by South Africa’s worst ever plantation fires in 2007, resulting in a further reduction in long-term sawlog availability. In that single fire season, a total of 84 000 hectares of plantation area in South Africa and Swaziland was damaged or destroyed, including 6,5% of the total pine sawlog plantation area. The immediate aftermath of the fires brought with it huge timber salvage operations, particularly in northern Mpumalanga, and in turn created very large volumes of salvaged timber being stockpiled under irrigation. In the short-term, the salvaged sawlog volume represents

a market glut, with considerably more log volume in storage than the market can consume. A second year of devastating fires followed in 2008 where an estimated 40 000 hectares was damaged over a four day period. The log salvage operations arising from the latest fires may compound the short term oversupply. This short-lived feast will, however, translate into a long-term famine from 2010 onwards once the last of the burnt logs has been consumed.

THE SHORT-TERM PICTURE

Spiralling oil prices, inflation, rising interest rates and the National Credit Act have seemingly combined to cause a slowdown in demand for finished forest products in South Africa’s residential and commercial construction sectors. The demand for sawn timber during the first six months of 2008 was significantly lower than in previous years. Demand began to improve from July 2008 as a result of the electricity savings-related moratorium on large construction projects having been lifted by government.

The upsurge in government infrastructure projects is likely to provide good demand for timber products and these include:

2010 Soccer World Cup-related infrastructure developments,

the Gautrain construction project and construction of power stations,

government’s commitment to the replacement of all informal settlements with affordable housing by the year 2015,

government’s ongoing programme to upgrade the general infrastructure throughout the country.

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•

•

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"The upsurge in government infrastructure projects is likely to provide

good demand for timber products"

THE FUTURE OF THE FOREST PRODUCTS INDUSTRY IN SA

21

Source: Crickmay and Associates

THE LONG-TERM IMPACT

As stated, the projected long-term shortage of timber in South Africa has been exacerbated by the fires of 2007. Crickmay’s preliminary estimates, taking into consideration the effects of the fires on sustainable harvest levels, now indicate shortages of pine logs ranging between 32% and 55% of demand per year for the next 30 years, or as much as 5,8 million m3 per year (see table). While these numbers are indeed acknowledged to be preliminary, they are substantial and foretell a scenario far beyond the “market tension” level.

The industry will have to make up a sizeable portion of this shortfall, or fall victim to invasion by substitute products such as steel and even plastics. The substitute products which are, however, already in short supply, are not well suited to the purpose and are significantly more costly than timber products.

SOUTH AFRICAN PINE LOG SUPPLY AND DEMAND

Preliminary update, including June 2007 fire damage, but not adjusted for changes in demand.

5 Year Period Demand Supply Annual Shortage Shortage Accumulative Shortage

(m3) (m3) (m3) (%) (m3)

2007-11 6,179,690 3,325,033 2,854,658 46 14,273,288

2012-16 6,974,030 4,726,793 2,247,237 32 25,509,479

2017-21 7,876,010 4,919,833 2,956,178 38 40,290,369

2022-26 8,900,584 5,674,593 3,225,991 36 54,420,328

2027-31 10,064,822 4,945,033 5,119,789 51 82,019,278

2032-36 11,388,216 5,802,993 6,305,223 55 113,545,397

Average shortfall of 46% during the first 5 years

Annual average shortfall of 3,7 million m3 for 30 years 2007 to 2036

SA will need to import 500,000m3 to 600,000m3 p.a. of sawn timber during the first decade

The shortage will most likely be mitigated in the short-term by sawn timber and plywood imports. In the longer term, the industry may be able to address the shortfall by optimising the growth, protection and utilisation of its pine sawlog resources and by persuading government that plantation areas should be expanded to meet South Africa’s future needs. The effects of the recent 2008 fires have not yet been calculated, but they will only worsen the extent of the shortage.

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INDUSTRY’S ROLE IN MITIGATING THE SHORTFALL

Various interventions by the timber industry can potentially help to limit the extent of the shortage.

RECOVERY IMPROVEMENTS

Sawmilling recoveries improve as new processing technologies are developed. The current industry average recovery rate of 48% is likely to increase to 54% over the next 25 years. This would mean that by the year 2033, the sawlog supply volume of 5,802,993 m3 shown in the table would yield 3,133,612 m3 of sawn timber, as compared to the 2 ,727,406 m3 of sawn timber produced at today’s industry-wide recovery rates, an improvement of 14,8% which will go toward meeting consumer demand by that time.

ENHANCED TREE GROWTH

Improved timber growth through genetic improvements to the growing stock is likely to increase yields from existing forestry land. Current estimates are that long term, timber growth in South Africa can be improved by some 18% to 24% by the planting of enhanced pine hybrids. Most large timber growers have commenced planting hybrids such as Pinus Elliotii/Carribea and Patula/Tecunumanii.

FIRE PROTECTION

The vast majority of commercial forest fires in South Africa is caused by humans, as opposed to starting from natural causes such as lightning. The industry has reacted to the 2007 fires and is focusing on greater public education and fire awareness, improved weather prediction and fire fighting systems.

TIMBER IMPORTS

Some of the above industry interventions are already underway and will limit the extent of the shortage in the longer term if they are successfully implemented. In the medium term South Africa will need to import sawn timber to make up for the shortages.

On the surface, sawn timber imports would seemingly solve the long-term problem of supply shortages. High value structural sawn timber constitutes about 60% of timber produced by formal sawmills in South Africa and accounts for the highest value products.

Theoretically, the South African industry could simply fill the gap of approximately 500,000m3 to 600, 000m3 of structural sawn timber per year by placing orders to foreign suppliers.

"Improved timber growth through genetic improvements to the growing

stock is likely to increase yields from existing forestry land"


23

Sawn timber imports, however, come with their own problems and, while small volumes of imported structural pine sawn timber have indeed begun to flow into South Africa, large-scale imports have a number of drawbacks and numerous obstacles have been experienced by those attempting such imports to date.

UNIQUE SOUTH AFRICAN STRUCTURAL SAWN TIMBER SIZES

The traditional South African structural sawn timber dimensions, developed over the years to match the country’s pine strength qualities against structural design requirements, are unique. No other timber growing country in the world, save Zimbabwe, manufactures sawn timber which matches South African sizes. At current South African price levels, foreign sawmillers are reluctant to cut South African sizes, as they have difficulty selling the fall down grades and optimising the higher grades that are not suitable for structural timber. Foreign sizes have been imported and reworked to South African sizes with wastage and extra cost, but again the prevailing prices make this option unattractive.

VOLATILE CURRENCY

Most international sawn timber trade is conducted in US dollars. The sawn timber importer in South Africa, therefore, is perpetually exposed to exchange risk. A 10% fluctuation in rand value can change the margins on sawn timber imports by as much as 46%. The volatility of the rand increases the business risk of sawn timber importation for both the foreign supplier and the importer. Forward cover only provides a temporary and costly remedy against rand volatility. In general, the rand needs to be strong against major world currencies to make importing sawn timber financially viable over the long term.


FICKLE EXPORTERS

Most sawn timber suppliers around the world turn to exports when either their own market is in a down cycle or when the demand from their domestic economy is inadequate to absorb the available supply. As soon as those factors change in favour of the domestic option, the tendency is to curtail exports. For that reason, it can be difficult for potential importers to establish reliable, long-term relationships with foreign suppliers.

The South African forest products industry is a prime example of this phenomenon. Sawn timber exports, for many years a significant ingredient of the South African export mix, have slowed to a trickle today thanks to the rise in domestic demand over the past three years.

SOUTH AFRICAN NATIONAL STANDARDS

All structural sawn timber used in municipal areas for the erection of roofs and similar load-bearing applications in South Africa must comply with size and strength specifications developed and regulated by the South African Bureau of Standards and clearly defined in South African National Standards documentation. All such sawn timber must be indelibly marked with its structural grade (i.e. S5, etc) and certified by an accredited auditor. Any imported structural sawn timber must also be tested by one of the certification organisations and must qualify under these standards before formal certification of the source is given and an official stamp issued for that source. This is a time-consuming and costly process, and is certainly a major obstacle for budding importers intending to be in business for the short term or to do spot business in sawn timber imports.


"Optimal long-term success in the South African forest products industry depend upon ownership of raw material resources and protection of those resources"

25

SHIPPING COSTS

Complex logistics giving rise to long lead times, the rising price of oil and the demand for vessel space driven by large import-export countries such as China, have combined to drive ocean freight costs to record levels in the past two years.

The daily charter cost of a 35,000 Dead Weight Tonnage Handy size vessel has quadrupled over the last two years from US$11,500 per day, to US$46,100 per day. Shipping costs make up a significant portion of the total cost of importing low value commodities such as sawn timber and logs, and have made the large scale “breakbulk” shipment of sawn timber to South Africa infeasible. Sawn timber imports to South Africa are thus likely to remain with container freight where a lower cost escalation has been experienced relative to breakbulk costs.

Annual imports of 500,000 m3 of structural sawn timber annually would require no less than 10,000 forty-foot containers per year. Each container, once discharged from the vessel, must be cleared through customs and unloaded; the sawn timber must then be loaded on to a truck and transported to its destination, where it is unloaded again, placed in storage until it is sold to an end-user, and then loaded and transported again. This is a very complicated and costly logistics chain which, again, will not be attractive to the under-capitalised or feint-hearted importer. Margins on timber imports will have to be significantly higher to justify the effort and resources required to meet the projected import volumes, the rand needs to settle down, and local timber prices would need to rise an estimated 15% to 20% to make large-scale imports attractive.

CONCLUSION

Optimal long-term success in the South African forest products industry will certainly depend upon:

ownership of raw material resources

protection and enhancement of those resources

improved sawmill recoveries

achieving and maintaining market share, and

successful participation in the softwood sawn timber import business as a hedge against supply/demand imbalances.

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•

•

In summary, the short-term future for the South African forest products industry is much the same as for the rest of the country’s economy. Long-term, there is very little doubt that the forest products market in South Africa will remain under the tension created by supply shortages. While management and operating improvements, combined with sawn timber imports, will partially close the gap between supply and demand, most notably for structural sawn timber, it is very unlikely that South Africa will see a balance between the two in the next 30 years.

RS ClaunchNon-executive Director


INTRODUCTION

This report seeks to inform stakeholders, ranging from shareholders, communities, employees and their representatives, government and other interested parties about York’s impact and obligations in respect of our employees, the environment, the (local) economy as well as the local communities in which we operate. Our commitment to sustainable development is aimed at improving our performance in our social, economic and environmental activities.

YORK’S CONTRIBUTION IN THE MARKET ECONOMY

York’s core business is to grow trees and manage plantations. Once the trees are matured, they are harvested and the logs are converted in York’s various processing plants into sawn timber and plywood products. The finished products are supplied to the construction, furniture manufacture, joinery and packaging industries.

York’s assets and operations are primarily located in Mpumalanga and the company is headquartered in Sabie. York Timbers is the only Johannesburg Stock exchange (JSE) listed company so far with its head office in Mpumalanga.

York recently created two black economic empowerment deals at R180 million for the local communities and its staff. Through these deals, under-resourced rural communities have been granted an opportunity to participate in the Stock Exchange.

LAND CLAIMS

York has approximately 50% of its land under claim by the previously disadvantaged communities. A comprehensive strategy to deal with the land claims has been developed in conjuction with the Mpumalanga Land Claims Commission. In a nutshell, the strategy entails a community with a valid claim owning the land and York leasing the land and retaining ownership of the plantation. The communities are provided with equity participation in York Timbers by way of the IDC funded equity put aside for this purpose. York has plans to assist such communities with pre- and post-settlement support for business planning (to access government grants), small business development and with preferential procurement in respect of services to York’s core business.

Through the empowerment deals mentioned above, York has not only ensured that the communities derive maximum benefits from the land claimed, but that these communities are empowered to participate at the ownership level of York itself.

York has a transparent relationship with government. York has played a catalytic role in organizing the industry to take a proactive approach in dealing with land claims. Through this initiative, the forestry industry, coordinated by Forestry South Africa, has come up with models that will facilitate the speedy resolution of the land claims in the forestry industry.

SUSTAINABILITY REPORT

"Our commitment to sustainable development is aimed at improving our

performance in our social, economic and environmental activities"

27

YORK’S PEOPLE IN THE WORKPLACE

York consists of a team of highly capable people. Our employees are undoubtedly the single most important ingredient in York’s successful track record to date. York is committed to:

Provide all employees with the opportunity to develop their skills and to participate in training that will improve their workplace competency regardless of race, language, gender, age, disability or religion

Treat its workforce fairly and with dignity and to create a workplace that is free of harassment and unfair discrimination

Work towards an outcome whereby the demographic makeup of the country is reflected within all levels of seniority

In 2007/8, York employed 6,000 employees, made up of 3,700 (62 %) direct employees and 2,300 (38 %) employed by small contractors. In terms of the broad based black economic empowerment definition, the contribution of the various race groups to total employment is 94% African, 1% coloured, 1% Indian and 6% white. The effective average representation of Previously Disadvantaged Individuals (PDIs) in senior, middle, and junior management is 53%.

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FREEDOM OF ASSOCIATION

Approximately 63% of York’s workforce belong to trade unions. The biggest union is CEPPWAWU, representing 51% of the total of York’s employees.

EMPLOYMENT TURNOVER

York’s turnover remains well below the national average. Over the period, York has experienced an average of 0.74% turnover of staff. The high demand of skills in engineering in South Africa has impacted York as skilled artisans were difficult to recruit and retain and bold steps have been taken in the period under review to address this problem.

York considers the training and skills development of its employees as a very important element in the development of both its employees and the company. As a result, York has, over and above collaborating with institutions of higher learning and private service providers, established its own Training Unit to provide technical skills training, equipment handling, computer literacy, life orientation, ABET and apprenticeship programmes to its work force.

In the past financial period, 1 841 members of staff were trained at a cost of R5,1 million in the below mentioned fields as follows:

ABET : 96

Higher Education Diplomas and Degrees : 24

Managerial skills : 102

Technical and Managerial skills : 1 619

ENVIRONMENT

York accepts its role as a responsible steward of the environment wherever it does business. York will at all times operate its business in a manner that is ecologically and socially sound. York is committed to practicing sustainable forestry; to conserve natural resources and energy; and to continually improve its environmental management practices. The sound management of York’s plantations and processing facilities is conducted in strict accordance with the standards demanded by the Forestry Stewardship Council and other relevant bodies.

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"York accepts its role as a responsible steward of the environment wherever

it does business and is committed to practising sustainable forestry"


29

York’s plantations and sawmills are certified by the Forestry Stewardship Council, an international accreditation body. York ensures that all of its products are produced in a manner that is economically, environmentally and sociologically sustainable and strives to service today's needs, while protecting resources for future generations.

To underpin its commitment, York has committed R50 million for the next five years to improve its air quality, water and waste treatment processes at all its sawmills.

BIODIVERSITY MANAGEMENT

York actively promotes biodiversity by setting aside and managing areas suitable for rare animals and plant species to live and grow. Over 60 Red Data Species (species that are classified as Endangered, Vulnerable or Rare such as blue swallow, specific reptiles and bats) have been identified and are closely monitored on the 24,000 hectares of land that York has set aside for conservation.

York owns and manages 1,100 hectares of indigenous forests. These are all considered High Conservation Value Forests (HCVF) in terms of National Forest Act No. 84 of 1998.

NATURAL HERITAGE SITES

York protects and manages seven natural heritage sites, areas designated by the South African government as having environmental or national significance. The sites located on York property include a tree fern reserve, caves as well as rock art paintings. The natural heritage sites provide environmental educational opportunities for organizations such as schools, bird watching clubs and lepidopterist societies. York is ensuring that these national treasures will be around for the enjoyment of future generations.


QUALITY

York has South African Timber Auditing Services (SATAS) certification for all its processed products. Furthermore, York uses the ISO 9001 for most of it sites. During the period, ISO 9001 was rolled out to the Sabie Mill, with Driekop Mill, Jessievale Mill and the Forestry Division to follow.

The Plywood plant is certified to the Certification Europe (CE) standard. The Plywood Plant has been accredited as a supplier by the 2012 London Olympics Technical Committee.

SAFETY

One of the main aims of York is to ensure that a safe working environment is created and maintained for all its employees and the general public. This is achieved by implementing practical procedures and precautions that are to be observed by all employees, contractors and visitors. These procedures and guidelines comply with both statutory requirements as well as the safety standards. The NOSA 5 Star System is being used at all of York’s processing sites. The Forestry Division contractors are using the NOSA 3 Star System. Despite our concerted efforts to improve safety, the team still has a long way to go and in the past year, the following Lost Time Injuries Frequency Rate (LTIFR) was recorded:

"York has South African Timber Auditing Services (SATAS) certification

for all its processed products"


31

HEALTH

York provides occupational and primary health services through its clinics at all its mills. All clinics have a visiting occupational health medical practitioner. The clinics consult an average of 20 – 30 primary health care patients per day. Injuries on duty are also treated at the clinics. Medication is also dispensed from the clinics as they are all licensed in accordance with the Occupational Health and Safety Act No. 84 of 1993. The clinics co-operate with nearby hospitals and the Mpumalanga Department of Health. At some of the more remote villages, such as Jessievale, York clinics are also accessed by the members of the community.

POSITIVE LIVING PROGRAMME

York believes in the notion of “prevention is better than cure”. Therefore, York has introduced the Positive Living Programme that promotes a positive living lifestyle and diet, encompassing its HIV/AIDS programme. The program goes beyond health. It incorporates topics such as stress management, finance management, alcohol and substance use and abuse into monthly topics discussed with employees. Through this programme, a holistic approach to wellness is taken. This programme is driven through 150 Positive Living Champions, deployed throughout the Group.

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1.49 1.50 1.42

2.67

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1.52

3.42

7.62

0.14


CORPORATE SOCIAL RESPONSIBILITY

York is committed to undertake social investment initiatives in the areas of need where it can make a practical and meaningful contribution. In particular, York’s CSI policy is to:

Make a meaningful contribution towards all aspects of health, education, environment, local economic development and sports in the communities in which York conducts its business.

Make a profound impact on those communities that are poor, under resourced and needy.

Comply with the Forestry Charter as a minimum guideline.

In the past period, York has invested more than R1,5 million in corporate social investment projects in the community in the following sectors:

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"York will strive to improve its safety culture and practices, thereby

significantly reducing and eventually eliminating workplace fatalities"

EDUCATION

York has contributed to some of the surrounding schools by:

Upgrading infrastructure and facilities

Donating redundant equipment and furniture

Sponsoring fund raising activities

Sponsoring some of the sporting codes

York has contributed varied donations to at least 11 schools in the surrounding communities. These donations range from rebuilding classrooms to sponsoring outstanding sports teams. In the near future, York will increase its support for training and educational materials and capacity.

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33

HEALTH

THE VILLAGE VEGETABLE GARDENS

The gardens are situated in the staff villages and provide the residents with the opportunity to plant their own fresh vegetables. York provides the residents with training in organic farming techniques and supplies them with their first batch of seedlings. For example, in the Driekop Village the communal garden is about a hectare in size and it is utilized by the 300 residents of the village. Vegetables such as cabbage, beetroot, onions, pumpkin and peppers are being planted in the garden.

LOCAL ECONOMIC DEVELOPMENT (LED)

York is a significant role player in the economies of Thaba Chweu, Msukaligwa and Albert Luthuli municipalities. As a responsible corporate citizen, York is actively involved in the local economic development initiatives. In Thaba Chweu, York is a permanent member of the Local Economic Development Forum (LEDF).

York is also contributing towards LED, developing own initiated socio-economic projects, such as the medicinal plants project for the essential oils market. York has identified 30ha for the planting of Rose Geranium which is one of the key plants used in the essential oils market. Together with land claimant communities, York will develop the project into a commercial venture.

York is the main sponsor of the Sabie Forest Fair that is held annually. The Fair is a showcase event of the forestry industry.

SPORT

Supporting sport in the community and in staff villages is a vital part of York’s community support programmes. York believes that sporting communities are happy and contribute to a more enjoyable socio-economic environment. York contributes by developing and maintaining recreational facilities at all staff villages. Villagers have, for example, their own soccer league. One of the teams is so successful that it plays in the South African Football Association’s (SAFA) third division, the highest league of amateur football in South Africa.

York also sponsors a number of sports activities and tournaments such as the Sabie Experience and the Sabie Shenanigan (cycling), the Uplands Golf Day, the Longtom Road Race and the God’s Window Marathon, to mention but a few.

LOOKING AHEAD

York is committed to contribute towards resolving sustainable development challenges that face our country. York will strive to:

Improve its safety culture and practices, thereby significantly reducing and eventually eliminating workplace fatalities

Improve its environmental management practices

Advance socio-economic transformation in South Africa

Gay MokoenaDirector : Corporate Services

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GOVERNANCE CULTURE

York’s business model is straightforward – maintain and grow mutually beneficial business relationships by ensuring that we provide our customers with quality, needed products at affordable prices that will enable them to make a fair profit or to obtain a fair return on their investment in those products.

Key to our continued growth has been the concept of fair-trading, central to which are the values of accountability, openness and integrity. As such, York’s commitment to good corporate governance is not only compliance driven; it is the framework of our organisational culture and underlies our business strategies. It is a dynamic commitment responsive to the expectations of our stakeholders and infuses York’s stance as a responsible corporate citizen.

KEY GOVERNANCE HIGHLIGHTS

During the period under review York reinvented itself in terms of its governance and ownership structures. Blackstar Plc acquired the shareholding of the erstwhile controlling shareholders and shortly thereafter York’s executive team concluded the acquisition of the Global Forest Products group of companies (GFP).

Resulting from the GFP transaction York’s issued share capital increased more than sevenfold from 11,040,597 shares to 78,370,068 listed ordinary shares plus 2,870,529 voting but unlisted, convertible, non-redeemable, cumulative preference shares.

Except for the executive team of Lance Cooper (CEO), John Lehman (CFO) and Gay Mokoena (previously a non-executive director appointed an executive director in October 2007), the Board and its sub-committees were reconstituted in their entirety. The Board of York comprises eleven directors, eight of whom are independent and/or non-executive directors, with a diversity of skills and experience suited to York’s market capitalisation and market share. Detail of the resignations and appointments of directors appear on page 51.

CORPORATE GOVERNANCE REPORT

35

BOARD OF DIRECTORS

ROLE AND FUNCTION

The Board of directors is the focal point of York’s governance framework. It is a balanced, unitary Board which at year-end comprised as set out above. The Board is collectively mandated to set clear the long-term strategic direction, the annual Board and business plans of the Group and to monitor progress towards achievement of the Group's objectives set against the of economic, environmental and social issues that pertain to York; ensure the integrity of the financial statements to fairly present the state of affairs of the Company and of the Group; maintain and manage an effective system of key risk and internal control, and the highest standard of compliance with the Code of Corporate Practices and Conduct (King II) and with the JSE Listing Requirements; select directors subject to election by the members in general meeting and to evaluate their performance; act in good faith with skill and diligence and exercise the necessary care in carrying out their duties owed to the Company.

Apart from their invaluable role as members of the various Board committees, certain of York’s non-executive directors function in an advisory capacity in respect of operational matters, in which capacity they act as consultants to the executive, subject always to the inherent fiduciary role of all directors in terms of their statutory and other obligations.

NOMINATION PROCEDURE AND SERVICE CONTRACTS

In terms of York’s existing procedure each of the directors must have been separately identified by a sub-committee of the Board, acting as a Nomination Committee, as persons with the required skills and experience to bring to bear on the strategy, performance, standards of conduct and resources of the Company. The Board as a whole individually considers the nomination and values that will ensure diversity and full and free exchange amongst Board members. No director has a service contract enduring beyond a year and re-appointment is subject to performance evaluation. In terms of the Company’s Articles of Association, the Board must from amongst its members appoint executive directors and executive appointments may not exceed a period of three years. In addition, the appointment of new directors and re-appointment of directors who retire by rotation is subject to confirmation at the next Annual General Meeting of shareholders. One-third of the directors is subject to retirement by rotation but they are eligible for re-election should they so offer themselves.


11/1/07 14/2/07 26/2/07 28/3/07 30/5/07 04/9/07 14/11/07 20/2/08 20/3/08 23/4/08

Van Vuuren a a Res.

Kopp a a Res.

De Villiers a a Res.

Tucker a a a a Res.

Motlana a a a a a Res.

Marshall-Smith App. a a a Res.

Myers (Chair) App. a a a a a a a

Bonamour App. a a a a a a a

Claunch App. a a a a a a

Botha App. a a a a a

Meer App. a a a a a

Modise App. a a a a a

Murray App. a a a a

Tipper App. a a a a

Odendaal App. a

Cooper a a a a a a a a a a

Lehman a a a a a a a a a a

Mokoena a a a a a a a a a

2007 2008

BOARD MEETING FREQUENCY AND ATTENDANCE

The Board meets at least quarterly to review results and to receive the reports of the chairpersons of the Audit, Transformation and Remuneration Committees. In the period under review meetings were held and attended as set out in the table below:

Annual General Meeting of 5 June 2007 and Special General Meetings of 20 February 2007 and 9 July 2007 not shown.

AUDIT AND RISK COMMITTEE

ROLE AND PRINCIPAL FUNCTIONS

During the period under review the Board reformulated written terms of reference for the Audit Committee. The committee is mandated to consider and make the appropriate recommendations to the Board in regard to, inter alia, the appropriateness of the expertise and experience of the financial director, the appointment of independent external auditors, the auditors’ remuneration and in particular their involvement in the performance of non-audit services to the Group.


37

26/02/07 30/05/07 21/09/07 27/11/07 19/03/08

Tucker a Res.

Cooper a a Res.

Marshall-Smith a a Res.

Bonamour App. a a a

Botha (Acting Chair) App. a a a

Modise App. a a a

Tipper App. a a a

AUDIT COMMITTEE MEETING FREQUENCY AND ATTENDANCE

The committee meets at least quarterly to examine and review the management accounts, interim results and annual financial statements of the Company. In the period under review meetings were held and attended as set out in the table below:

2007 2008

The financial director, external auditor and internal auditor was present at each meeting by invitation.

RISK MANAGEMENT PROGRAMME

Although ultimately the Board as a whole remain responsible for York’s system of internal control, the Audit Committee is mandated to monitor and supervise the effective functioning of the internal audit function in order to assure the effectiveness of York’s systems of internal control, including internal financial control and business risk management.

York’s risk management programme is integrated at all levels of the Group’s structure. The financial control system is managed by means of a weekly analysis of segmental contributions that are consolidated into detailed monthly management accounts. An independent firm performs an ongoing internal audit of York’s operations and accounts.

The aim is not merely to attain an automated state of compliance but to have structures in place that will monitor key risk areas and further strengthen management’s ability to control, minimise and, where possible, avoid adverse risk. Internal Audit annually submits a work plan and report at senior level to the chairperson of the Audit Committee. It also has unfettered access to the Chairperson of the Board.

York maintains comprehensive insurance cover against unavoidable loss, business interruption, machinery breakdown, etc. Its insurance cover is reviewed annually in consultation with brokers and industry experts. In addition, York, in consultation with its broker and insurer’s representatives conduct operation specific risk audits which are documented and used to systematically further reduce operational risk. These ongoing annual risk audits include the preparation of Fire Protection Plans for its various plantation regions.


28/03/07 30/05/07 01/10/07 19/3/08 11/04/08

Tucker a Res.

Bonamour a a Res.

Myers (Chair) a a a a a

Claunch App. a a a

Meer App. a a a

Murray App. a a a

DISCHARGE OF RESPONSIBILITIES

The Board is satisfied that the Audit Committee has in compliance with its terms of reference performed its responsibilities for the period under review.

REMUNERATION COMMITTEE


The Remuneration Committee is mandated to develop and from time to time to review the remuneration strategy of York. The committee discharges its responsibilities with the assistance of independent remuneration consultants (and their reports based on industry comparatives). The committee reports its recommendations to the Board who, as a whole, considers the committee’s proposals.

The functions of the committee includes the setting of remuneration and incentive packages for the executive directors and certain senior managers, evaluating and rewarding the performance of the executive directors and recommending policy relating to York’s bonus and share based or other incentive programmes. In addition the committee recommends the basis for non-executive directors’ fees and reviews the process for annual salary increases and adjustments when appropriate. The fees payable to non-executive directors are in turn subject to the approval of the shareholders of York in general meeting.

REMUNERATION COMMITTEE MEETING FREQUENCY AND ATTENDANCE

The committee meets at least once a year and during the period under review meetings were held and attended as set out in the table below:

2007 2008

CASH-SETTLED MEDIUM-TERM INCENTIVE PROGRAMME

In the period under review the committee recommended a cash-settled medium-term incentive programme for executive directors and senior management of York, which programme was approved by the Board. The programme was developed as a mechanism to retain key members of management, reward operational performance and to afford key managers the opportunity to benefit from growth in the value of the shares of York. In terms of the programme, and on the appropriate recommendations being received from the Remuneration Committee, the Board will annually allocate a number of phantom shares to key managers. An annual cash bonus, calculated in terms of a pre-determined formula and the number of phantom shares allocated, will be awarded to the manager based on the preceding three-monthly weighted average closing price of York’s shares on the JSE. The cash awards will accrue annually over a three-year period and be payable on a date at the fifth anniversary of the first allocation.

No actual shares will be subscribed for or transferred to the participating key managers. Continued inclusion and the level of participation in the programme are dependent on a number of factors including the manager’s operational performance, previous allocations made and seniority. As such, the Board retains control over the programme and the participation factors.


39

27/11/07 19/03/08

Modise (Chair) a a

Botha a a

Cooper a a

Mokoena App. a

Shareholders will benefit from the programme in that the programme ensures the retention of the services of talented individuals in key positions which in turn assure business continuity in addition to which it aligns management’s interests with those of shareholders by placing the sustained growth of York’s equity at the heart of operational performance.

EXECUTIVE DIRECTORS’ REMUNERATION

The executive directors’ remuneration packages (including performance and other bonuses, incentive programme costs, retirement and medical aid contributions and other costs of employment) are detailed on page 104 of this report.


Having regard to the role and functions of the committee and the strategies implemented the Board is of the view that the Remuneration Committee has carried out its mandate during the period under review.

TRANSFORMATION COMMITTEE


The Transformation Committee was established in late 2007. Its primary objectives are to ensure that York attains transformation in compliance with the Forestry Charter and that the Group is positioned to its best advantage in the industry. To achieve these objectives the committee will assist with the development of policies and guidelines for the management of transformation issues such as procurement, employment equity, human resource development and retention, succession planning and social development.

Principally the committee will provide a forum for discussing transformation issues and presenting key findings to the Board from the ongoing monitoring and reporting processes and ensure that there is a disciplined and co-ordinated approach to all transformation and social issues within the Group.

TRANSFORMATION COMMITTEE MEETING FREQUENCY AND ATTENDANCE

The committee meets at least once annually to consider, inter alia, the Group's employment equity reports and at that time to make recommendations for the ensuing year. During the period under review meetings were held and attended as set out in the table below:

2007 2008

Gay Mokoena, Director Corporate Services, was appointed to the committee at its March 2008 meeting and was, inter alia, charged with implementing a Corporate Social Investment strategy for the York Group; to finalise York’s BEE rating and to evaluate York’s involvement with enterprise development in the timber industry. The progress in these areas is included in the Sustainability Report.



The Board is satisfied that the Transformation Committee has performed its responsibilities for the period under review.

DIRECTORS’ DISCLOSURES AND DEALING IN SECURITIES

SECURITIES TRADING POLICY AND RULES

The Board approved a revised Share Trading Policy and Rules to regulate the dealing in the Company’s securities by directors and employees who may, due to the nature of their duties, come into possession of price sensitive inside information. The policy and rules mirror the provisions of the Securities Services Act 36 of 2004 and the JSE Listings Requirements and is drawn in the spirit of good corporate governance. In summary, the directors and the Company Secretary are prohibited from trading in York securities during any closed periods; at any time when any of the directors are aware of unpublished price-sensitive information and/or if clearance to deal has been refused. Directors must obtain clearance to deal in York securities from the chairperson of the Board and in the case of the chairperson, from the chairperson of the Audit Committee, alternatively, the majority of the other directors serving on the Board.

Closed periods are from 31 December up to the date of publication of the interim results; from 1 June to date of publication of the preliminary, abridged or provisional annual financial statements and also during any period when York securities are traded under a cautionary announcement. The policy is freely available to directors and employees from either the Company Secretary or York’s Human Resources Department.

DIRECTORS’ DISCLOSURE OF CONTRACTUAL INTERESTS

Directors of the Company are obliged and at every Board meeting given the opportunity to disclose any material interest in contracts with the Group in terms of Section 234 of the Companies Act. Such disclosures are noted by the Company Secretary and kept in a separate register of directors’ disclosures.

ORGANISATIONAL INTEGRITY AND CODE OF ETHICS

Directors and employees are required to maintain the highest ethical standards to ensure that our stakeholders are assured of our integrity and good faith in their interaction with us. Ethical guidelines commit us to the concept of fair-trading but also to compliance with a broad range of statutory obligations, industry practices and a vigilant protection of the Company’s interests.

The application of our code echoes the practicalities of the dynamic cultural and corporate environments in which we operate – it is continually changing and adapting to the many synergies created within society as a whole. Our code is a living set of values to ensure that we remain within the mainstream of societal development whilst striving to exceed run-of-the-mill expectations. At York we believe that each individual is able to contribute to the success of the Group. As such the ethos requires of each to: perform to the best of his/her ability; honour the highest standards of ethics in dealing with fellow employees, customers, suppliers, service providers, members of the public and competitors; be dedicated to the improvement of their skills, ability and productivity and also to be good custodians of the Group’s resources utilised in their spheres of activity.


41

FAIR BUSINESS PRACTICES

York subscribes to the principles regulating fair business practices set out in the Competition Act 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 includes collusive conduct.

CORPORATE REPORTING, STAKEHOLDER COMMUNICATION AND RELATIONSHIPS

The Company’s standard of corporate reporting has been recognised by inclusion in the Financial Mail Roll of Honour for companies which have won its annual report trophy more than three times. The Company has also been recognised by way of awards for excellence in corporate reporting given by the South African Institute of Chartered Accountants and the Institute of Chartered Secretaries of South Africa.

York on a regular basis, provides information to stakeholders through the Stock Exchange News Service (“SENS”), the media and its website (www.york.co.za). At the publication of its financial results it engages countrywide with investors and analysts to present the results and to answer questions and generally address any business raised in connection therewith.

Shareholders are invited and encouraged to attend the annual and special general meetings of the Company where voting is conducted by ballot (refer to the notice to shareholders on page 112 of this annual report for detail instructions).

York is involved with several groups and recognised associations in the timber industry and actively engage 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 is reported in the Sustainability Report.

GROUP SECRETARY AND ACCESS TO PROFESSIONAL ADVICE

Directors are entitled to seek independent professional advice, at the Company’s expense, concerning the affairs of the Group and have unfettered access, to the Company Secretary. The Company Secretary performs his duties in accordance with the Companies Act, the JSE Listings Requirements and the provisions of King II 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 to ensure compliance with JSE Listings Requirements and that the proceedings of the Board and its 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 in 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 interests in contracts with the Company.

The appointment and removal of the Company Secretary is considered by the Board as a whole.

KING II COMPLIANCE AND “CONTINUED GOING CONCERN”

The directors of York and the Group as a whole endorse the Code of Corporate Practices and Conduct contained in the King Report on Corporate Governance for South Africa 2002 (“King II”). The directors of York are of the opinion that the York group has, in the year under review, complied with and implemented the requirements of King II as set out therein and codified in the JSE Listings Requirements and other regulatory instruments. The directors believe that the Group operations will continue as going concerns in the financial year ahead.

CERTIFICATE OF THE CHAIRMAN AND THE COMPANY SECRETARY IN TERMS OF SECTION 268(G)(D) OF THE COMPANIES ACT (AS AMENDED) AND SCHEDULE 8 OF THE JSE LISTING REQUIREMENTS (AS AMENDED)

We hereby certify that to the best of our knowledge the Company has lodged with the Registrar of Companies all returns as are required of a public company in terms of the Companies Act and that all such returns are true, correct and up-to-date and that all legal requirements have been fulfilled.

Jim Myers Francois DekkerNon-executive Chairman Company Secretary


Wealth Wealth

2008 created 2006 created

R'000 % R'000 %

The value added by Group operations, being the margin of revenue over expenditure on raw materials and third party services, is an indication of the wealth created by the Group’s activities and is directly dependent upon our effectiveness in making York products and our skill in marketing them. The statement below summarises the total cash wealth created and how it was disbursed among the Group’s stakeholders, leaving a retained amount which was re-invested in the Group for the replacement of assets and the further development of operations.

CASH VALUE ADDED STATEMENTFOR THE 18-MONTH PERIOD ENDED 30 JUNE 2008

Cash generated:

Cash derived from revenue 1,387,534 369,312

Income from investments and interest received on cash balances 31,613 1,253

Paid to suppliers for materials and services (912,267) (303,275)

Cash value added 506,880 100.0 67,290 100.0 Cash utilised to:

Remunerate employees for services 250,895 49.5 58,022 86.2

Pay direct taxes to the state 5,704 1.1 1,475 2.2

Provide lenders with a return on borrowings 163,279 32.2 5,282 7.9

Cash disbursed among stakeholders 419,878 82.8 64,779 96.3

Cash retained in the Group 87,002 17.2 2,511 3.7 Note to Cash value-added statement Contribution to government

Direct taxes (as above) 5,704 1,475

Value-added taxes 40,470 14,906

Regional service council levies 23 188

Rates and taxes paid to local authorities 6,869 1,470

Amounts deducted from remuneration paid to employees 58,501 4,839

Total contributions 111,567 22,878

43

Borrowings

Interest bearing long- and short-term financing from third parties.

Capital employed

The sum of debt plus equity.

Company/Group

Company — The York Timber Organisation Limited.

Group — The York Timber Organisation Limited and its subsidiaries.

Debt

The sum of long-term borrowings and short-term borrowings less cash resources.

Debt equity ratio

Debt divided by debt plus equity.

Earnings/(loss)

Net profit/(loss) from ordinary activities.

Earnings/(loss) per share

Earnings/(loss) divided by the weighted average number of shares in issue during the year.

Equity

Total shareholders' funds.

Headline earnings/(loss) per share

Earnings/(loss) adjusted for items of a capital nature divided by the weighted average number of shares in issue during the year.

Net asset value per share

Equity divided by the number of shares in issue.

Net cash inflow/(outflow)

Net increase/(decrease) in bank balances and cash.

DEFINITIONS OF TERMS


18 months

to June

2008 2006 2005 2004 2003 2002 2001

TRADE IN YORK SHARES ON THE JOHANNESBURG SECURITIES EXCHANGE

SHAREHOLDERS PROFILEFOR THE 18-MONTH PERIOD ENDED 30 JUNE 2008

Number of Number of

shareholders % shares %

SHAREHOLDER SPREAD

1 - 1000 shares 203 30.52 73,144 0,09

1,001 - 5000 shares 267 40,15 568,193 0,73

5,001 - 10,000 shares 75 11,28 492,553 0,63

10,001 - 50,000 shares 73 10,98 1,376,239 1,76

50,001 shares and over 47 7,07 75,859,939 96,80

Total 665 100% 78,370,068 100%

DISTRIBUTION OF SHAREHOLDERS

Banks 4 0.60 8,041 0.01Broker 3 0.45 148,969 0.19Close Corporations 13 1.96 23,518,748 30.01Endowment Funds 4 0.60 12,002 0.02Individuals 491 73.84 3,550,031 4.53Insurance Companies 1 0.15 21,240 0.03Investment Companies 2 0.30 5,420,125 6.92Medical Aid Schemes 1 0.15 60,850 0.08Mutual Funds 20 3.01 18,745,635 23.92Nominees & Trusts 58 8.72 536,685 0.68Other Corporations 25 3.76 8,387,153 10.70Pension Funds 5 0.75 690,341 0.88Private Companies 37 5.56 17,222,048 21.97Share Trust 1 0.15 48,200 0.06 Total 665 100 78,370,068 100

Number of transactions 2,152 116 254 72 30 27 25

Number of shares traded '000 18,777,625 192 282 162 107 75 42

Value of shares traded R000 451,924,669 2,378 2,925 482 207 119 38

Highest price cents 4,000 1400 1415 400 205 190 150

Lowest price cents 1,000 851 310 200 160 135 72

JSE Building & Construction Index 27,468 49,425 28,361 21,144 14,227 13,114 8,823

JSE Industrial Index 10,519,192 21,598 17,597 11,797 8,244 5,910 7,764

45

PUBLIC / NON-PUBLIC SHAREHOLDERS

Non - Public Shareholders 11 1.65 65,730,472 83.87Directors of the Company holdings 7 1.05 21,288,771 27.16Share Trust 1 0.15 48,200 0.06Strategic Holdings (more than 10%) 3 0.45 44,393,501 56.65Public Shareholders 654 98.35 12,639,596 16.13

Total 665 100 78,370,068 100

BENEFICIAL SHAREHOLDERS HOLDING 3% OR MORE

Industrial Development Corporation 23,333,333 29.77Lereko Metier Capital Growth Fund 12,924,314 16.49Blackstar Investors Plc 8,135,854 10.38Bridge Creek Trading 10 (Pty) Limited (York Community Trust) 7,200,000 9.19RMB Ventures Four (Pty) Limited 5,000,000 6.38Coronation Capital 5,000,000 6.38Auburn Avenue Trading 55 (Pty) Limited (York Staff Trust) 2,800,000 3.57

BREAKDOWN OF NON-PUBLIC HOLDINGS

Lereko Metier Capital Growth Fund (represented by P Botha) 12,924,314 60.71 Blackstar Investors Plc (represented by A Bonamour) 8,135,854 38.22 Cooper, L 138,603 0.65 Lehman, J 50,000 0.23Mokoena, G 40,000 0.19

Total 21,288,771 100.00

STRATEGIC HOLDINGS (MORE THAN 10%)

Industrial Development Corporation 23,333,333 29.77Lereko Metier Capital Growth Fund 12,924,314 16.49Blackstar Investors Plc 8,135,854 10.38

Total 44,393,501 56.64

SHARE TRUST The York Timber Organization 48,200 0.06

Total 48,200 0.06

Number of Number of

shareholdings % shares %

SHAREHOLDERS PROFILEFOR THE 18-MONTH PERIOD ENDED 30 JUNE 2008


COUNTRY OF INCORPORATION AND DOMICILE South Africa

COMPANY REGISTRATION NUMBER 1916/004890/06

NATURE OF BUSINESS AND PRINCIPAL ACTIVITIES Forestry and sawmilling

REGISTERED OFFICE AND BUSINESS ADDRESS York Corporate Office 3 Main street, Sabie 1260POSTAL ADDRESS PO Box 1190, Sabie 1260

SPONSORS Barnard Jacob Mellett Corporate Services (Pty) Ltd BJM House, 24 Fricker road Illovo Corner, Illovo 2196 PO Box 62200, Marshalltown 2107

TRANSFER SECRETARIES Computershare investor Services 2004 (Pty) Ltd Ground floor, 70 Marshall street Johannesburg 2001 PO Box 61051, Marshalltown 2107

AUDITORS KPMG Inc. Registered Auditors

SECRETARY Jan Francois Dekker

GENERAL INFORMATION

DIRECTORS' RESPONSIBILITY AND APPROVAL 47

REPORT OF THE INDEPENDENT AUDITORS 48

DIRECTORS' REPORT 49

BALANCE SHEETS 54

INCOME STATEMENTS 55

STATEMENTS OF CHANGES IN EQUITY 56

CASH FLOW STATEMENTS 57

NOTES TO THE ANNUAL FINANCIAL STATEMENTS 58

CONTENTS OF THE ANNUAL FINANCIAL STATEMENTS

THE REPORTS AND STATEMENTS SET OUT BELOW COMPRISE THE FINANCIAL STATEMENTS PRESENTED TO THE SHAREHOLDERS

47

TO THE MEMBERS OF THE YORK TIMBER ORGANISATION LIMITED

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

statements of The York Timber Organisation Limited, comprising the balance sheets at 30 June 2008, and the income statements, the

statements of changes in equity and cash flow statements for the period 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 in the manner required by the Companies Act of South Africa.

The directors’ responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation

of these financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate

accounting policies; and making accounting estimates that are reasonable in the circumstances.

The directors’ responsibility also includes maintaining adequate accounting records and an effective system of risk management.

The directors’ have made an assessment of the Group and Company’s ability to continue as a going concern and there is no reason to

believe the businesses will not be going concerns in the year ahead.

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

with the applicable financial reporting framework.

APPROVAL OF THE ANNUAL FINANCIAL STATEMENTS

The Group annual financial statements and annual financial statements of The York Timber Organisation Limited, set out on pages 49 to 111,

as identified in the first paragraph, were approved by the board of directors on 16 September 2008 and were signed on its behalf by:

Lance Stuart Cooper John Kingsley Heyns LehmanDirector Director

DIRECTORS' RESPONSIBILITIES AND APPROVAL


TO THE MEMBERS OF THE YORK TIMBER ORGANISATION LIMITED

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying Group annual financial statements and the annual financial statements of The York Timber Organisation

Limited, which comprise the balance sheets as at 30 June 2008, the income statements, the statements of changes in equity and cash flow

statements for the 18 months then ended, and the notes to the financial statements, which include a summary of significant accounting policies

and other explanatory notes, and the director’s report as set out on pages 49 to 111.

DIRECTORS' RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The Company's directors are responsible for the preparation and fair presentation of these financial statements in accordance with International

Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. This responsibility includes: designing,

implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are

free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting

estimates that are reasonable in the circumstances.

AUDITORS' RESPONSIBILITY

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with

International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the 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 auditors' judgement,

including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order

to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting

estimates made by the directors, 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.

OPINION

In our opinion, these financial statements present fairly, in all material respects, the consolidated and separate financial position of the The York

Timber Organisation Limited at 30 June 2008, and its consolidated and separate financial performance and consolidated and separate cash flows

for the 18 months then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies

Act of South Africa.

KPMG Inc.

Registered Auditors

Per: S van den Boogaard

Chartered Accountant (SA)

Registered Auditor

Director

16 September 2008

REPORT OF THE INDEPENDENT AUDITORS FOR THE 18-MONTH PERIOD ENDED 30 JUNE 2008

KPMG Forum

1226 Schoeman Street

Hatfield

0028

49

REPORT OF THE DIRECTORS FOR THE 18-MONTH PERIOD ENDED 30 JUNE 2008

HISTORY AND BUSINESS OF YORK

The York Timber Organisation Limited commenced business as a merchant trader in 1895. The business was formally incorporated in 1916, as

Katzenellenbogen Limited, and listed its shares on the JSE Securities Exchange of South Africa on 24 June 1946, offering 220,000 of its 640,000

issued share capital to the public.

Implementing a diversification strategy in 1963, York through its chief operating subsidiary York Timbers, commissioned timber seasoning kilns

in Pretoria. This strategy culminated in the 1970 acquisition of York’s first sawmill, Nicholson & Mullin and later in the same year, its York Lumber

sawmill. During this time and the ensuing period York divested itself of its commercial retail, property, public transport and quarrying business

interests whilst maintaining a market presence in the manufacture of glue laminated beams and structural roof trusses.

In 1980 the name of the Company was changed to The York Timber Organisation Limited to reflect the nature of its business.

With a clear vision for the future York continued on this growth path and over time acquired a further three sawmills; the Madiba, Roburnia

and Golden Rhino sawmills, as well as developing a timber value adding facility to further diversify its product offering. In 2002 York created its

warehousing division, initially to complement its network of timber agents and later, as York’s in-house marketing strategies took increasing

effect, as a stand-alone business aimed at increasing market development and penetration through superior distribution capability coupled with

just in time deliveries of a complete range of timber products that are manufactured locally or abroad by third parties.

York’s core business at that time was sawmilling. Since its first venture into the industry and to underpin its core operations York, together with

black empowerment consortiums, for a number of years participated in all of the tender processes aimed at privatising the state owned forestry

assets of the South African Forestry Company Limited and its parastatal Komatiland Forests (Pty) Limited. For various reason government was

unable to bring these assets to market and York embarked on a strategy to secure its own supply of raw material through the acquisition of

strategically located and privately owned commercial plantations.

In 2005 it acquired the Taurus plantations; the consideration settled in cash and parent equity and in the 2006 the Goedgeloof plantations. During

that year negotiations had also commenced with the AIM listed UK entity Blackstar Plc, which culminated in the 2007 sale by the erstwhile

controlling shareholders of York of their stake to Blackstar Plc.

By that time York management had also finalised York’s bid for the acquisition of the Global Forest Products group of companies (GFP). The

acquisition was successfully concluded in July 2007 for a purchase consideration, inclusive of acquisition costs, of R1,703 billion settled by cash

raised from a rights offer and debt facilities extended by Rand Merchant Bank Limited. The subsequent reorganisation created York the largest

vertically integrated forest products and sawmilling business in Africa.

In addition to York’s continuing national network of warehouses and value adding activities, York owns seven product specific sawmills located

across the Mpumalanga province, the most advanced plywood manufacturing facility in the country and a land holding of approximately 96,000ha.

Notwithstanding the effects of the forest fires which occurred during the closing of the acquisition transaction, 60,000ha of the land holding is

sustainably managed Forest Stewardship Council certified pine and eucalyptus afforested plantations. These timber lands make York self sufficient

in 60% of its raw material requirement.

York operates in various markets, domestic and exports overseas, and in various sectors of the timber trade and industry. As stated the core

businesses are commercial forestry and sawmilling. Our log mills convert round softwood into a wide range of sawn timber and value added

wood products as well as wood chips sold to paper manufacturers. Our timber products are sold predominantly through York’s sales and marketing

division and to a small extent through a network of independent timber agents to the construction, furniture, packaging and other industries,

as well as to timber merchants generally.


In addition to its core activities, York has investments in revenue-producing and unimproved realty. Certain of the investment properties have

been and/or are held for sale now or pending development in conjunction with both local authorities and private investors.

York provides financial and technical support to a number of business partners locally and abroad. Black empowerment and enterprise development

is one of the focus areas of York’s strategy development and in the year under review York has had the support of black empowerment enterprises

such as Silulu Investment Services (Pty) Limited and ILH Holdings (Pty) Limited. York is itself in excess of 25% black-owned.

REVIEW OF OPERATIONS AND SALIENT FINANCIAL RESULTS

The results for the 18-months ended must be read in the context of the merger with GFP. The detailed results of the Groups operations for

the period are set out in the income statement on page 55.

The accompanying financial statements show revenue increasing by 286% from R394 million in 2006 to R1,522 billion in 2007/8 and Group

profit before taxation of R758 million compared with a profit of R42 million for the previous year.

Earnings per share increased 259% from 284 cents in 2006 to 1019 cents in 2007/8.

The segmental report is set out on page 67.

The net asset value of the Group increased from 941 cents per share at the end of 2006 to 2113 cents in 2007/8.

The annual financial statements of the Group are set out on page 49 to 111.

LITIGATION

In December of 2007 a judgement was handed down in respect of previous disputes with the Lone Creek River Lodge. York continues to

adhere to the court order.

Several claims from third parties were lodged against York in respect of damages allegedly caused by veld fires in 2007, A court case to address these claims has been scheduled for early 2009. Total value of claims amount to R3,3 million. York is fully insured against any third party claims.

Neither York nor its subsidiaries are involved in any other litigation other than the routine collection of recalcitrant trade receivables.

SUBSIDIARIES

The attributable interest of the Company in the aggregate profit after taxation of its subsidiaries for the year was R565,6 million compared with

a profit of R28,2 million in 2006. Further details of the Company’s subsidiaries are set out in note number 10 to these financial statements.

ACCOUNTS

The accompanying financial statements have been prepared based on the underlying assumption of a going concern and in accordance with

the accounting framework as required by International Financial Reporting Standards (IFRS). The Group's accounting policies have been

consistently applied for the comparative period.


51

BORROWING POWERS

York and its subsidiaries’ borrowings are not limited by their respective Articles of Association. Borrowings increased gearing to 36,3 %

from 2,9% in the previous period.

POST BALANCE SHEET EVENTS FIRE UPDATE 2008

Fires caused by high winds and temperatures combined with low humidity to create orange to red Fire Danger Indexes (FDI) occured

during August, when 100km/h winds fanned several wildfires across South Africa. A portion of York’s highveld plantations was damaged.

The fire that damaged the York plantation, started on a neighbouring property and jumped roads and boundaries.

A final estimate of York’s damaged area is 1,620 ha of pine and 345 ha of eucalyptus. York has insurance cover for its plantations and the

preliminary financial impact is limited to the R5 million excess aggregate payment, with the balance of the damage being covered by the

insurers. A total of 117,000 m3 of logs will be salvaged during the next few months. The highveld plantations were planning to harvest

149,000 m3 during the year ahead and the salvage volumes are thus well within the Group’s harvesting and sawing capacity A rapid

harvesting process will necessitate the wet deck storage of 42,000 m3. An efficient planting programme will ensure that the long-term

impact of the fire will be minimised. The insurance cover also includes the replanting costs of all the burnt trees under seven years.

DIRECTORS

The directors in office at the date of this report are as follows:

J P Myers appointed 26 February 2007

A D Bonamour appointed 26 February 2007

P C Botha appointed 4 September 2007

R S Claunch appointed 30 May2007

L S Cooper

S G Murray appointed 4 September 2007

T J Modise appointed 4 September 2007

T G Mokoena

S A U Meer appointed 4 September 2007

J K H Lehman

P B Odendaal appointed 26 March 2008

The following directors resigned during the course of the period:

A C de Viliers resigned 26 February 2007

I S D Tucker resigned 30 May 2007

M J van Vuuren resigned 26 February 2007

S Motlana resigned 4 September 2007

W J Kopp resigned 26 February 2007

G Tipper resigned 30 April 2008

W Marshall-Smith resigned 4 September 2007


DIRECTORS’ SHAREHOLDINGS

The interests of the directors in the ordinary share capital of the Company set out in terms of paragraph 3.83 read with paragraphs 8.63(d)

of the JSE Listings Requirements, are as follows:

Direct holding

Name 2007/8 2006

L Cooper 138,603 78,603

J Lehman 50,000 0

G Mokoena 40,000 0

Beneficial direct / indirect allocation

Name Direct Beneficial Indirect Beneficial Percentage

L Cooper 138,603 — 0.177%

J Lehman 50,000 — 0.064%

G Mokoena 40,000 — 0.051%

SHARE CAPITAL

The authorised and issued share capital changed twice during the period under review:

FEBRUARY 2007

Of its authorised share capital of 20,000,000 shares, the Company repurchased and delisted 2,870,529 York ordinary shares of the 11,040,597

ordinary shares in issue and in the place thereof created and issued 2,870,529 non-redeemable convertible preference shares at par of

R0.05 and a subscription price of R9.83 per preference share to two special purpose vehicles set up for the benefit of staff and previous

disadvantaged communities. The total aggregate ordinary share capital then amounted to R408 503, consisting of 8,170,068 York ordinary

shares in issue and a share premium of R3,061,301 and 2,870,529 York preference shares with total preference share capital of R144,000.


53

JULY 2007

York’s authorised share capital was increased from R1,000,000 by 80,000,000 shares to R5,000,000 being 100,000,000 shares with a nominal

value of R0.05 each. Of the authorised share capital an additional 70,210,000 York ordinary shares were issued through a specific issue for cash

and a vendor consideration issue at an issue price of R15.00 per share bringing the number of York ordinary shares in issue to 78,370,068. The

total ordinary share capital now amounts to R3,91 million, consisting of the 78,370,068 York ordinary shares in issue and a share premium of

R1,02 billion and 2,870,529 York preference shares with total preference share capital of R144,000. These changes were advised to shareholders

in the circular setting out the acquisition of the GFP Group of companies and York’s revised listing particulars and were approved by at a general

meeting of shareholders held on 9 July 2007.

At the annual general meeting of shareholders held on 5 June 2007 the un-issued share capital was placed under the control of the directors.

There has been no consolidation or sub-division of securities during the preceding three years.

The number of ordinary shares issued at 30 June 2008 was 78,370,068 compared to 11,040,597 at 31 December 2006.

DIVIDENDS

Taking into consideration the debt facilities extended by York’s bankers for the GFP acquisition and other growth plans, no dividend (save preference

dividends) was declared during the period under review. During the previous year no dividend was declared.

For and on behalf of the board

Jim Myers Lance CooperChairman Chief Executive Officer


BALANCE SHEETS

FOR THE 18-MONTH PERIOD ENDED 30 JUNE 2008

Group Company

30 June 31 December 30 June 31 December 2008 2006 2008 2006 Note R'000 R'000 R'000 R'000

Assets

Non Current Assets

Property, plant and equipment 5 363,511 65,801 806 993

Biological assets 6 1,718,407 18,000 — —

Goodwill 7 610,352 — — —

Investment property 8 4,920 5,900 — —

Other financial assets 9 80,669 902 589 902

Investments in subsidiaries held by the Company 10 — — 1,884,808 11,342

Instalment sale receivables 11 1,005 — — —

2,778,864 90,603 1,886,203 13,237

Current Assets

Inventories 12 197,908 34,724 — —

Biological assets 6 264,663 — — —

Other financial assets 9 265 — — —

Trade and other receivables 13 192,108 59,909 1,984 78

Instalment sale receivables 11 1,848 — — —

Cash and cash equivalents 14 222,538 41,731 176 411

Non-current assets held for sale 15 1,023 2,200 — —

880,353 138,564 2,160 489

Total Assets 3,659,217 229,167 1,888,363 13,726

Equity and Liabilities

Equity

Issued capital 17 3,919 552 3,919 552

Reserves (219) 144 (219) 144

Share premium 17 1,002,622 3,061 1,002,622 3,061

Share based payment reserve 18 10,446 — 10 446 —

Retained earnings 638 900 100,150 825,103 6,990

1,655,668 103,907 1,841,871 10,747

Liabilities

Non-Current Liabilities

Loans and borrowings 19 1,096,983 26,582 28,217 —

Finance lease obligation 20 31,562 6,175 — —

Retirement benefit obligation 21 17,431 — — —

Provisions 22 54,643 7,889 — —

Deferred tax 23 498,615 9,414 — 339

Share-based payment 18 733 — 733

1,699,967 50,060 28,950 339

Current Liabilities

Loans and borrowings 19 59,833 10,244 — 2

Trade and other payables 24 233,984 57,676 17,057 2,085

Current tax payable 5,489 5,474 485 544

Finance lease obligation 20 4,276 1,806 — 9

303,582 75,200 17,542 2,640

Total Liabilities 2,003,549 125,260 46,492 2,979

Total Equity and Liabilities 3,659,217 229,167 1,888,363 13,726

55

INCOME STATEMENTS FOR THE 18-MONTH PERIOD ENDED 30 JUNE 2008

Group Company


Revenue 26 1,521,581 393,975 — —

Cost of sales (569,804) (242,481) — —

Gross profit 951,777 151,494 — —

Other operating income 38,726 6,649 104 —

Selling, general and administration expense (765,815) (118,319) (10,479) (9,126)

Profit/(loss) from operations 29 224,688 39,824 (10,375) (9,126)

Biological asset fair value adjustment 28 607,308 5,722 — —

Profit/(loss) before finance costs 831,996 45,546 (10,375) (9,126)

Finance income 27 110,421 2,066 169 1,267

Finance expense 27 (204,322) (5,282) (16,501) (209)

Income from subsidiaries 29 — — 844,963 12,208

Profit before tax 738,095 42,330 818,256 4,140

Taxation 31 (199,345) (11,014) (143) (1,021)

Profit for the period 538,750 31,316 818,113 3,119

Earnings per share (cents) 45 1,018 284

Diluted earnings per share (cents) 45 981 284


STATEMENTS OF CHANGES IN EQUITYFOR THE 18-MONTH PERIOD ENDED 30 JUNE 2008

Share Share Total Fair value Share Retained Total equity

capital premium share adjustment based earnings

capital assets payment

available for reserve

R'000 sale reserve

Group

Balance at 01 January 2006 552 3,060 3,612 — — 68,834 72,446

Issue of shares — 1 1 — — — 1

Change in fair value of available for sale financial assets — — — 144 — — 144

Total income and expense recognised directly in equity 144 144

Profit for the year — — — — — 31,316 31,316

Balance at 01 January 2007 552 3,061 3,613 144 — 100,150 103,907

Issue of shares 3,511 1,049,490 1,053,001 — — — 1,053,001

Buy back of own shares (144) (28,074) (28,218) — — — (28,218)

Share based payment — — — — 10,446 — 10,446

Change in fair value of available for sale financial assets — — — (363) — — (363)

Share issue expenses (21,855) (21,855) —) — — (21,855)

Total income and expense recognised directly in equity (21,855) (21,855) (363) — — (22,218)

Profit for the period — — — — 538,750 538,750

Balance at 30 June 2008 3,919 1,002,622 1,006,541 (219) 10,446 638,900 1,655,668

Company

Balance at 01 January 2006 552 3,061 3,613 — — 3,871 7,484

Change in fair value of available for sale financial assets — — — 144 — — 144

Total income and expense recognised directly in equity — — — 144 — — 144

Profit for the year — — — — — 3,119 3,119

Balance at 01 January 2007 552 3,061 3,613 144 — 6,990 10,747

Issue of shares 3,511 1,049,490 1,053,001 — — — 1,053,001

Purchase of own / treasury shares (144) (28,074) (28,218) — — — (28,218)

Share based payment — — — — 10,446 — 10,446

Change in fair value of available for sale financial assets — — — (363) — — (363)

Share issue expenses — (21,855) (21,855) — — — (21,855)

Total income and expense recognised directly in equity — (21,855) (21,855) (363) — — (22,218)

Profit for the period — — — — — 818,113 818,113

Balance at 30 June 2008 3,919 1,002,622 1,006,541 (219) 10,446 825,103 1,841,871

57

CASH FLOW STATEMENTFOR THE 18-MONTH PERIOD ENDED 30 JUNE 2008

Group Company


Cash flows from operating activities

Cash generated/(utilised) by operating activities 34 224,372 8,015 11,433 (8,176)

Finance income 31,561 891 117 92

Income from investments 52 362 52 12,570

Dividend received from subsidiaries — — 836,323 —

Finance expense (163,279) (5,282) (6,055) (209)

Taxation paid 35 (5,704) (1,475) (541) (11)

Net cash from operating activities 87,002 2,511 841,329 4,266

Cash flows from investing activities

Proceeds from sale of property, plant and equipment 13,271 783 35 —

Acquisition of property, plant and equipment – to maintain (50,323) (2,787) — (76)

Acquisition of subsidiaries, net of cash 36 (1,684,520) — (1,703,649) —

(Purchase)/sale of other financial assets (1,587) 10,069 — 10,069

Purchase of biological assets (45,725) — — —

Reduction in purchase consideration of biological assets — 2,000 — — Proceeds from sale of non—current assets held for sale 838 — — —

Increase in investments in subsidiaries — — (169,084) (14,361)

Net cash from investing activities (1,768,046) 10,065 (1,872,698) (4,368)

Cash flows from financing activities

Proceeds on share issue 1,002,928 1 1,002,928 1

Loans and borrowings repaid (273,362) (8,433) — (14)

Loans and borrowings raised 1,107,281 28,880 28,215 —

Increase/(decrease) in finance lease obligation 27,857 — (9) —

Increase in instalment sale receivables (2,853) — — —

Net cash from financing activities 1,861,851 20,448 1,031,134 (13)

Net increase/(decrease) in cash

and cash equivalents 180,807 33,024 (235) (115) Cash and cash equivalents at beginning of period 41,731 8,707 411 526 Cash and cash equivalents at the end of the period 14 222,538 41,731 176 411


1. Reporting entity

The York Timber Organisation Limited (the “Company”) is a company domiciled in South Africa.

The financial statements of the Company for the 18 month period ended 30 June 2008 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). The Group is a forest products enterprise, whose business primarily involves forestry, sawmilling and the trading of timber products.

2. Basis of preparation

(a) Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), and the Companies Act of South Africa, 1973. The financial statements were approved by the Board of Directors on 16 September 2008.

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis except for the following:

financial instruments held for trading and financial instruments classified as available for sale are measured at fair value;

derivative financial instruments are measured at fair value;

investment property is measured at fair value; and

biological assets are measured at fair value less estimated point of sale costs

(c) Functional and presentation currency

The financial statements are presented in Rands, which is the Company’s functional currency. All financial information presented in Rands has been rounded to the nearest thousand.

(d) Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions 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 judgments and estimates are reviewed annually by management.

•

•

•

•

Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. For details of judgments and estimates that have a significant effect on the financial statements, see:

note 6 – Biological assets,

note 7 – Goodwill;

note 8 – Investment property;

note 9 – Other financial assets

note 13 – Trade and other receivables;

note 18 – Measurements of share based payments

note 22 – Provisions; and

note 30 – Impairments of assets, and

note 38 – Contingencies.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by all Group entities.

(a) Basis of consolidation

(i) Subsidiaries

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

(ii) Investments in subsidiaries

Investments in subsidiaries are measured at cost less impairment losses.

(iii) Transactions eliminated on consolidation

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

•

•

•

•

•

•

•

•

•

NOTES TO THE FINANCIAL STATEMENTSFOR THE 18-MONTH PERIOD ENDED 30 JUNE 2008

59

(b) Foreign currency

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at the rate of exchange ruling on the transaction date. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at rates of exchange ruling at the reporting date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Any foreign exchange differences are dealt with in the income statement in the year in which the difference occurs.

(c) Property, plant and equipment

(i) Owned assets

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

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

The cost of self constructed assets and acquired assets includes:

Property that is being constructed or developed for future use as investment property is classified as property, plant and equipment and measured at cost until construction or development is complete, at which time it is re-classified as investment property. On reclassification to investment property, it is re-measured to fair value and any gain or loss arising on re-measurement is recognised in profit or loss.

When parts of an item of property, plant and equipment have different useful lives, those components are accounted for as separate items of property, plant and equipment.

(c) Property, plant and equipment (continued)

(ii) Leased assets

Finance leases

Leases that transfer substantially all of the risks and rewards of ownership of the underlying asset to the Group are classified as finance leases. Assets acquired in terms of finance leases are measured at the lower of its fair value and the present value of the minimum lease payments at inception of the lease, and depreciated over the estimated useful life of the asset. The capital element of future obligations under the leases is included as a liability in the balance sheet.

Lease payments are allocated using the effective interest rate method to determine the lease finance cost, which is charged against income over the lease period, and the capital repayment, which reduces the liability to the lessor subsequent to initial recognition.

The assets under finance leases are treated in the same manner as owned assets.

Operating leases

Leases where the lessor retains the risk and rewards of ownership of the underlying asset are classified as operating leases. Payments made under operating leases are recognised in profit or loss on a straight line basis over the period of the lease.

(iii) Subsequent costs

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

(iv) Depreciation

Depreciation is recognised in profit or loss on a straight line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. Depreciation of an item of property, plant and equipment begins when it is available for use and ceases at the earlier of the date it is classified as held for sale or the date it is derecognised upon disposal.

the initial estimate at the time if installation and during the period of use, when relevant, of the costs of dismantling 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 the timing or outflow of resources required to settle the obligation or from changes in the discount rate

i.

ii.


The estimated useful lives for the current and comparative period are as follows:

Average useful lifeFreehold land and buildings comprise

Land Indefinite

Buildings 10 — 49 years

Roads 40 years

Buildings on leasehold land 10 — 49 years

Plant, equipment and vehicles comprise

Furniture and fixtures 5 years

Plant and equipment 8 — 12 years

Motor vehicles 4 — 27 years

IT equipment 3 — 15 years

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

(d) Financial instruments

(i) 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.

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

Cash and cash equivalents

Cash and cash equivalent comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Available for sale financial assets

The Group’s investments in equity securities and certain debt securities are classified as available for sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (note 3(e) (ii)), and foreign exchange gains and losses on available for sale monetary items (note 3 (b)), are recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit and loss.

Financial assets at fair value through profit and loss

An instrument is classified as fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.

Other

Other non-derivative financial instruments are measured at amortised cost using the effective interest rate method, less any impairment losses.

Determination of fair value

The fair value of financial assets at fair value through profit or loss, held to maturity investments and available for sale financial assets is determined with reference to their quoted market bid price at the reporting date. The fair value of held to maturity investments is determined for disclosure purposes only.

The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at reporting date. The fair value of non-derivative financial liabilities, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows. These payments are discounted at the market rate of interest at the reporting date. In respect of the liability component of convertible notes, the market rate of interest is determined by reference to similar liabilities that do not have a conversion option. For finance leases the market rate of interest is determined by reference to similar agreements.


61

(ii) Derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value. Fair values are obtained from quoted market prices in active markets, including recent market transactions and valuation techniques, including discounted cash flow models and options pricing models, as appropriate. All derivatives are carried as assets when fair value 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 a hedging instrument, and if so, the nature of the item being hedged.

Derivatives not designated for hedge accounting

Certain derivative instruments are not designated for hedge accounting. Changes in the fair value of any derivative instrument that are not designated for hedge accounting are recognised immediately in the income statement under net trading income.

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.

(e) Impairment

(i) Non financial assets

The carrying amounts of the Group’s non-financial assets other than biological assets (refer accounting policy (g)), investment property (refer accounting policy (f)), inventories (refer accounting policy (i)) and deferred tax assets (refer accounting policy (o)) are reviewed at each reporting date to determine whether there is any indication of impairment. If there is any indication that an asset may be impaired, its recoverable amount is estimated. For goodwill, 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 pre-tax discount rate that 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 recoverable amount 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 the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units. Each unit or group of units to which goodwill is so allocated shall represent the lowest level within the entity at which the goodwill is monitored for internal management purposes. Impairment losses recognised in terms of cash generating units are allocated first to reduce the carrying value of any goodwill allocated to the cash generating unit and then to reduce the carrying amount of the other assets in the cash generating unit on a pro rata basis. An impairment loss is recognised in the profit or loss whenever the carrying amount of the cash generating unit exceeds its recoverable amount.

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 for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(ii) Financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available for sale financial asset is calculated by reference to its current fair value.


Individually significant financial assets are tested for impairment on an individual basis. The remaining 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 financial asset recognised previously in equity is transferred to profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available for sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available for sale financial assets that are equity instruments, the reversal is recognised directly in equity.

(f) 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. An external, independent valuation company, having an appropriate recognised professional qualification, and recent experience in the location and category of property being valued, values the portfolio on a three year cycle. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. Any gain or loss arising from a change in fair value is recognised in the profit or loss. Rental income from investment property is accounted for as described in accounting policy (o).

When an item of property, plant and equipment is transferred to investment property following a change in its use, any differences arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognised directly in equity if it is a gain. Upon disposal of the item the gain is transferred to retained earnings. Any loss arising in this manner is recognised immediately in the profit or loss. If an investment property becomes owner occupied, it is reclassified as property, plant and equipment and its fair value at the 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, the property remains an investment property, which is measured based on the fair value model, and is not reclassified as property, plant and equipment during the redevelopment.

(g) Biological assets

Biological assets are measured at fair value less estimated point of sale costs, with any resultant gain or loss recognised in the profit or loss. Point of sale costs include all costs that would be necessary to sell the assets, excluding costs necessary to get the asset to market (e.g. transport costs).

Biological assets comprise of standing trees ranging in ages 1 year through to 25 years. The fair value of standing timber older than 4 years, being the age at which it becomes marketable, is based on the market price of the estimated recoverable wood volumes, net of harvesting costs.

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

(h) Intangible assets

Goodwill

All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of subsidiaries. In respect of business acquisitions that have occurred since 1 January 2003, goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable asset acquired. In respect of acquisitions prior to 1 January 2003, goodwill represents the amount recognised under the Group’s previous accounting framework, SA GAAP. Goodwill is measured at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units and is tested annually for impairment (refer policy note (e)). Negative goodwill arising on acquisitions is recognised directly in profit or loss.


63

(i) Inventories

Raw materials, work in progress and finished goods of timber and timber related products and consumable stores are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course 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 on inventories 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 in accordance with the accounting policy for biological assets (refer policy (g)). Any change in value at the date of harvest is recognised in the profit or loss.

(j) Non current assets held for sale

Non current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. Immediately before classification as held for sale, the assets (or components of a disposal group) are re-measured 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 less costs to sell. Any impairment loss on a disposal group is allocated to goodwill first, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property and biological assets, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on re-measurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

(k) Share capital

Ordinary Shares

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

Preference share capital

Preference share capital is classified as a liability if it is redeemable on a specific date or at the option of the shareholders, or if dividend payments are not discretionary. Dividends thereon are recognised as interest expense in profit or loss.

Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the Company’s option, and any dividends are discretionary. Dividends thereon are recognised as distributions within equity upon approval by the Group’s shareholders.

Dividends

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

(l) Employee benefits

Short-term employee benefits

The cost of all short-term employee benefits is recognised during the period in which the employee renders the related service. The provisions for employee entitlements to wages, salaries and annual leave represent the amount which the company has a present obligation to pay as a result of employees’ services provided to the balance sheet date. The provisions have been calculated at undiscounted amounts based on current wage and salary rates.

Defined contribution plans

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

Defined benefit plans

The Group's policy is not to provide post retirement medical aid benefits to its employees. A provision is made for a close group of existing employees. The Group’s net obligation in respect of a defined benefit medical plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine it’s present value. This value is then reflected as a liability in the annual financial statements with the cost thereof being allocated to the income statement. The calculation is performed every three years by a qualified actuary using the projected unit credit method.


(l) Employee benefits (continued)

Share based payment transactions

The grant date fair value of options granted to employees is recognised as an employee expense, with a corresponding 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.

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 become unconditionally entitled to payment. The liability is re-measured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as personnel expense in profit or loss.

(m) Provisions

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

(n) Revenue

Group revenue comprises sales of goods, commission earned and property rentals received after deducting value added tax. Inter group transactions are excluded on consolidation. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns or allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return 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 is the 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.

(o) Income tax

Income tax expense for the year comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at 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 carrying amounts 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 neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for 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 liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities 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 which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent 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 pay the related dividend is recognised.


65

(r) Earnings per share

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

(s) New standards and interpretations not yet adopted

A number of new standards, amendments to standard and interpretations are not yet effective for the year ended 30 June 2008, and have not been applied in preparing these consolidated financial statements:

IAS 1 Presentation of Financial Statements introduces the concept of comprehensive income. Comprehensive income is all income earned, net of related costs, which is currently shown in both the income statement and statement of changes in equity, other than transactions directly with owners.

The main change in the revised IAS 1 (AC 101) is a requirement to present all non-owner changes in equity, for example foreign currency translation reserve movements, as follows:

in a single statement of comprehensive income (which includes income statement line items), or

in a statement of comprehensive income (which includes only non-owner equity changes). In addition an income statement is disclosed.

For each component of comprehensive income, reclassification adjustments (previously known as “recycling” from equity to the income statement) must be disclosed. The income tax relating to each component of other comprehensive income (items not recognised in profit and loss) must be disclosed. These disclosures may be given either on the face of the statement of comprehensive income or in the notes.

•

•

(p) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or providing products or services within a particular economic environment (geographical segment), which is subject to risks and returns that are different from those of other segments. Segment information is presented in respect of the Group’s business and geographical segments.

The Group’s primary format for segment reporting is based on business segments. The business segments are determined based on the Group’s management and internal reporting structure.

Inter-segment pricing is determined on an arm’s length basis.

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

(q) Finance income and expense

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

Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that 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, unwinding of discount on the provisions, dividends on preference shares classified as liabilities, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets, and losses on hedging instruments that are recognised in profit or loss. All borrowing costs are recognised in profit or loss using the effective interest rate method.


(s) New standards and interpretations not yet adopted (continued)

Owner changes in equity, are presented in the statement of changes in equity. Dividends and related per share amounts are disclosed on the face of the statement of changes in equity or in the notes.

An additional statement of financial position (“balance sheet”) must be presented when the entity restates the comparatives as a result of a change in accounting policy, the correction of an error, or the reclassification of items in the financial statements. This results in the presentation of two comparative periods as well as the current period. The Group will present all non-owner changes in equity in a single statement of comprehensive income (which will include the current income statement) and owner changes in equity in the statement of changes in equity. Reclassification adjustments and income tax relating to each component of other comprehensive income will be disclosed on the face of the statement of comprehensive income. Currently these components are available for sale fair value gains/losses reserve and the foreign currency translation reserve.

IAS 23 Borrowing costs supersedes the existing IAS 23, stating that borrowing costs that are directly attributable to a qualifying asset form part of the cost that asset. Other borrowing costs are recognised as an expense. The Group’s existing accounting policy on borrowing costs will change as a result of the adoption of the revised IAS 23.

IFRS 3: Business combinations supersedes the previous IFRS 3 issued in 2004 and will result in a change in the manner the Group disclose business combinations.

The term minority interest will be replaced by non-controlling interest (NCI) and purchase method of accounting will be replaced by acquisition method of accounting. The revised definition of a business combination includes a set of activities that are not being operated as a business, but that the acquirer can operate as a business. The revised scope includes business combinations achieved by contract alone and business combinations involving only mutual entities (such as mutual insurers or co-operatives).

The acquirer will be able to elect to measure any NCI on acquisition of a subsidiary, on a transaction-by-transaction basis, at either:

the FV as determined at the acquisition date (in this case goodwill is recognised in full and not based on the acquirer’s pro-rata share acquired), or

the proportionate interest of the non-controlling interest in the FV of the identifiable assets and liabilities of the acquiree.

Transaction costs incurred by the acquirer have to be expensed and are no longer part of the cost of the business combination. The initial recognition of a contingent purchase consideration is at fair value on the acquisition date regardless of the possibility of meeting the contingent event, i.e. profit target. All subsequent changes in fair value will be recognised in profit or loss. For successive share purchases (step acquisitions), the identifiable assets and liabilities will be recognised at fair value when control is obtained and a gain or loss will be recognised in profit and loss for the difference between the carrying value of the previously held equity interests. The standard applies for financial periods commencing on or after 1 July 2009, and only to those acquisitions where the acquisition date falls within this reporting period or thereafter.

IAS 27 Consolidated and Separate Financial Statements

Limited amendments have been made to IAS 27 Consolidated and Separate Financial Statements as a result of the issue of the revised IFRS 3 Business Combinations. The amendments relate mainly to the accounting for changes in the non-controlling (minority) interest in a subsidiary and the loss of control in a subsidiary:

Acquisitions of additional non-controlling equity interests after control has been obtained are accounted for as equity transactions. Disposals of equity interests while retaining control are accounted for as equity transactions. As a result profit or loss is unaffected. Transactions giving rise to a loss of control, through sale or otherwise, will result in a gain or loss being recognised in profit or loss. Where a non-controlling interest is retained, the gain or loss will include a re-measurement to fair value of the retained equity interest in the investee. The amendments to IAS 27 (AC 132) also require losses to be allocated to the non-controlling interest even if doing so causes the non-controlling interest to be in a deficit position. Losses include negative “other comprehensive income” as detailed in the revised IAS 1. All these amendments have to be applied prospectively. The Group’s existing accounting policy on interest in subsidiaries will change as a result of the adoption of the amended IAS 27.

•

•


67

Sawmilling Plywood Merchandising Forestry Elimination Consolidated

R'000 2008 2006 2008 2006 2008 2006 2008 2006 2008 2006 2008 2006

4. Segmental reportBusiness segmental analysisRevenue

External sales 916,241 230,657 180,064 — 368,941 160,807 56,335 2,511 — — 1,521,581 393,975

Inter-segment sales 45,710 5,010 — — 34,483 — 461,618 — (541,811) (5,010) — —

Total revenue 961,951 235,667 180,064 — 403,424 160,807 517,953 2,511 (541,811) (5,010) 1,521,581 393,975

Result

Fair value adjustment biological assets 607,308

Trading 112,465 (5,860) 10,147 172,318

Segment result 112,465 35,359 (5,860) — 10,147 8,106 779,626 3,668 — — 896,378 47,133

Unallocated expenses (64,382) (1,587)

Profit from operations 831,996 45,546

Net Finance Costs (93,901) (3,216)

Income tax expense (199,345) (11,014)

Profit for the year 538,750 31,316

Segment assets 409,471 144,650 98,397 — 83,118 47,554 2,153,193 17,611 2,744,179 209,815

Unallocated corporate assets 915,038 19,352

Consolidated total assets 3,659,217 229,167

Segment liabilities 176,150 35,330 15,970 — 34,621 25,907 45,042 — 271,783 61,237

Unallocated corporate liabilities 19,427 4,328

Non-current and current loans and borrowings 1,208,235 44,807

Taxation and deferred

taxation 504,104 14,888

Consolidated total liabilities 2,003,549 125,260

Additions to biological assets — — — — — — 45,725 — 45,725 —

Capital expenditure 22,299 6,132 469 — — 864 14,321 — 37,089 6,996

Depreciation 20,653 4,532 1,754 — 514 236 3,286 — 26,207 4,768

Impairment of tangible assets — 300 — — — — — 300



4. Segmental report (continued)

Business segments:

The segmented trading results is reported as the operating profits by divisions before depreciation, tax and interest and excluding fair value

adjustments. The Group is organised into four major operating divisions - Sawn timber products, Plywood, Merchandising and Forestry.

The divisions are the basis on which the Company reports its primary segment information. The Sawn timber products segment produces

and sells a broad range of structural & industrial sawn timber products. The Plywood division manufactures and sells plywood products.

The Merchandising division buys and sells timber related products on a wholesale basis. The Forestry division owns plantations on which

it grows pine and eucalyptus trees that are felled on a rotational basis and then sold.

Geographical segments:

The Group regards its business as a single geographical segment.

Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of operating cash, receivables, inventories and

property, plant and equipment, net of allowances and provisions. While most such assets can be directly attributed to individual segments,

the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment

liabilities include all operating liabilities and consist principally of accounts, wages and accrued liabilities. Segment assets and liabilities do

not include deferred income taxes and taxes currently payable.

Inter-segment transfers:

Segment revenue, segment expenses and segment results include transfers between business segments. Such transfers are accounted for at competitive market prices charged to unaffiliated customers for similar goods. Those transfers are eliminated in consolidation.

There were no changes in segment accounting policy, although two new segments were added due to the business combination.

The segment report was prepared in accordance with IFRS 8, which was early adopted. The standard is applicable for periods beginning on or after 1 January 2009.

69

2008 2006

Accumulated Carrying Accumulated Carrying

Cost depreciation value Cost depreciation value

R’000 R’000 R’000 R’000 R’000 R’000

5. Property, plant and equipment

Group

Land 145,566 (590) 144,976 — — —

Buildings 92,694 (8,786) 83,908 25,983 (3,868) 22,115

Plant and equipment 126,732 (26,246) 100,486 47,122 (8,577) 38,545

Vehicles 14,187 (5,403) 8,784 8,853 (4,423) 4,430

Furniture and equipment 1,056 (463) 593 521 (352) 169

Computer hardware and software 7,730 (3,113) 4,617 1,714 (1,172) 542

Work in progress 20,147 — 20,147 — — —

Total 408,112 (44,601) 363,511 84,193 (18,392) 65,801

Company

Plant and equipment 1,142 (377) 765 1,142 (280) 862

Vehicles — — — 218 (218) —

Furniture and equipment 291 (289) 2 291 (287) 4

Computer hardware and software 591 (552) 39 590 (463) 127

Total 2,024 (1,218) 806 2,241 (1,248) 993



Additions through

Opening business Closing

balance Additions combinations Disposals Depreciation balance

R’000 R’000 R’000 R’000 R’000 R’000

Opening Closing

balance Additions Disposals Depreciation Impairment balance

R’000 R’000 R’000 R’000 R’000 R’000

5. Property, plant and equipment (continued)

Reconciliation of property, plant and equipment — Group 30 June 2008

Land — 14,249 131,317 — (590) 144,976

Buildings 22,115 1,293 65,423 (5) (4,918) 83,908

Plant and equipment 38,545 11,174 81,696 (13,261) (17,668) 100,486

Vehicles 4,430 1,662 4,027 (355) (980) 8,784

Furniture and equipment 169 283 253 (1) (111) 593

Computer hardware and software 542 2,495 3,570 (49) (1,941) 4,617

Work in progress — 20,147 — — — 20,147

Total 65,801 51,303 286,286 (13,671) (26,208) 363,511

Reconciliation of property, plant and equipment — Group 31 December 2006

Land — — — — — —

Buildings 22,438 616 — (939) — 22,115

Plant and equipment 38,993 2,749 (16) (2,881) (300) 38,545

Vehicles 1,869 3,301 — (740) — 4,430

Furniture and equipment 96 93 — (20) — 169

Computer hardware and software 498 237 (5) (188) — 542

Total 63,894 6,996 (21) (4,768) (300) 65,801

71

5. Property, plant and equipment (continued)

Reconciliation of property, plant and equipment — Company 30 June 2008

Opening Closing

balance Depreciation balance

R’000 R’000 R’000

Plant and equipment 862 (97) 765

Vehicles — — —

Furniture and equipment 4 (2) 2

Computer hardware and software 127 (88) 39

Total 993 (187) 806

Reconciliation of property, plant and equipment — Company 31 December 2006

Opening Closing

balance Additions Depreciation balance

R’000 R’000 R’000 R’000

Plant and equipment 924 — (62) 862

Vehicles 6 — (6) —

Furniture and equipment 5 — (1) 4

Computer hardware and software 129 75 (77) 127

Total 1,064 75 (146) 993

Pledged as security

The freehold land and buildings including the plantations referred to in note 5 are encumbered in favour of Micawber 558 (Pty) Ltd as security

for the loan as per note 19. The total hectares that are mortgaged in favour of Micawber 558 (Pty) Ltd amount to 28,012 hectares.

Freehold land and buildings having a carrying value of R4,3 million (2006: R4,3 million) are subject to first mortgage bonds referred to in

note 19. Certain plant and equipment having a carrying value of R8,2 million (2006: R8,2 million) are subject to suspensive sale and lease

agreements referred to in note 19.

During the period the Group has acquired two Wesbank term loans for property, plant and equipment as well as motor vehicles as part

of the restructuring of business operations.

A hewsaw plant and Farm Driekop No. 546, reflected under property, plant and equipment, with a carrying value of R18,6 million and

R0,9 million, respectively, is encumbered over the term loans with a net carrying value of R33,1 million and R18 million, respectively, on

30 June 2008, refer note 19.



Group Company

R’000 R’000 R’000 R’000

Group Company

2008 2006 2008 2006

Hectares Hectares Hectares Hectares

5. Property, plant and equipment (continued)Assets subject to finance lease (Net carrying value)

Buildings on leasehold land 42,784 11,075 — —

Plant, equipment and vehicles 72,008 8,220 — —

114,792 19,295 — —

Impairment

Refer note 30

Instalment sale agreements

During the period the Group entered into instalment sale agreements with Stannic and Wesbank for plant, equipment and vehicles.

The net carrying value of these assets is R 28,4 million at 30 June 2008.

Finance leases

During the period the Group entered into finance lease agreements with Wesbank for plant, equipment and vehicles.

The net carrying value of all assets under finance leases is R22,8 million on 30 June 2008.

Details of properties

Land claims have been lodged against a significant percentage of the land registered to Global Forest Products (Pty) Ltd (also refer to note

5). This land has been transferred from Global Forest Products (Pty) Ltd to York Timbers (Pty) Ltd (formerly Global Sawmills (Pty) Ltd) as

part of the restructuring process (refer to note 36). The status of these land claims as at the date of preparing this report is as follows:

Information

Gazetted and in process of being gazetted 45,035 — — —

Claims in research phase 38,455 — — —

Unaffected at present 6,203 — — —

89,693 — — —

A register containing the information required by paragraph 22(3) of Schedule 4 of the Companies Act is available for inspection at the

registered office of the company.

73

6. Biological assetsTrees in plantation forests

Opening Balance 18,000 14,278

Additions 1,367,693 —

Fair value adjustment 607,308 5,722

Plantation felled and held under irrigation (9,931) —

Reduction of acquisition price — (2,000)

Closing Balance 1,983,070 18,000

Non-current 1,718,407 18,000

Current 264,663 —

1,983,070 18,000

At 30 June 2008 standing timber comprised approximately 50,906 hectares (2006: 1,164 ) of pine and 4,227 hectares (2007 : 3,679) of

eucalyptus tree plantations which ranges from newly established plantations to plantations that are 25 years old. During the period the

Group harvested approximately 913,025 m3 of logs (2006: Nil)

The fair value adjustment comprises of the following elements: R’000

Fair value adjustment 607,308

Adjustment to standing timber values to reflect fair value less point of sale costs at year end 751,208

Fair value of timber felled (191,785)

Cost of planting 82,111

Adjustment to fair value as a result of fire damage (34,226)

Pledged as security

The plantations, including the fixed property referred to in note 5 are encumbered in favour of the Micawber 558 (Pty) Ltd as security for

the loan as per note 19 and amounts to 86,458 hectares.

Methods and assumptions used in determining fair value.

(i) Current market prices

The current market price utilised for pine is the market related price per cubic meter as sold within the Group to it's own sawmills and to

the plywood plant. Eucalyptus market prices are determined with reference to prices achieved from external customers, while pulp prices

are determined by the ruling price achieved for pulp sold to third parties. The prices utilised are based on prices achieved in May 2008.

2008 2006

R’000 R’000



6. Biological assets (continued)(ii) Expected yield per log class

The expected yield per log class are calculated with reference to growth models relevant to the growing areas (Escarpment and Highveld). The growth models are derived from actual trial data (permanent sample plots PSP's) that have been measured annually since 1976. A merchandising model, using the modelled tree shape at various ages, is used to split the tree into predefined products.

(iii) Volume Adjustment Factor

Due to the nature of the plantations and more specifically the susceptibility thereof to the environment, an adjustment factor (percentage based) has been determined to reduce the volumes determined above based on information that management has at its disposal. This percentage is mainly based on factors, such as felling and extraction breakages, pest disease and baboon damage, as well as damage due to the natural elements such as wind/rain/hail. An adjustment factor of 10% has been used for 2008.

(iv) Rotation

The Group continues to manage pine trees on a 25 year rotation in the Escarpment and on a 22 year rotation in the Highveld. Older age classes are systematically reduced to reach these targets.

Temporary Unplanted Areas

Temporary Unplanted Areas (TUP) for the group as at 30 June 2008 amounted to approximately 5,504 hectares which is above the targeted level of approximately 2,500 hectares.

Current portion

The current portion of biological assets presents the biological assets to be harvested and sold in the next 12 months after year end.

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

Regulatory and environmental risk:

The Group has established environmental policies and procedures aimed at compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure the systems in place are adequate to manage those risks. The Group manages its plantation in compliance with the Forestry Steward Council (FSC).

Supply and demand risks

The Group is exposed to risks arising from fluctuations in the price and sales volumes of pine. When possible the Group manages this risk by aligning its harvest volume to the market and Group’s supply and demand. Management performs regular industry trend analysis to ensure that the Group’s pricing structure is in line with the market and to ensure that projected harvest volumes are consistent with the expected demand.

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 and mitigating those risks. The Group subscribes to the national fire index prediction which uses various weather conditions to indicate fire risk. The Group insures itself against natural disasters such as fires and floods.

75

Additions through

Opening business Closing

balance combinations Impairment balance

R’000 R’000 R’000 R’000

2008 2006

Carrying Carrying Cost Impairment value Cost Impairment value R’000 R’000 R’000 R’000 R’000 R’000

7. Goodwill

Group

Goodwill 610,352 — 610,352 — — —

Reconciliation of goodwill — Group — 30 June 2008

Goodwill — 610,352 — 610,352

Goodwill arose from the business combination that took place on 13 July 2007, when the Company purchased 100% of the shares in Global Forest Products (Pty) Ltd and South African Plywood (Pty) Ltd and therefore purchased 100% and 70% of the shares of York Timbers (Pty) Ltd (formerly Global Sawmills (Pty) Ltd) and Bonheur 50 Investments (Pty) Ltd, respectively. Goodwill represents the difference between the fair values of net assets purchased and the acquisition price. Refer to note 36.

Goodwill has been allocated only to the forestry segment for segment reporting purposes because the Company acquired the subsidiaries for the purpose of their plantations to add value to the Group’s forestry activities.

Impairment testing

The Group’s goodwill is classified as an indefinite asset and is therefore tested for impairment at each financial year-end. The forestry assets are compared to the present value of the future cash flows that are expected to flow from the forestry division.

The key assumptions used in estimating the future cash flows are as follows:

The forest is managed in rotation based on a clear fell age of between 21 years and 25 years.

The forest is managed on a sustainable basis and all harvested areas are replanted, so that the temporary

unplanted areas are approximately 2,500 hectares at any point in time

Long term CPIX of 5,4%

Weighted average cost of capital 13.46%

Target debt equity ratio of 30 : 70

Pre-tax cost of debt of 14.75%

i.

ii.

iii.

iv.

v.

vi.



2008 2006 Valuation Carrying value Valuation Carrying value R’000 R’000 R’000 R’000

8. Investment propertyGroup

Investment property 4,920 4,920 5,900 5,900

Reconciliation of investment property

Group - 30 June 2008

Transfers to

Opening freehold land Closing

balance and buildings balance

R’000 R’000 R’000

Investment property 5,900 (980) 4,920

Reconciliation of investment property

Group - 31 December 2006

Opening Classified as Fair value Closing balance Disposals held for sale adjustments balance

R’000 R’000 R’000 R’000 R’000

Investment property 7,070 (650) (2,200) 1,680 5,900

Investment property comprises of

1. Parts 1 and 2 of Erf 1279, White River

2. Portion 5 of Erf 254, Claremont

Lease agreements for investment properties are at market related rentals and are renewed on a six monthly basis.

Pledged as security

Investment property with a carrying value of R4,3 million (2006: R4,3 million) is subject to a mortgage bond with a carrying value of R1,2 million in favour of Nedbank Limited (2006: R1,3 million). Refer to note 19.

Details of valuation

The effective date of the revaluations was 31 December 2006. Revaluations of investment properties were performed by an independent valuer, who is not connected to the Group and who has recent experience in the location and the category of the investment property being valued. The valuation was based on the open market value for existing use.

During the current financial period the directors assessed the carrying value of the investment property and came to the conclusion that the carrying value of the investment property does not differ significantly from the market value as at 30 June 2008.The directors thus decided not to adjust the carrying value with any fair value adjustment.

Direct expenses arising from investment property that generated rental income during this year were R2,5 million(2006: R0,4 million).

77

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

9. Other financial assets Non-current other financial assets

Available for sale financial assets

— Listed shares 589 902 589 902

— Self Insurance Fund 1,174 — — —

1,763 902 589 902

Loans and receivables 98 — — —


— Derivative – interest rate swap 78,808 — —

80,669 902 589 902 Current other financial assets


— Foreign exchange contracts 265 — — —

265 — —

Listed shares

These investments are recognised initially at cost and subsequently measured at their fair value. The fair value of listed investments are the quoted market prices as at the balance sheet date. The gain or loss on measurement to the fair value is recognised in equity.

Listed shares comprise of:

40,540 (2006: 40,540) Ordinary shares in First Rand Limited at quoted market price of R13.30 (2006: R22.25) per share

2,276 Ordinary shares in Discovery Holdings Limited at quoted market price of R21.70 per share

Self Insurance Fund

A five year contract has been signed with Santam Risk Finance Limited effective 1 July 2005, whereby Global Forest Products (Pty) Ltd, York Timbers (Pty) Ltd and South African Plywood (Pty) Ltd undertake to pay a R2 million (excluding VAT) premium per year to cover:

Property and machinery breakdown and business interruption with a maximum cover of R10 million over the 5 year contract period, in aggregate.

Property and machinery breakdown and business interruption aggregate protection with a maximum cover of R3 million over the 5 year contract period, in aggregate.

The maximum aggregate amount the insurer shall pay under this policy is limited to R13 million in the aggregate in respect of all sections of the contract. The R3 million over the R10 million becomes payable in the event a claim exceeds R35 million.

•

•



9. Other financial assets (continued)

Global Forest Products (Pty) Ltd, York Timbers (Pty) Ltd and South African Plywood (Pty) Ltd shall retain the following amounts for its own account:

Property and machinery as well as breakdown and business interruption - R0,5 million per occurrence

Property and machinery breakdown as well as business interruption aggregate protection - R35 million

This policy, which commenced on 1 July 2005, gives the Company, Global Forest Products (Pty) Ltd and SA Plywood (Pty) Ltd immediate cover of R13 million.

The Company, Global Forest Products (Pty) Ltd and South African Plywood (Pty) Ltd is entitled to a refund of R10 million, less claims paid and administration costs and after interest earned at the end of the 5 year contract period.

The Self Insurance Fund is measured at fair value. The fair value is the adjustment for the market related interest to be received on this financial asset over 'n fixed period. The gain or loss on measurement is recognised in the profit or loss for the period.

Loans and receivables

This loan is with Global Forest Products Holding Company (Pty) Ltd. The loan is unsecured, bears no interest and has no fixed terms of repayment. The loan is measured at amortised cost.

Derivatives : Interest rate swaps

The Group uses derivative financial instruments to hedge its exposure to interest rate risks arising from operational activities.

The notional amounts of certain types of financial instruments provide a basis for comparison with instruments recognised on the balance sheet but do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and, therefore, do not indicate the Group’s exposure to credit or price risks. The derivative instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations in market interest rates or foreign exchange rates relative to their terms. The aggregate contractual or notional amount of derivative financial instruments on hand, the extent to which instruments are favourable or unfavourable, and thus the aggregate fair values of derivative financial assets and liabilities, can fluctuate significantly from time to time.

Interest rate swaps are commitments to exchange one set of cash flows for another. Swaps result in an economic exchange of currencies or interest rates (for example, floating rate for fixed rate). No exchange of principal takes place. The Group’s credit risk represents the potential cost to replace the swap contracts if counterparties fail to fulfil their obligation. This risk is monitored on an ongoing basis with reference to the current fair value, a proportion of the notional amount of the contracts and the liquidity of the market. To control the level of credit risk taken, the Group assesses counterparties using the same techniques for its lending activities.

Foreign exchange contracts

The Group uses forward exchange contract financial instruments to hedge its exposure to foreign exchange risks arising from operational activities.

Forward exchange contracts are classified as held for trading and measured at fair value.

The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price. Forward exchange contracts consist out of 15 contracts with a fair value of R50 million. This foreign exchange contract assets is the difference between the fair value of the contracts measured at spot rate at year end and the contract value at year end.

•

•

79

Issued share capital Interest in capital Interest in company

Direct Indirect Direct Indirect Shares Indebtedness

2008 2006 2008 2008 2006 2006 2008 2006 2008 2006 R R % % % % R'000 R'000 R'000 R'000

10. Investments at cost in subsidiaries held by the Company

Sawmilling

York Timbers (Pty) Ltd 1 — — 100 — — — — — —

Global Sawmills Ltd 500,001 500,001 — 100 — 100 — — — 9,450

Madiba Timbers (Pty) Ltd 200 200 — 100 — 100 — — — —

Management and investment

Inland Realty Ltd 483,060 483,060 100 — 100 — 1,508 1,508 — 384

Property

Beth Warehouse (Pty) Ltd 4 4 100 — 100 — — — — —

Mount Bogen View (Pty) Ltd — 2 — — — 100 — — — —

Pretoria Amalgamated

Transport Ltd 16,000 16,000 — 100 — 100 — — — —

Silverbogen (Pty) Ltd — 2 — — — 100 — — — —

Sonrach Properties (Pty) Ltd 1,000 1,000 — 100 — 100 — — — —

Longbogen (Pty) Ltd 4,000 4,000 — 100 — 100 — — — —

Trading

Agentimber (Pty) Ltd 260,120 260,120 — 100 — 100 — — — —

South African Plywood (Pty) Ltd 200 — 100 — — — — — —

Bonheur 50 Investments (Pty) Ltd 100 — — 70 — — — — — —

Forestry

Madiba Forest Products (Pty) Ltd 200 200 — 100 — 100 — — — —

Global Forest Products (Pty) Ltd 100 — 100 — — — 1,117,744 — 765,556 —

Total amount owing

from subsidiaries 1,119,252 1,508 765,556 9,834



Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

10. Investments at cost in subsidiaries held by the Company (continued)

Interest in capital is the same as 2006 except:

South African Plywood (Pty) Ltd Direct 100% (2006: 0%)

Global Forest Products (Pty) Ltd Direct 100% (2006: 0%)

York Timbers (Pty) Ltd Indirect 100% (2006: 0%)

Bonheur 50 Investments (Pty) Ltd Indirect 70% (2006: 0%)

All Group companies are incorporated in the Republic of South Africa.

11. Instalment sale receivables

Gross investment in the lease receivables

— less than one year 1,848 — — —

— between one and five years 1,666 — — —

3,514 — — —

less: unearned finance income (661) — — —

2,853 — — —

Present value of minimum lease payments received

— less than one year 1,516 — — —

— between one and five years 1,337 — — —

2,853 — — —

Non-current assets 1,005 — — —

Current assets 1,848 — — —

2,853 — — —

Global Forest Product (Pty) Ltd entered into two instalment sale agreements to sell certain of its motor vehicles and equipment during the prior year. These agreements have been transferred from Global Forest Products (Pty) Ltd to York Timbers (Pty) Ltd (formerly Global Sawmills (Pty) Ltd) as part of the restructuring process. These instalment sale receivables bear interest at prime rate of 15.5% per annum and are receivable over the lease term of 3 years in 36 monthly instalments of R15 thousand starting on 30 April 2007 and ending on 30 March 2010. These instalment sale agreements are secured by motor vehicles and equipment with a carrying value of R928 thousand.

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

•

•

•

•

81

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

Group Company

2008 2006 2008 2006

The banking facility granted by First Rand Bank Limited is secured by a cession of trade receivables (refer note 13) and cross suretyships within the Group as well as the assets financed under the asset based facility. Total bank facilities are as follows:

12. Inventories

Raw materials 10,158 — — —

Work in progress 35,484 — — —

Timber and timber products 131,202 32,036 — —

Consumables 21,064 2,688 — —

197,908 34,724 — —

Inventory pledged as security

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

13. Trade and other receivables

Loans and receivables 174,542 57,495 165 —

Other receivables 17,566 2,414 1,819 78

192,108 59,909 1,984 78

Trade receivables are shown net of impairment losses which arise as a result of debtors where the recoveries of the debts are doubtful. The provision as of June 2008 was R8,3million (2006: R0,7million).

The trade receivables of the Group have been ceded to First Rand Bank Limited as security for the banking facilities made available to the Group (Refer note 14).

14. Cash and cash equivalents

Cash on hand 138 32 — 2

Bank balances 222,400 14,576 176 403

Short term deposits — 27,117 — —

Standard Equities — 6 — 6

222,538 41,731 176 411

General banking facility 80,000 — — —

Guarantees 44,000 — — —

Forward exchange contracts 1 — — —

The general banking facility of R80 million is shared within the Group.



Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

15. Non-current assets held for sale

The Group is in the process of disposing of certain of its investment properties. It is expected that that these properties will be disposed of, piecemeal, within the 12 months after year end. These non-current assets have not been allocated to any specific segment for segment reporting purposes.

Non-current assets held for sale consist out of the following:

Investment property

Port.20 of Farm Krelingspost 1,023 1,073 — —

Prts. 24, 26, 27, 28 and 34 of Schietfontein — 1,127 — —

1,023 2,200 — — Details and carrying value of investment property classified as held for sale:

The Group had two investment properties classified as held for sale. One of the properties with a carrying value of R1,2 million was sold during the current financial year and a loss of R0,5million was realised. These non current assets held for sale do not belong to a specific segment, and therefore have not been allocated.

Fair value

through profit

Loans and or loss Available

receivables held for trading for sale Total

R’000 R’000 R’000 R’00016. Financial assets by category

The accounting policies for financial instruments have been applied to the line items below

Group – 30 June 2008

Forward exchange contracts — 265 — 265

Derivatives — 78,808 — 78,808

Other financial assets 98 — 1,763 1,861

Instalment sale receivables 2,853 — — 2,853

Loans and receivables 174,542 — — 174,542

Cash and cash equivalents — 222,538 — 222,538

177,493 301,611 1,763 480,867

Group – 31 December 2006 Other financial assets — — 902 902Trade and other receivables 59,909 — — 59,909Cash and cash equivalents — 41,731 — 41,731 59,909 41,731 902 102,542Company – 30 June 2008 Loans to group companies 765,556 — — 765,556

Other financial assets — — 589 589

Trade and other receivables 165 — — 165

Cash and cash equivalents — 176 — 176

765,721 176 589 766,486

Company – 31 December 2006

Loans to group companies 9,834 — — 9,834Other financial assets — — 902 902Loans and receivables 78 — — 78Cash and cash equivalents — 411 — 411 9,922 411 902 11,225

83

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

17. Issued capital

Authorised

100 million (2006: 20 million) Ordinary shares of 5 cents each 5,000 1,000 5,000 1,000

2,870,529 convertible, non-redeemable

cumulative preference shares of 5 cents each 144 — 144 —

5,144 1,000 5,144 1,000

’000 ’000 ’000 ’000Reconciliation of number of ordinary shares issued:

Opening balance 11,041 11,041 11,041 11,041

Shares repurchased (2,871) — (2,871) —

Issue of shares: Vendor Consideration issue 33,333 — 33,333 —

Issue of ordinary shares: Specific issue for cash 13,544 — 13,544 —

Issue of shares: Rights Offer 23,333 — 23,333 —

Closing balance 78,380 11,041 78,380 11,041

York increased its authorised shares from 20 million shares to 100 million shares. The unissued ordinary shares are under the control of the directors in terms of a resolution of members passed at the lastannual general meeting. This authority remains in force until the next annual general meeting.

Issued Ordinary Shares

Ordinary 3,919 552 3,919 552

Share premium 1,024,477 3,061 1,024,477 3,061

Share issue costs written off against

share premium (21,855) — (21,855) —

1,006,541 3,613 1,006,541 3,613

Issued Preference Shares

Non-redeemable, convertible preference shares 144 — 144 —

Share premium 28,073 — 28,073 —

28,217 — 28,217 —

The share issues during the current period consist of:

Issue of ordinary shares through rights offer on an impending underwritten renounceable rights offer of 23,3 million new York ordinary shares at an issue price of R15 per rights offer share. The rights offer was announced on 04 July 2007 with the ratio being 211.34123 rights offer shares for every 100 York shares held at the close of business on 3 August 2007.

Issue of ordinary shares through a "Specific Issue for Cash": York issued 13.5 million additional shares at R15 each on 4 July 2007 to raise additional working capital and to improve the gearing of the Company.

Issue of ordinary shares through a "Vendor Consideration Issue": A share swap took place on 24 August 2007, between the Company and Industrial Development Corporation of SA Ltd (IDC) where the Company swapped 33,3 million shares at R15 each as consideration for the outstanding loans to the value of R 500 million with the IDC.



17. Issued capital (continued)

Share buy back:

The Company, jointly with Blackstar Investors Plc, made a repurchase offer to shareholders of the Company to repurchase its shares at R9.83 per share. The Company repurchased 2,870,529 shares from the existing shareholders.

This share buyback transaction took place on 16 March 2007.

The share buyback transaction has been financed by the issue of 2,870,529 convertible, non-redeemable cumulative preference shares at 5 cents each. The preference shares are convertible on a one to one basis three years and six months from the date of issue. The coupon payable on the preference shares is prime rate less 1.25% per annum. These preference shares form part of loans and borrowings and the preference dividends part of finance cost. Refer to note 19.

The ordinary shares that were repurchased by the Company were cancelled.

Rights issue cost:

The Company paid R21,86 million for the rights offer as mentioned above. This cost has been deducted from share premium during the year.

18. Share based payments

(i) Cash settled share based payment

Share Option Group Number Weighted Total value

exercise price '000 R R’000

Options granted on 1 March 2008 492 7 3,618

Outstanding at the end of the period 492 7 3,618

Weighted average share price at exercise date of options was R 23 (2006: R Nil).

Outstanding options Exercise date Exercise date Exercise date

within one year two to five years after five years Total

Options with exercise price of R7.36 733 2,885 — 3,618

Information on options granted during the year

Weighted fair value of options issued during the year 1 — — —

The Group offers their key employees an incentive plan in the form of an employee share option scheme. This incentive will be achieved through certain employees being afforded the right to receive a cash payment after a five year period, subject to the fulfilment of certain conditions. This cash payment will be based on the appreciation in the value of the shares over the five year period.

85

18. Share based payments (continued)

The shares were allocated on 1 March 2008 and notice of allocation sent to beneficiaries. The transaction in the hands of the employees constitutes a long European call option with a term of five years from the grant date.

Employee share options are call options granted by entities to their employees. During the first portion of its life the option cannot be exercised and is forfeited should the employee leave the employment of the entity. This period of the option’s life is referred to as the vesting period. After the vesting date, a lock in period up to five years after the grant date follows, at which time the option is exercised.

The payoff that a beneficiary of the share option scheme will receive, at the end of the lock in period, is the difference between the spot price on the exercise date and one and a half times the 60 day volume weighted average price on the grant date. The structure of this scheme is valued using the Black Scholes methodology.

The scheme is treated as a cash settled scheme. Cash settled schemes are valued at reporting date in terms of IFRS 2, i.e. 30 June 2008.

Fair value was determined by the Black Scholes Model. The following inputs were used:

Weighted average share price of R20.75 per share

Exercise price of R34.05 per share

Expected volatility was calculated by using the moving weighted average (lambda = 99%) on historical share prices

Option life is 5 years

Expected dividends to be paid is 25 cents in 2011 and an increase of 25% each year thereafter. No dividends are expected until 1 March 2011. This was based on the latest available share price of R20.75 on 30 June 2008, grown at the risk free rate less the expected dividends to be paid.

The risk free interest rate was sourced from the Bond Exchange of South Africa. The zero coupon swap curve as at 30 June 2008 was used.

Method and the assumptions to incorporate the effects of expected early exercise:

Volatility was calculated using the exponentially moving weighted average (lambda = 99%), on historical share price data, to calculate the volatility. When historical share prices are used normally the history preceding valuation date equal in duration to the time to maturity is used, 5 years in this instance. However, management indicated that the rights issue during August of 2007 biased the volatility upwards. Based on analysis of share price volatility subsequent to the rights issue, the average of the exponentially weighted volatilities for 1 March 2008 and 13 August 2008 were selected.

•

•

•

•

•

•

•



Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

18. Share based payments (continued)Liability arising from share based payments

Amount recognised (733) — (733) —

Intrinsic value (733) — (733) —

(ii) Share based payment equity reserve

As per the Company's principal strategic objectives, it implemented a broad based BEE structure that resulted in approximately 26% of the Company's equity at that time, prior to the GFP aquisition, and voting rights being beneficially held by Main Street 488 (Pty) Limited and Main Street 493 (Pty) Ltd, (“Main Street”). Main Street comprises of the Community Trust SPV and the Staff Empowerment Trust SPV.

Valuation Methodology

This empowerment transaction enabled Main Street to own up to approximately 26% of the shares in York, at that time, via the conversion of the preference share transaction within the specified time frame. The fair value of the conversion feature was determined by estimating the value of a call option held by the preference share holders on the shares of York. The strike applied in the call option valuation will be the subscription price of R 9.83 per share.

Model Inputs and Assumptions

Valuation Date

The transaction was approved at a shareholders meeting on 20 February 2007, which is used as valuation date.

Subscription & Funding Assumptions

Main Street subscribed for preference shares issued by the Company. These shares will be convertible to ordinary shares in time to result in Main Street’s 26% stake in York at the time of conversion. Main Street obtained funding for the York preference share subscription by issuing preference shares to Blackstar Plc (“Blackstar”).

York Preference Shares

The York preference shares were issued as follows:

Main Street subscribed for 2,870,529 York preference shares.

The York preference shares will be convertible on a one-for-one basis into ordinary shares at the option of the holder three years and six months from the date of issue.

The coupon payable will be the prevailing Prime interest rate less 1.25%.

The York preference share subscription price was R 9.83 per share.

York preference dividend dates will be 1 July each year.

•

•

•

•

•

87

18. Share based payments (continued)

Share Price

The share price at which Blackstar Plc purchased a majority stake in York at the time of the preference share subscription is used as the

spot price on valuation date, i.e. R9.83.

York Dividend Assumptions

Management indicated that no ordinary dividends are expected until 2011.

Volatility Estimation

Since the potential transaction with Blackstar was announced on 22 January 2007 in a circular to the shareholders, the stock price between

the announcement and the transaction date was biased upwards by the potential corporate action. The volatility prior to the announcement,

i.e. 19 January 2007, is therefore more indicative of the variability in the York stock price around the time of the transaction. The exponentially

weighted moving average (EWMA) method with a lambda coefficient of 99% was used to estimate the historical volatility from York’s

historical share prices. The estimated EWMA volatility of 36.8% has been applied.

Risk-free Interest Rates

The risk—free interest rate for the valuation date was independently sourced from the Bond Exchange of South Africa.

Maturity

The maturity date of the transaction is the date on which the preference shares are convertible to ordinary shares, i.e. 20 August 2010.

We will assume that trigger events will not occur during the life of the transaction.

Valuation results

Given the details and assumptions mentioned above, the fair value adjustment is as follows:

Fair value adjustment recognised in profit and loss 10,446 — 10,446 —

Equity reserve arising from share based payment 10,446 — 10,446 —

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000



Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

This loan bears interest at an effective rate of 14% per annum and is payable over a period of 7 years in 14 payments of R0,4million, every 6 months, starting in June 2007 and ending in December 2013. This loan is secured by a R38 million Special Notarial Bond over the hewsaw plant, reflected under property, plant and equipment, with a carrying value of R18.6 million and a R27million mortgage bond over Farm Driekop No. 546 (refer note 5). This loan has been restructured during the year as part of the Group’s re-organisation.

This loan bore interest at 11% per annum and is repayable by monthly instalments of R0,2million starting on 01 April 2006

This loan was incurred on 12 July 2007, bears interest at the quarterly NACM rate and is repayable as a bullet payment on 13 July 2014.

This loan was incurred on 12 July 2007, bears interest at the quarterly JIBAR rate of 12.375% per annum and is repayable in quarterly instalments of R2,12 million starting 31 January 2008 with a final payment on 13 July 2014.

This loan was incurred on 12 July 2007, bears interest at the quarterly JIBAR rate of 12.375% per annum and is repayable in quarterly instalments of R7,82 million starting 31 October 2009 with a final payment on 13 July 2014.

19. Loans and borrowingsMeasured at amortised cost

Industrial Development Corporation of SA Limited — 2,105 — —

Wesbank Capital loan 51,122 — — —

Rand Merchant Bank Mezzanine Facility 444,280 — — —

Rand Merchant Bank Senior Term A 168,516 — — —

Rand Merchant Bank Senior Term B 281,789 — — —

89

This loan bears interest at prime of 15.50% less 3.5% and is repayable on 01 July 2009.

This loan was secured by a first mortgage bond over freehold land and buildings and bore interest at prime of 15.50% less 1.75% quarterly and was repayable over a period of 10 years. This loan was settled in full in the current financial period (refer note 5).

These preference shares have a coupon rate of prime (15.50%) less 1.25% per annum and are convertible into ordinary shares on a one to one basis in a period of 3 years and 6 months after the date of issue. (Refer to note 17).

This loan was unsecured, bore interest at 10.5% per annum and was repayable over a period of 4 years with an a annual payment of R 2,1 million, the first instalment due on 13 December 2006. This loan has been settled during the current financial period.

This loan is secured by a first mortgage bond over freehold land and buildings with a carry value of R4,3 million (2006: R4,3 million), bears interest at a 12% per annum (2006: 12%) and is repayable by monthly instalments of R0,01million (2006: R0,01million). The last payment due is on 30 December 2021. Refer to note 5.

This loan was incurred on 12 July 2007, bears interest at the quarterly JIBAR rate of 12.375% per annum and is repayable as a bullet payment of R205,054 million on 13 July 2014.

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

Nedbank Capital loan — 8,105 — —

Convertible, non—redeemable cumulative preference shares 28,217 — 28,217 —

Taurus Estates — 6,683 — —

Nedbank Mortgage bond 1,273 1,415 — —

19. Loans and borrowings (continued)Measured at amortised cost

Rand Merchant Bank Senior Term C 205,054 — —

South African Forestry Company Limited (SAFCOL) 5,522 16,566 — —


This loan bore interest at 11% per annum, was unsecured and was repayable over a period of 3 years by an annual payment of R76 thousand. This loan has been settled during the current financial year.

19. Loans and borrowings (continued)Industrial Development Corporation of SA Ltd — 1,744 — —


Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

Other loans — 208 — 2

– unsecured bearing interest at 12.5% per annum

Less: raising fees amortised over period of loan (7 years). (28,957) — — —

1,156,816 36,826 28,217 2

Non-current liabilities

At amortised cost 1,096,983 26,582 28,217 —

Current liabilities

At amortised cost 59,833 10,244 — 2

1,156,816 36,826 28,217 2

20. Finance lease obligationMinimum lease payments due

– less than one year 9,090 2,005 — 9

– between one and five years 32,129 6,812 — —

– more than five years 8,635 — — —

49,854 8,817 — 9

less: finance charges (14,016) (836) — —

Present value of minimum lease payments 35,838 7,981 — 9

Present value of minimum lease payments due

– less than one year 4,292 1,807 — 9

– between one and five years 20,004 6,174 — —

– more than five years 11,542 — — — 35,838 7,981 — 9

Non-current liabilities 31,562 6,175 — —

Current liabilities 4,276 1,806 — 9

35,838 7,981 — 9

91

20. Finance lease obligation (continued)These liabilities consist of 26 capitalised finance leases, payable over a period of 5 to 7 years at an effective interest rate of 14% per

annum. These liabilities are secured by plant, equipment and motor vehicles with a carrying value of R 22,8 million, refer to note 5. These

leases have no escalation clause. Repayments are based on the outstanding debt and the prevailing interest rate. On expiry of the initial

lease period, the lease will automatically be renewed on the same terms and conditions as the existing agreements. The annual rental for

the first year of renewal is specified in the existing agreements. The asset can be disposed after renewal of the lease by either the Group

or the lessor. The Group is entitled to a rebate of rentals equivalent 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 5. In 2008, instalment sale liabilities consisted

of 5 new instalment sale agreements with Stannic. They are payable over a period of 3 to 4 years at an effective interest rate of at 14%

per annum. These liabilities are secured by plant, equipment and motor vehicles with a carrying value of R7,3 million (refer note 5). These

liabilities have been added as part of the business combination. Refer to note 36.

21. Retirement benefitsDefined contribution plan

The Group's policy is not to provide post retirement medical aid benefits to its employees. A provision is made for a close group of existing

employees that are subject to the Pension Funds Act, 1956 as amended. Independent actuaries determine the accumulated post retirement

medical aid obligation and the annual costs of such benefits. The assumptions used are consistent with those adopted by the actuaries in

determining pension costs and in addition include long term estimates of the increases in medical costs and appropriate discount rates.

The level of claims is based on the individual medical aid funds experience. The Yorkcor Group Staff Pension and Life Insurance Fund

for monthly paid employees was updated and entirely converted from a defined benefit to a defined contribution plan with effect from

October 1994.

The latest actuarial valuation was carried out in June 2007.

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

Carrying value

Present value of the defined benefit obligation wholly unfunded (17,431) — — —

Movements for the period

Purchased through business combination 15,874 — — —

Contributions by members 11 — — —

Net expense recognised in the income statement 1,546 — — —

17,431 — — —

Net expense recognised in the income statement

Current service cost (46) — — —

Interest cost 1,592 — — —

1,546 — — —



Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

21. Retirement benefits (continued)Main assumptions

It is assumed there would be a gap of 2% between the discount rate (estimated

corporate bond yield of 9.75%) and the medical contribution inflation rate (an increase

of 7.75% was assumed).

Defined contribution plan

The Group has three provident schemes, R&S Provident Fund, ROL Provident Fund

and the Hospitality Provident Fund, for weekly paid employees, which are defined

contribution plans. Pensioners under the scheme have had their pensions bought by

means of annuities from insurers and there is no ongoing liability for the scheme. The

scheme is governed by the Pensions Fund Act, 1956, as amended.

Retirement fund

It is the policy of the Group to provide retirement benefits to all its employees, salaried/

monthly paid and weekly paid. The Group has three provident schemes Hospitality

Provident Fund, General Provident Fund and York Timbers Provident Fund (formerly

GFP Provident Fund), for employees, which are a defined contribution plans, all of

which are subject to the Pensions Fund Act.

The number of members of each scheme at year end:

ROL Provident Fund 209 1,120 — —

Hospitality Provident Fund — 1,247 — —

Pension fund

It is the policy of the Group to provide pension benefits to all its salaried employees. The Group has 2 pension funds, ROL Pension Fund and Liberty Pension Fund.

Medical aid fund

The Group contributes to a defined medical aid scheme for the benefit of its permanent employees and their dependants.

The Group reviewed the contribution and benefit structure of its medical aid scheme and with effect from 1 September 1999 made changes in light of informed advice. In terms of the Group’s policy there is no obligation on the Group to provide post-retirement medical aid benefit to current or retired employees. The Group is under no obligation to cover any unfunded benefits.

Total Group Provident Fund contribution 3,796 989 — —

Total Group Pension Fund contribution 117 841 — —

Total Group Medical Aid Fund contribution 371 1,287 — —

93

22. ProvisionsReconciliation of provisions - Group 30 June 2008

Opening Reversed Closing

Balance Additions during the year Balance

Environmental rehabilitation — 54,643 — 54,643

Provisions for shutdown cost 1,344 — (1,344) —

Provisions for retrenchment cost 6,545 — (6,545) —

7,889 54,643 (7,889) 54,643

Reconciliation of provisions - Group 31 December 2006

Opening Utilised Reversed

Balance during the during the Unwinding Closing

year year of interest Balance

Provisions for shutdown cost of York Lumber 1,344 - - - 1,344 Provisions for retrenchment cost 7,718 - (1,890) 717 6,545 Arbitration awards 22,956 (22,956) - - - 32,018 (22,956) (1,890) 717 7,889

Provision for retrenchment and shutdown costs

The provision for shutdown and retrenchment costs of York Lumber sawmill have been provided on the basis that the Group received compensation of the amounts from the Department of Water Affairs and Forestry’s (DWAF) contract with York. The full provision was utilised during the period as the sawmill was shut down.

Environmental rehabilitation

The environmental rehabilitation provision relates to costs associated with indemnities in the business combination (Refer to note 36). This amount was calculated for business combination purposes in terms of International Financial Reporting Standards 3 (IRFS 3). The expected timing of the outflow of economic benefits with regards to the provision is uncertain.

No reimbursements are expected.



Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

Group Company

2008 2006 2008 2006

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

23. Deferred tax

Deferred tax liability

Capital allowances (49,609) (13,423) — (339)

Biological assets (489,957) — — —

Investment property — (342) — —

Provisions 30,233 3,248 — —

Calculated assessed loss 32,784 1,103 — —

Derivative financial instruments (22,066) — — —

(498,615) (9,414) — (339)

Reconciliation of deferred tax asset (liability)

Balance at beginning of the year (9,414) (4,607) (339) —

Acquired through business combination (295,575) — — —

Charge to the income statement (193,626) (4,807) 339 (339)

(498,615) (9,414) — (339)

Recognition of deferred tax asset

An entity shall disclose the amount of a deferred tax asset and the nature of the evidence supporting its recognition, when:

the utilisation of the deferred tax asset is dependent on future taxable profits in excess of the profits arising from the reversal of

existing taxable temporary differences; and

the entity has suffered a loss in either the current or preceding period in the tax jurisdiction to which the deferred tax asset relates.

Use and sales rate

The deferred tax rate applied to the fair value adjustments of investment properties/financial assets is determined by the expected manner

of recovery. Where the expected recovery of the investment property/financial assets is through sale, the capital gains tax rate of 14%

(2006: 14.50%) is used. If the expected manner of recovery is through indefinite use the normal tax rate of 28% (2006: 29%) is applied.

If the manner of recovery is partly through use and partly through sale, a combination of capital gains rate and normal tax rate is used.

Tax consequences of undistributed reserves

STC on remaining reserves 10.00% 12.50% 10.00% 12.50%

24. Trade and other payablesFinancial liabilities measured at amortised cost 199,197 26,805 68 849

Other payables 34,787 30,871 16,989 1,236

233,984 57,676 17,057 2,085

•

•

95

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

25. Financial liabilities by category

The accounting policies for financial instruments have been applied to the main items below

Financial liabilities measured at amortised cost

Loans and borrowings 1,156,816 44,600 28,217 2

Finance lease obligation 35,838 7,981 — 9

Trade and other payables 199,197 26,805 68 849

1,391,851 79,386 28,285 860

26. RevenueSale of goods 1,520,161 393,590 — —

Rental Income 1,420 385 — —

1,521,581 393,975 — —

27. Finance income and expenses

Finance income

Dividend income on available for sale financial assets 52 362 52 362

Derivative-interest rate swap 78,808 — — —

Interest income on bank deposits 15,358 891 82 —

Net change in fair value of available for sale financial assets — 813 — 813

Other interest 16,203 — 35 92

110,421 2,066 169 1,267

Finance expense

Borrowings 182,766 5,282 1,440 —

Dividends on preference shares classified as liabilities 4,615 — 4,615 —

Fair value of share based payment 10,446 — 10,446 —

Other finance expense 6,495 — — 209

204,322 5,282 16,501 209

28. Fair value adjustments

Biological assets 607,308 5,722 — —

607,308 5,722 — —



Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

29. Profit/(loss) from operations

Profit/(loss) from operations for the period is measured after accounting for the following:

Income from subsidiaries

Dividends — — (836,323) (12)

Interest — — — (12)

Administration and management fees — — (8,550) (12,115)

Leasing and hire charges — — (90) (69)

— — (844,963) (12,208)

Operating expenses

Leases - premises - Contractual amounts 2,377 1,107 — —

(Loss)/profit on sale of property, plant, equipment and vehicles (400) 112 35 —

Impairment on property, plant and equipment — 300 — —

Reversal of impairment on trade and other receivables — (1,632)

Loss on sale of non current assets held for sale and net assets of disposal groups 339 — — —

Depreciation on property, plant, equipment and vehicles 26,208 4,768 187 146

Director’s emoluments (note 40) 12,059 5,325 2,577 2,434

- Executive directors 10,069 4,447 587 1,556

- Non-executive directors - for services as directors 1,990 353 1,990 353

- Non-executive directors - consulting fees — 525 — 525 Amount expensed in respect of retirement benefit plans consisting of the following:

- Pension fund contribution 117 989 — —

- Provident fund contribution 3,796 841 — —

- Medical aid fund contribution 371 1,287 — —

Operating expenses on investment property 2,515 471 — —

Foreign exchange gain on forward exchange contracts 551 — — —

Operating lease income 1,420 385 — —

Administration expense 49,968 29,511 3,475 7,739

Distribution expense 156,789 6,883 — —

Employment expense 279,230 49,867 4,525 —

Selling expense 1,469 — — —

Direct cost of fire 25,766 — — —

Restructuring costs 8,355 — — —

Cost of sales comprises of the purchase of raw materials.

97

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

Group Company

2008 2006 2008 2006

% % % %

30. Impairment of assets

Material impairment losses (recognised) or reversed

Property, plant and equipment — 300 — —

— 300 — —

31. Taxation

Major components of the tax expense

Current

Local income tax - current period 6,084 6,207 (4) 682

Local income tax - adjustment for prior periods (365) 12,607 — —

Refunded by Department of Water and Forestry — (12,607) — — (for details refer below) 5,719 6,207 (4) 682

Deferred

Originating and reversal of timing differences 204,143 4,807 147 339

Change in tax rate (10,517) — — —

Deferred tax expense 193,626 4,807 147 339

199,345 11,014 143 1,021

In terms of the arbitration award received from the Department of Water Affairs and Forestry in 2004, any taxes arising from the award would be for the account of the Department. During 2006 the SA Revenue Service revised the assessment for the 2004 year with an additional R12,61 million as payable. This was recovered from the Department and is disclosed above. An objection against this assessment has been lodged.

The recovery of the taxation from the Department has been excluded from net income. In the event that the Receiver seeks to tax this amount, there is a contingent liability of R3,66 million taxation payable which in turn is recoverable from the Department.

Reconciliation of the tax rate

Current years charge as a percentage of net income before taxation 27,0 25,9 — 21,8

Disallowed expenditure (0,4) (0,6) — (1,5)

Dividend and capital income — 0,3 28,6 3,5

Rate difference on capital gains — 0,8 — —

Assessed losses utilised — 0,8 — 5,2

Prior year - deferred taxation — 1,8 — —

Deferred tax asset not raised — — (0,6) —

Rate adjustment 1,4 — — —

Standard tax rate 28,0 29,0 28,0 29,0



Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

32. Auditors' remuneration

Audit fees 1,636 627 — 25

Other services 195 — — —

Expenses 39 — — —

1,870 627 — 25

33. Operating lease

The Group leases industrial land and certain land and buildings under operating leases. The lease is renewable for a further 5 years in 2010.

Total future minimum lease payments under non-cancellable operating leases:

Not later than 1 year 2,636 315 — —

Between 1 and 5 years 353 1,536 — —

After 5 years 412 2,213 — —

3,401 4,064 — —

34. Cash generated by/(utilised in) operating activities

Profit before taxation 738,095 42,330 818,256 4,140

Adjustments for:

Amortisation, depreciation and impairment 26,208 5,068 187 147

Loss/(profit) on sale of property, plant and equipment 400 (112) (35) —

Loss on sale of non-current assets held for sale 339 — — —

Finance income (110,421) (2,066) (169) (1,267)

Finance expense 204,322 5,282 6,055 209

Fair value adjustments (607,308) (7,402) 10,446 —

Share based payment 733 — — —

Post retirement medical aid (35) — — —

Provisions raised/(reversed) — (5,161) — —

Unwinding of interest on provisions — 717 — —

Income from subsidiaries — — — (12,208)

Fair value adjustment: shares acquired — — (50) —

Dividend recived from subsidiaries — — (836,323) —

Cash generated from operations 252,333 38,656 (1,633) (8,979)

99

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

34. Cash generated by/(utilised in) operating activities (continued)

Changes in working capital

Increase in inventories (46,595) (10,658) — —

(Increase)/decrease in trade and other receivables (10,606) (24,663) (1,906) 70

Increase in trade and other payables 37,129 28,031 14,972 733

Decrease in provisions (7,889) (23,351) — —

Working capital movement (27,961) (30,641) 13,066 803

Cash generated by/(utilised in) operating activities 224,372 8,015 11,433 (8,176)

35. Taxation paid

Balance at beginning of period (5,474) (742) (544) 127

Amount charged to income statement (199,345) (11,014) (143) (1,021)

Movement in deferred taxation 193,626 4,807 (339) 339

Balance at end of period 5,489 5,474 485 544

Movement in taxation (5,704) (1,475) (541) (11)

36. Acquisition of business

Business Combination

The Company purchased 100% of all the shares in and shareholders’ claims against Global Forest Products (Pty) Ltd and South African Plywood (Pty) Ltd during the period under review for an amount, inclusive of acquisition costs, of R1,703 billion. The acquisition was settled by cash raised from a rights offer, debt facilities extended by Rand Merchant Bank Limited and a vendor consideration issue to the Industrial Development Corporation (IDC). The purchase was approved by Shareholders on 12 July 2007.

Global Forests is an integrated forest products business, with its head quarters situated in Sabie, South Africa, It manages almost 87 000 hectares of land, predominantly pine plantations. The business also owns and operates timber processing facilities which include three sawmills and a plywood plant. Global Forests is a significant supplier of solid wood products to the South African market and actively exports to five other countries. All land holdings of Global Forests are Forest Stewardship Council certified. Plantations are classified into two areas, namely Escarpment, situated in Sabie, Graskop and White River areas, and Highveld. The Sawmills are situated in the same areas.

Goodwill representing the difference of fair values of net assets purchased and the acquisition price, is underpinned by the availability of own logs for the Global and York mills, thereby ensuring sustainability. Refer to calculation below. The acquiree’s revenue and profit since acquisition date (13 July 2007) was approximately R1,059 billion and R 700 million (EBIT) respectively.



Pre acquisition Recognised

Carrying Fair value values on

amounts adjustments acquisitions

R'000 R'000 R'000

36. Acquisition of business (continued)

Business combinations

Property, plant and equipment 342,963 (56,677) 286,286

Biological assets 1,321,968 — 1,321,968

Inventories 106,658 — 106,658

Trade and other receivables 121,593 — 121,593

Cash and cash equivalents 4,868 — 4,868

Loan and borrowings (257,066) — (257,066)

Deferred tax liabilities (332,226) 36,651 (295,575)

Trade and other payables (155,053) (54,643) (209,696)

Net identifiable assets and liabilities 1,153,705 (74,669) 1,079,036

Goodwill on acquisition 624,613

Consideration paid in cash, satisfied in cash 1,703,649

Warranty provision refunded in cash by vendors (14,293)

Business combination cost 32

Cash and cash equivalents purchased (4,868)

Net cash outflow 1,684,520

Fair values of assets and liabilities

The identifiable assets, liabilities and contingent liabilities of the acquiree that exist at the date of acquisition are recognised in the consolidated financial statements at fair value.

Biological assets

These have been valued on the Standing Timber methodology, using the pre fire volumes and selling prices information available in early July 2007.

Property, plant and equipment

Land was valued independently and the increased value of R 95,6 million adopted.

Residential and commercial buildings were valued independently and an increased value of R 35,1 million adopted.

Industrial buildings were independently valued at replacement value, but a fair value could not be established owing to the integration of these businesses with the plantation business and the lack of a market for buildings in their locality. No adjustment to carrying values was therefore made.

101

36. Acquisition of business (continued)Property, plant and equipment

The fair value of the remaining plant and equipment by business unit was then established by reviewing the recoverable amounts of the business units as cash generating units based on value in use calculations. These calculations used in cash flow projections based upon a detailed five year forecast which is based on the current installed production facilities and business circumstances (as at July 2007). Cash flows for a further fifteen year period were extrapolated using a eight percent per annum inflation rate which is appropriate because of the expected useful life of the majority of assets. The projected inflation rate is consistent with long term projections of financial institutions. A pre-tax discount rate of 16% has been used in discounting the projected cash flows. The discount rate is based on the rate of Government Bonds of 9% at 30 June 2007, which was seen as a risk free rate. A risk premium of 7% has been added, which is considered appropriate for the sawmilling and plywood industry in South Africa. The calculations reflected the requirement to impair assets to the value of R238million over the operations Sabie Mill, Driekop Mill and Plywood.

Inventories of finished goods

Finished goods are valued at selling prices less the cost of disposal and a reasonable profit margin for the selling effort of the acquirer.

Inventories were valued at July 2007 achieved selling prices, less a selling margin of 5% and Warehouse Distribution costs in the case of Plywood division.

Aggregate values of all business unit inventory required an upward valuation of R 415 thousand. Owing to the immateriality no adjustment was made.

Intangible assets

No intangible assets were identified as part of the assets taken over. Goodwill of R 610 million was raised, being the difference between the acquisition cost and the fair values of assets and liabilities.

Deferred tax assets and liabilities

Acquired deferred tax assets and liabilities are recognised at the probable amount of the tax benefit/ liability that will be recovered/payable, assessed from the point of view of the acquirer and the Group as a whole.

SA Plywood deferred tax asset, became a liability on aggregating and R6,4 million was provided for.

Indemnities in a business combination

The contingent liabilities with respect to environmental costs have been valued and an amount of R54 million was provided for in the calculation of the business combination.

Liabilities incurred or assumed

The cost of a business combination includes liabilities incurred or assumed by the acquirer in exchange for control of the acquiree. Future losses or other costs expected to be incurred due to the acquisitions such as the costs of restructuring the acquiree, are not part of the business combination as they are not liabilities at the date of acquisition.

By definition no adjustment was made for restructuring costs.

Consideration for business combination

Consideration paid by the Company for the acquisition of businesses consists out of three parts:

R 350 million 23,333,333 ordinary shares issued through rights offer at R15 per share

R 500 million 33,333,333 shares issued through "Vendor Consideration Issue" at R15 per share

Cash consideration of R854 million

•

•

•



Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

37. Commitments

Authorised contracted for but not provided for

Property, plant and equipment — 168 — —

Not yet contracted for and authorised by directors — 4 — —

This committed expenditure relates to plant an equipment and will be financed by available bank facilities, retained profits, rights issue of shares, issue of debentures, mortgage facilities, existing cash resources, funds internally generated, etc.

38. Contingencies

Fire

Several claims from third parties were lodged against the Group in respect of damages allegedly caused by veld fires in 2001. A court case to address these claims has been scheduled for early 2009. Total value of claims amount to R3,3 million. The Group is fully insured against any third party claims.

Driekop fire claim damages

Damages incurred to Driekop mills during the plantation fires amounted to R110 million with an additional loss of plant of R75 million and additional cost of working of R8 million. The claim has been accepted and payments are being made on the claim as costs are incurred.

Suretyship

The Group participates in the pooled banking facilities granted by First Rand Bank Limited. As such, the Group has provided an unlimited suretyship in favour of First Rand Bank Limited in respect of its obligations to the bank.

Global Forest Products Provident Fund Guarantee

Some employees of the Group, are members of the Global Forest Products Provident Fund. The Mondi Provident Fund valuation report had disclosed that part of the contingency reserves, after approval from the Financial Services Board, must be allocated to the employees who transferred from the Mondi Provident Fund to the Global Forest Products Provident Fund. Management of the Group has decided to include the value of the contingency reserves to be allocated to the employees who transferred from the Mondi Provident Fund to the Global Forest Products Provident Fund in the benefit statements of the individual members and that the company, York Timbers (Pty) Ltd and South African Plywood (Pty) Ltd will stand good for these amounts.

The administrators of the Mondi Provident Fund had submitted the application for the transfer of R1,053 million as at 1 June 2002 together with fund growth to the Financial Services Board, which will be transferred to the Global Forest Products Provident Fund on receipt of approval from the Financial Services Board.

103

39. Related parties

Relationships

Related parties consist of all directors and subsidiaries

Directors - Refer to note 40

All related party transactions were made on terms equivalent to those that prevail in arm's length transactions.

Related party transactions

Adminisration fees received — — 5,700 —

Dividends received — — 838,532 —

Rental received — — 73 —

Related party balances — — 764 —

Compensation to directors and other key management

Short-term employee benefits 54,714 1.083 — —

Share-based payment 733 — 733 —

55,447 1,083 733 —

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000



2008 Pension Travel Housing Directors

R'000 Salary Life Cover Alowance Bonus Leave pay Medical Aid allowance fee Consultancy Total

40. DIRECTORS' EMOLUMENTS

Paid by the Company

ISD Tucker 329 61 43 — — 22 — 1 — 456

AC de Villiers — — — — — — — 2 — 2

TG Mokoena — — — — — — — 38 91 129

Total 329 61 43 — — 22 — 41 91 587

Paid by Subsidiaries

AC de Villiers 775 41 128 69 112 41 — — — 1,166

LS Cooper 2,059 177 245 1,267 155 73 66 — — 4,042

JHK Lehman 1,843 106 165 1,100 86 62 — — — 3,362

TG Mokoena 681 84 135 — — 12 — — — 912

Total 5,358 408 673 2,436 353 188 66 9,482

Paid by the Group

ISD Tucker 329 61 43 — — 22 — 1 — 456

AC de Villiers 775 41 128 69 112 41 — 2 — 1,168

LS Cooper 2,059 177 245 1,267 155 73 66 — — 4,042

JHK Lehman 1,843 106 165 1,100 86 62 — — — 3,362

TG Mokoena 681 84 135 — — 12 — 38 91 1,041

Group Total 5,687 469 716 2,436 353 210 66 41 91 10,069

2006

Paid by the Company

ISD Tucker 922 151 — — — — — 1 41 1,115

AC de Villiers — — — — — — — 1 — 1

LS Cooper — — — — — — — 1 — 1

JKH Lehman — — — — — — — 1 — 1

S Tucker 352 49 — — — — — — 37 438

Total 1,274 200 — — — — — 4 78 1,556

Paid by Subsidiaries

ISD Tucker (Chairman) — — 129 — — — — — — 129

AC de Villiers 675 62 114 — — — — — 37 888

LS Cooper 737 54 152 — — — — — 109 1,052

JHK Lehman 630 — 114 — — — — — 22 766

S Tucker — — 56 — — — — — — 56

Total 2,042 116 565 — — — — — 168 2,891

Paid by the Group

ISD Tucker (Chairman) 922 151 129 — — — — 1 41 1,244

AC de Villiers 675 62 114 — — — — 1 37 889

LS Cooper 737 54 152 — — — — 1 109 1,053

JHK Lehman 630 — 114 — — — — 1 22 767

S Tucker 352 49 56 — — — — — 37 494

Group Total 3,316 316 565 — — — — 4 246 4,447

105

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

40. DIRECTORS' EMOLUMENTSNon-executive

*A Bonamour 180 — 180 —

*P Botha 184 — 184 —

*S Murray 133 — 133 —

*G Tipper 170 — 170 —

T Modise 219 — 219 —

*S Meer 133 — 133 —

J Kopp 45 93 45 93

S Motlana 28 59 28 59

N Motlana — 16 — 16

T Mokoena — 26 — 26

MCJ van Vuuren 37 159 37 159

P Odendaal 25 — 25 —

R Claunch 193 — 193 —

W Marshall-Smith 52 — 52 —

J Myers 591 — 591 —

Total 1,990 353 1,990 353

Details in regards the payment of directors' emoluments

* These non-executive directors fees were paid to the funds represented by them.

41. Comparative figures

The reporting period is longer than a year, therefore comparative amounts are not comparable to the current balances. The year end has been changed from December to June to be in line with the year end of companies acquired in the business combination.

42. Risk management

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow

interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability

of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative

financial instruments to hedge certain risk exposures. Risk management is carried out by a central treasury department (Group treasury)

under policies approved by the board of directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation

with the Group’s operating units. The board of directors provides written principles for overall risk management, as well as written policies

covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk, use of derivative financial instruments and non

derivative financial instruments, and investment of excess liquidity.


42. Risk management (continued)

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an

adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying

businesses, Group treasury maintains flexibility in funding by maintaining availability under committed credit lines.

The Group’s risk to liquidity is a result of the funds available to cover future commitments. The Group manages liquidity risk through an

ongoing review of future commitments and credit facilities.

Cash flow forecasts are prepared and adequate utilised borrowing facilities are monitored.

Group

At 30 June 2008 Less than Between 1 Between 2

1 year and 2 years and 5 years Over 5 years

R’000 R’000 R’000 R’000

Borrowings 59,781 — 28,217 1,097,773

Trade and other payables 170,805 — — —

At 31 December 2006 Less than Between 1 Between 2


R’000 R’000 R’000 R’000

Borrowings 12,050 11,631 2,536 7,750


Company



R’000 R’000 R’000 R’000

Borrowings — — 28,217 —


At 31 December 2006 Less than Between 1 Between 2


R’000 R’000 R’000 R’000

Borrowings 11 — — —



107


The table below analyses the Group’s derivative financial instruments which will be settled on a gross basis into relevant maturity groupings

based on the remaining period at the balance sheet to the contractual maturity date. The amount disclosed in the table are the contractual

undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Group



R’000 R’000 R’000 R’000

Forward foreign exchange contracts - held for trading

Outflow 1 — — —

Inflow (265) — — —

Credit risk

Credit risk is managed on a group basis. The Group only deposits cash with major banks with high quality credit standing and limits exposure to any one counter party. Trade receivables comprise a widespread customer base. Management evaluated credit risk relating to customers on an ongoing basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored. Credit guarantee insurance is purchased when deemed appropriate. No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by these counterparties. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Financial instrumentAvailable for sale financial assets 1,763 902 589 902Financial assets at fair value through profit or loss- interest rate swap 78,808 — — —- foreign exchange contracts 265 — — —Instalment sale receivables 2,853 — — —Loans and receivables 174,206 59,909 1,984 78Cash and cash equivalents 222,538 41,731 176 411

Trade debtors (included in loans and receivables) are quaranteed by a

CGIC contract with a credit limit of R351 million, with a deductable

annual aggregate of R15 million, and 15% of each claim thereafter.

The aging of trade receivables at the reporting date was:

Current 105,923 31,097 — —

30 days 23,456 13,047 — —

60 - 90 days 8,703 3,047 — —

120 days and over 9,294 1,864 — —

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000



Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000


The movement in the allowance for impairment in respect of trade

receivables during the year was as follows:

Opening balance 739 739 — —

Impairment loss recognised 7,572 — — —

Closing balance 8,311 739 — —

Market Risk

Foreign exchange risk

Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The group companies are required to hedge their entire foreign exchange risk exposure with the group treasury. To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, the Group uses forward contracts, transacted with group treasury. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency. The group treasury’s risk management policy is to hedge between 75% and 100% of anticipated cash flows (mainly export sales and purchase of inventory) in each major foreign currency for the subsequent 12 months.

Forward exchange contracts which relate to future commitments comprise of:

- US$2.9 million, with forward exchange rates varying from 1US$:R6.67 to 1US$:R7.99, and maturing up until 31 October 2008

- EUR2.1million, with forward exchange rates varying from 1EUR:12.79 to 1EUR:13.3, and maturing up until 30 April 2009

The Group reviews its foreign currency exposure, including commitments on an ongoing basis. The Group expects its foreign exchange contracts to hedge foreign exchange exposure. At 30 June 2008, if the currency had weakened by 6% against the US dollar and Euro with all other variables held constant, post tax profit for the year would have been R1,887 million (2006: R Nil) higher, mainly as a result of foreign exchange gains of translation of US dollar and Euro Foreign Exchange Contract that have fixed exchange rates.

Interest rate risk

The Group’s interest rate risk arises from long term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group uses interest rate swaps to hedge its interest rate risk. The Group policy is to hedge more than 90% of its interest cost using interest rate swap agreements.

Below is an analysis of fixed and variable interest rate dependent financial assets and liabilities:

Fixed interest rate

Financial assets

- Interest rate swap 78,808 — — —

Variable interest rate

Financial assets

- Instalment sale receivables 2,853 — — —Financial liabilities

- Loans and borrowings 1,156,816 — 28,217 —

- Finance lease obligation 35,838 6,175 — —

The majority (92%) of the Group's debt is borrowed at a fixed interest rate, therefore no interest rate sensitivity analysis has been performed.

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

109


Price risk

The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated balance sheet either as available for sale or at fair value through profit or loss. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group. Post tax profit for the 18 months would increase/decrease as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would increase/decrease as a result of gains/losses on equity securities classified a available for sale.

Non-current available for sale instruments 589 902 — —

Current available for sale instruments — — — —

Risk from biological assets

The Group is exposed to financial risks arising from changes in fair value less point of sale cost of its biological assets. The Group reviews

its outlook for selling prices regularly in considering the need for active financial risk management.

Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitor both the demographic spread of shareholders, as well as the return on capital, which the Group defines as total shareholders' equity, excluding non-redeemable preference shares and monitor interest, and 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 borrowings and the advantages and security afforded by a sound capital position. From time to time the Group purchases its own shares on the market; the timing of these purchases depends on market prices. Buy and sell decisions are made in a specific transaction basis by the Risk Management Committee; the Group does not have a defined share buy back plan. There were no changes in the Group's approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

43. Going concern

The 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.

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000


Calculations are as follows:

Reconciliation of basic earnings per share to diluted earnings per share

Net profit/(Loss) for the year 538,750 31,316 818,113 3,119

Profit attributable to ordinary shareholders 538,750 31,316 818,113 3,119

Preference dividends 4,615 — 4,615 —

Profit attributable to ordinary shareholders (diluted) 543,365 31,316 822,728 3,119

Weighted average number of shares

Ordinary shares 52,931 11,041 52,931 11,041

Weighted average ordinary shares for the year 52,931 11,041 52,931 11,041

Effect of convertible preference shares 2,477 — 2,477 —

Diluted weighted average ordinary shares for the year 55,408 11,041 55,408 11,041


45. Basic earnings and diluted earnings per share

The calculation of basic earnings per share at 30 June 2008 was based on the profit attributable to ordinary share holders of R539 million (2006: R31 million) and a weighted average number of ordinary shares of outstanding shares of 52,931 million (2006: 11,041 million). The calculation of diluted earnings per share at 30 June 2008 was based on the profit attributable to ordinary share holders, after the effect on basic earnings for the convertible preference shares of R543 million (2006: R31 million) and a weighted average number of ordinary shares after the effect of the convertible preference shares of 55,408 million (2006: 11,041 million).

44. Post balance sheet events

The group annual financial statements and annual financial statements of The York Timber Organisation Limited were authorised for issue on 16 September 2008 by the Board of Directors.

Fire Update 2008

Fires caused by high winds and temperatures combined with low humidity to create orange to red Fire Danger Indexes (FDI) occured in August, when 100km/h winds fanned several wildfires across South Africa. A portion of York’s highveld plantations was damaged. The fire that damaged the York plantation, started on a neighbouring property and jumped roads and boundaries. A final estimate of York’s damaged area is 1,620 ha of pine and 345 ha of eucalyptus. York has insurance cover for its plantations and the preliminary financial impact is limited to the R5 million excess aggregate payment, with the balance of the damage being covered by the insurers. A total of 117,000 m3 of logs will be salvaged during the next few months. The highveld plantations were planning to harvest 149,000 m3 during the year ahead and the salvage volumes are thus well within the Group’s harvesting and sawing capacity A rapid harvesting process will necessitate the wet deck storage of 42,000 m3. An efficient planting programme will ensure that the long-term impact of the fire will be minimised. The insurance cover also includes the replanting costs of all the burnt trees under seven years.

Group Company

2008 2006 2008 2006

R’000 R’000 R’000 R’000

111

Gross Tax Total

R’000 R’000 R’000

2008 2006

’000 ’000

Weigted average number of ordinary shares

Issued ordinary shares at 1 January 11,041 11,041

Effect of own shares held (9,527) —

Effect of shares repurchased 1,762 —

Effect of shares issued in July 2007 5,097 —

Effect of shares issued in August 2007 44,558 —

Weighted average number of ordinary shares at 30 June 2008 52,931 11,041

46. Headline earnings

The calculation of headline earnings per share at 30 June 2008 was based on the

profit attributable to ordinary share holders of R539 million (2006: R31 million)

adjusted by items not qualified being part of headline earnings and number of shares

of 52,931 million (11,041 miilion).

Reconciliation of earnings to headline earnings - Group - 30 June 2008

Basic earnings attributable to ordinary shareholders 738,095 (199,345) 538,750

- Loss on disposal of equipment and vehicles 400 (112) 288

- Loss on sale of non-current assets held for sale 339 (95) 244

Headline earnings for the period 738,834 (199,552) 539,282

Headline earnings per share (cents) 1,019

Reconciliation of earnings to headline earnings - Group - 31 December 2006

Basic earnings 42,330 (11,014) 31,316

- Surplus on disposal of equipment and vehicles (112) 32 (80)

- Increase in fair value of investment property (1,680) 299 (1,381)

- Impairment of plant (300) 87 (213)

Headline earnings for the year 40,238 (10,596) 29,642

Headline earnings per share (cents) 268.5

In terms of Circular 8/2007, increase in fair value of listed investments should no longer be added back in the calculation of headline earnings.

The headline earnings for 2006 are restated by removing the add back of the increase in fair value of 5.2 cents, from 263.3 cents to 268.5

cents.


NOTICE TO SHAREHOLDERS OF ANNUAL GENERAL MEETING

Notice is hereby given that the 92nd annual general meeting of the shareholders of The York Timber Organisation Limited; (“the Company”) will be held at Ground Floor, 2 Arnold Road, Rosebank at 11:30 on 3 December 2008 for the transaction of the following business:

1. To read and confirm the following minutes:

1.1. Special General Meeting of shareholders held on 20 February 2007;

1.2. 91st Annual General Meeting of shareholders held on 5 June 2007; and

1.3. Special General Meeting of shareholders held on 9 July 2007.

2. To elect the following directors retiring, in terms of the Company’s Articles of Association and who are eligible to offer themselves for re-election: Jim Myers, Andrew Bonamour and Gay Mokoena.

3. To confirm the appointment as Non-executive Directors of: Tlhopheho Modise, Shakeel Meer, Simon Murray, Paul Botha (on 4 Sept 2007) and Pieter Odendaal (on 26 March 2008).

4. To confirm the resignation as directors (executive and non-executive) of: Ivor Tucker (on 31 April 2007), Sally Motlana (on 30 May 2007) and William Marshall-Smith (on 4 September 2007).

5. To receive and consider the financial statements and reports of the directors and auditors of the Company for the year ended 30 June 2008.

6. To authorise the directors (subject to the recommendation of the Company’s Audit Committee) to:

6.1. approve the remuneration of the auditors for the past financial year; and

6.2. appoint auditors for the ensuing financial year.

7. Subject to meeting the requirements of the Companies Act 1973 as amended (“the Act”) and the JSE Securities Exchange South Africa (“the JSE”), to consider and, if approved, to pass with or without modification the following ordinary and special resolutions:

Ordinary resolution No 1

That in terms of section 221 of the Act, the Company and its shareholders extend, until the next annual general meeting, to the Directors the authority to allot and issue, at their discretion and in terms of the Listings Requirements of the JSE, the unissued shares of the Company.

Ordinary resolution No 2

That the Directors have the power to allot and issue any shares of any class already in issue in the capital of the Company for cash when the Directors consider it appropriate in the circumstances, subject to the following:

this authority shall not endure beyond the earlier of the next annual general meeting of the Company or beyond 15 months from the date of passing of this ordinary resolution, unless the 15 months’ period is extended on application to the Registrar of Compa nies and the JSE in which event the authority shall continue for the extended period;

there will be no restrictions in regard to the persons to whom the shares may be issued, provided that such shares are to be issued to public shareholders (as defined by the JSE Listings Requirements) and not to related parties;

upon any issue of shares which, together with prior issues during any financial year, will constitute 5% (five percent) or more of the number of shares of the class in issue, the Company shall, by way of a paid press announcement in terms of 11.22 of the JSE Listings Requirements, give full details thereof, including the effect on the net asset value of the Company and earnings per share, the number of securities issued and the average discount to the weighted average traded price of the securities over the 30 days prior to the date that the price of such issue was determined or agreed by the Company’s Directors;

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that issues in the aggregate in any one financial year may not exceed 15% of the number of that class of the Company’s issued shares (including instruments which are compulsorily convertible into shares of that class) at the date of application less any shares of that class issued, or to be issued in the future arising from options / convertible securities issued during the current financial year, plus any shares to be issued pursuant to an announced, irrevocable and fully underwritten rights offer or to be issued pursuant to any acquisition for which final terms have been announced;

the maximum discount at which securities may be issued is 10% of the weighted average traded price of those securities over the 30 business days prior to the date that the price of the issue is determined or agreed by the Directors, and

a 75% majority is required of votes cast by the shareholders present or represented by proxy at the general meeting to approve the resolution.

Ordinary Resolution No 3

To approve the fees paid and payable from time to time by the Company (as recommended by the Company’s Remuneration Committee) to Non-Executive Directors.

Special Resolution No 1

That the Company and its shareholders hereby approve the change of the name of the Company from “The York Timber Organisation” to “York Timber Holdings” in the manner contemplated in sections 42 (name reservation) and 44 (change of name) of the Act and that the Company Secretary be authorised to do all things required to give effect to the resolution so taken.

Reason for Special Resolution No 1

To better describe the nature of the principal business of the Company as a holding company of subsidiaries that operate in the timber industry and, as such, an investment vehicle holding the interests of shareholders invested in the activities of the York Group.

Special Resolution No 2

That the Company and its shareholders hereby approve, as a general approval contemplated in sections 85(2), 85(3) and 89 of the Act and in terms of the Company’s Articles of Association the acquisition of the Company or any of its subsidiaries from time to time of the issued ordinary shares of the Company, upon such terms and conditions and in such amounts as the Directors of the Company may from time to time determine, but, subject to the articles of association of the Company, the provisions of the Act and the JSE Listings Requirements, as presently constituted and which may be amended from time to time, and provided:

that any such acquisition of ordinary shares shall be effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the Company or any of its subsidiaries and the counter party;

that this general authority shall only be valid until the Company’s next annual general meeting provided that it shall not extend beyond 15 months from the date of passing of this Special Resolution unless the 15 months’ period is extended on application to the Registrar of Companies and the JSE in which event the authority shall continue for the extended period;

that a paid press announcement will be published as soon as the Company or its subsidiaries has/have acquired ordinary shares constituting, on a cumulative basis, 3% of the number of ordinary shares in issue, prior to the acquisition pursuant to which the 3% threshold is reached, and in respect of every 3% thereafter, which announcement shall contain full details of such acquisitions;

that acquisitions by the Company and its subsidiaries of ordinary shares in any one financial year may not exceed 20% of the Company’s issued ordinary share capital from the date of the grant of this general authority;

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Special Resolution No 2 (continued)

that no subsidiary of the Company will acquire more than 10% of the Company’s issued ordinary share capital at any one time;

that in determining the price at which the Company’s ordinary shares are acquired by the Company or any of its subsidiaries in terms of this general authority, the maximum price at which such ordinary shares may be acquired will be at a premium of no more than 10% of the weighted average of the market price at which such ordinary shares are traded on the JSE, as determined over the 5 business days immediately preceding the date of repurchase of such ordinary shares by the Company or any of its subsidiaries;

that the Company may at any point in time only appoint one agent to effect any repurchase(s) on its behalf;

that the Company or any of its subsidiaries may only undertake a repurchase if, after such a repurchase it shall still comply with the spread requirements of the JSE Listings Requirements; and

that the Company or any of its subsidiaries may not repurchase securities during a prohibited period, as defined in the JSE Listings Requirements.

Reason for Special Resolution No 2

To grant the Company or any of its subsidiaries a general authority in terms of the Act for the acquisition by the Company or any of its subsidiaries of shares issued by the Company, which authority shall be valid until the earlier of the next annual general meeting of the Company or the variation or revocation of such general authority by special resolution by any subsequent general meeting of the Company, provided that the general authority shall not extend beyond 15 months from the date of this annual general meeting unless the 15 months’ period is extended on application to the Registrar of Companies and the JSE in which event the authority shall continue for the extended period.

The passing and registration of this special resolution will have the effect of authorising the Company or any of its subsidiaries to acquire shares issued by the Company.

Information required in terms of the JSE Listings Requirements with regard to this general authority for the Company or any of its subsidiaries to repurchase the Company’s securities appears in the annual financial statements, to which this notice of annual general meeting is annexed as indicated below:

Pursuant to and in terms of the JSE Listings Requirements, the Directors of the Company hereby state that:

1. the intention of the Company and/or any of its subsidiaries is to utilise the authority if at some future date the cash resources of the Company are in excess of its requirements. In this regard the Directors will take account, inter alia, an appropriate capitalisation structure for the Company, the long-term cash needs of the Company, and will ensure that any such utilisation is in the interest of shareholders;

2. the method by which the Company and or any of its subsidiaries intends to re-purchase its securities and the date on which such repurchase will take place, has not yet been determined, and

3. after considering the effect of a maximum permitted re-purchase of securities, the Company and its subsidiaries are, as at the date of this notice convening the annual general meeting of the Company, able to fully comply with the JSE Listings Requirements. Nevertheless, at the time that the contemplated re-purchase is to take place, the Directors of the Company will ensure that the:

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115

3.1. Company and the Group will be able in the ordinary course of business to pay its debts for a period of 12 months after the date of the notice of the annual general meeting;

3.2. assets of the Company and the Group will be in excess of the liabilities of the Company and the group for a period of 12 months after the date of the notice of the annual general meeting. For this purpose, the assets and liabilities will be recognised and measured in accordance with the accounting policies used in these audited annual group financial statements;

3.3. share capital and reserves of the Company and the Group will be adequate for ordinary business purposes for a period of 12 months after the date of the notice of the annual general meeting;

3.4. working capital of the Company and the Group will be adequate for ordinary business purposes for a period of 12 months after the date of the notice of the annual general meeting; and

3.5. the Company will provide its sponsor and the JSE with all documentation as required in Schedule 25 of the JSE Listings Requirements, and will not commence any repurchase programme until the sponsor has signed off on the adequacy of its working capital, advised the JSE accordingly and the JSE has approved this documentation.

Information regarding certificated and dematerialised holdings

Shareholders who hold their shares in certificated form or who are own name registered dematerialised shareholders who are unable to attend the general meeting but who wish to be represented thereat, are required to complete and return the attached form of proxy so as to be received by the Transfer Secretaries, Computershare Investor Services 2004 (Proprietary) Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), by not later than 48 hours before this annual general meeting at 11:30 on 3 December 2008.

Shareholders who have dematerialised their shares through a CSDP or broker, other than with own name registration who wish to attend the general meeting should instruct their CSDP or broker to issue them with the necessary authority to attend the meeting, in terms of the custody agreement entered into between such shareholders and their CSDP or broker.

Shareholders who have dematerialised their shares through a CSDP or broker, other than with own name registration who wish to vote by way of proxy, should provide their CSDP or broker with their voting instructions, in terms of the custody agreement entered into between such shareholders and their CSDP or broker. These instructions must be provided to their CSDP or broker by the cut-off time or date advised by their CSDP or broker for instructions of this nature.


Directors’ and Audit Committee’s responsibility statements

In terms of the Act and the JSE Listings Requirements the Directors, whose names are given on page 51 of this annual report, and/or Audit Committee (“the Committee”), as the case may be, respectively confirm that:

collectively and individually they accept full responsibility for the accuracy of the information given and certify that to the best of their knowledge and belief there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the annual report and notice of general meeting contains all information required by the Act and the JSE Listings Requirements; and

save as may be addressed in the report of the Directors, there has been no material change in the financial or trading position of the Company or any of its subsidiaries that has occurred since 30 June 2008; and

other than as disclosed in this annual report, they are aware of no legal or arbitration proceedings, either pending or threatened against the Company or its subsidiaries which may have, or have had in the last 12 months, a material effect on the financial position of the Company or its subsidiaries;

the Committee has carried out and have met periodically to consider and to act upon its statutory duties and functions and confirms that it has satisfied itself of the independence of the Company’s auditors and of the appropriateness of the expertise and experience of the financial director of the Company.

Shareholders diary 2008 - 2009

Interim year-end: 31 December 2008

Release of interim results: on or before 31 March 2009

Financial year-end: 30 June 2009

Release of annual financial results: on or before 30 September 2009

Next (93rd) annual general meeting: October/November 2009

By order of the Board

Francois DekkerCompany Secretary

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DESIGNED AND PRODUCED: YORK TIMBERS COMMUNICATIONS DIVISION

PRINCIPLE PHOTOGRAPHER: NEIL KLEB

117

For use ONLY by certificated and dematerialised ordinary shareholders of The York Timber Organisation Limited (“the Company”) with own name registration, Central Securities Depository Participants’ (“CSDP”) nominee companies and brokers’ nominee companies at the 92nd York annual general meeting to be held at Ground Floor, 2 Arnold Road, Rosebank at 11:30 on 3 December 2008. Dematerialised York shareholders other than those with own name registration must NOT complete this form of proxy and must provide their CSDP or broker of their voting instructions in terms of the custody agreement entered into between such York shareholders and their CSDP or broker.

I/We

of (address)

being (an) ordinary shareholder/s in the Company holding shares, appoint

or failing him,

or failing him, the Chairman of the meeting as my/our proxy to act for me/us at the annual general meeting of the Company which will be held at Ground Floor, 2 Arnold Road, Rosebank at 11:30 on 3 December 2008 for the purpose of considering the business as set out in the notice which this form of proxy accompanies, and, in particular, to vote for and on my/our behalf in respect of the following resolutions:

Insert X in the appropriate box

VOTING INSTRUCTIONS FOR AGAINST ABSTAIN

1. To read and confirm the following minutes:

1.1. Special General Meeting of shareholders held on 20 February 2007

1.2. 91st Annual General Meeting of shareholders held on 5 June 2007

1.3. Special General Meeting of shareholders held on 9 July 2007

2. To re-elect the following directors retiring in terms of the Company’s Articles of Association

and who are eligible offered themselves for re-election:

2.1. Jim Myers

2.2. Andrew Bonamour

2.3. Gay Mokoena

3. To confirm the appointment of the following non-executive directors:

3.1. Tlhopheho Modise (on 4 Sept 2007)

3.2. Shakeel Meer (on 4 Sept 2007)

3.3. Simon Murray (on 4 Sept 2007)

3.4. Paul Botha (on 26 March 2008)

3.5. Pieter Odendaal (on 26 March 2008)

4. To confirm the resignations of the following executive and non-executive directors:

4.1. Ivor Tucker (on 31 April 2007)

4.2. Sally Motlana (on 30 May 2007)

4.3. William Marshall-Smith (on 4 September 2007)

4.4. Gavin Tipper (on 30 April 2008)

5. To receive and consider the financial statements and reports of the directors

and auditors of the Company for the period ended 30 June 2008

6. To authorise the directors to approve the remuneration of the auditors for the past

financial period and (on the recommendation of the Audit Committee) to appoint auditors

for the ensuing financial year

7. Ordinary resolution 1: Authorising the directors to allot and issue the unissued shares of the Company

8. Ordinary resolution 2: Authorising the directors to allot and issue for cash shares in the capital

of the Company of a class of shares already in issue

9. Ordinary resolution 3: Approving the fees paid and payable to Non-Executive Directors

10. Special resolution 1: Changing the name of the Company

11. Special resolution 2: Authorising the Company and its subsidiaries to repurchase the issued

ordinary shares of the Company

Signed at on 2008

Signature: Number of shares:

A member entitled to attend and vote at the meeting, is entitled to appoint one or more proxies to attend, speak and, on a poll, vote in his stead. A proxy need not be a member of the company. Forms of proxy, in order to be valid, must be lodged at the transfer secretary or the registered office of the company at least 48 hours before the commencement of the meeting.

FORM OF PROXY

The York Timber Organisation Limited

Incorporated in the Republic of South Africa

Registration Number 1916/004890/06

JSE Code: YRK SIN CODE: ZAE000008108


Notes to proxy

1. A York shareholder may insert the name of a proxy or the names of two alternative proxies of the York shareholder’s choice in the space/s provided, with or without deleting “the Chairperson of the annual general meeting”, but any such deletion must be initialled by the York shareholder concerned. The person whose name appears first on the form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow.

2. Please insert an “X” in the relevant spaces according to how you wish your votes to be cast. However, if you wish to cast your votes in respect of a lesser number of shares than you own in York, insert the number of ordinary shares held in respect of which you desire to vote. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting as he/she deems fit in respect of all the shareholder’s votes exercisable thereat.

A York shareholder or his/her proxy is not obliged to use all the votes exercisable by the York shareholder or by his/her proxy, but the total of the votes cast and in respect whereof abstentions recorded may not exceed the total of the votes exercisable by the shareholder or by his/her proxy.

3. The date must be filled in on this proxy form when it is signed.

4. The completion and lodging of this form of proxy will not preclude the relevant York shareholder from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof. Where there are joint holders of shares, the vote of the senior joint holder who tenders a vote, as determined by the order in which the names stand in the register of members, will be accepted.

5. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy unless previously recorded by the transfer secretaries of York or waived by the Chairperson of the annual general meeting of York shareholders.

6. Any alterations or corrections made to this form of proxy must be initialled by the signatory/ies.

7. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the transfer secretaries of York.

8. Forms of proxy must be received by the transfer secretaries, Computershare Investor Services 2004 (Pty) Ltd at 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) or by the Company at York Corporate Offices, Main Street, Sabie, 1260 (PO Box 1191, Sabie, 1260) at least 48 hours prior to the meeting by not later than11:30am on Monday, 01 December 2008.

9. The Chairperson of the annual general meeting may accept or reject any form of proxy, in his absolute discretion, which is completed other than in accordance with these notes.

10. If required, additional forms of proxy are available from the transfer secretaries of York.

11. Dematerialised shareholders, other than by own name registration, must NOT complete this form of proxy but must provide their CSDP or broker with their voting instructions in terms of the custody agreement entered into between such shareholders and their CSDP or broker.

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