ANNUAL REPORT 2011 - ShareData · DAWN HR. • The DAWN Academy is launched. 2009 • Acquisition of a 49% interest in Apex Valves. Electroline becomes a wholly-owned subsidiary

Distribution and Warehousing Network Limited

ANNUAL REPORT

2011

Contents

Executive statements

Group at a glance

Divisional overview

Corporate governance

Sustainability

Integrated report

Annual financial statements

Shareholders’ information

DAWN manufactures and distributes quality branded hardware, sanitaryware, plumbing, kitchen, engineering and civil

products through a strategically positioned branch network throughout South Africa, as well as in selected countries in the

rest of Africa and Mauritius.

The Group has two operating segments, namely Building and Infrastructure, supported by the DAWN Solutions segment.

The Building segment has five clusters – Wholesale Trading and Business Development, Watertech, Sanitaryware, Kitchen

and International (including AST – joint venture) and two associates – Apex Valves and Heunis Steel. The Infrastructure

segment consists of two businesses, DPI and Incledon, and two associates – Sangio Pipe and Angolan-based Fibrex as

well as two joint ventures – DPI Simba in Tanzania and Aqualia DPI in Mauritius. The DAWN Solutions segment comprises

DAWN Logistics (DAWN Cargo and DAWN Distribution Centres), DAWN HR Solutions, DAWN IT, DAWN Marketing &

Design, DAWN Merchandising and DAWN Packaging.

The Group’s focused cluster approach allows for the extraction of synergies, including cost reduction and improved

utilisation.

The Group’s strategy is to optimise the mix of trading, brands and manufacturing to maximise the economies of scale

created as the largest, low-cost South African building and infrastructure industry distributor. Even though the Group’s

operations have been right-sized to adapt to current activity levels and certain excess commodity capacity has been

mothballed, the Group has ensured sufficient capacity to take up opportunities when they present themselves. There is no

plan to sell any of its businesses in total at this stage.

Profile

DAWN annual report 2011

GAG01 <

Product and market scope

DAWN distributes approximately 40 000 products sourced through more than 2 500 suppliers to over 12 000 customers

in the building and infrastructure sectors. As market dynamics have evolved it has become important to manage the

businesses according to the markets they serve, therefore changing the reporting segments in 2010 from Trading and

Manufacturing to Building and Infrastructure. The Building segment contributed 62%, the Infrastructure segment

contributed 32% and the Solutions segment contributed 6% of Group revenue, before intergroup eliminations, in the year

under review.

Geographical scope

Products are distributed through a national, strategically positioned channel network in South Africa as well as in

sub-Saharan African countries such as Angola, Nigeria, Mozambique, Botswana, Swaziland, Lesotho, Namibia, Tanzania,

Zambia and Zimbabwe, and Indian Ocean islands such as Mauritius. Manufacturing operations have been established in

Botswana and Namibia with joint venture manufacturing operations in Mauritius and Tanzania and an associate in Angola.

Channel scope

The distribution fleet of the Group with more than 250 vehicles, its advanced information technology infrastructure which

allows for online ordering, the establishment of centralised distribution centres in all major areas and strong relationships

with both customers and suppliers give DAWN its competitive edge.

Scope


> GAG02

1997 – 2011Milestones


2001

2002

• DAWN’s shares aredematerialisedunder Strate.

2003

• Acquisition of theassets of Windoor, afocused hardwareand tool wholesaler,now trading asStability HardwareWholesale.

• DAWN Cargo is createdas a separate profit centre and the fleet ofvehicles in the Group isexpanded.

• DAWN embarks on anextensive share repurchase programmeand obtains shareholderapproval to repurchase98,2 million shares.

• Acquisition of 30,43% of the equity in Incledon, a company with itsprimary investment being an effective50% equity holding in Incledon DPI, anentity which focuses mainly on thewholesale of plumbing and engineeringgoods and equipment in the civil andconstruction sectors.

2004• Revenue exceeds R1

billion for the first time.

• Ukhamba Holdings,through its wholly-owned subsidiary,Dream WorldInvestments 239,acquires 33,47% ofDAWN. 10 milliondeferred ordinaryshares, with a vesting period over five years,are issued to Ukhamba to bring the effectiveBEE shareholding in DAWN by Ukhamba to38,8%. Ukhamba is a broad-based black-owned investment holding companywhose beneficiaries include some 15 000 historically disadvantaged individuals and anumber of community trusts.

• Acquisition of 76% of the share capital of AFF,a manufacturer and distributor of kitchen fittings, hinges and related products.

• Acquisition of 77,6% of Cobra Watertech, amanufacturer and supplier of taps and relatedaccessories.

1998

• City Investment Holdings, throughthe disposal of the manufacturingbusinesses and the acquisition ofwholesale distribution companies,is transformed into a wholesaledistribution company.

• Acquisition by City InvestmentHoldings of WHS.

• Acquisition of Saffer from Boumat Limited.

• DAWN’s strategic change indirection – to be a vertically integrated distribution and trading specialist.

2000

1999

• City Investment Holdings is renamedDistribution and Warehousing NetworkLimited (DAWN) and the listing is transferred to the Retail sector of the JSE.

• Acquisition from Barlows of HardwareDistributors SA, now trading as WHDsa.

• The DAWN Share Trust is created.

1997

• Establishment ofWholesale HousingSupplies (WHS).

GAG03 <



2006

2007

• Acquisition of 79% of the share capital of LibraBathrooms and Amanzi Bath Works, manufacturersand distributors of bathroomware, and merging thetwo entities under Libra.

• Acquisition of a 49%interest in HalstedInvestments (LasherTools).

• Acquisition of Isca, aleading tap and mixersupplier.

• Acquisition of the business of Vaal Sanitaryware, amanufacturer of ceramic sanitaryware through bothvitreous china and fireclay production.

• Acquisition of a 100% shareholding in DPI Holdings,the leading supplier of PVC pipes and fittings to thebuilding and infrastructure sectors, a 50% shareholder in Incledon DPI, and shareholding in anumber of decentralised engineering trading entitiesin the major regions as well as cross-border manufacturers.

• Acquisition of the remaining 69,57% interest inIncledon (see 2003).

• Revenue exceeds R3 billion.

• DAWN is rated first in the Sunday Times Top 100Companies.

• Formation of a South African company, AST, withFranke Holding AG. AST offers warehouse and distribution facilities for branded product ranges in Africaand the adjacent Indian Ocean islands, as well as showroom and office facilities.

• Acquisition of a 49% shareholding in Sangio Pipe, amanufacturer of high densitypolyethylene and polypropylenepipes in KwaZulu-Natal.

• Acquisition of a 33,3% share-holding in Fibrex, a plastic pipe extrusion operation inAngola.

• Acquisition of the business of RocoFittings and the formation of DAWNKitchen Fittings division.

• Acquisition of a 49% interest inHeunis Steel.

• Acquisition of a 49% interest inElectroline.

• Gauteng trading operations move toa centralised distribution facility inGermiston.

• Debt reduction and debtrestructuring processmainly through a capitalraising of R300 million byway of a rights issue andR70 million from the saleof Lasher.

• Acquisition of the business of Plexicor, anacrylic bath manufacturerbased in Pietermaritzburg.

2005

• Establishment ofDAWN HR.

• The DAWNAcademy islaunched.

2009

• Acquisition of a 49%interest in ApexValves.

• Electroline becomes awholly-owned subsidiary.

• The Support Servicessegment is renamedDAWN Solutions andthe underlying entities’ brands areupdated.

2011

2008

• Reporting segments are changed fromthat of Trading and Manufacturing to thatof Building and Infrastructure, andSupport Services.

• The Group adopts a focused clusterapproach to allow for the extraction ofsynergies and cost reduction.

2010

> GAG04


Building Infrastructure

Associates

DAWN Solutions

Associate

*

* The over-border operations of DPI Plastics enhance DAWN International’s geographical footprint.

– Joint Venture

– Joint Venture

– Associate

– Subsidiary

– Subsidiary

DPI over-border operations

Group structure


GAG05 <

Apex Valves

Executive committee


Derek TodCEO

Jan BeukesRisk and Internal Audit Officer

Dries FerreiraFD

René RoosCEO – DAWN Solutions

Collin BishopCOO

Bob HaynesBrands

Gerhard KotzeeCEO – Infrastructure

Pieter van NiekerkCEO – International

> GAG06

• Market share gains were experienced in an

environment where the level of buildings

completed remained flat

• Competitive environment led to lower volume

throughput and lower gross margins

• Increases in operating expenditure were

mainly attributable to catch-up salary

increases

Segment contribution to Group revenue *

62% 63%

2011 2010

2011 2010

Cluster contribution to Building segment revenue

Wholesale Sanitaryware KitchenWatertech International

58%27%

7%5% 3%

59%

26%

8%

5% 2%

* Excludes associate revenue of R188 million from Electroline and Heunis Steel

* Before intergroup eliminations

Building


GAG07 <

DAWN Wholesale clusterThe Wholesale cluster consists of:

• Trading (Saffer Bathroom & Plumbing and WHDsa); and

• Business Development (DAWN Power Tools, Wholesale

Tile Supplies, Wholesale Building Materials, Stability,

Electroline).

Wholesale Trading sustained its revenue performance

through support from price inflation. Profitability was affected

by inflationary cost escalations, partially offset by

improvement in gross margins. The overall performance was

however affected by the impact of lower volumes on

metropolitan operations. Inventory management was

complicated by erratic demand patters, resulting in increased

stock levels. Bad debt was minimised through strict credit

control disciplines and credit insurance.

Business Development is a new entity established in

January 2011 for the focused development of

underperforming and greenfield operations. Significant

progress has been made in Wholesale Building Materials and

Wholesale Tile Division, with both businesses rendering

breakeven performances. Electroline and Stability delivered

good performances for the period. The main successes in

the division were achieved through spreading of the

customer base, thereby being less reliant on chain stores,

and the resultant margin and volume improvements.

DAWN Watertech clusterDAWN Watertech cluster comprises Cobra and Isca.

Cobra achieved volume increases, but earnings were

affected by marketing spend and margin erosion from an

adverse change in the product mix, absorption of raw

material price inflation and discounting against competitors.

Cobra’s main focus will remain on product specification and

retail positioning and benefits from new products will be

extracted in F2012.

Isca attained revenue growth, supported by improved

service levels. Earnings were however reduced due to

margin erosion, attributable to the product mix, and

marketing spend. Isca experienced market share gains from

brand strengthening through an effective marketing and

brand building campaign, its strong presence in mass retail

groups and effective product range strategies and new

product launches.

DAWN Sanitaryware clusterDAWN Sanitaryware cluster is constituted of Ceramic – Vaal

Sanitaryware and Acrylic – Libra Bathrooms and Plexicor.

Ceramic – Vaal Sanitaryware

Vaal Sanitaryware achieved volume growth, but at a lower

average selling price. Profitability was severely affected by a

decline in margins as a result of an adverse change in the

product mix. Market share increased due to its strong

position in the specification and hospitality markets.

Improved manufacturing efficiencies resulted in lower

average unit cost after energy and labour cost escalations.


Buildingcontinued

> GAG08

Acrylic – Libra Bathrooms and PlexicorThe Acrylic division made a loss, mainly due to low capacityutilisation as a result of reduced volumes and low marginexports attributable to the strong Rand.

Libra Bathrooms mainly produces commodity products

and is a low cost, low breakeven operation which saw 54%

volume growth during the year, largely from commodity

baths. Gross margins were down, but overheads were well

controlled.

Plexicor manufactures higher margin products and

pressure on demand during the year resulted in factory

under-recoveries. Export volumes and margins were poor as

a result of the strong Rand. The sales mix was affected by

lower margin products in line with current market demand.

DAWN Kitchen Fittings clusterThe kitchen fittings industry remained depressed resulting in

a 5% decline in revenue in the Kitchen Fittings cluster. Strong

gross margins were maintained through pricing disciplines.

Inflationary escalations in the expense base contributed to an

operating loss. Working capital disciplines resulted in strong

improvements in inventory management and debtors’

control.

DAWN InternationalDAWN International consists of AST, Saffer International,

DAWN Exports and the Africa manufacturing businesses.

ASTRevenue increased by 21% to R118 million (including joint

ventures at 100% and associates) after accounting for

currency conversion losses. However, profit before interest

and tax reduced to a loss of R8 million. Most operations

performed well, with the exception of Angola where a loss of

R12 million was recorded, resulting in a significant reduction

in overall profit. Excluding Angola, AST rendered a positive

result.

Saffer InternationalPerformance levels were maintained at those of 2011.

DAWN Exports from South Africa increased revenue by 5%

to R559 million. Performance was curbed by the impact of

the global recession and the strong Rand.

AssociateApex Valves (49% held)A 49% interest in Apex Valves was acquired by DAWN on

1 February 2011. Apex Valves manufactures control valves,

mainly for domestic hot water applications, under licence.

The business experienced strong volume and profit growth,

supported by the introduction of new tempering valves for

the solar water-heating market.

Heunis Steel (49% held)Heunis Steel achieved market share and volume growth

through sustained competitive pricing. Profitability was

maintained despite margin sacrifice, mainly through tight

expense control and improved factory efficiencies.

Buildingcontinued

GAG09 <


> GAG01

Opportunities in Africa remain attractive

DAWN International

The division consists of Africa Swiss Trading (AST) – subsidiary heldfor sale, Saffer International, DAWN Exports and the Africa manufacturing businesses.

Strong revenue growth of 16% was maintained, despite the continued negative impact of currency conversions. Zambia andMozambique exceeded budget expectations with Zimbabwe achieving volume budget in its first year of operation. Mauritius rendered a stable performance.

The main focus remains on correction of the negative performancesin Angola and Nigeria.

DAWN’s new joint venture partner in AST, Kwikot, will enhance theservice delivery and expand the product offering of the business.

The over-border manufacturing operations maintained profitability indifficult market conditions, against weakening currencies and a poorperformance in Botswana.

The vast building and infrastructure needs in various countries onthe continent and the general need for DAWN’s products createopportunities for the Group in Africa. The Group is therefore makinga concerted thrust into these markets.

Cluster contribution to Group revenue

Africa and Indian Ocean islands South Africa

82,3%

17,7%18,4%

81,6%

2011 2010

> GAG10


Botswana

Namibia

Angola

Nigeria

Zambia

Tanzania

MozambiqueMauritius

South Africa

Lesotho

Swaziland

Zimbabwe

Africa

* Gross revenue including associates and joint ventures.

R976 million* R893 million*

Focus on attaining breakeven, depending on

sustainability of upturn

• DPI Plastics managed to reduce its loss by

21% for the full year, assisted by extra volume

throughput and factory recoveries.

• Electricity cuts continued to constrain

productivity, however DPI managed to reduce

its scrap rates and gross margins were

maintained at the prior year’s levels.

• Incledon increased gross margins as a result

of a better ratio of engineering products to

PVC and steel pipe being sold.


31%32%

2011 2010

2011 2010

Divisional contribution to Infrastructure segment revenue

Incledon DPI Plastics

39%

61%

36%

64%

Infrastructure


GAG11 <

* Before intergroup eliminations.


IncledonMarket conditions improved in the second half of the year,

resulting in an improved performance from Incledon. The

order book has been sustained at much higher levels with

support from bulk water projects. Municipal spend on water

and sewer projects seems to be improving, but remains

affected by slower payments. During the year Incledon

opened three new branches in strategic growth areas and

five branches have relocated to either new or improved

premises. A focus on procurement and pricing disciplines

contributed to much improved gross profit margins. The key

focus remains on growth of engineering end-users and

merchants and a reduced dependence on low-margin PVC

pipe.

DPI PlasticsDPI Plastics’ factory loading and order book improved during

the second half of the year, resulting in a better performance,

after the poor performance in the first half of the year.

Despite the strong Rand, there was a strong performance

from exports. Further restructuring was effected in the

business in order to maintain the low expense base and to

counter increases, most notably electricity. A key focus area

remains improvement in market share of higher margin

building products.

AssociatesSangio Pipe (49% held)Sangio Pipe started the year off slowly, but attained

significant revenue growth in the second half. The order book

was boosted from the demise of a major competitor,

combined with an improvement in market conditions,

particularly on mining and industrial projects. Production

capacity has been expanded significantly, in line with the

strong order book, and is expected to be sustained.

Fibrex (33,3% held)Earnings in Fibrex were severely affected by the weakening

currency and stock revaluation. Market conditions improved

due to improved liquidity driven by improved oil prices.

Prospects for F2012 are supported by an improved order

book from new projects and regional expansion to the south

of Angola.

Infrastructurecontinued

> GAG12

Providing a crucial competitive advantage in

logistics

• Assisted the Group to contain costs across

all businesses and to significantly reduce

warehouse and logistics stock losses.

• Further transport and warehousing volumes

were brought in-house and income from

Group companies grew by 8%.

• HR, Marketing, IT and Packaging saw an 80%

increase in profit before interest and tax

attributable to additional business drawn from

outside the Group.


6% 6%

2011 2010

Divisional contribution to DAWN Solutions segment revenue

41%

39%

7%

5%7% 1%

DAWN Cargo DAWN Distribution Centres DAWN HR Solutions DAWN IT

DAWN Marketing & Design DAWN Packaging

38%

38%

8%

5%

7%4%

DAWN Solutions


GAG13 <

2011 2010

* Before intergroup eliminations.


DAWN LogisticsDAWN Cargo DAWN Cargo is a road freight distribution business with the

capability to service the Group’s entire customer base across

South Africa and its neighbouring countries. DAWN Cargo

provides significant competitive advantage to the Group and

its subsidiaries through its national reach and by offering a

delivery service at less than half the cost charged by any

commercial transporter.

DAWN Distribution DAWN Distribution is a focused and highly specialised

provider of warehouse and related facilities management

solutions to its internal client base. DAWN Distribution

Centres benchmarks its key performance indicators,

including productivity measures, efficiencies and cost

optimisation against available alternatives to ensure optimal

service delivery and thereby competitive advantage benefits

to its clients.

DAWN HR Solutions DAWN HR Solutions provides a comprehensive package of

human resources (“HR”) solutions, services and support

across the full spectrum of the HR function, firstly to

in-house clients and secondary to external clients. The

package includes recruitment and selection, industrial

relations, organisational development, skills development,

broad-based black economic empowerment implementation,

performance and remuneration management, legal

compliance, occupational health and safety, payroll

management and administration and strategic HR

management.

DAWN Information TechnologyDAWN Information Technology offers a defined range of

customised IT management solutions to its in-house client

base, focusing on optimising their access to and utilisation of

customised and value-adding hardware and software

options.

DAWN Marketing & DesignDAWN Marketing & Design offers all aspects of below-the-

line marketing to DAWN Group companies as well as some

external clients and attends to the implementation of the

divisional companies’ marketing strategies as well as Group

media bookings.

DAWN Merchandising DAWN Merchandising provides an in-store merchandising

service to all Group companies in the national chain stores,

ensuring professional and effective representation and

display of pre-packed and concept product ranges.

Presence at the receiving backdoor of the chain stores also

assists with stock loss prevention and expediting the pull

through of DAWN products onto retail shelves.

DAWN PackagingThe pre-pack plant provides cost effective, quick-turnaround

packaging services and solutions to both trading and

manufacturing companies in the Group to support their

merchandised product strategies.

DAWN Solutionscontinued

> GAG14

Value proposition


Customers benefit from, and are

showing an increased requirement

for, just-in-time break-bulk

distribution. The premium brand

product range, with its extensive line

item offering, provides a one-stop

shop opportunity with added working

capital management advantages.

2011 2010

R’000 R’000

Group summary (R’000)

Revenue 3 792 631 3 618 391

Operating profit before finance charges 33 070 207 868

Profit before income tax (14 167) 156 568

Attributable earnings (30 325) 109 177

Headline earnings 38 085 98 914

Total assets 2 558 797 2 498 536

Cash and cash equivalents (34 526) 39 902

Non-current interest-bearing borrowings 835 16 563

Non-current non-interest-bearing borrowings 40 027 252 022

Market capitalisation 1 535 152 1 849 870

Share performance

Headline earnings per ordinary share (cents) 16,30 48,91

Fully diluted earnings per share (cents) (12,98) 50,38

Net asset value per ordinary share (cents) 488,50 512,10

Share price at end June (cents) 639,00 770,00

Ordinary shares in issue (’000) 240 243 240 243

Ordinary shares held in treasury (’000) (8 718) (8 258)

Deferred ordinary shares in issue (’000) 2 000 2 000

Financial statistics

Return on total assets (%) 1,29 8,32

Current ratio (times) 1,40 1,90

Net financial gearing ratio (%) * 30,30 21,10

Operating profit margin (%) 0,87 5,74

Return on ordinary shareholders’ funds (%) (2,53) 13,28

* Includes cash and cash equivalents.

Financial highlightsfor the year ended 30 June

Rebased relative share price performance

550

600

650

700

750

800

850

900

950

1 000

1 050

DAWN

Jul 10 Aug 10 Sep 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11

Building and ConstructionMaterials Sector

JSE All Share Index


06 07 1008 09

Headline earnings per share (cents)

0

20

40

60

80

100

120

140

160

11

06 07 1008 09

Revenue (Rm)

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

11

06 07 1008 09

Total assets (Rm)

0

500

1 000

1 500

2 000

2 500

3 000

11 06 07 1008 09

Net asset value per share (cents)

0

50

100

150

200

250

300

350

400

450

500

550

11

06 07 1008 09

Operating profit (Rm)

0

50

100

150

200

250

300

350

400

450

11

Graphical presentation of financial highlightsfor the year ended 30 June

06 07 1008 09

Headline earnings (Rm)

0

50

100

150

200

250

300

11


Twelve-year financial reviewfor the year ended 30 June

2011 2010 2009 2008Group R’000 R’000 R’000 R’000

INCOME STATEMENTSRevenue 3 792 632 3 618 391 3 957 256 3 935 752

Operating profit 33 070 207 868 245 635 411 294

Before depreciation and amortisation 101 400 267 164 302 972 449 832 Depreciation and amortisation (68 330) (59 296) (57 337) (38 538)

Net finance charges (46 531) (56 511) (125 876) (94 357)Share of results of associates (net of impairment) (706) 5 211 30 666 35 461

(Loss)/profit before income tax (14 167) 156 568 150 425 352 398 Attributable (losses)/earnings (30 325) 109 177 112 451 267 204 Exceptional items – – – – – – – –Headline earnings 38 085 98 914 143 701 260 954 Dividends paid – – 30 042 – – – – – – – – –Repayment of share premium – – 34 966 47 866

STATEMENTS OF FINANCIAL POSITIONCapital and reserves 1 173 669 1 197 163 821 868 747 372 Non-controlling interests 1 261 18 797 17 832 21 630

Total equity 1 174 930 1 215 960 839 700 769 002

Non-current liabilities 116 802 398 886 224 244 263 683

Interest-bearing borrowings 40 027 252 022 93 368 110 405 Non-interest-bearing borrowings 835 16 563 20 543 44 320 Deferred profit 37 735 61 536 59 008 61 000 – – – – – – – –Convertible debentures – – – – – – – – – –Derivative financial instrument 6 990 6 526 – – – – – – – – – –Retirement benefit obligation 5 979 – – – – – – – – – – –Deferred tax liabilities 25 236 62 239 51 325 47 958

Current liabilities 1 267 065 883 690 1 312 323 1 641 268

Borrowings 476 186 215 712 612 136 636 374 Other 790 879 667 978 700 187 1 004 894

Total equity and liabilities 2 558 797 2 498 536 2 376 267 2 673 953

Non-current assets 737 819 827 449 795 151 796 763

Property, plant and equipment 373 996 353 986 357 489 307 592 Intangible assets 218 099 271 253 277 373 250 686 Deferred tax assets 57 308 77 934 49 104 35 646 Trade and other receivables – 36 826 29 932 45 000 – – – – – – – –Investments in associates 88 416 87 450 81 253 157 839

Current assets 1 778 512 1 671 087 1 511 116 1 877 190Held for sale assets 42 466 – 70 000 – – – – – – – – –

Total assets 2 558 797 2 498 536 2 376 267 2 673 953

OTHER DATANumber of employees employed by the Group

(including subsidiaries) 3 839 3 966 4 274 4 480


2007 2006 2005 2004 2003 2002 2001 2000R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

3 002 544 1 740 917 1 304 104 1 047 417 933 051 844 922 808 590 734 429

323 946 203 370 134 409 63 274 48 194 31 082 33 573 38 691

357 561 220 153 144 491 72 473 56 690 39 850 40 432 43 349 (33 615) (16 783) (10 082) (9 199) (8 496) (8 768) (6 859) (4 658)

(62 196) (22 805) (17 184) (5 813) (6 645) (5 100) (3 332) (4 408)21 389 8 657 3 460 3 707 – – – –

283 139 189 222 120 685 61 168 41 549 25 982 30 241 34 283 199 210 128 364 85 915 45 013 31 561 19 648 20 254 29 610

– – – – 207 (1 961) (14 050) (11 081)187 896 124 553 84 974 45 013 31 354 19 839 34 304 40 691

– – – – – – – –28 391 22 232 11 831 7 169 – – 10 323 –

515 864 337 791 198 247 118 730 92 286 123 705 108 382 87 840 23 613 35 459 7 136 12 – – – –

539 477 373 250 205 383 118 742 92 286 123 705 108 382 87 840

394 948 132 223 112 124 35 067 26 815 9 779 22 852 13 196

219 550 94 848 75 162 22 133 22 238 5 477 9 990 4 158 136 109 13 031 25 841 12 310 – – – –

– – – – – – – –– – – – – – 4 482 4 482– – – – – – – –– – – – – – – –

39 289 24 344 11 121 624 4 577 4 302 8 380 4 556

1 069 282 644 218 356 134 217 313 167 560 154 714 146 022 132 378

387 005 189 790 74 932 15 224 4 748 9 842 16 694 9 167 682 277 454 428 281 202 202 089 162 812 144 872 129 328 123 211

2 003 707 1 149 691 673 641 371 122 286 661 288 198 277 256 233 414

606 602 306 712 157 917 44 479 23 441 25 370 28 310 14 510

232 268 91 938 89 418 21 456 23 441 24 770 26 986 13 986 249 652 119 682 38 054 – – 600 800 –32 077 26 722 5 232 – – – – –

– – – – – – – –92 605 68 370 25 213 23 023 – – 524 524

1 397 105 842 979 515 724 326 643 263 220 262 828 248 946 218 904 – – – – – – – –

2 003 707 1 149 691 673 641 371 122 286 661 288 198 277 256 233 414

4 567 2 795 2 489 958 871 805 902 840


Twelve-year financial review continued

for the year ended 30 June

1. Headline earnings per share

Profit attributable to ordinary shareholders adjusted for any

losses or gains of a capital nature and other items as set

out in the headline earnings per share accounting circular

divided by the weighted number of shares in issue during

the year.

2. Attributable earnings per share

Profit attributable to ordinary shareholders divided by the

weighted number of shares in issue during the year.

3. Fully diluted earnings per share

Profit attributable to ordinary shareholders divided by the

weighted number of shares in issue during the year,

inclusive of incentive shares to be issued.

4. Net asset value per share Ordinary shareholders’ interest (excluding non-controllinginterests) divided by the number of ordinary shares in issueat year-end and including deferred ordinary shares, net oftreasury and incentive shares.

5. Net tangible asset value per share Net asset value per share excluding intangible assets.

6. Return on ordinary shareholders’ funds Net profit attributable to ordinary shareholders as a percentage of ordinary shareholders’ funds at beginning ofthe year.

7. Return on total assetsOperating profit before finance charges and income tax asa percentage of total assets.

DEFINITIONS

Group Definitions 2011 2010 2009 2008

Ordinary share statistics

Weighted average shares (’000)

For earnings per share 233 681 202 235 175 975 174 771

For fully diluted earnings per share 233 681 216 676 188 942 187 738

Shares in issue (’000) 240 243 240 243 198 576 191 464

Shares held in treasury (’000) (8 718) 8 258 7 726 7 726

Share Incentive Trust (’000) – – 12 967 12 967

Deferred ordinary shares (’000) 2 000 2 000 2 000 4 000

Market capitalisation (R’000) 1 535 152 1 849 871 1 290 745 2 393 303

Market price (cents) 639 770 650 1 250

Headline earnings per share (cents) 1 16,30 48,91 81,66 149,31

Attributable earnings per share (cents) 2 (12,98) 53,99 63,90 152,89

Fully diluted earnings per share (cents) 3 (12,98) 50,39 59,52 142,33

Asset value per share (cents)

Net asset value 4 488,53 511,64 456,89 427,63

Net tangible asset value 5 397,75 395,71 302,69 284,19

Dividend per share (cents) – – 35,00 – –

Capital repayment per share (cents) – – – 25,00

Returns on productivity

Return on ordinary shareholders’ funds 6 (2,53) 13,28 15,05 51,80

Return on total assets 7 1,29 8,32 10,34 15,38

Asset turnover ratio 8 2,9 2,3 3,8 4,1

Operating profit margin 9 0,87 5,74 7,09 10,45

Turnover per employee (R’000) 923 854 885 879

Solvability and liquidity

Financing cost cover (times) 10 0,71 3,68 2,20 4,36

Financial gearing ratio 11 30,30 21,10 71,40 68,20

Current ratio 12 1,40 1,89 1,20 1,13

Acid-test ratio 13 0,76 1,05 0,62 0,67

Debt:equity ratio 14 1,18 0,51 0,65 0,71


8. Asset turnover ratioRatio of revenue to total assets less current liabilities andnon-controlling interest in equity.

9. Operating profit marginOperating profit on ordinary activities as a percentage ofrevenue.

10. Financing cost coverOperating profit divided by net financing cost.

11. Financial gearing ratioRatio of net interest-bearing debt to total shareholders’interest, including preference and minority shareholders andcash and cash equivalents.

12. Current ratioThe ratio of current assets to current liabilities.

13. Acid-test ratioThe ratio of current assets less inventory to current liabilities.

14. Debt:equity ratioThe ratio of total liabilities to total equity.

2007 2006 2005 2004 2003 2002 2001 2000

170 070 165 860 161 100 149 445 167 680 289 992 291 318 277 565

183 037 183 607 180 633 – – – – –

189 464 174 689 169 013 169 013 188 984 298 627 298 627 277 565

7 726 7 726 7 726 7 726 21 145 12 341 – –

12 967 5 160 7 397 12 807 15 200 – – –

6 000 8 000 10 000 – – – – –

3 268 258 1 484 856 1 014 078 405 631 173 865 125 423 134 382 147 109

1 725 850 600 240 92 42 45 53

110,48 75,11 52,75 30,12 18,70 6,84 11,78 14,66

117,13 77,39 53,33 30,12 18,82 6,78 6,95 10,67

108,84 69,91 47,56 – – – – –

295,17 198,93 120,96 79,96 60,46 43,21 36,29 31,65

152,32 128,45 97,74 79,96 60,46 43,00 36,03 31,65

– – – – – – – –

15,00 13,00 7,00 4,00 – – 3,5 –

58,97 64,75 72,36 48,78 25,51 18,13 23,06 45,88

16,17 17,69 19,95 17,05 16,74 11,47 18,40 21,38

3,3 3,7 4,2 6,8 7,8 6,3 6,2 7,3

10,79 11,68 10,31 6,04 5,17 3,68 4,15 5,29

657 623 575 1 093 1 071 1,050 896 874

5,21 8,92 7,82 10,88 7,22 6,48 15,31 22,32

52,03 38,54 38,92 26,32 29,24 12,38 28,76 16,56

1,31 1,31 1,45 1,50 1,57 1,70 1,70 1,65

0,80 0,82 0,70 0,89 0,91 1,09 1,08 1,06

0,73 0,68 0,70 0,68 0,68 0,57 0,61 0,62


The Group’s strategy remains one of

optimising the mix of trading, brands and

manufacturing to maximise the economies of

scale created as the largest, low cost South

African building and infrastructure industry

distributor.


> ES01

ES02 >> Outgoing Chairman’s review

ES06 >> Incoming Chairman’s review

ES08 >> Chief Executive Officer’s report

ES12 >> Financial Director’s report


Outgoing Chairman’sreview

Lou AlbertsOutgoing Independent Non-Executive Chairman

ES02 <

DAWN remains committed to its strategy of

pursuing activities in both the building and

infrastructure sectors.


OverviewAlthough activity in both the building and, more

particularly, the infrastructure markets improved

somewhat in the second half, industry data confirms that

the Group experienced its toughest trading environment

to date.

Building segment – 62% of Group revenue(before intergroup eliminations)The Building sector experienced a further decline in

activity levels in the 2011 financial year, with the total

decline in buildings completed now 25% off the peak

levels achieved in the 2009 financial year. The current low

level of building activity has had a marked impact on the

Building segment’s economies of scale and, therefore, a

negative impact on earnings.

Despite the 12% decline in buildings completed in the

market during this financial year, the Building cluster’s

organic revenue did not decline. It delivered a six

percentage point average market share gain across the

brands in this segment, although of a much smaller pie

and at lower margins than the 2010 financial year. The

market trend towards more affordable products

exacerbated the lower margins prevalent in the market

due to an extremely competitive environment. The market

share gain was achieved due to the Group’s just-in-time

business model which provides a particularly strong

competitive advantage as clients had to continue keeping

lower stockholdings in tough markets.

However, operating profit decreased by 32% from R247

million to R169 million and operating margins declined

from 10,5% to 6,8%, excluding the impact of impairments

and non-operational once-off costs. See financial review

for more information.

The decrease in operating profit and operating margin

were due to a number of factors. Firstly, the Group had to

absorb the effect of two salary increases during the year

following an 18-month delay in increases leading up to

the first half of F2011.

Furthermore, profit was impacted by lower volumes and

the reduction in efficiencies, changing customer buying

patterns which placed inventory models under pressure

as well as certain time-crucial expansion initiatives, such

as the development of new Vaal products and

efficiency-enhancing investments at Cobra and Vaal.

Infrastructure segment – 32% of Group revenue(before intergroup eliminations)

The infrastructure market continued to experience lower

volumes, with the value of civil contract awards down

15% in the 2011 financial year, which is 38% lower than

the highs achieved in F2009. However, there has been an

improvement in the awarding of civil contracts during the

second half of the 2011 financial year.

Revenue showed a pleasing increase of 8%, turning

around from a 2% decline in the first half to a 19%

increase in the second half of F2011. Although a full-year

operating loss of R32 million (2010: R34 million operating

loss) was recorded, the loss reduced substantially in the

second half of the year from R25 million to R4 million,

excluding impairments. Market share increased from 30%

to 35%, largely attributable to the new sales structure,

successful cost eradication programmes and some

pick-up in volumes due to fewer competitors.

DPI Plastics managed to reduce its loss by 21% for the

full year, assisted by extra volume throughput and a

strategic decision to increase prices following quality

improvements during the last quarter, thereby entrenching

the differentiation of the product in the market. However,

volumes in the high-margin buildings fittings business

decreased in line with the contraction in the building

market and DPI’s factory in Roodekop struggled to gain

momentum due to electricity cuts which continued to

constrain productivity. DPI’s factory generators could only

assist with smooth shutdowns, but were unable to run

production to the level of power required. This business

saw 28 electricity cuts during the year, 12 of which

occurred in June 2011.

> ES03

Outgoing Chairman’sreviewcontinued



Against these challenges and with delays in implementing

a corrective market strategy in DPI, the business achieved

R16 million in cost reductions, through focusing on

improving the efficiency of raw material consumption,

reducing headcount and reducing transport costs.

Incledon saw a 47% decline in operating profit for the

year off a low base of R8 million to R4 million for the 2011

financial year.

DAWN Solutions – 6% of Group revenue (beforeintergroup eliminations)Against the impact of higher fuel and electricity costs,

DAWN Logistics (comprising DAWN Cargo and DAWN

Distribution Centre), continued to provide a crucial

competitive advantage to the overall Group, enabling

distribution costs at much lower rates than the logistics

industry average.

DAWN Solutions experienced inflationary pressures in its

predominantly fixed expense base and incurred a loss of

R10,5 million (2010: R8,3 million profit). Maintaining the

correct level of capacity to service the medium- to

long-term growth requirements of the DAWN Group is

extremely important, but negatively impacted earnings in

the short term.

DAWN InternationalDAWN International’s contribution is included in the

Building and Infrastructure results. However, to provide

additional disclosure, the revenue of this cluster is

discussed separately.

DAWN International contributed 18% to Group revenue

(on a gross level including 100% of joint ventures’ and

associates’ revenue in these regions), spread over

Infrastructure (44%) and Building (56%). Exports from

South Africa increased revenue by 5% to R559 million.

Results were curbed by the global recession and the

strong Rand. AST’s operations in Africa increased revenue

by 21% to R118 million (after accounting for currency

conversion losses) and DPI’s operations in Africa

increased revenue by 13% to R300 million. Challenges to

the international operations included slower infrastructure

spend, availability of foreign currency (mainly US$), the

postponement of major contracts and increased

competition. Opportunities in Africa, however, remain

attractive due to the vast infrastructure needs in various

countries on the continent. The Group is continuing its

concerted thrust into these markets.

ProspectsAlthough there are some positive signs of growth starting

to resume in the building and infrastructure markets,

DAWN expects this growth to be both protracted and

erratic.

The year ahead will see an intensified focus on returns in

working capital management, forecasting and monitoring

of individual companies. The challenge remains to align

stockholding with volatile demand patterns. The Group’s

stock systems are being further improved through the

enhancement of customer sales history analysis to

strengthen stock availability. The Group’s just-in-time

stock availability offering to merchants will remain a key

focus area to maximise its logistics advantage.

Capital allocation will be monitored continually and it is

considered paramount that cash is generated from

improvements in working capital as well as profitability

across the board, with specific focus on loss-making

businesses.

Improved volumes will be a necessity to assist factory

recoveries.

Benefits should flow through from the development of

new products at all manufacturing entities, with aesthetics

and ‘green’ product development enjoying particular

focus.

Although these initiatives will ensure increased growth, it

is uncertain over what timeframe due to the current

unpredictability of the markets.

Corporate citizenshipThe Board is committed to the principles of openness,

integrity and accountability and to the provision of

timeous, relevant and meaningful reporting to all

stakeholders. They accept their duty to ensure that the

principles set out in the King Report of Corporate

Governance for South Africa – 2009 (King III) are

implemented.

ES04 <



Salient features of the Group’s corporate governance

policies and procedures are recorded on pages CG01 to

CG22.

The Sustainability Report, which has been prepared in

accordance with GRI Guidelines, appear on pages SR01

to SR45.

The Group’s first Integrated Report is disclosed on pages

IR01 to IR27.

Board changes Mr Veli Mokoena did not make himself available for

re-election at the annual general meeting held on

14 January 2011. He has however remained involved in

the Group, particularly on transformation and ethics

matters, and was re-appointed to the Board on 22 June

2011 as an independent non-executive director. Veli is

also currently a non-executive director of Eqstra Holdings

Limited and the founder and chairman of Ninathi

Investment Holdings (Pty) Limited. He brings with him an

extensive business network.

Mr Mohammed Akoojee, an Executive Committee

member of Imperial Holdings Limited, was appointed to

the Board as a non-executive director on 23 June 2011

as an Ukhamba Holdings (Pty) Limited representative.

Mohammed gained experience from his background in

financial services and will bring valuable additional skills to

the DAWN Board.

As I have retired from the position as Chairman of the

Board on 30 June 2011, Mr Tak Hiemstra, an executive

director of Imperial Holdings Limited, was appointed as

non-executive Chairman of the Board on 1 July 2011. Tak

has been a valuable Board member for a number of years

and the Group welcomes him in his new role.

The directors look forward to their contribution of the

above-named appointees to the Board.

DividendThe Board considers it prudent to conserve cash until the

market recovers and therefore does not propose a

dividend in respect of the 2011 financial year.

AppreciationAs announced previously, I retired as Chairman of the

Board on 30 June 2011, but will remain as an

independent non-executive director. It has been an

honour and a priviledge to chair the Board over the past

ten years. The financial and strategic acumen as well as

the industry knowledge of my fellow directors made my

task easy and contributed to the creation of the platform

to ensure DAWN’s sustainability. I wish to thank them for

their contribution and support.

I look forward and am grateful to continue as an

independent non-executive director and also wish to

thank my fellow directors for making that possible. Tak

Hiemstra’s contribution to the Board has always been

invaluable and he is an extremely competent and

deserving successor as Chairman. He has the total

support of all the directors and executives of DAWN and

we wish him well in his future role.

I am also greateful to our CEO, Derek Tod and his team

for the passion and dedication which they have displayed,

as well as their unrelenting support to me over the past

ten years.

Lastly, to all our stakeholders and everyone involved with

DAWN during the last year, I wish to express our gratitude

for your input, support and contribution during this

challenging period in our history.

Lou AlbertsRetiring Independent Non-Executive Chairman

> ES05

Incoming Chairman’sreview

RL HiemstraNon-Executive Chairman

In my opinion, the DAWN Group has the businesses,

the capacity, the people and the reputation to

restore and surpass its previous levels of profitability.


ES06 <

DAWN is experiencing very challenging markets for our

products, which took their toll on our 2011 financial

results and our balance sheet. Demand for civil

contracting material has been extremely weak and activity

in residential home building has been at historically low

levels. As a manufacturer and stockist for basic materials

for these industries, DAWN suffered from low revenues

whilst its production and trading capacity had to be kept

intact for a recovery, which we believe is underway.

Drastic cost containment measures were taken in the

prior year and are continuing, as a result of which the

Group is now in a sound position to benefit from any

upturn in demand.

In my opinion, the DAWN Group has the businesses, the

capacity, the people and the reputation to restore and

surpass its previous levels of profitability even without the

buoyant conditions in its markets which prevailed a few

years ago.

Serious backlogs exist in the maintenance and

improvement of underground water-related infrastructure

all over South Africa as well as in African countries where

DAWN is represented. These problems are being

addressed, as the need is clear and budgeted funds are

available for a rapid step-up in the commissioning of

projects.

At the same time, South African consumers are returning

to health after the set-backs of the 2008 and 2009 credit

crunch. Household debt to disposable income has turned

decisively downward and with low interest rates, interest

on household debt to disposable income is

currently close to its lowest levels in the past decade.

While interest rates may start rising within the next twelve

months, this will not occur before clear signs of stronger

demand becomes evident. Such demand will be

reflected in new housing starts, for which much of the

basic planning and even services have already been

installed.

However, the DAWN Group is facing serious challenges

which are being tackled with vigour. These include:

• Returning loss-making manufacturing businesses to

profitability;

• Restoring balance sheet strength through operational

cash generation and restructuring, where appropriate;

• Ensuring that individual products and ranges are

correctly positioned for market demand;

• Ensuring that marketing practices are appropriate to

gain market share;

• Considering and implementing alliances which benefit

the Group;

• Strengthening the Group’s African operations to take

advantage of strong growth opportunities on the

continent;

• Applying exemplary corporate governance; and

• Improving BBBEE ratings of Group companies

through employment equity, training and enterprise

development.

From my experience with the Group, I am confident that

the management and Board will succeed in meeting

these challenges in the year ahead.

Tak HiemstraNon-Executive Chairman


> ES07

Incoming Chairman’sreviewcontinued

Chief Executive Officer’sreport

DA TodChief Executive Officer

DAWN will apply aggressive energy to ensure

results.


ES08 <

Performance in the downturnSince the advent of the global financial crisis, the Group’s

results reflected the impact of this event on the markets in

which it operates and the resultant effect on DAWN

businesses. In the seven years from F2002 to F2008,

DAWN’s markets were in an increasing growth phase and

the Group took action accordingly, with strategic

acquisitions and new product and regional development

geared to making the most of the growth environment.

However, in the three years from F2009 to F2011 the

environment changed significantly, encountering far more

than a usual cyclical downturn as a result of the global

credit crunch.

The upshot was that the Group found itself over-geared in

a market where volumes were declining at a rate which

DAWN had not seen since its inception, with the result

that the economies of scale so crucial to the DAWN

business model could not be accessed, which resulted in

lower earnings while interest payments were still high.

To aggravate matters, the Group ended up in both

over- and under-stocked positions. The reasons for this

were two-fold. Firstly, three ‘false starts’ to the recovery

were experienced. These false starts took place in the

months just prior to each reporting period at March 2010,

September 2010 and March 2011. For instance, the data

for DPI Plastics, Incledon, Sangio Pipe, Vaal Sanitaryware

and Cobra’s volumes showed a pick-up in volumes and

increased capacity utilisation in the first quarter of F2011,

but these short-term improvements proved unsustainable.

The Group is now being much more circumspect before it

believes short-term data patterns. The other factor

affecting stock levels has been the fluctuating patterns in

demand, making it almost impossible not to end up in

either over- or under-stocked positions to retain

customers.

In hindsight, the Group should have focused more on

cash and capital management and some hard lessons

were learnt in this regard. However, as conditions

deteriorated the Group did take action. In the three-year

period from June 2009 to June 2011 a rights issue was

implemented, reducing gearing from 71% to 26%, which

allowed the Group to restructure its remaining debt and to

reduce overall finance costs by R80 million. Furthermore,

market share was increased by a total of 4 percentage

points this year, bringing the total market share gains over

the three years to 11 percentage points. Although this

market share was won at lower margins, the additional

volumes are crucial to driving the Group’s economies of

scale and factory throughput.

The right-sizing drive included 1 069 retrenchments over

the three years to adapt to the lower volume environment.

However, care was taken not to cut to the extent that

DAWN cannot capitalise on any market recovery. In total

R114 million in costs has been taken out. Through

reducing factory overheads by R86 million, gross margins

were protected from decline and the Group managed to

maintain gross margins steady at around 25% over the

three years. Furthermore, R128 million in operating

expenses were removed over this time. Over the full

three-year period average operating expenses increased

by an average of only 8% per annum. Cost reduction

remains a continuous process and the effectiveness of

cost reductions introduced are evaluated on a monthly

basis.

Despite all these corrective measures, headline earnings

per share continued to decline sharply as reduced

volumes had a severe impact. On the positive side,

corrective actions in the Infrastructure segment started to

find traction and the loss reduced meaningfully in the

second half of F2011. The main disappointment came

from the Building segment where headline earnings per

share declined by 42%.

The further sharp decline in Group earnings in F2011

specifically was attributable to both internal and external

factors.


> ES09

Chief Executive Officer’sreportcontinued



External factors that affected resultsThe external factors combined to produce another

‘perfect storm’. Consumers remained under severe

pressure as, in addition to the volatile economic

conditions, consumers had to endure abnormal increases

in fuel, electricity and property rates combined with

alarming employment numbers staying in place. Housing

prices remained at decimated levels leading to reluctance

by homeowners to invest in additions, refurbishment and

alterations, with no certainty of recouping their

investment.

Banks started to lean heavily toward shorter term credit

financing as opposed to long-term bonds. Even though

DAWN has the ability to adapt its offering to this change,

the change in the product mix inevitably hurt margins. The

major obstacle remains that levels of debt to disposable

income at almost 80% is way too high with households

conserving cash and showing a heightened tendency to

reduce debt and pay off bonds.

The further 8% strengthening of the Rand against the

dollar over the year resulted in increased competition

from imports. DAWN increased its thrust into

non-South-African business, but the currency translation

had impacts on both the income statement and the

statement of financial position. Non-South-African

business constituted R976 million (18%) of Group

revenue.

The awarding of civil projects increased in the second half

of the year and this improvement should be reflected from

F2012.

Internal factors that affected resultsDAWN is, however, under no illusion that only external

factors affected the Group’s earnings for the year under

review. The Group experienced the effects of low volumes

on internal efficiencies and a R106 million increase in

stock to unacceptable levels as well as a 19% increase in

overheads. However, excluding the increase in salaries to

catch up after deferring increases in the prior year and

time critical capacity investments, overheads increased by

only 8% in F2011.

Revenue improved in the second half of the year,

although off a decimated base, with improvement

particularly noticeable in the Infrastructure segment. DPI

Plastics’ costs were further reduced with an R11 million

saving in the first half and a further R5 million saving in the

second half.

The Group managed to move on from cost-cutting,

efficiency evaluations and right-sizing of the business to

achieving further market share growth.

StrategyAgainst this background with due regard to current

market conditions, the Group’s strategy has repeatedly

been evaluated to re-confirm that it remains correct.

DAWN’s strategy is to optimise the mix of trading, brands

and manufacturing to extract economies of scale as the

largest, low-cost South-African building and infrastructure

industry distributor. DAWN’s wide spread of brands

includes both lower and higher margin products.

The strategic rationale for backward integration into

manufacturing activities remains:

• gaining control of premium brands;

• sharing in the higher margins traditionally available in

manufacturing;

• adding further economies of scale to DAWN’s

distribution capability;

• accessing better market intelligence; and

• accessing untapped opportunities to use DAWN’s

superior distribution capability to positively influence

the manufacturing businesses.

The motivation for the move into the infrastructure sector

was the potential to access the enormous pent-up

infrastructure demand in both South Africa and Africa.

Historically, government infrastructure expenditure

stimulates economies, making infrastructure

counter-cyclical to building. Delays in government spend

unfortunately continue to prevent this.

Due consideration has been given to whether elements of

the DAWN Group should be sold or mothballed until the

business cycle improves. A decision was taken that for as

long as evaluations show that loss-making businesses will

deliver on DAWN’s strategy, it is believed appropriate to

allow some time for a turnaround.

DAWN therefore continues to believe in its strategy and

has concluded that none of its businesses should be sold

off in toto at this point in time. As for mothballing

operations, the commodity bath plant of Libra Bathrooms

has been mothballed. It should be noted that, when

mothballing, due care is taken not to jeopardize the

brands or the service delivery throughout the Group.

ES10 <



Whilst the infrastructure businesses have significantly

detracted from Group earnings over the last three years,

four competitors have had to close their doors. DAWN

infrastructure businesses have removed manufacturing

costs, reduced operating expenses and reduced the

labour component. The Group’s assessment is that the

benefits of fewer competitors in the segment, combined

with the pent up demand for infrastructure products

supplied by the Group, will result in strong earnings

advances over time.

Management priorities Although the Board remains confident that the

longer term will provide strong growth prospects in both

the building and infrastructure markets, the short-term

outlook is difficult to predict.

In the current context, therefore, the Group is placing

increased focus on improving returns, which were at

unacceptable levels at June 2011.

An area which is a huge priority for the year ahead is

controlling the levels of inventory. To this end, direct

Group executive intervention will be enforced in working

capital management, forecasting and monitoring at the

individual companies. Achieving the right stock levels is

DAWN’s key focus for F2012. Despite working to reduce

stock holdings, the Group will still ensure its just-in-time

stock availability offering to merchants, which is a key

competitive advantage. In addition, the Group’s

sophisticated stock systems will be further improved

through the enhancement of customer sales history

analysis to strengthen stock availability.

Across the Group the constant monitoring to ensure that

the capital invested in each entity is at an optimal level,

has been improved. In this regard, profit levels in respect

of assets employed are monitored. Regarding longer term

issues, capital expenditure allocation will be intensively

scrutinised to ensure that each business justifies the

capital it is utilising.

Cash is now paramount. By reducing working capital and

converting it into cash, DAWN’s cash position will be

improved. All actions will be geared toward improving the

ratio of debt service covered by free cash flow generated

by the Group.

The other side of the returns equation is to increase

profits. DAWN will be positioning itself to have the right

stock in place to attract every bit of business available. In

terms of increasing market share still further, benefits

should flow through from the development of new

products at all the manufacturing entities, with aesthetics

and ‘green’ product development receiving particular

focus. Success in growing market share will translate into

increased volumes which will ensure further economies of

scale. Finally, DPI Plastics and the Sanitaryware cluster

have to return to profitability as for these businesses to

even return to breakeven, would impact on the Group’s

bottom line. A higher margin sales mix is required and, to

this end, Vaal Sanitaryware has launched a number of

new products and cost-saving initiatives in the factories

and the commodity bath plant in the Acrylics division has

been mothballed to improve recoveries. At DPI Plastics

there are further cost reductions to come and the focus

on improving the swing in the sales mix towards higher

margin fittings products will continue.

In conclusion, in the year ahead, DAWN will apply

aggressive energy to ensure results.

AppreciationIt has been my honour to have had Lou Alberts as my

Chairman for the past ten years. I value his industry

knowledge, advice and strategic input which he shared

with me. His enormous contribution to the Board over this

time was of huge value and greatly appreciated. I am very

grateful that he decided to remain on the Board as an

independent non-executive director and look forward to

our continued relationship on this level.

I welcome Tak Hiemstra as my new Chairman, another

longstanding Board member whose financial and strategic

acumen differentiated him over the years. In this

challenging era in DAWN’s history he is most certainly the

right man for the right job.

My management team and our dedicated staff – trying

times, but together we face the challenge of returning the

Group to its previous levels of performance, and beyond –

thank you for your commitment to the task!

DA TodChief Executive Officer

> ES11

Financial Director’sreport

JAI FerreiraFinancial Director

Cost containment at operating expense level,

inventory management in a fluctuating demand

environment as well as cash preservation through

a more prudent approval process for capital

expenditure are key focus areas to restore the

Group’s return on invested capital to acceptable

levels in the short term.


ES12 <

This report provides information on the financial position and performance of the Group and should be read in conjunction

with the annual financial statements presented on pages FS01 to FS94.

Key performance indicatorsAnnualised key ratios

Achieved in Medium-

term

F2011 H1 2011 F2010 goal

Group operating margin (%) 0,9 3,4 5,7 8 to 10 *

(2,7)^

Free cash flow (excluding interest) (R’million) 57 113 157 >100 *

(rolling 12 months)

Cash conversion ratio (%) 55,9 75,8 75,6 >75 *

(rolling 12 months)

Net debt : equity ratio (%) 30,3 28,7 21,1 <50 *

Net working capital : revenue (%) 22,8 23,6 19,1 <25 *

(rolling 12 months)

Return on invested capital (%) 1,6 7,9 11,3 >15 *

(rolling 12 months)

Return on assets (%) 1,3 4,5 6,0 >10 *

(rolling 12 months)

* Goal ratios can only be achieved when the market moves into a sustained market cycle^ Excluding impairments and once-off costs

The executive team of the Group monitors the above listed key financial performance indicators against medium-term

objectives. The focus is driven by the level of invested capital required to generate desired levels of returns. Each business

unit in the Group has clearly outlined performance objectives and results are tracked accordingly.

The adverse trading environment negatively impacted the Group’s results. As a result all the ratios are significantly below

the medium-term goals, except for the gearing and net working capital ratios which are within the medium-term goal

ranges.

The decision was taken not to reset the medium-term goals as these goals represent where the Group’s performance will

be in a normalised year.

Free cash flow amounted to R57 million, well below the minimum threshold of R100 million. The main impact on the

Group’s free cash flow was firstly, the significant drop in EBITDA to R170 million (2010: R258 million), secondly, the R94

million capital expenditure during the course of the year, and thirdly, the R31 million cost to step up the Group’s

shareholding in Cobra from 94% to 100%. More detail is provided in the cash flow discussion on pages ES15 and ES16.


> ES13

Financial Director’sreportcontinued



This drop in free cash flow negatively impacted the cash conversion ratio which dipped below 75% of operating profit.

The Group’s return on invested capital and return on assets for the 2011 financial year declined further to 1,6% and 1,3%,

respectively.

It is the clear objective of the executive team to restore the Group’s actual performance to more acceptable levels in the

short term.

Operating performanceThe Group’s performance during the year under review was as follows:

2011 2010 %

R’000 R’000 change

Revenue 3 792 631 3 618 391 5

Operating profit before finance charges 33 070 207 868 (84)

Net finance charges (46 531) (56 511) (18)

Income tax expense (14 689) (42 088) (65)

Attributable earnings (30 325) 109 177 (128)

Headline earnings 38 085 98 914 (61)

Earnings per share (cents) (12,98) 53,98 (124)

Headline earnings per share (cents) 16,30 48,91 (66)

Revenue and operating profit

The Group’s revenue grew by 5% to R3,8 billion indicating a stabilised base for the Group’s volumes. Group gross margins

were maintained at 24,9% (2010: 25,0%) under difficult trading conditions mainly through disciplined price management

and factory cost containment.

Operating expenses for the year however increased by 19% to R842 million. Besides the general 8% inflation in operating

expenses, the Group incurred abnormal movements compared to the 2010 financial year, such as electricity and fuel

increases that amounted to 43% and 15%, respectively. The Group’s employee costs also increased by 17% in total

against 2010 where all salary increases were deferred to the 2011 financial year. Other once-off costs such as foreign

exchange losses, retrenchment costs and costs incurred in relocation of facilities added R19 million to the current year’s

operating expenses.

ES14 <

2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

0

50

100

150

200

250

300

350

400

450

Revenue Operating profit

R’million



Strategic initiatives were embarked on in opening new branches in Incledon, developing new product ranges and

streamlining operations in Cobra, Vaal and DPI. These initiatives added R25 million to the 2011 financial year operating

expense base.

The operating profit before impairments and derecognition of investments for the Group declined by 49% to R101,8 million

(2010: R199,2 million) resulting in a profit before interest and tax margin of 2,7% (2010: 5,5%). Building segment margin

reduced from 10,5% to 6,8% due to lower margin product mix in sales and also the increased operating expenses

outlined above. Infrastructure improved its margin from -2,8 to -2,5%, but is still in a loss position.

As a result of the tough economic environment, the projected earnings and therefore the future cash flows of all the Group

businesses were reassessed. Where the future cash flow of a business was found not supporting the carry value of the

goodwill, the goodwill was written off. All the goodwill in Vaal Sanitaryware (R27 million), the Acrylic division (consisting of

Libra Bathrooms and Plexicor) (R19 million) and AST Angola (R3 million) was impaired. The total goodwill impairment

amounted to R49 million (2010: Rnil).

Franke AG, DAWN’s joint venture partner in AST, took a decision to divest from its non-core South African

investment and, consequently, DAWN acquired its 49% interest. This 49% stake was on-sold to Kwikot Proprietary

Limited, the local water heater and kitchen sink manufacturer, subsequent to year-end. As a result of the change in control

and in compliance with IFRS, the Group realised the cumulative translation losses which arose since 2007. This being the

main impact on this transaction, the Group accounted for a loss of R16 million related to AST.

In total the impairments and once-off charges amounted to R69 million for the year.

Net finance chargesThe net finance charges for the Group decreased by 17,5% to R46,6 million (2009: R56,5 million). The average debt for

the period however increased since December 2010 to R424 million, largely due to necessary capital expenditure during

the year specifically at Cobra, Vaal and DPI, combined with an excess investment of R82 million in inventories against

target.

Headline earningsHeadline earnings per share decreased by 67% to 16,3 cents (2010: 48,9 cents).

Cash flow analysis and working capital management

> ES15

Cash opening balance40 -278

244

2011 2010R’million

Working capital changes

Net finance charges

Tax paid

Investing and financing activities

Cash closing balance

Cash generated from operations

-19

-51

-38

-131

-35 40

223

-62

-62

-25

164



Cash generated from operations remained sound and amounted to R164 million, down 33% from the prior year and

compares favourably against the 51% decline in operating profit.

An increased investment in net working capital resulted in a R19 million outflow in a market where fluctuating demand

complicated effective investment in inventories.

The main outflow of cash for the year relates to R94 million capital expenditure referred to earlier. Besides the R49 million

maintenance capital expenditure undertaken during the year, further necessary investment projects were undertaken at

Cobra where investments were made in improving efficiencies and productivity after five manufacturing facilities were

consolidated into two. Vaal invested R12 million in developing crucial new ranges of products in combination with very

necessary efficiency improvements in the factory, while DPI invested R12 million into much needed new capacity, mainly in

large bore PVC to service demand.

Financing activities reflect the R31 million investment made, increasing DAWN’s stake in Cobra by 6%. DAWN now owns

100% since 1 July 2010.

Working capital analysis

The Group’s net investment in working capital is measured against the turnover activity. As reflected on the graph, the

Group has improved its net position over the past three reporting periods to June 2011 closing at 22,8%. It is, however,

important to understand the components of the working capital.

Creditor funding improved to 65 days mainly as a result of a stronger focus on managing the level of invested capital in the

current volatile market. Creditor days will return to a more realistic level closer to 50 days.

Inventory increased by 7 days (or R106 million) since June 2010 as a result of the fluctuating demand patterns making it

difficult to maintain efficient levels of inventory investment. At 101 days the investment is too high and the Group’s

inventory levels will improve.

Debtors’ days increased slightly, mainly as a result of the increased sales towards year-end. Bad debts are still maintained

at less than 0,1% of revenue.

Despite some improvement in the net working capital days to 87 days (2010: 92 days), the Group still needs to improve to

operate closer to the targeted 80 days.

ES16 <

Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 110

2

4

6

20

25

30

Reportable turnover (rolling 12 months) (right-hand side)

Target of 25% (left-hand side)

Working capital ratio (left-hand side)

%

3,9

23,3 23,222,3

21,9

23,8 23,622,8

4,2 4,03,6 3,6 3,6 3,8

Rb



Debt structure and financial gearing

The Group’s net debt amounted to R356 million at year-end. Included here is R194 million reclassified into current debt as

a result of a temporary breach in required liquidity ratios. The Group and its lenders expected the markets to recover much

sooner at the time these liquidity ratios and debt structures were negotiated and accordingly both parties have agreed that

these required liquidity ratios need to be renegotiated to terms more appropriate to match the current economic cycle.

This position will be corrected by December 2012.

The Group’s gearing amounts to 30%, 4 percentage points up from the levels achieved directly after the rights issue in

December 2009.

The Group’s interest cover at EBITDA level amounted to 3,7 times cover and is considered too low. Accordingly,

considerable focus is applied to debt reduction in the Group, mainly through reducing inventories as well as further cost

containment. This will secure strong cash generation for the Group. The targeted interest cover is above 6 times and the

Group is aiming for the mid-point in the short term.

No dividend is proposed as cash will be conserved until the market recovers.

ConclusionThe performance of the Group was disappointing on the basis that anticipated improvements in trading conditions did not

materialise. The areas which are receiving more focus is cost containment at operating expense level, inventory

management under the difficult fluctuating demand environment as well as cash preservation through a more prudent

approval process for capital expenditure.

The objective is to restore the Group’s return on invested capital to acceptable levels in the short term.

AcknowledgementsThroughout the difficult financial year it was important to place reliance on the Group’s financial team. I wish to thank the

financial executives for showing their mettle.

I also wish to thank my colleagues for their role in steering the Group under difficult conditions.

JAI FerreiraFinancial Director

> ES17


100

200

300

400

500

600

0

10

20

30

40

50

60

70

80

90

100

Net interest-bearing debt (left-hand side)

Maximum gearing of 50%

Net gearing % (right-hand side)

Rm %

Industry demand remained harshly impacted

by low levels of credit extension by financial

institutions, especially for new building

activities. Continued resilience of discretionary

spend on upgrades and refurbishments

sustained the demand for DAWN’s products.

Despite the stronger currency, imports,

although at higher levels than the prior year,

were not buoyant, mainly affected by market

uncertainty and access to funding.


> DO01

DO02 >> Building

DO16 >> Infrastructure

DO20 >> DAWN Solutions

Building

The Building segment comprises five clusters:


Financial reviewThe Building segment saw revenue increased marginally to R2 495 million (2010: R2 434 million). Volumes in building-

related activities decreased by 4% (2010: 8,0%) while prices increased by 4% (2010: 5,0%). Operating profit after

impairments and derecognitions was 53,0% lower (2010: 8,0% higher) at R115,8 million (2010: R246,9 million).

Capital expenditure increased by 56,7% (2010: 42,6% decrease) from R35,8 million in 2010 to R56,1 million this year,

primarily as a result of investing activities for longer term gains relating to a R21 million efficiency investment at Cobra as

well as the consolidation from five to two facilities and R12 million new product development and factory efficiency projects

at Vaal.

The Building segment’s net margin amounted to 6,7%, before impairments and derecognitions.

Introduction

DAWN Wholesale – Trading (Saffer Bathroom & Plumbing and WHDsa)– Business Development (DAWN Power Tools, Wholesale

Building Materials, Wholesale Tile Supplies, Stability)

DAWN Watertech – Cobra, Isca

DAWN Sanitaryware – Ceramic (Vaal Sanitaryware)– Acrylic (Libra Bathrooms and Plexicor)

DAWN Kitchen Fittings – Roco Fittings, Amalgamated Fasteners & Fittings (AFF)

DAWN International – AST, Saffer International, DAWN Exports, Africa manufacturing businesses

An additional 41% of the shares in Electroline (Pty) Limited (previously Castle King Investments 1013 (Pty) Limited) was

acquired on 31 December 2010. Electroline was derecognised as an associate and recognised as a subsidiary of the

Group. Electroline is reported in the DAWN Wholesale Cluster and is part of the Business Development division.

The two associates in the Building segment are therefore Apex Valves and Heunis Steel.

DO02 <

Buildingcontinued


DAWNWholesalecluster

Trading Saffer Bathroom & Plumbing • WHDsa

Business Development DAWN Power Tools • Wholesale Building

Materials • Wholesale Tile Supplies • Stability

1

Overview

DAWN Wholesale cluster (WHS) constitutes two divisions namely the Trading division and the Business Development

division. The Trading division comprises Saffer Bathroom & Plumbing and WHDsa and the Business Development division

comprises DAWN Power Tools, Electroline, Wholesale Building Materials, Wholesale Tile Supplies and Stability.

Revenue in Saffer Bathroom & Plumbing was maintained with a marginal decrease in hardware volumes. Margins improved

slightly, but sales growth did not match expense growth. Market share gains were mainly driven by continued low industry

stocking and the resultant reliance of merchants on just-in-time replenishment. Diligent inventory and credit control

continued with a strong focus on cash flow generation.

Industry demand remained harshly impacted by low levels of credit extension by financial institutions, especially for new

building activities. Continued resilience of discretionary spend on upgrades and refurbishments sustained the demand for

DAWN’s products. Despite the stronger currency, imports, although at higher levels than the prior year, were not buoyant,

mainly affected by market uncertainty and access to funding.

Trading

Saffer Bathroom & PlumbingSaffer Bathroom & Plumbing is the leading supplier of locally manufactured and branded plumbing and sanitaryware

products to retailers, builders’ merchants, plumbers’ merchants and hardware stores. The product range includes

products manufactured by DAWN companies as well as by other suppliers. In support of DAWN’s collaboration model,

locally produced products are favoured in support of the local economic environment and products are principally imported

when there are no locally produced alternatives.

The just-in-time break-bulk and supply-chain capability differentiates Saffer in the marketplace and offers retailers,

merchants and hardware stores both plumbing and sanitaryware products in any quantities, nationally, on a consistent

basis. Merchants are enabled to maintain service levels to their customers while enjoying the benefits of lower stockholding

and improved cash flow.

> DO03


Buildingcontinued

Saffer maintained overall market share with plumbing and

sanitaryware products showing some market share

growth as a result of the general shrinking of the

marketplace, more effective customer service levels, the

offering of a larger basket of products and import

substitution.

Saffer upheld its position as a significant player in the

supply of both plumbing and sanitaryware products,

benefiting from the sale of its strong local brands,

supported by the availability of spares and excellent

after-sales service provided by the local manufacturers.

Smaller orders were placed more regularly by the

merchants, which is aligned to the Group’s strategy of

just-in-time break-bulk distribution, but also put pressure

on Saffer due to the reduced value per order.

With the major cost-cutting drives occurring in the prior

year, operating cost-effectively remains an ongoing

process with a continued focus on efficiencies.

With customers’ cash flows under pressure, Saffer saw

demand switching to local suppliers and brands, despite

the stronger Rand supporting increased imports. The

wide range of local, branded, quality products it offers to

the market at competitive prices and in smaller quantities

which allow merchants and retailers to limit their

stockholding, improve their cash flow and have stock

available on a just-in-time basis, remained the significant

value drivers that differentiate Saffer in the marketplace.

DAWN’s warehousing and distribution capabilities ensure

that Saffer has an efficient, cost-effective supply-chain

capacity that can handle flexible volumes of stock and

distribute this to the customer at the most competitive

price in the market.

Saffer experienced a favourable market reaction to the

introduction of Cobra entry-level products. In-house

pre-packaged plumbing and hardware products

increased Saffer’s product offering.

The introduction of product clusters enabled Saffer to

leverage greater synergies that led to innovation, cost

savings and a more holistic approach to sales, offering

different packages and identifying changing trends in the

market.

Saffer is faced with the constant need to retain and

upgrade skills and, to this end, retention schemes and

succession planning remain key focus areas. Incentive

schemes for sales representatives are aligned to market

trends and the benefits thereof materialise through

improved customer service levels and increased positive

market feedback.

The prevailing challenging market conditions which led to

property owners opting to rather upgrade their existing

properties than building new properties, support gradual

growth in the renovations market. The huge need for

lower income group housing coupled with critical

maintenance will create growth opportunities for Saffer

when they occur. Some residential pick-up is slowly

starting to materialise in the rural areas where

refurbishment is starting on the back off the availability of

electricity and water. Pressure to service this new rural

market will lead to commercial developments in the form

of convenience centres.

The carefree motoring model that was introduced last

year, which allows the sales representatives to have a

presentable motor vehicle at all times with more

manageable expenses, has resulted in an increased

footprint for the business with the sales force covering an

expanded territory more regularly. The Trading division

embraces technology and to this end an iPad-operated

ordering system has been introduced to its sales force.

These innovative tools will lead to greater effectiveness of

the sales force as it allows for greater flexibility and

improved productivity.

WHDsaWholesale Hardware Distributors (WHDsa) is the preferred

supplier of locally manufactured and imported, branded

hardware and tool products to its target market of retail

hardware outlets. WHDsa reduced its line item offering

during the year by reducing duplication while still offering

a comprehensive range covering the complete

requirements of a hardware store, with the exception of

paint, at competitive pricing levels.

The affiliation WHDsa has with strong brands, both locally

and internationally, continues to form the backbone of the

business. Aligned to the DAWN Group operational

strategy, WHDsa offers a just-in-time break-bulk and

supply-chain capability which allows retailers the benefit

of optimal working capital management.

During the year under review, a further tightening of the

market was experienced throughout the industry with

more importers entering the market on the back of

opportunities created by the favourable exchange rate.

As challenging trading conditions continued, merchants

DO04 <


Buildingcontinued

became less discerning in an attempt to be more competitive and to gain market share. Importers capitalised on these

opportunities by tapering down on quality and claiming similar products with similar functionality to ensure take-up by the

merchants at a slightly lower price point.

Given the harsh trading conditions, WHDsa rendered an acceptable performance during the year under review as

merchants’ need to manage their stockholding and cash flow continued and their reliance on DAWN’s just-in-time delivery

increased. The unrecorded activities in the residential refurbishment and upgrading sector contributed to WHDsa’s ability to

maintain margins.

The focus on credit management remained strict and WHDsa has consequently seen no material increase in the write-off

of bad debts.

Cost-saving initiatives were concluded in the prior year. Capacity was maintained through improved efficiencies by

leveraging the benefits from synergies realised through the centralised DAWN Distribution Centres.

Electroline’s pre-packed products for the DIY and retail markets expanded WHDsa’s electrical product offering and DAWN

Power Tools’ Xtreme brand was introduced to, and well received by, the market. The merchandised solutions offering

included a range of fastener pre-packs. WHDsa it taking full advantage of opportunities with existing and new product

categories.

WHDsa is confident that it will, in the year ahead, be able to leverage further from synergies within the DAWN Group to

reach targeted objectives.

Business Development

DAWN Power ToolsDAWN Power Tools is differentiated in the marketplace through its complete offering of power tools, which ranges from

entry level DIY products to top-end industrial products supported by the Group’s logistics capability, both nationally and

into Africa.

The year under review was focused on re-establishing the brands, streamlining the offering to cater correctly for all

spectrums of the market and building on service centres, thereby ensuring that the support is in place for after-sales

service – key to the industry in which the business operates. The year saw DAWN Power Tools introducing its own brand,

Xtreme. Products in the range were very well received in the market. Marketing focus on all branded products was

directed to the independent store owners. The basket of products was expanded to include outdoor products, which were

channelled through WHDsa. The spread of products offered by the business helped it to grow in the review year.

Cost-saving initiatives included the sharing of resources between DAWN Power Tools and Electroline and sales

representatives marketing both product lines in the marketplace. Stockholding levels were improved and the business

benefited from higher margin products in the range.

DAWN Power Tools will continue to gain further market share with its experienced power tool sales force in all the major

centres and by the leveraging of its entry level DIY product offering to cater for the small- to medium-sized customer.

ElectrolineWith the Group acquiring the additional 41% interest in Electroline on 31 December 2010, Electroline was derecognised as

an associate and became a subsidiary of the Group.

Electroline specialises in pre-packaging and assembling of electrical components. The increased buying power

created through its association with DAWN resulted in the lowering of landed cost and increased margins. Improved

procurement resulted in a more balanced stockholding and an improved customer offering.

New concepts and pre-pack solutions have been developed successfully and Electroline, by becoming a recognised

brand, offers a valuable contribution to the Group’s expanded product package offering. There is a focus on the

independent retail market and products are distributed through WHDsa.

> DO05


Buildingcontinued

The business is in a building phase and benefits from the

shared resource structure with DAWN Power Tools. The

2012 financial year should see this business increasing its

positive contribution.

Wholesale Building MaterialsWholesale Building Materials, based in Gauteng, was

established in July 2010 to facilitate the distribution of

building materials excluding cement, sand, bricks and

stone, to hardware and building materials retail stores.

The business targets the independent stores with its

competitively priced product offering which is distributed

on a break-bulk basis, to the benefit of the merchants.

The labour cost in this business is still high and the

challenge is to implement the product distribution

effectively. As a business in growth phase, benefits are

expected to start materialising in 2012.

Wholesale Tile SuppliesWholesale Tile Supplies commenced activities in July

2010 for the supply of local and imported tiles and tile

adhesive nationally. Wholesale Tile Supplies supplies to

tile merchants, tile showrooms and hardware stores in

bulk or in smaller quantities. By utilising the DAWN

supply-chain capability, delivery is reliable and accurate,

thereby enabling merchants to turn their stock. During the

year the business develop its own tile range, Xplore,

which was well received by its target market. Efficiencies

are optimised through shared resources with Wholesale

Building Materials. The business expanded its offering to

include ceramic tiles and its branded tiles increased its

product reputation. Opportunities are explored to enhance

the business’ offering to the market and contribution to

the Group, with some flow through expected to

commence in 2012.

StabilityStability, a distributor of imported sanitaryware and

plumbing products, commenced trading in January 2011.

During its first six months of trading, Stability exceeded

targets and, as a business in its growth phase, is

optimistic about the year ahead.

The futureAs a new business entity which operates off a low base,

the Business Development division is well positioned to

grow in the year ahead with a key focus area being

market share gains and reinforcing its differentiation in the

market through its break-bulk just-in-time distribution

capabilities offered through DAWN Logistics. Its proven

business model will assist the business in extending its

reach into a wider market with an expanded product

offering.

The DAWN Watertech cluster comprises Cobra and Isca.

Value propositionDAWN Watertech contains the two leading brands of taps and mixers in the country, with Cobra also being the leading

supplier of plumbing brassware in the country. Both brands have built their value proposition around supplying quality

product with a countrywide service back-up.

Strategic drivers of the industryA major strategic driver for the industry is the construction industry spend on developments and the ease of obtainingfinance. The industry can be split into two major segments namely, the residential sector and the commercial and infrastructural sectors. The Watertech cluster has strong representation in both sectors. These sectors have differing

DAWNWatertechcluster

Cobra • Isca

2

DO06 <


Buildingcontinued

cyclical natures which are two years transposed over a seven-year period. This provides a fairly balanced exposure to the market, except for the period (approximately two years when both segments are at theirlow), which was the case over the last two years. Anothermajor driver in the industry is government spending onwater reticulation and housing.

Industry dynamicsIn the year under review, the housing sector continued tobe depressed, in line with international trends, as bankstightened their lending criteria. During the second half ofF2011, the cluster however saw an increase in the number and value of bonds awarded by the banks.Although not hugely significant, it is believed to mark thetrough of the building industry on the retail housing side,with commercial buildings anticipated to remaindepressed for another twelve months.

After the activities of the 2010 Soccer World Cup, thecommercial and infrastructural segments entered adepressed phase due to the non-availability of financeand the lack of government spend. The focus of government spend has been on low-cost housing andthis was where Cobra captured some of this spend as anOEM supplier of parts to the low-cost solar industry.

Many projects are still on hold, but there has been anupturn in the townhouse market segment. Notably, however, even upmarket projects are specifying lowercost (and hence margin) products.

The market still showed signs of increased competitionfor the available work, which necessitated aggressivepricing and therefore lower margins.

The export markets continued to grow despite a significant downturn in the economies of Watertech’strading partners. It found that although these marketswere depressed, people still bought quality products.Deliveries went to six different continents: South America,West Indies, South East Asia, Middle East, Africa andChina.

Divisional sales were marginally down, year-on-year, in asector that was estimated to have declined by more than20%. This implies a market share capture which is estimated to be at least 5%.

Customers have reduced their inventories to very low levels, demanding just-in-time deliveries. This particularlysuited Isca directly with their three-day delivery policy. A continued strong rand will affect both Cobra and Isca,since importers will grow more bullish as this trend is prolonged.

The retail and DIY channels showed some growth duringthis period and will continue to be the growth channel forthe foreseeable future.

Operational overviewBoth Cobra and Isca’s focus in the past year was on costreduction. These efforts were particularly focused onworking capital management, input cost reduction andreduced expenditure.

The Watertech cluster achieved 97% sales on the prioryear, with a decrease of 16% on profit before interest andtaxation. Both Cobra and Isca showed this same trend.This was a direct result of aggressive pricing and a trendtowards the lower-end and lower margin products in thesales mix.

CobraThe launch of the Cobra solar products had a slow take-up, but started showing improvement towards year-end. Cobra launched four new low-cost ranges inalignment with market demands.

IscaIsca expanded its mid-range products during the year,however, uptake has been slower than expected. As aresult of strengthening its bottom-end ranges in the prioryear, sales volumes remained constant. The exchangerate favoured Isca during the year.

Sensitivity analysisDue to the Watertech cluster’s strength in both marketsectors and channels, it has a well-balanced exposure toexternal economic factors, allowing it to maintain marketshare.

Typically the cluster’s challenges lie in interest rate fluctuations, low-cost imports (that are normally of inferiorquality), international copper/brass prices, exchange ratefluctuations, the ability for private individuals and corporates to obtain finance and government spend onhousing, clinics and correctional facilities.

The futureThe Watertech cluster is of the view that the market willremain competitive for the next eight to twelve months,showing signs of recovery, albeit gradual. Growth is anticipated to firstly originate from the DIY and retail sectors, where Isca is traditionally strong. Cobra hasupgraded and re-launched its pre-pack product range toensure that it captures some of this upswing as it occurs.Cost reduction initiatives will be ongoing. During the yearahead both Cobra and Isca will be launching new productranges and marketing campaigns from both entities, withspecific focus on point-of-sale displays, will be increased.

> DO07


Buildingcontinued

DAWN Sanitaryware cluster comprises Vaal Sanitaryware (Ceramic division) and Libra Bathrooms and Plexicor (Acrylic

division).

Ceramic

Value propositionVaal Sanitaryware (Vaal) is the only sanitaryware supplier offering medical products and fireclay products and is also the

only manufacturer that carries the SABS mark and who is also ISO 9001 compliant. Vaal is highly focused on the

specification side of the industry, working closely with architects and designers, providing them with a total solution. Vaal’s

competitive advantage lies in its strong brand, visibility and relationships with architects and professionals and it is also one

of only two ceramic manufacturers in South Africa.

Strategic driversThe entry level to the mid-market products is considered for fit, form and function and pricing determines the market pull in

this highly price sensitive market sector. The residential market growth is under pressure exacerbated by delayed

government infrastructure spend. Vaal has a dominant position in the commercial sector, where professionals specify its

product range, with additional dominance being maintained through the specification of its product range for hospitals,

clinics, schools and correctional facilities. The global economic downturn had a major impact on activity levels as a result

of affordability constraints, following aggressive monetary policies and raised debt levels. The renovations market has been

more active due to weak house price growth and this opportunity was not fully utilised by the division due to limited retail

exposure and product depth. The business of Vaal is also impacted by government spend on low-cost housing solutions

and the timing of basic services from municipalities.

Vaal is more exposed to the residential sector, which exposure is partially offset by exposure to the commercial and

infrastructure sectors.

External influences on the division include currency fluctuations which lead to trading volatility; the credit crunch which

adversely impacted on new building development activity and placed cash flow pressures on the division’s customer base,

thereby affecting payments and credit control; increased levels of liquidations at service providers and the rise in energy

costs, particularly gas and electricity.

Internal influences include increases in the manufacturing cost base (mainly related to energy), labour productivity levels

and factory loading density.

Industry dynamicsDuring the year under review the market, in general, experienced a slight increase over the previous year. It is anticipated

that a recovery in the residential market will take longer than initially anticipated with consumer confidence lagging.

Imports gained momentum during the year, mainly driven by commodity pricing and the trend of retailers to import directly

from manufacturers to improve margins. Local imported product wholesalers are typically not brand loyal and are

positioning themselves to be independent suppliers to the retail chains.

DAWNSanitarywarecluster

Ceramic (Vaal Sanitaryware) •

Acrylic (Libra Bathrooms

and Plexicor)

3

DO08 <


Buildingcontinued

Demand at the bottom-end of the market, where

products are price sensitive and carry low margins, and at

the top-end, which typically has low volumes, saw some

improvements, but the main contractors’ markets, which

are volume and price driven, saw a drop in demand due

to the negative growth in new residential projects.

There has been a drastic decline in the export of bath

products to the United Kingdom and Europe, mainly due

to the global economic recession.

Locally many customer and wholesaler operations

destocked and now require just-in-time delivery, resulting

in additional distribution at a cost.

The local manufacturing competitor and imports pricing

were reduced substantially to dispose of stock and

generate cash, thereby affecting product margins and

debasing pricing.

The upgrade of the main ranges at Vaal is nearing

completion and it is anticipated that the upgrade of

ranges to the latest international trends will increase Vaal’s

product depth and market penetration. The new family of

ranges will give it greater exposure to the retail market as

Vaal intends to grow and capture a share of this market,

traditionally not supplied by it.

Vaal achieved volume growth due to its ability to have

stock available, the shortened lead times and competitive

pricing which led to a slight increase in market share. The

division increased its exposure within the customers’

showrooms through more effective displays. Vaal’s new

aspirational and lifestyle marketing literature was well

accepted in the market and by professionals.

The distribution network is key to getting stock into the

market and DAWN Cargo has provided an edge over any

other supplier/competitor to the business. Vaal is

incentivising its customers with forward orders that would

assist when planning production loading on the factory

and is also enforcing bulk supply of product. The division

has dominance in the specification sector of the market

as well as in the hospitality market, where Vaal’s products

specifically provide for facilities for the disabled. Strong

customer relationships, through DAWN’s supply

integration and alliance, impact positively on the business.

Challenges remain demand levels and loading on the

factory, the increased level of imports and margin loss

attributable to the highly competitive environment in which

the division operates.

Operational overviewDuring the year under review, Vaal improved its product

offering to existing customers and gained new customers.

Branding initiatives included the launch of a signature

range of upmarket luxury goods and products, the

addition of import ranges to augments its product offering

and increase product depth, the development of four new

ranges to the latest trends for local manufacturing and the

development of an ‘anti-bacterial’ glaze, NanoSil.

Cost-savings were achieved through improved raw

material formulation, a reduction of waste and the

resultant increase in plant yields, optimisation of kiln

exhaust heat-reducing gas consumption and gas

optimisation by re-firing through the main kiln. Waste

components of both clay and fired product were recycled

and efficiencies were improved through the rationalisation

and consolidation of the Libra bath plant on the Vaal site.

The firing capacity at Vaal was improved with the new

shuttle kiln now fully operational and rendering excellent

yields. High pressure capacity and yield as well as the

drying capacity were improved. Management and

supervisory capacity was optimised through a simplified

operational structure, being a leaner structure with full

employee ownership.

Major contributors to a less than satisfactory performance

included the unfavourable recovery rates from the factory

due to lower production volumes in an effort to balance

stock and extended shutdown periods due to reduced

market activity. Margins were sacrificed as a result of the

very competitive operating environment and a higher

demand for commodity products which carry lower

margins. Sales opportunities were also lost due to the

limited product offering.

Vaal has identified significant opportunities in the local

retail market and is gearing up with the upgrading and

modernising of its range to grow into this sector of the

market, not previously targeted. The creation of a family

of product ranges, targeting the middle to top end of the

market, will further enhance its product offering. To

support these objectives, Vaal has started to implement

international manufacturing standards and maintained its

SABS certification.

> DO09


Buildingcontinued

The futureVaal is well positioned to benefit from improved levels of demand on the back of a recovering economy as well as its new

range or products further supported by export opportunities into Africa. Aspects which may hinder the business in the year

ahead include foreign exchange volatility which will enhance imports by competitors, erratic electrical and gas supply,

delayed government spend and deferrals of infrastructure projects as well as labour disruptions.

The value drivers of Vaal lie in its continued focus on quality improvement and the growing of its customer base through its

product offering. Improved product costing through cost-saving initiatives and effective working capital management

together with the restructuring of pricing on commodities and better utilisation of economies of scale would create value

for the operation.

Investments that have been made in elements that will create long-term value for the business are the new shuttle kiln and

building which improved capacity substantially, the milling capacity which reduces raw material costs, the crushing

capacity which recycles fired scrap and reduces the environmental impact and costs of disposal and upgrading the

product range.

The implementation of new high pressure technology and robotic spraying with improved quality standards will contribute

to increasing Vaal’s competitive edge. Upcoming events include the launching of 26 new products over the next six

months, exhibiting at trade shows in Kenya and Uganda and the introduction of 3D drawings, which should further

enhance Vaal’s offering to the specifications market. The division is also participating in a number of housing projects in the

Northern Cape and KwaZulu-Natal.

Acrylic

Value propositionThe Acrylic division, comprising Libra Bathrooms and Plexicor, is differentiated in its activities in the marketplace through its

technology to lead in the production of caste acrylic surrounds for the free-standing bath market, which is currently the

market trend in the international bath industry. Production of spa-converted baths in the Western Cape, KwaZulu-Natal

and Gauteng reduces the time to market and minimises transport costs, thereby further establishing the Acrylic division as

the lowest cost producer in the country. Through its participation in the benefits offered by utilising the services offered by

DAWN Logistics, the division’s competitive edge is sharpened further. The bulk offering to the retail market facilitates cost

effective distribution in skip loads while a flexible offering is made available to smaller merchants through Saffer Bathroom &

Plumbing.

Strategic driversThe business is influenced by both internal and external factors with the weighting favouring external factors. The Acrylic

business has to be positioned to take the lead in market trends and respond swiftly. Factory loadings have to be balanced

to ensure stock availability with realistic lead times and producing the products to the required levels of quality.

Industry dynamicsThe industry has seen an increase in the import of contract baths over the past year, with pockets of upmarket imported

brands also appearing. There was a further drop off in new development project work and the market has become more

competitive with competitors either joining forces or revitalising their product ranges.

Market share was maintained with the drop off in the Acrylic division’s direct market with nationals and independents

mitigated by significant market growth through strong support from Saffer Bathroom & Plumbing’s trading network. The

market was generally subdued and this was the Acrylic division’s first year with both brands, Libra and Plexicor, operating

in the DAWN stable. Customer service levels dropped off slightly as the division migrated to the DAWN Distribution

Centres and DAWN Cargo and time was spend on resolving teething problems, with issues now largely resolved and the

change bedded down.

DO10<


Buildingcontinued

The Acrylic division is the lowest cost producer through

the availability of stretch technology. Local suppliers

responded to import substitution by not enforcing price

increase. The advanced in-house surround technology

enabled the division to corner the surround bath market.

Consumer education continues to be a challenge as there

remains a failure to equate low prices with poor quality

when making bath purchase decisions. The division

experienced a severe loss in margins due to changes in

the sales mix in favour of contract baths. Market demand

also remains tempered leading to an inability for the

division to load both factories to full capacity.

Market-related risks and uncertainties continue to be the

reluctance of banks to advance home loans, which

therefore further dampens demand; the strengthening of

the rand against all currencies which compromises

returns from export markets and the recessionary impact

of business failures and credit risks.

Operational reviewThe Acrylic division failed to achieve sales targets as both

export and local demand were well below anticipated

levels. Gross profit targets were impacted by the

unfavourable move in the product sales mix, heavy

loading on contract baths at low gross margins and

increased competition from imported low-end baths and

inferior co-extruded ABS baths at very low prices.

Cost-saving initiatives included the use of NCPC to

achieve improved power utilisation, a change in the

formulation of the resin mix at the same standard, but

more efficiently, as well as the benefits of the collaborative

model through DAWN Logistics’ distribution and

warehousing capabilities.

Branding initiatives comprised the positioning of Libra and

Plexicor as joint but independent bath brands in the

DAWN Group, the introduction of the Plexicor brand to

the national lifestyle centres and the joint offering of

suites, comprising Libra baths with Vaal sanitaryware,

mainly through Saffer Bathroom & Plumbing.

The year saw greater consumer demand for low-end

products, which are very price sensitive. A strong interest

and demand for free-standing skirted baths emerged and

this demand was encouraged through the extensive use

of promotions.

Major contributors to the losses during the year were the

cut-throat pricing at the low end of the market, which

increased volumes but slashed margins, as well as the

failure to operate at full capacity at times, which brought

about an escalation in under-recovery in the factories and

pushed up the recovery rate attached to the products.

A new skirt and surround facility was launched at the

Pietermaritzburg factory, which brought the production

in-house, with the resultant cost-saving benefits and

providing a more competitive edge. The resin cast plant

at the Pietermaritzburg factory, previously outsourced,

was completed at the end of the financial year, the

benefits of which will flow through in the year ahead.

The streamlining of the product range will result in some

products being mothballed and design has commenced

on a new one piece bath, utilising unique box technology

– the first of its kind in South Africa.

The future

By moving the manufacturing of cast resin baths internally

in Pietermaritzburg, a new product segment will be

developed and introduced to the market. Major objectives

for the year ahead will remain the increasing of demand,

as it is vital to fill the capacity at both factories as well as

the improvement of margins, specifically at the lower end

of the market. The protection and enhancement of the

two joint brands, Plexicor and Libra, will remain key focus

areas and their association with quality, availability, value,

after-sales service and customer satisfaction will be

enhanced. New business has been secured with a major

retailer for the year ahead as well as hospitality

refurbishment projects in KwaZulu-Natal. New products

will be introduced in the upmarket free-standing bath

segment. Big national groups will be targeted to secure

central supply agreements and the customer base of

independent retailers will be grown. The ability to execute

3D drawings, in conjunction with DAWN Marketing &

Design, will be developed. Ongoing in-store plumbing

days, incorporating training of customers’ staff and

plumbers, will assist in creating top-of-the-mind

awareness of the division’s brands and product lines.

> DO11


Buildingcontinued

The DAWN Kitchen Fittings (DKF) cluster comprises the AFF brand, with its product sub-brands of which Ferrari is the

strongest and the Roco brand, with many product sub-brands, with FGV being the strongest. Roco is the lifestyle brand,

supported by the commodity brand of AFF.

Value propositionDKF distributes specialist fittings to the kitchen and furniture industries. The cluster purchases product from both local and

international suppliers, with the focus being on fittings required in the manufacture of cupboards and furniture. DKF’s value

proposition is strengthened by the DAWN group’s corporate structure, while being able to operate in the fragmented

market that makes up its industry.

Strategic driversDemand for DKF’s products is influenced by new residential housing developments, the household refurbishment market,

retail sales on hardware items sold through retail chains and the sale of case goods through furniture stores. The

strengthening of the rand against the dollar has a significant influence on the results of the business.

Industry dynamicsTrading conditions in the industry were very subdued during the review year with an upturn expected in the last quarter,

which did not materialise. DKF’s market share improved slightly as its competitors and others experienced serious

backward trends. Credit and credit rating in the industry in which the cluster operates is a particular challenge, with a large

number of small and medium-sized customers being liquidated, and DKF enforced credit controls which contributed to the

lack of sales growth. The industry remains very reliant on the return of a buoyant new residential market.

Operational reviewGeneral lack of demand and a lagging recovery in new residential developments led to revenue targets not being met with

the resultant impact on profit targets. Margins were maintained with stock levels aligned to market demand.

The dual brand strategy was maintained and two new handle brands, Furnipart and Metakor, were introduced to the South

African market, followed by the introduction of two new sink brands, Livinox and Kromevye. The bigger basket approach

into the kitchen manufacturing industry was attempted, without much success as merchants continued to de-stock. The

cluster’s biggest single retail group customer consolidated their range, which resulted in a smaller basket uptake.

After closing three unprofitable operations in the previous year, the review year was characterised by consolidation as well

as cutting back on products at the end of their life cycle.

As handles are fashion items, it is important to stay abreast of trends and be at the front-end of innovation. To this end,

DKF attended two industry trade fairs during the year, one in China and one in Germany.

The futureDKF is a customer-driven business and will continue to build on these relationships while driving the value of the dual

brand and building the sub-brands. The cluster has great capacity and extensive industry experience, coupled with the

leadership and efficiencies of the DAWN Group, which positions it well to benefit from any upturn in the markets it serves.

DAWN Kitchen Fittings cluster

Roco Fittings •

Amalgamated Fasteners &

Fittings (AFF)

4

DO12 <


Buildingcontinued

DAWN International DAWN International comprises Africa Swiss Trading (AST),

Saffer International, DAWN’s manufacturing companies’

exports and the Africa manufacturing businesses.

These products are distributed into Africa and to the

Indian Ocean islands, the United Kingdom, Germany, the

Middle East, South America, the West Indies, South East

Asia and China.

African operations are situated in Tanzania, Angola,

Mozambique, Zambia and Botswana, as well as in

Nigeria, Namibia and Zimbabwe and Indian Ocean island,

Mauritius. Some of these countries’ GDP, unemployment

and price indices vary without any balance or sustainable

finance in place for consumers to obtain loans for building

improvements and therefore projects are often funded by

organisations outside Africa.

DAWN International results are incorporated in the

Building and Infrastructure segmental results. The results

of the division are disclosed to express DAWN’s activity

outside South Africa. DAWN International contributed

18% to gross Group revenue, spread over Building (56%)

and Infrastructure (44%).

Exports from South-Africa were curbed by the strong

Rand and the delayed impact of the recession.

AST

AST is uniquely positioned to deliver DAWN and its

strategic partners’ locally manufactured products as well

as direct imports into Africa. This is achieved through

direct distribution channels and a local warehousing

presence in six countries, namely Angola, Nigeria,

Mozambique, Zambia, Mauritius and Zimbabwe.

AST’s operations increased revenue by 21% to R118

million, after accounting for currency conversion losses of

R3 million, and most operations did well. The exception

was Angola, where losses of R12 million were incurred ad

which resulted in a significant reduction in profit overall.

The Angolan business has been relocated to Lubango in

the South of Angola, which is better suited to conducting

AST’s business. Therefore, excluding Angola, AST

rendered a positive result.

Zambia and Mozambique exceeded budget expectations

with Zimbabwe achieving volume budget in its first year of

operation. Mauritius rendered a stable performance. The

main focus in the business remains on correction of the

negative performances in Angola and Nigeria.

On 30 June 2011 the Group increased its shareholding in

AST by acquiring the remaining 49% shareholding from

the co-joint venture party. Subsequent to the year-end the

Group sold 49% of its interest in AST to a new joint

venture partner, Kwikot. Kwikot is a well-established

South-African company, acknowledged as market leaders

and market innovators in domestic and industrial hot

water storage systems.

This joint venture will allow AST to provide the African and

Indian Ocean market with a dynamic approach to service

delivery, coupled with a comprehensive basket offering of

locally manufactured, leading brand products. With a

common understanding and expectation of African

markets, coupled with the efficiency and streamlined

nature of the distribution of locally manufactured

products, this joint venture will have significant potential

within the existent AST strongholds and future investment

opportunities underpinning DAWN’s expansion plans in

Africa.

Saffer International

Saffer International is the wholesale export arm for the

DAWN range of products, including those of the Group’s

manufacturing businesses, into Africa. The business is

differentiated in the marketplace through its wholesale

DAWNInternationalCluster

AST • Saffer International •

DAWN Exports • Africa

manufacturing businesses

5

> DO13


Buildingcontinued

trading services that provide a consolidated service to customers in Africa and the adjacent Indian Ocean islands, where

the complete range of quality products is available for consolidation directly from the manufacturers into combined loads

as per customer requirements. Product cost, the cost of transport and administration is reduced by this approach to the

benefit of both the business and its customers.

Saffer International maintained performance levels at those of 2011. The product ranges into Zimbabwe and Zambia were

expanded and new markets were developed to generate growth. The business gained ground in the Seychelles, St

Helena, Sierra Leone, Guinea, Sudan, the Ivory Coast and Uganda through developments in these countries, which

included small lodges and consequential residential buildings resulting from mining activities, as well as in the DRC where

residential development was flowing from increased agricultural activities.

In the year ahead distributors will be appointed in Uganda, Ghana, Egypt and the UAE and the product offering will be

broadened.

DAWN ExportsDuring the year exports from South Africa increased revenue by 5% to R559 million. DAWN Exports comprise the

manufacturing businesses of Cobra, Isca, DPI Plastics, Vaal Sanitaryware, Libra Bathrooms and Plexicor as well as exports

from associate, Heunis Steel, and trading activities of WHS, Incledon, DAWN Kitchen Fittings and Saffer International.

Africa manufacturing businessesThe over-border manufacturers of DPI Plastics are:

• NPC in Namibia;

• Pipex in Botswana;

• Aqualia DPI in Mauritius – 50% shareholding;

• DPI Simba in Tanzania – 50% shareholding; and

• Fibrex in Angola – 33,3% shareholding.

These operations are reported on under DPI Plastics in the Infrastructure segment’s review of operations.

The over-border operations in Africa maintained profitability in difficult market conditions, against weakening currencies and

a poor performance in Botswana. Revenue increased by 13% to R300 million and profit before interest and tax was up

14%. The businesses are mainly infrastructure-reliant and to broaden its offering, NPC’s operations in Namibia were

expanded to include a trading office with warehousing and distribution capabilities.

The challenge remains that infrastructure spend has slowed in light of the global economic crises. A shortage of foreign

exchange was also experienced in some countries, which hampered sales and resulted in the postponement of major

contracts as well as increased competition.

The futureOpportunities in Africa remain attractive due to the vast building and infrastructure needs in various countries on the

continent and the general need for DAWN’s products. The Group is therefore making a concerted thrust into these

markets.

DO14 <


Buildingcontinued

AssociatesApex ValvesThe Group acquired a 49% interest in Apex Valves South Africa (Pty) Limited for a consideration of R4,2 million on

1 February 2011. Apex Valves’ main business is the assembling (under licence) of control valves, mainly for domestic hot

water systems.

Apex Valves has seen strong volume and profit growth during the period, supported by the introduction of new tempering

valves for the solar water-heating market.

Heunis SteelHeunis Steel, in which the Group has a 49% shareholding, is a manufacturer of high-quality galvanised rainwater goods

and roof sheeting products for the plumbing and building industries.

During the year under review, Heunis Steel achieved market share and volume growth through sustained competitive

pricing. Despite the sacrifice in margins, profitability was maintained due to tight expense control and improved factory

efficiencies.

The business is gradually being repositioned to be less dependent on low margin roofing products though steady growth

in new and higher-margin related products. While the biggest challenge remains the sourcing of raw materials, profitable

growth will be supported by spare factory and fleet capacity. The year ahead will be characterised by a continued

strengthening of the Heunis Steel brand as a reliable supplier of quality products.

ProspectsThe outlook for the building sector contains both positive and negative messages. Building plans passed are a fairly

reliable indicator of activity to come and, in the Building segment, usually affect the next eight to twelve months. Of

concern is that anecdotal evidence indicates households are postponing non-essential maintenance. Housing prices

remain at decimated levels, translating into consumers’ hesitation to invest in additions, refurbishments and alterations

against the uncertainty of recouping the investment. The usual five-year cycle has extended into seven to eight years and

only the most essential maintenance and improvements are being done. The banks’ trend away from mortgages to shorter

term unsecured lending and the prevailing high level of consumer indebtedness could also inhibit building growth.

Therefore, for the housing industry to enter a sustainable recovery phase, debt levels will first have to drop.

The short-term improvement in residential building plans passed was up a sustained 9% in each half, off very low levels

last year. This improvement may compensate for any short-term decline in refurbishment, addition and alteration activity.

The conclusion that is drawn from the above is that any recovery in the building industry is likely to be both erratic and

protracted.

The Building segment will therefore continue its concerted drive to boost sales, gain market share and increase efficiencies

in all operations.

> DO15


InfrastructureThe Infrastructure segment comprises Incledon and DPI Plastics, with

associates being Sangio Pipe and Fibrex.The Infrastructure cluster’s losses reduced substantially during the second half of the financial year. Average civil contracts

awarded declined by a further 15% year-on-year with the Infrastructure segment hitting the lows of the market during the

first half of the year, but pleasingly showed a 35% recovery in the second half. These numbers are however still 30% off

the peak levels seen in F2009. The general improvement in contracts awarded has also been reflected in the cluster’s

specific end-market of water and sanitation.

Financial reviewThe Infrastructure segment saw revenue increasing by 8,4% to R1 316 million (2010: R1 214 million). An operating loss ofR32,5 million was incurred (2010: loss of R33,5 million).

The second half improvement in market conditions is reflected in the 8% revenue growth of the segment for the year, with

11% of that improvement being generated in the second half. Volumes improved similarly in the second half, and resulted

in the segment’s loss in the second half reducing by 84% to R4 million. Even when the R3 million impairment at DPI

Plastics is included, the loss still reduced to R7 million.

Capital expenditure increased by 77,0% from R13,2 million to R23,4 million primarily due to a R12 million capability investment at DPI Plastics in largebore PVC extrusion and some replacement of capacity.

The Infrastructure segment’s net margin amounted to a loss of 2,5%.

Operational review

DPI Plastics manufactures and trades a wide product range which includes PVC-M, PVC-U, hot and cold water PEX pipe

and PVC-O pressure pipes, mining pipes, building fitting and multi-layer building pipes. It operates a unique business

distribution model/network with factories in South Africa, Tanzania, Mauritius, Angola, Botswana and Namibia.

DPI Plastics is the market-leader in certain aspects of its technology and is differentiated in the market through its deep

knowledge of PVC pipes and pressure pipes for the civil industry, the positioning of the DPI brand and SABS certification

and management system in the factory.

DPI Plastics

DO16 <


The first six months of the year saw the lagging effect of the aftermath of the 2010 World Cup as government and

municipal budgets were exhausted as a result of overspending during that time. The awarding of tenders slowly started to

increase towards the end of the calendar year with momentum picking up during the second half of the financial year as

reflected in DPI’s order book. DPI did not manage to reach profitability for the year, but had a couple of profitable months

in the second half of the year.

DPI Plastics managed to reduce its loss by 21% for the full year, assisted by extra volume throughput and factory

recoveries. The business achieved a 17% improvement in production volumes. Volumes of building fittings have not yet

rendered sustainable increases and were 26% below the benchmark at year-end.

The business was severely impacted by power outages during the year averaging two outages per month, with twelve

power outages experienced during June 2011 exacerbated by six power dips in the same month. The powered outages

constrained productivity and whilst its generators assisted with smooth shut-downs, they cannot replace the electricity.

DPI entered into discussions with Ekurhuleni regarding this matter and it turned out that the power infrastructure was not

maintained. The electricity disruptions contributed R5 million in June 2011 alone to DPI’s R33 million loss for the year.

Despite the electricity challenges, DPI still managed to reduce its scrap rates by 1%. This scrap rate is directly related to

short runs and electricity outages.

DPI Plastics market share increased significantly, largely attributable to the closure of competitors, however, margins

remained under severe pressure. Transport costs were lowered by eliminating duplication through more effective

collaboration with DAWN Logistics. All the injection moulded fittings are now warehoused at the DAWN Distribution Centre

in Germiston from where distribution is effected by DAWN Cargo. This process will be duplicated in Cape Town in the

year ahead.

A focused restructuring of the business commenced at the beginning of F2011 with the second phase commencing at the

end of June 2011 to structure the business for the reality of the market going forward. A lower cost structure and

momentum in the growth of the order book will ensure DPI’s return to profitability. Business process re-engineering and

product development will increase efficiencies in the business.

Product expansion, particularly on the injection-moulding side, is being investigated together with further new product

development. During the year DPI Plastics developed and patented a clamp for pipes which is particularly suited for mining

and water infrastructure applications. The clamp is injection moulded in-house and is currently in a testing phase at

customers.

The over-border DPI businesses ended the year profitably. DPI Aqualia in Mauritius secured a three-year sewer contract;

NPC in Namibia brought DAWN sanitaryware trading into the business and delivered very good results for the year. Fibrex’s

earnings were severely affected by weakening currency and stock revaluation. Pipex in Botswana experienced a tough

year as government spending disappeared. Some of the Roodekop factory’s loading is now done in Botswana. DPI Simba

in Tanzania experienced a very slow first half with a turnaround in the second half of the year.

DPI Plastics started the new financial year with an improved order book as well as a lower cost structure. The annualised

value of costs that have been eliminated is R10 million, excluding the impact of inflation. The business has also started a

project to improve procurement. New product development will receive focus during the year, with an emphasis on

products for the agricultural market, whilst being cognisant of the learning curve on new products.

> DO17



Incledon stocks over 14 000 line items of preferred products used in the engineering, mining, municipal, civil, plumbing

merchant and irrigation markets. It supplies products used in the conveyance of water, gases and liquids and has

branches in every major South African city. New branches were opened in Incledon North West (Klerksdorp), Lephalale

and Burgersfort during the year, resulting in Incledon having 15 branches nationwide.

The year started off disappointingly with government’s awarding of tenders on water and tender spend not materialising

due to government’s budget being exhausted by 2010 World Cup infrastructure spend. One of the biggest obstacles in

the awarding of tenders seems to be government’s inability to manage the projects, coupled with capacity constraints,

particularly at local government level. Towards December 2011 a slow roll-out of tenders commenced with further

improvement in the second half of F2011.

Incledon saw a R10,6 million turnaround in the second half of the year, turning the R6,5 million loss in the first half of the

year into a R4,1 million profit for the full year. This was attributable to a substantial two percentage point increase in gross

margins due to a better ratio of engineering products to PVC and steel pipe being sold. Costs, however, increased by 17%

due to a R6 million non-recurring abnormal cost relating to foreign exchange contract corrections. An additional R12 million

was also incurred in opening three new branches, which have already delivered R3 million in profit. Excluding these two

items, costs would have shown a decrease of 1% year-on-year, which levels are acceptable taking into account the

increases in electricity and fuel costs during the year.

Incledon’s order book has doubled, albeit off a low base, and there was an upswing in activity levels on a national basis,

showing an improvement across the board. New products were introduced into the range and the business has started

dealing directly with manufacturers, instead of through agents. Incledon also introduced variable speed drive pumps, which

create an energy-saving of 35%, into the range. Incledon also concluded a strong supply agreement with one of the steel

suppliers to act as main distributor for them.

Incledon’s business strategy is focused on the development of the engineering side of its business to reduce its reliance on

the infrastructure and civil markets. Incledon has the ability to render turnkey solutions, as has been proven with its

participation in the Bombela Stadium. Through its comprehensive offering, it is well positioned to benefit from

improvements in market conditions.

Incledon has geared its operations to tap into water and sewer projects as these opportunities arise. The product range

has been expanded to ensure that the required commodities are in place. Incledon is also in the process of preparing for a

SABS 9001 grading and its positioning as the supplier of choice in its premium markets. Good processes and people are

in place at Incledon and the business looks forward to a radically better year.

Incledon


DO18 <


AssociatesSangio PipeSangio Pipe, in which the Group holds a 49% interest, is a low-cost manufacturer of HDPE plastic pipe to the

construction, mining, agricultural and industrial markets.

Sangio Pipe showed a very good turnaround over the twelve months, after a slow first three months. One of its major

competitors closed around October 2010 and this, together with improvement in market conditions pertaining to mining

and industrial projects, resulted in a significant market uptake for Sangio Pipe. The remaining impediment to business

growth is the lack of government spend on capital projects, but Sangio Pipe’s order book looks promising and production

capacity has been expanded significantly in line with the strong order book, expected to be sustained.

FibrexDPI Plastics owns 33,3% of Fibrex and is reported as an associate.

Fibrex, based in Viana, Angola, is a manufacturer of PVC-U and high density polyethylene (HDPE) pipes and PVC Fittings.

Fibrex trades in HDPE fittings, fabricated PVC fittings, PVC glue and steel valves to complement its range of manufactured

products.

Earnings were severely affected by weakening currency and stock revaluation. During the year market conditions improved

due to improved liquidity driven by improved oil prices.

Prospects for the year ahead are supported by an improved order book from new project and regional expansion to the

south of Angola.

ProspectsAll the businesses in the cluster started the year with a strong order book, indicating an improvement in market conditions.

Sangio Pipe and DPI Plastics will both expand capacity in certain key products in the year ahead. Sangio Pipe will relocate

to accommodate additional production lines and will start operating from the new plant in the second half of the year.

Incledon will continue to investigate the opening of new branches in areas where market opportunities exist. The segment

relies on a sustained market upturn and continuous changing of its product mix to higher margin products to improve

earnings.


> DO19

DAWN Solutions


The DAWN Solutions segment comprises:

DAWN Logistics – DAWN Cargo– DAWN Distribution Centres

DAWN HR Solutions

DAWN Information Technology

DAWN Marketing & Design

DAWN Merchandising

DAWN Packaging

DO20 <


IntroductionThe Support Services segment of DAWN was built on the

requirement to fully exploit and realise the economies of

scale opportunities presented by a Group structure. The

intended benefits of a shared services strategy are well

known –

• cost containment through pooling of resources and

elimination of duplication; and

• optimised efficiencies through adopting and driving

best practice.

DAWN has expanded on the benefits extraction concept by

setting up all of the shared services functions (Logistics,

HR, IT, Marketing, Merchandising, Packaging) as profit

centres which enter into service level agreements with

Group companies to deliver highly efficient services at

optimised and competitive cost levels. This system also

allows the Group to turn costs into income streams.

Collaboration is a cornerstone principle driven assertively

throughout the Group and, in taking the Support Services

segment to the next level of value-add, a decision was

taken during the year under review to change its identity to

reflect a more proactive, partnership-based approach to

in-house customer relationships. The segment is now

known as DAWN Solutions and has made progress this

year in implementing a strategy focused on moving beyond

service level agreements with the Group companies to

alliance relationships.

Having built a solid platform for realisation of the traditional

benefits of shared services structures, the segment now

also focuses on optimising the strengths of both centralised

and decentralised structures and eliminating their

respective weakness areas. Decentralised structures

typically allow for strong business focus, high levels of

responsiveness and the building of effective partnerships.

The weaknesses that come with decentralised structures

and which DAWN Solutions and its in-house partners aim

to minimise are costs, redundancy – as a result of

duplication of resources – and lack of standardisation.

In contrast, centralised structures facilitate common

support, realisation of economies of scale benefits and

creation of a critical mass of skills. DAWN Solutions is

optimally structured to achieve these benefits. Elimination

of the weaknesses of centralisation, which include poor

responsiveness, lack of accountability, inflexibility to support

varied and unique service requirements and remoteness

from users are key focus areas of the solutions strategy of

the segment.

The evolution from ‘services’ to ‘solutions’ is enabling

DAWN and the Solutions segment to optimise the best of

both worlds.

Financial reviewThe DAWN Solutions segment maintained revenue at

R241 million (2010: R214 million). However, an operating

loss of R10,5 million was incurred, as opposed to the profit

of R8,3 million in the prior year.

There have been substantial cost increases in utility

charges and rent. DAWN Solutions recovers these cost

increases from its revenue growth. However, during the

year under review, due to the low levels of volume

throughput in DAWN Logistics, the segment had to absorb

the increased distribution and warehousing costs.

Capital expenditure increased to R13,9 million (2010: R11,7

million) to maintain capacity.


> DO21



DO22 <

OverviewDAWN Solutions continued to provide a crucial competitive advantage to the Group, charging warehouse and distribution

costs at much lower rates than the logistics industry average. It also assisted the Group to contain costs across all

businesses and to contain warehouse and logistics stock losses.

Further transport and warehousing volumes were brought in-house and income from Group companies grew by 8%. There

has been an increase in order frequencies, but at lower volumes per order. This directly affected the DAWN Distribution

Centres’ costs, which have increased by 19%. The DAWN Cargo cost base was affected by the 15% increase in fuel

costs, exacerbated by an increase in transport kilometres and additional vehicles to service the activity brought

in-house. Excluding the cost of additional business, costs increased by 9%.

The HR Solutions, Marketing & Design, Information Technology and Packaging businesses saw an 80% increase in profit

before interest and tax, attributable to additional business drawn from both internal and external sources.

DAWN Cargo and DAWN Distribution Centres were brought closer together in one division (DAWN Logistics), in order toeliminate intergroup logistics inefficiencies and conflicts and render a more seamless service to Group companies and ultimately to their customers.

DAWN Cargo This business experienced a difficult year with revenue growth coming only from new initiatives such as expansion of theline haul service. On the cost side, DAWN Cargo felt the impact of higher fuel prices, exacerbated by an increase in transport kilometres and a need for additional vehicles to service activities which were brought in-house. The businesswent through a learning curve in its distribution of building materials and tiles, with a small percentage of the product suitable for break-bulk distribution and the balance requiring a more specialised distribution model due to the nature of theproducts that does not stack well and with some being very fragile. The capability that DAWN Cargo is building in the distribution of these specialised products will become a significant competitive advantage. At the same time, a reviewprocess of the fleet configuration has been launched to address demands of specialist product distribution and to adapt tochanges in market demand patterns (more frequent, lower volume purchases).

An initiative launched during the year whereby DAWN merchandisers would receive the DAWN Cargo trucks at the merchants’ premises, overseeing the process from delivery to shelf, carried major customer relationship benefits.

Opportunities have been identified for additional cost-saving benefits through improved management controls as well asthe protection of products in transit, especially those that are more susceptible to damage such as sanitaryware and geysers, through programmes initiated at the Germiston premises pertaining to packaging and loading.

DAWN Logistics

DAWN Cargo •

DAWN Distribution


DAWN Cargo’s stated objective is to have 50% of its fleet operated by owner-drivers by 2014, with 25 out of the 130

drivers currently being owner-drivers. Certain changes have been implemented to make the owner-driver scheme more

effective and the model is gaining momentum as benefits are flowing through in terms of driver productivity, general care

for the trucks and a zero loss rate off the trucks – neither theft nor damages. Apart from the operational and financial

benefits of the owner-driver scheme, it is also an enterprise development initiative.

One of the biggest risks in DAWN Cargo is a lack of technology and to this end a Transport Management System, linked

to the DAWN Group ERP system, will be implemented as phase one of a Group-wide information technology

enhancement programme. Processes will evolve from an unsighted reactive mode to a real live information environment

with customers being able to access information in real time. Historic norms around processes such as route and load

planning will be reassessed and challenged so as to radically enhance delivery efficiencies, customer service levels and

cost control models. This system will add exponential value to DAWN Cargo’s distribution model, the results of which will

flow through in the business’ performance.

DAWN Distribution Centres

DAWN Distribution Centres (DDC) focuses on warehousing and related facilities management solutions to its internal client

base. The business benchmarks its key performance indicators, including productivity measures, efficiencies and cost

optimisation against available alternatives to ensure optimal service delivery and thereby competitive advantage benefits to

its clients. The business operates from eight strategically positioned distribution centres across the country.

During the year revenue from trading operations was below that of the prior year with revenue from rental income higher

than the prior year. Trading customers tended to place smaller orders more frequently, making use of the Group’s

break-bulk capacity, which resulted in higher activity levels in the DDCs. Stockholding was higher to provide for volatile

market demand as well as additional principals coming on board.

DPI Plastics moved the warehousing of its pipe fittings to the Germiston DDC, resulting in a more regular service to DPI

Plastics’ customers, a process which will be duplicated nationally in all the DDCs in the year ahead. The Polokwane DDC

moved to a much larger site (8 000 m2 from 2 500 m2) and Incledon will be incorporated into this site to optimise

efficiencies. A greenfields development was started in Bloemfontein with a 5 000m2 warehouse and Incledon will open a

trading store on the premises in December 2011.

Certain elements of the bar-coding project was deferred to become part of the software renewal project in DAWN

Logistics, namely the Transport Management System and the Warehouse Management System, which will integrate with

the Group’s ERP system. Bar-coding is the operational side of the Warehouse Management System. Existing hardware,

such as scanners and wireless networks, will be utilised and the learning to date will assist in a technology-driven culture

vesting in the business.

Over the next year, the business will continue to drive down costs and render optimised service levels to meet and exceed

customers’ expectations. The main focus will be on enhanced key performance indicators measurement – with its resultant

efficiency optimisation benefits and embarking on a changed methodology in packaging methods and distribution to

customers, to optimise loading and reduce superfluous packaging materials.


> DO23



DO24 <

DAWN HR Solutions is accountable for the HR management function and strategies of the Group and provides this critical

support service through a team of qualified and experienced HR practitioners based in the operations and a

comprehensive team of specialists in all functional areas located within DAWN HR Solutions. Service level agreements

have been concluded with all the companies in the Group.

Focus areas include continued implementation of employment equity objectives, skills development, succession planning,

integration of the payroll administration function and benefit administration, BBBEE scorecard development for all

companies within the Group as well as talent acquisition.

Employment Equity plans are developed across all DAWN Group businesses and representative committees drive

implementation. Skills development forms part of the focus of these committees. All legislative reports and plans are

developed and submitted through these forums.

Skills development initiatives operate under the banner of DAWN Academy, which is responsible for sourcing, assessing

and arranging skills development programmes which are aligned with company needs. If a training initiative has been

vetted by DAWN Academy, it means that it adheres to accreditation requirements, its service providers have been

assessed as being suitable and the content is of a high quality and totally aligned to DAWN’s skills development needs.

The DAWN Group operates a Management Development Programme (MDP), one each for the trading and the

manufacturing operations. The long-established trading MDP entered its seventh year during the financial year and, to

date, approximately half of new management appointments in the trading businesses have come from MDP graduates.

The manufacturing MDP is now in its third year and similar results have been achieved as in the trading MDP. Both these

programmes are presented by an accredited external supplier and are delivering excellent results for the Group.

Adult Basic Education and Training (ABET) is relevant to all companies in the Group. The responsibility of the success of

these programmes is shared between the learners and the company representatives who make themselves available as

sponsors and supporters of the programme. Many of the participants of this programme are now in a position to apply for

promotion positions within the Group.

Ongoing customer care programmes (internal and external customers) benefit all employees, who are reminded of their

duty to be knowledgeable, supportive and willing to go the extra mile. Sales people, receptionists, finance and

administrative staff and warehouse staff have received training from a variety of experts over the past year. Several

technical skills training initiatives are continuously being conducted within DAWN companies to ensure expertise levels are

kept up to date. Individual development plans have also been developed for specific employees or employee groupings to

assist and drive personal development as well as to drive the succession planning within the Group.

Succession planning remains a key strategic focus area of DAWN HR Solutions. The Young Leaders’ Forum is an annual

development initiative where young managers are brought together in a forum for leadership development and to afford

them an opportunity to give input into overall Group strategy.

The HR Administration and Payroll function attends to the payment of salaries together with third-party payments.

The Occupational Health and Safety advisory service is centralised and on-site clinics with health practitioners being run at

the Group’s businesses. Health days are organised on an ad hoc basis throughout the Group.

DAWN HR Solutions


DAWN HR Solutions’ BBBEE advisory service includes management of the transformation objectives of the Group and

individual companies and the services of an external verification company, Empowerdex, is used to verify ratings.

Corporate Social Investment initiatives are managed in conjunction with the Group’s Ethics and Transformation Committee.

Plans are in the process of being developed for all business entities in the Group to improve their performance on

scorecard elements.

The Talent Acquisition department attends to the recruitment to fill vacancies in Group companies – from the most junior to

the most senior – and the process involves the full spectrum of activities from advertisements being placed, writing of job

descriptions, scanning of candidates to administering the final offer.

Together with the Group’s brokers, DAWN HR Solutions manages an in-house medical aid consultancy with a permanent

staff member seconded to DAWN HR solutions to attend to queries and administrative duties relating to the medical aid.

DAWN HR Solutions acquired a small private client labour consultancy during the year and this business was integrated

with DAWN HR Solutions as part of its strategic plan to build its private client base.

The year ahead will see a strong focus on the expansion of the external client base to render DAWN HR Solutions’

business model less dependent on the DAWN Group, whilst simultaneously positioning the business to strengthen its

offering to DAWN at reduced costs.

An investment has been made in terms of an integrated HR management information system which will facilitate the

extraction of information and enable DAWN HR Solutions to render a better quality service with a pro-active approach.

The same model which is applied on the administration and management of the medical aid will be duplicated in respect

of the provident fund. An internal liaison will be appointed to ensure a higher level of service delivery.

During the year DAWN IT performed an in-depth IT and systems needs analysis in the Group. A comprehensive proposal

on the implementation, through a phased approached, of new software programmes (including ERP, Transport and

Warehouse Management Systems) was submitted to the Board. The Board approved the first phase of the proposed

systems renewal programme. As logistics is at the heart of the DAWN business, it was decided that the first phase will

focus on logistics systems, namely a Transport Management System for DAWN Cargo. A project board was formed to

oversee the project, ensuring delivery of its intended business benefits and effective management of any risk areas around

costs and business interruption. Employees have been earmarked in the Group to be trained as ERP specialists up to

consultant level to implement the ERP system to ensure that all maintenance can be performed internally and to be

self-sufficient in terms of the systems implemented. More specialised technical elements will be outsourced to specialist

companies.

The IT Steering Committee was reconstituted in terms of King III to attend to matters pertaining to IT Governance. DAWN

IT’s role is to provide assurance to the Committee that IT projects and spend are in line with the strategic objectives of the

Group. An IT governance framework (COBIT) will be implemented.

The Group’s IT infrastructure (network and hardware) has been evaluated and network consolidation is one of the aspects

that will be implemented, with the resultant cost-saving benefits coupled with an expanded offering from specialist

external service providers.

Historically, DAWN IT has been seen as a computer supplier to the Group. This has now changed and the business is

viewed as a supplier of solutions.


> DO25




DO26 <

The trend is to host network infrastructures at hosting centres, with the server being managed externally and the added

benefit of expanded bandwidth, allowing for internal resources to be used more effectively. This option is currently being

investigated by DAWN IT, together with the outsourcing of email back-up systems.

DAWN Marketing & Design offers value through a cost effective basket of marketing support services and design to Group

companies, based on the benefits of Group purchasing and a competent in-house skills base, which includes web design.

During the year DAWN Marketing & Design expanded its external customer base to some degree, but remained fairly

reliant on DAWN Group spend. Extensive work was undertaken, which was not really taken to income stage and from

which the business anticipates to reap rewards in the first quarter of the new financial year.

Web development and hosting remained very active. A fleet management system was developed for DAWN Cargo to

assist in managing the condition of the trucks, specifically pertaining to branding, license renewals and border permits and

this system will be incorporated with the Transport Management System, which will be rolled out in 2012.

Activity levels on store-in-store concepts increased during the year with the focus on a common DAWN look and feel, with

each specific brand fully retaining its identity. Through this initiative space allocated by merchants is utilised more

effectively.

The DAWN Intranet is currently in development phase and is scheduled to go live in 2012. Individual companies in the

Group will be granted access on different levels and terminals will be installed in the factories to enable employees to log

onto the Intranet to obtain, for example, their HR information.

Initiatives to increase brand awareness in the DAWN showrooms are under review, with the additional possible

implementation of video conferencing facilities. The Customer Service Centre will benefit from the implementation of

DAWN’s new IT systems as the comprehensive software imbedded in the system will provide extensive statistics on call

data, which will enable DAWN Marketing & Design to pro-actively assist Group companies with improved customer

relationship management strategies.

DAWN Merchandising provides expertise and direction to merchandising strategies and programmes to enhance Group

companies’ opportunities in its respective market segments. Merchandising’s offering was expanded through the

appointment of promoters who operate on customers’ premises ensuring that in-store product presentations facilitate

purchasing. Furthermore, merchandisers would participate in the full chain of events from receiving products by overseeing

the process of delivery all the way through to on-shelf presentation and re-stocking of shelves. This value-adding service

differentiates DAWN’s businesses and brands in the marketplace.


DAWN Merchandising


DAWN Packaging remains an important value-adding resource for the Group and plays a key role in growing the

merchandised and concept product ranges of DAWN companies. Merchandised product strategies of the existing

packaging plant customers, Saffer Bathroom & Plumbing and WHDsa, are gaining moment as the trading companies are

more aggressively marketing pre-packed merchandised products, especially in the chain stores. Through the appointment

of the promoters in DAWN Merchandising and their focused drive, demand on the packaging plant will increase. DAWN

Packaging will commence packaging of DAWN Kitchen Fittings products in 2012 and there is a focused drive to bring

more DAWN Group products on board as well as external customers.

ProspectsThe year ahead will be focused on the software renewal project, implemented through a phased approach over three

years. Each phase will be completed and evaluated with the return on investment quantified before approval by the Board

of the next phase will be sought. With the new software project, each company in the DAWN Group’s distribution

information will be mapped into a business intelligence tool. The Transport Management System will optimise DAWN

Cargo’s efficiencies and will assist in an expanded roll-out of DAWN’s economies of scale model. The owner-driver scheme

will also gather further momentum as benefits have started to flow through in terms of driver productivity and performance.


> DO27

DAWN Packaging

Effective leadership is the core of good

governance as leaders define the strategy,

provide the direction and establish the values

and ethics that will influence and guide

practices and behaviour to ensure sustainable

performance.


CG02 >>Corporate Governance ReportCG22 >>Audit Committee ReportCG26 >>Remuneration ReportCG36 >>Ethics and Transformation ReportCG40 >>King III Compliance –

Gap Analysis

> CG01

Ethical leadership and corporate citizenship

The Board believes that good and balanced corporate governance creates an

environment in which free enterprise has the opportunity to prosper. It is of the

opinion that effective leadership is the core of good governance as leaders define

the strategy, provide the direction and establish the values and ethics that will

influence and guide practices and behaviour to ensure sustainable performance.

Distribution and Warehousing Network Limited and its subsidiaries fully support the

King Report on Governance for South Africa 2009 and the King Code of

Governance for South Africa 2009 (King III) which became effective on 1 March

2010. The Board and individual directors are committed to the principles of

transparency, integrity and accountability and accept their duty and responsibility to

ensure that the principles set out in the Code of Corporate Practices and Conduct

as defined in the King III Report are observed. The Board is satisfied that the Group

complies with all material provisions of the King III Report, as has been reported in

an apply or explain basis on the pages that follow, as well as the JSE Listings

Requirements.


CG02 <

Corporate governance report

Corporate governance report

The DAWN Group regards high ethical standards as non-negotiable. The Code of Ethical Conduct has been adopted to

give effect to the Group’s core values and to guide its relationships with all its stakeholders and other relevant role-players

as well as to outline its commitments to them.

DAWN’s Code of Ethical Conduct is binding on all directors, managers, employees, independent contractors, agents,

service providers and business partners, irrespective of their status as a natural person, legal person or other entity.

DAWN’s core values dictate that all DAWN’s people will:

• act honestly and fairly with due skill, care and diligence in the interests of DAWN’s customers, having due regard

and respect for diversity;

• avoid any act that reflects adversely on our honesty, trustworthiness or competence;

• accept accountability for all our actions and decisions;

• refrain from any behaviour that can be classified as unlawful discrimination or harassment;

• not tolerate any form of unlawful or criminal conduct including, but not limited to, bribery and corruption; and

• ensure a culture of responsible corporate citizenship including, but not limited to, promoting the importance of a

sustainable environment.

Whistle-blowing

A whistle-blowing mechanism has been in place since December 2006 for the reporting of suspected fraud and unethical

behaviour. DAWN uses an outsourced, anonymous, toll-free hotline, which is managed by KPMG. All reports are submitted

to Internal Audit, which ensures that all incidents are logged, investigated, actioned (if necessary), reported to the Executive

Committee and resolved. There is a strong focus on staff awareness of this facility through regular distribution of the

newsletter, posters and the intranet. A copy of the Code of Ethical Conduct and whistle-blowing policy are available on the

Company’s website www.dawnltd.co.za.


> CG03

Boards and directors


Independent Non-Executive Directors

LM Alberts

LM Alberts (70) * x + ºIndependent Non-Executive DirectorBSc Eng; MBL

Date appointed: 30 August 2001

Other membership: Member of the Engineering Council of South Africa (ECSA)

Lou Alberts is an electrical engineer with more than forty years’ experience in technical managementas well as in the business field, where he has held various executive directorships. He was activelyinvolved in the unbundling of the Boumat group in 1999, where he was the Chief Executive Officer, and has also served on the board and council of SEIFSA. He currently consults to the building industry,both locally and internationally. Lou was the Chairman of the DAWN Group until 30 June 2011, upon which date he resigned as Chairman, but agreed to continue as an independent non-executivedirector.

VJ Mokoena

VJ Mokoena (51) #

Independent Non-Executive DirectorBA (UJ); Post-Graduate Diploma in Management (Wits); Executive Development Programme (New York)

Other directorships: Non-executive director of Eqstra Holdings Limited; Trustee of Imperial andUkhamba Community Development Trust; Founder and Chairman of Ninathi Investment Holdings (Pty) Limited

Date appointed: 22 June 2011

Veli Mokoena was appointed to the Imperial board on 17 March 2004 and with the unbundling of Eqstrafrom the Imperial Group in April 2008, resigned from the Imperial board and joined the Eqstra board. Veli was the chief executive officer of Ukhamba Holdings, the Group’s BEE partner, and served on theDAWN Board from December 2004 until February 2011. He resigned in February 2011 and formedNinathi Investment Holdings (Pty) Limited. Veli was re-appointed to the DAWN Board in June 2011.

Dr SD Mthembi-Mahanyele

Dr SD Mthembi-Mahanyele (60)Independent Non-Executive DirectorBA Education; Post Graduate Diploma Economic Principles; Post Graduate Diploma FinancialManagement Honorary Doctorate (Honoris Causa)

Date appointed: 1 May 2010

Other directorships: Eqstra Holdings Limited, ITB Manufacturing Proprietary Limited, EdwinConstruction and Ma-Africa Films Proprietary Limited, Central Energy Fund (State-Owned Enterprise)

Dr Sankie Mthembi-Mahanyele served as Minister for Housing under former Presidents NelsonMandela and Thabo Mbeki for the period between 1994 and 2002. The United Nations Habitat(Human Settlement Programme) recognised her contribution in providing housing for more than six

million people during her term in office as National Housing Minister. She was provided with a Scroll of Honour awarded for high achievement in addressing homelessness. In South Africa the Central University of Technology in the Free State also recognised her workby honouring her with a Honoris Causa (Honorary Doctorate) for the same. She has worked as a Diplomat of the ANC before independenceand served in Africa and Europe at different levels of responsibility. In December 2002, Sankie was appointed Deputy Secretary of the ANC,a responsibility she held until December 2007. She is a student of Economics and Literature and has published some poetry and short stories in different journals. She has published an anthology in her name “Flames of Fury”.

Corporate governance reportcontinued

CG04 <

Boards and directors continued


OS Arbee

Non-Executive Directors

Executive Directors

OS Arbee (52) * x + ºNon-Executive DirectorBAcc, CA(SA)

Date appointed: 15 December 2004

Other directorships: Director of Ukhamba Holdings Proprietary Limited, Midas Proprietary Limited,Imperial Holdings Limited and a number of Imperial Group subsidiaries

Osman Arbee was a senior partner at Deloitte & Touche. He is the Chief Executive Officer of the CarRental Division and Chairman of the Automotive Retail, Parts and Tourism Divisions of ImperialHoldings Limited. He joined Imperial on 1 September 2004.

M Akoojee

M Akoojee (32)Non-Executive DirectorBAcc (Hons) Acc; CA(SA); CFA


Mohammed Akoojee is a member of the Imperial Holdings Executive Committee where he is responsible for investor relations and is also involved in the strategic development of the ImperialGroup. He joined the Imperial Group in 2009. He previously worked at Nedbank Securities as aninvestment analyst and at Investec in the corporate finance division.

RL Hiemstra

RL Hiemstra (55) * x + ºNon-Executive DirectorNon-Executive ChairmanBAcc (Hons); CA(SA)


Other directorships: Executive Director of Imperial Holdings Limited and various operating companiesin the Imperial Group as well as Kagiso Media Limited and director of Ukhamba Holdings ProprietaryLimited

Tak Hiemstra is the Executive Director: Strategic Planning of Imperial Holdings Limited. He was formerly the chief executive officer of Imperial Bank. He has twenty years’ experience in corporatefinance affairs and contributes to the Board of DAWN through corporate strategic planning. Tak wasappointed Chairman of DAWN with effect from 1 July 2011.

DA Tod

DA Tod (55) ^ ºChief Executive Officer


Derek Tod is an executive with approximately thirty-five years’ experience in business management andretail distribution on a national basis. Derek was appointed Managing Director of DAWN in 1998 andplayed a pivotal role in the successful implementation of a turnaround strategy at DAWN whichinvolved a complete change of direction. Derek’s in-depth knowledge and experience of the buildingmaterials supply industry expands across into the manufacturing environment which drove a highlysuccessful backward integration strategy at DAWN since 2004.


> CG05



Executive Directors continued

Prescribed Officers

JAI Ferreira

JAI Ferreira (33) ^ • ºFinancial DirectorCA(SA); Harvard (MDP)

Date appointed: 30 November 2007

Dries Ferreira is a chartered accountant (SA) who completed his articles at PricewaterhouseCoopersInc. He has approximately nine years’ experience in the finance field. He joined the DAWN Group inNovember 2005 as Group Financial Manager and was appointed Financial Director in 2007. In 2008,Dries successfully completed the Harvard Management Development Programme.

RD Roos

RD Roos (44) ^ • #

Executive DirectorBCom (Hons); MBA

Date appointed: 14 December 2009

René Roos completed her BCom (Hons) at the University of Johannesburg in 1989 and an MBA atWits Business School in 1999. She joined Lonrho in 1990 as HR consultant, seconded to a platinumrefinery as HR manager in 1992. René joined Saffer in 1997 in the role of Group HR manager. She wasappointed as Chairperson of the Support Services Forum in 2004 and as Chief Executive of theSupport Services division (now DAWN Solutions) in July 2006.

C Bishop

CJ Bishop (54) ^ ºChief Operating OfficerCA(SA)

Date appointed: 1 March 2010

Collin has twenty-five years’ experience in corporate finance, both locally and abroad, originating withPricewaterhouseCoopers in London and culminating in his appointment as Managing Partner of PWC’sCorporate Finance Lead Advisory division. In 1998 Collin started Bishop Corporate Finance (Pty)Limited and was lead advisor to all DAWN’s acquisitions and disposals until his appointment in 2010as Chief Operating Officer of DAWN.

* Audit Committee# Ethics and Transformation Committee^ Executive Committee• IT Steering Committee+ Nomination Committeex Remuneration Committeeo Risk Committee


CG06 <

JA Beukes

JA Beukes (43) ^ • #

Risk and Internal Audit OfficerCompany SecretaryBCom (Hons) Acc


After completing his articles, Jan joined the Group as financial manager in 1994 and was appointedGroup financial director in 1998. In 2006 he assumed the position as the Chief Executive of the Tradingdivision and was appointed Chief Operating Officer of Distribution and Warehousing Network Limited in2008. He was appointed as Group Risk and Internal Audit Officer in 2010 and Group CompanySecretary in June 2011.



M Coetzee

Prescribed Officers continued

M Coetzee (54)CEO Sanitaryware clusterNational Diploma in Costing


Martin Coetzee has extensive manufacturing experience having spent twenty-four years with theMurray and Roberts group of companies and he successfully ran Borbet SA, an aluminium wheel rim manufacturing plant in Port Elizabeth, for twelve years. He joined Vaal Sanitaryware on 1 August 2008 as Managing Director and in June 2009 was appointed CEO of the DAWN Sanitaryware cluster, whichincorporates the Vaal, Libra and Plexicor brands.

R Haynes

RP Haynes (64) ^

DAWN Brands Executive

Date appointed: 1 July 2010

Bob Haynes has over forty-two years’ experience serving at many of the forerunners to the Group,starting at AECI, to Sasol Polymers and finally Group 5. After his appointment in 1969 as a resinchemist and plastics systems service consultant, he transferred to the commercial operations of AECIto spearhead the technical development of plastic product systems in the civils, mining and construction sectors. His marketing career with Duropenta and DPI Plastics spanned a period of twenty-five years. Bob’s range of technical and marketing skills has now been combined into a singlefunction at DAWN to drive Group specifications and company brands.

GD Kotzee

GD Kotzee (50) ^

CEO Infrastructure clusterB Eng (Met), MBL Unisa

Date appointed: 1 January 2009

After qualifying as a metallurgical engineer through Iscor’s pupil engineering bursary scheme, Gerhardhas worked for various companies involved in manufacturing local and international branded products.Some of these positions included Quality & Manufacturing manager at Copalcor Rolled Metals, GeneralManager at Dorbyl, Managing Director and later Divisional Manager Africa and Middle East at FrankeKitchen Systems, a Swiss-owned company. Gerhard is on the management committee of SAPPMA.

R Straussner

R Straussner (52)CEO Watertech clusterMSc Eng (Ind) WITS; BSc Eng (Mech) RAU

Date appointed: 2 January 2008

Rainer Straussner spent thirteen years in the manufacturing industry, of which eight were in seniormanagement and director positions, where he gained experience in manufacturing methods and supply-chain management. Thereafter he spent eight years in consulting, as a principal, where hefocused on consumer products, retail and distribution with many of the major brands in South Africaas his clients. He joined the DAWN Group as Managing Director of Cobra in 2008 and was appointedCEO of the Watertech cluster, comprising Cobra and Isca, in 2010.

PJ van Niekerk

PJ van Niekerk (56) ^

CEO International clusterDiploma in Financial Management; BCompt; Executive Leadership Programme (UNISA)

Date appointed: 1 July 2009

Pieter van Niekerk started his career in finance at Eloptro (a division of Denel) in 1976 whereafter heheld various financial management positions at Sunripe Fruits, Kentron and T&N Holdings until hisappointment as Financial Director at DPI Plastics in 1999. Pieter was appointed CEO of DAWNInternational and to the DAWN Executive Committee in 2009.


> CG07




The unitary Board of Directors of DAWN, chaired by TakHiemstra, a non-executive director who was appointed asChairman on 1 July 2011, reflects an appropriate mix ofexecutive and non-executive directors. Specifically, itcomprises six non-executive directors, of whom three areindependent, and four executive directors. This allows thenon-executive directors to provide independent judgement on issues of strategy, performance, resources,transformation, diversity, employment equity and evaluation of performance and standards of conduct.While executive directors have service contracts andrestraint agreements, they are also shareholders.

The Board meets at least quarterly to initiate, evaluateand monitor business matters, which have an impact onthe wellbeing of the Group and its stakeholders. Theseinclude setting Group strategy, determining policy andinstituting control measures. The Board takes finalresponsibility for acquisitions and disposals, approvescapital expenditure and appraises proposals from theExecutive and other Board Committees.

The Board gives strategic direction to the Group, appointsthe Chief Executive Officer and ensures that succession isplanned. The non-executive directors take responsibility forensuring that the chair encourages proper deliberation ofall matters requiring the Board’s attention. The Boardensures that there is an appropriate balance of power andauthority on the Board so that no one individual or blockof individuals can dominate the Board’s decision-makingprocess.

The roles of the Chairman and Chief Executive Officer areseparate.

The Board has a comprehensive system of control ensuring that risks are mitigated and the Group’s objectives are attained. This control environment sets thetone of the Group and covers ethical values, management’s philosophy and the competence ofemployees.

The Board ensures that the Group complies with all relevant laws, regulations and codes of business practiceand that it communicates with its shareholders and relevant internal and external stakeholders openly,promptly and with substance prevailing over form.

The Board and its committees are supplied with full andtimely information which enables them to discharge their responsibilities and have unrestricted access to all Groupinformation, records, documents and property. Non-executive directors have access to management and mayeven meet separately with them, without the attendanceof executive directors.

The Board defines levels of materiality, reserving specificpower to itself and delegating other matters with the necessary written authority to management. These matters are monitored and evaluated on a regular basis.

The Board identifies the key risk areas and key performance indicators for the Group. These are regularlyupdated and particular attention is given to technologyand systems.

Directors, both executive and non-executive, are appointed for their skill and experience. The appointmentof new directors requires the unanimous approval of theBoard. The Board is in the process of establishing a formal orientation programme to familiarise incomingdirectors with the Group’s operations, senior managementand its business environment and to induct them in theirfiduciary duties and responsibilities.

The daily management of the Group’s affairs is delegatedto the Chief Executive Officer, who co-ordinates the implementation of Board policy through the ExecutiveCommittee. The Chairman annually appraises the ChiefExecutive Officer and the results of this appraisal are considered by the Remuneration Committee to guide it inits evaluation of the performance and remuneration of theChief Executive Officer.

The Board regards sustainability as a business opportunity to create value on social, economic and environmental levels. The objective of the Group’s sustainability programme is to eliminate or minimiseadverse consequences for the Group on the communityand the environment and to improve the impact of the Group’s operations on the economic life of the community.

The Chief Executive Officer, Chief Operating Officer, theChief Financial Officer, the Risk and Internal Audit Officer,and the Chief Executives of DAWN Solutions,Infrastructure and DAWN International together with theDAWN Brand Executive form the Executive Committee.

Independence assessmentAll non-executive directors are required to complete anindependence questionnaire to establish whether theymeet the objective independence criteria of King III andthis will be applied in 2012. Three of the six non-executive directors are independent according to the King III definition.

Messrs M Akoojee and OS Arbee are not consideredindependent in terms of the King III definition due to their representation of a significant shareholder of the Group.

Two of the directors on the Board have served a termexceeding nine years. The Board reviewed the independence of Messrs LM Alberts and RL Hiemstraand, after due consideration, concluded that their longassociation with the Group has not impaired their integrity, impartiality and objectivity and that they haveretained their ability to act independently.

While Mr Hiemstra is a director of Ukhamba HoldingsProprietary Limited, an important shareholder of DAWN,he has not been nominated to the DAWN Board byUkhamba Holdings Proprietary Limited.

CG08 <



Board composition

Board balance Board race balance

Board gender balance Board composition

Attendance at Board meetingsThe number of meetings attended by each of the directors of the Company during the period 1 July 2010 to 22 June 2011

is as follows:

6 Aug 9 Sep 5 Nov 8 Mar 22 Jun 13 Sep

2010 2010 2010 2011 2011 2011

LM Alberts √ √ √ √ √ √DA Tod √ √ √ √ √ √M Akoojee *

3n/a n/a n/a n/a n/a √

OS Arbee √ x x √ x √JA Beukes √ √ √ √ √ √JAI Ferreira √ √ √ √ √ √RL Hiemstra √ √ √ √ √ √VJ Mokoena *

1*

2 √ √ √ n/a √ √SD Mthembi-Mahanyele √ √ √ √ √ √RD Roos √ √ √ √ √ √*

1 Resigned 14 January 2011.

*2 Appointed 22 June 2011.


> CG09

11

10

09

4 2

4 3

3

ExecutiveDirectors

Non-ExecutiveDirectors

Independent Non-ExecutiveDirectors

3 3

2

2 4

11

10

09

4 6

3 6

2 7

Black Directors White Directors

11

10

09

8 2

7 2

9

Men Women

0

11

10

09

4 6

4 5

3 6

Executive Directors Non-Executive Directors

Annual Board evaluation

An annual evaluation of the Board and each of the

sub-committees will be implemented in 2012 and will be

undertaken by means of a questionnaire completed by all

Board members. The results will be collated by the

Company Secretary and passed on to the Chairman who

will have a one-on-one interview session with each

director to discuss their feedback as well as any areas of

concern. The Chairman will provide feedback to the full

Board on any actions arising from the evaluation process.

This annual evaluation will be comprehensive,

encompassing all aspects of the Board’s responsibilities.

It will cover both individual member contributions and the

effectiveness of the Board as a whole. The results of the

executive and non-executive directors’ evaluations will be

separately tabulated, in order to gauge any areas of

difference in perception.

Board Charter

The Board Charter was refined and approved by the

Board on 22 June 2011.

Purpose and objectives

The purpose of the Charter is to regulate how business is

to be conducted by the Board in accordance with the

principles of good corporate governance. The Charter

sets out specific responsibilities to be discharged by

Board members collectively and the individual roles

expected of Board members. The objectives of the

Charter are to ensure that all Board members acting on

behalf of the Group are aware of their duties and

responsibilities as Board members and the various

legislation and regulations affecting their conduct and to

ensure that the principles of good corporate governance

are applied in all their dealings in respect of, and on

behalf of, the Group.

The Charter defines the role and responsibilities of the

Board as follows:

• act as the focal point for, and custodian of,

corporate governance by managing its relationship

with management, the shareholders and other

stakeholders of the Company along with sound

corporate governance principles;

• appreciate that strategy, risk, performance and

sustainability are inseparable and to give effect to

this by:

– contributing to and approving the strategy;

– satisfying itself that the strategy and

business plans do not give rise to risks that

have not been thoroughly assessed by

management;

– identifying key performance and risk areas;

– ensuring that the strategy will result in

sustainable outcomes; and

– considering sustainability as a business

opportunity that guides strategy formulation;

• provide effective leadership on an ethical

foundation;

• ensure that the Company is and is seen to be a

responsible corporate citizen by having regard to

not only the financial aspects of the business of the

Company but also the impact that business

operations have on the environment and the

society within which it operates;

• ensure that the Company’s ethics are managed

effectively;

• ensure that the Company has an effective and

independent Audit Committee;

• be responsible for the governance of risk;

• be responsible for information technology (IT)

governance;

• ensure that the Company complies with applicable

laws and considers adherence to non-binding rules

and standards;

• ensure that there is an effective risk-based internal

audit;

• appreciate that stakeholders’ perceptions affect the

Company’s reputation;

• ensure the integrity of the Company’s Integrated

Report;



CG10 <



• act in the best interests of the Company by

ensuring that individual directors:

– adhere to legal standards of conduct;

– are permitted to take independent advice in

connection with their duties following an

agreed procedure;

– disclose real or perceived conflicts to the

board and deal with them accordingly; and

– deal in securities only in accordance with the

policy adopted by the Board;

• commence business rescue proceedings as soon

as the Company is financially distressed;

• elect a Chairman of the Board that is an

independent non-executive director; and

• appoint and evaluate the performance of the Chief

Executive Officer.

Board Committees

Specific responsibilities have been formally delegated to

Board Committees with defined terms of reference, life

span and function, clearly agreed upon reporting

procedures and written scope of authority. The

Committees are appropriately constituted with due regard

to the skills required by each Committee and the

Committees’ terms of reference are reviewed once a year.

There is transparency and full disclosure from the Board

Committees to the Board, except where mandated

otherwise by the Board. Board Committees are free to

take independent outside professional advice as and

when necessary and are subject to regular evaluation by

the Board to ascertain their performance and

effectiveness.

The Group, upon implementation of its compliance

programme, adopted the King III principles pertaining to

Board Committees, which resulted in the following actions

being taken:

• the reconstitution of the Board Committees to

provide for the Chief Executive Officer to not be a

member of the sub-committees, and attending by

invitation only, with the exception of the Risk

Committee, where he is a member, as

recommended by King III;

• the establishment of a Nomination Committee;

• the Audit and Risk Committee being split into two

separate committees, being the Audit Committee

and the Risk Committee;

• the Transformation Committee was expanded to

include ethics and sustainability areas of

responsibility and was renamed the Ethics and

Transformation Committee and new terms of

reference was developed and approved; and

• the IT Steering Committee was reconstituted to

have a refined focus on the ongoing evolution of

systems, requirements and governance and terms

of reference has been developed and approved by

the Board.

The following Board Committees therefore currently exist:

• Audit Committee

• Risk Committee

• Remuneration Committee

• Nomination Committee

• Ethics and Transformation Committee

• IT Steering Committee (see The Governance of

Information Technology on pages CG18 and CG19)

Audit Committee

The Report of the Audit Committee is outlined on pages

CG22 to CG25 of the Corporate Governance section.

Risk Committee

Towards the end of the year, the Audit and Risk

Committee was split into two separate committees with

the Risk Committee’s membership being as non-

executive directors OS Arbee (Chairman), LM Alberts

(independent) and RL Hiemstra and the executive

directors being DA Tod, CJ Bishop and JAI Ferreira. The

Chairman of the Audit Committee is also the Chairman of

the Risk Committee. The executive responsible for

enterprise-wide risk, Mr JA Beukes, is an ex officio

member of the Committee.

> CG11



At the Audit and Risk Committee meeting held on 1 March 2011, a decision was taken to split the Audit and RiskCommittee into two separate committees, namely the Audit Committee and the Risk Committee, to align the RiskCommittee composition with the requirements of King III. Messrs DA Tod, JAI Ferreira and CJ Bishop were appointed tothe Risk Committee on 1 March 2011 and attendance at meetings was as follows:

Audit and Audit andRisk Risk Risk Risk

Committee Committee Committee Committee23 Aug 1 Mar 14 Jun 2 Sept

2010 2011 2011 2011

OS Arbee (Chairman) √ √ √ √LM Alberts √ √ √ xCJ Bishop n/a n/a √ √JAI Ferreira n/a n/a √ √RL Hiemstra n/a * √ √ √DA Tod √ # n/a √ √

* Appointed 14 January 2011.# Resigned 14 January 2011.

The overall objective of the Committee is to effectively communicate and oversee the process, models and frameworks formanaging risk across the Group to:

• safeguard the Group’s assets and investments;

• support business objectives and sustainability under normal as well as under adverse operating conditions; and

• behave responsibly towards all stakeholders having a legitimate interest in the Group.

Whilst the Board is ultimately responsible for the maintenance of an effective risk management process, the Committeeassists the Board in assessing the adequacy of the risk management process to ensure that:

• the Group has implemented an effective policy and plan for risk management that will enhance the Group’s ability to achieve its strategic objectives; and

• the disclosure regarding risk is comprehensive, timely and relevant.

The Committee is responsible for performing all the functions necessary to fulfil its role, including:

• overseeing the development and annual review of a policy and plan for risk management to recommend forapproval to the Board;

• monitoring the implementation of the policy and plan for risk management occurring through risk management systems and processes;

• evaluating and implementing King III Practice Notes;

• making recommendations to the Board concerning the levels of tolerance and appetite for risk and monitoring thatrisks are managed within the levels of tolerance and appetite as approved by the Board;

• overseeing that the risk management plan is widely disseminated throughout the Group and integrated in the day-to-day activities of the Group;

• ensuring that risk management assessments are performed on a continuous basis;

• ensuring that frameworks and methodologies are implemented to increase the possibility of anticipating unpredictable risks;

• ensuring that management considers and implements appropriate risk responses;

• ensuring that continuous risk monitoring by management takes place;

• liaising closely with the Audit Committee to exchange information relevant to risk;

• expressing the Risk Committee’s formal opinion to the Board on the effectiveness of the system and process of riskmanagement; and

• reviewing reporting concerning risk management that is to be included in the Integrated Report for it being timely,comprehensive and relevant.

CG12 <



The Committee utilises a heat risk mapping process

aimed at identifying key risk areas and key performance

indicators. It assesses and addresses, inter alia, physical

and operational risk, HR risk, technology risk, business

continuity and disaster recovery, credit and market risk

and governance and compliance risk. This assists the

Board in its assessment and management of risk.

Remuneration CommitteeThe Remuneration Report appears on pages CG26 to

CG35 of the Corporate Governance section.

Nomination CommitteeA Nomination Committee was established on 22 June

2011 and comprises LM Alberts (Chairman), OS Arbee

and RL Hiemstra. The Chief Executive Officer, Chief

Financial Officer, head of human resources and other

members of senior management, as may be required,

assurance providers, professional advisors and Board

members may be in attendance at Nomination Committee

meetings, but by invitation only and may not vote. The

Company Secretary is the secretary of this Committee.

The Committee has established terms of reference,

approved by the Board, and will meet at least twice per

year.

The role of the Committee will be to assist the Board to

ensure that the Board has the appropriate composition

for it to execute its duties effectively. The Committee will

annually review the Board’s required mix of skills,

experience and other qualities to assess the effectiveness

of the Board, its committees and the contribution of each

director.

The Committee will perform all the functions necessary to

fulfil its role, including the following:

• ensuring the establishment of a formal process forthe appointment of directors, being:

– the identification of suitable members for theBoard;

– performance of reference and backgroundchecks of candidates prior to nomination inaccordance with the recommendationrequired for listed companies by the JSE;

– the formalisation of the appointment of directors through an agreement between theCompany and the director; and

– the overseeing of the development of a

formal induction programme for new

directors;

• ensuring that inexperienced directors are

developed through a mentorship programme;

• overseeing the development and implementation of

continuing professional development programmes

for directors;

• ensuring that directors receive regular briefings on

changes in risks, laws and the environment in

which the Company operates;

• considering the performance of directors and

taking steps to remove directors who do not make

an appropriate contribution;

• finding and recommending to the Board a

replacement for the Chief Executive Officer when

that becomes necessary; and

• ensuring that formal succession plans for the

Board, Chief Executive Officer and senior

management appointments are developed and

implemented.

Executive directors have service contracts and restraint

agreements, where applicable, and are appointed on the

basis of their skills, experience and level of contribution to

and impact on the Group’s activities. Non-executive

directors are selected on the basis of industry knowledge

and their professional skills and experience to enhance

organisational decision-making.

All directors are subject to election by shareholders, retire

by staggered rotation and stand for re-election in

accordance with the Company’s Memorandum of

Incorporation. At least one-third of the directors who do

not have fixed term employment contracts with the

Company retire by rotation at the Company’s annual

general meeting.

The names of directors submitted for election or

re-election are accompanied by sufficient biographical

information to enable shareholders to make an informed

decision in respect of their election.

The Board will perform an evaluation of the effectiveness

of the Nomination Committee annually.

> CG13



Ethics and Transformation Committee The Board is committed to the spirit and principles of

B-BBEE, including corporate social investment objectives,

and to this end a Transformation Committee was

established in 2008. The Committee comprises

VJ Mokoena (Independent Non-Executive Chairman),

RD Roos (Executive Director) and JA Beukes (Executive

Director) as well as members of executive management

A Grobbelaar, D Madisa and L van de Venter, who have a

standing invitation to attend the Ethics and Transformation

Committee meetings. The Committee assists the Board in

ensuring that there are appropriate strategies and

policies in place to progress transformation. A Group

Ethics Officer will be appointed in 2012.

The Committee seeks to address any and all issues

pertaining to the transformation of the Group into an

organisation that is not only relevant in the context of a

democratic South Africa, but also to ensure that the

composition of the Group is fully representative of the

cultural landscape that is prevalent in the country. Its role

is not to redress the imbalances that exist in society per

se, but to ensure that DAWN is a leader in the

implementation of HR and IR practices that recognise the

equality of all individuals. DAWN seeks to implement,

through careful and considered processes, measures that

do not detract from the Group’s long-term goal of

delivering sustainable returns to all shareholders and

stakeholders alike.

The Ethics and Transformation Committee statutory-

specific functions include the monitoring of the

Company’s activities, having regard to any relevant

legislation, other legal requirements or prevailing codes of

best practice, with regard to matters relating to:

• social and economic development, including the

Company’s standing in terms of the goals and

purposes of:

– the 10 principles set out in the United

nations Global Compact Principles;

– the OECD (Organisation for Economic

Co-operation and Development)

recommendations regarding corruption;

– the Employment Equity Act;

– the Broad-Based Black Economic

Empowerment Act;

• good corporate citizenship, including the

Company’s:

– promotion of equality, prevention of unfair

discrimination and reduction of corruption;

– contribution to development of the

communities in which its products or

services are predominately marketed; and

– record of sponsorship, donations and

charitable giving;

• the environment, health and public safety, including

the impact of the Company’s activities and of its

products or services;

• consumer relationships, including the Company’s

advertising, public relations and compliance with

consumer protection laws; and

• labour and employment, including:

– the Company’s standing in terms of the

International labour Organisation Protocol on

decent work and working conditions; and

– the Company’s employment relationships

and its contribution toward the education

development of its employees;

• to draw matters within its mandate to the attention

of the Board, as the occasion requires; and

• to report, through one of its members, to the

shareholders at the Company’s annual general

meeting on the matters within its mandate.

In addition and complementary to its statutory duties in

terms of the Act, the Committee assists DAWN to

discharge its business sustainability with respect to the

implementation of practices that are consistent with good

corporate citizenship with particular focus on:

• the King III Code of Corporate Governance;

• the DAWN Group’s ethics and sustainability

commitments:

• Broad-Based Black Economic Empowerment

requirements as described in the DTI combined

generic scorecard (excluding ownership targets)

and associated Codes of Good Practice;

CG14 <



> CG15

• DAWN’s transformation commitments as describedin the transformation strategy in the Committee’sterms of reference and each business cluster’sspecific B-BBEE plans;

• environmental commitments as described in theDAWN Environmental Policy Framework, which isin the process of being developed;

• Corporate Social Investment (CSI) commitments asoutlined in the annual CSI plan and approved bythe Board; and

• triple bottom line reporting requirements as

described in the JSE Limited’s Social Responsibility

Investment Index (SRI).

The Committee establishes an Annual Work Plan,

covering matters laid out in the Charter, aimed at

achieving the aims and objectives to ensure that all

relevant matters are covered by the agenda of the

meetings planned for the year.

The Ethics and Transformation Report appears on pagesCG36 to CG39 of the Corporate Governance section.

Company Secretary All directors have access to the advice and services of theCompany Secretary and there is an agreed procedure bywhich directors may obtain independent professionaladvice at the Group’s expense, should they deem thisnecessary.

The Company Secretary provides guidance to the Boardas a whole and to individual directors with regard to howtheir responsibilities should properly be discharged in thebest interests of the Group. The Company Secretary alsooversees the induction of new directors and assists theChairman and the Chief Executive Officer in determiningthe annual board plan, board agendas and formulatinggovernance and board-related issues.

The Company Secretary ensures that the Board Charterand the Terms of Reference of Board Committees areregularly updated.

During the review year, the Chief Financial Officer wasalso the Company Secretary. In an attempt to move thisposition closer to an arm’s length relationship with theBoard, Mr JA Beukes, an executive director, was appointed Company Secretary on 22 June 2011. TheBoard evaluated the effectiveness of Mr Beukes as acompetent, suitably qualified and experienced CompanySecretary and concurred that even though he is a

director of the Company, he has a direct channel of communication to the Chairman of the Board and waspresent at the majority of shareholder, Board and committee meetings and has maintained an arm’s lengthrelation, as far as is reasonably possible in his position.His competencies furthermore relate to him having beenthe Company Secretary of DAWN from 1998 to 2007.

The intention is, however, to have a formal arm’s lengthCompany Secretary appointment by the end of the 2012financial year.

Accountability and auditGoing concernThe annual financial statements have been prepared onthe going concern basis in accordance with the framework concepts and the measurement and recognition requirements of International FinancialReporting Standards, the AC 500 standards as issued bythe Accounting Practices Board, the JSE Limited ListingsRequirements and in the manner required by theCompanies Act of South Africa. The appropriate principalaccounting policies as set out on pages FS15 to FS33 ofthe annual financial statements have consistently beenapplied. The directors have no reason to believe that theCompany and the Group will not be a going concern inthe foreseeable future.

The Board minutes the facts and assumptions used in theassessment of the going concern status of the Group atthe financial year-end.

Auditing and accountingThe Board is of the opinion that the Group’s auditorsobserve the highest level of business and professionalethics and that their independence is not in any wayimpaired. The auditors have the right of access to allinformation or personnel within the Group on any matternecessary to fulfil their duties. The external auditorsattend Audit Committee meetings by invitation.

Internal controlThe Group maintains systems of internal control, whichinclude financial, operational and compliance controls.These controls are established to provide reasonableassurance of the effective and efficient operation of theGroup and its compliance with all relevant laws and regulations, as well as to ensure the reliability of the annual financial reporting and to adequately safeguard,



verify and maintain accountability for assets. The controlsare reviewed and monitored regularly throughout theGroup by internal audit, management and employees.

The Board of directors is accountable for establishing

appropriate risk and control policies and is responsible for

monitoring, reviewing and communicating these controls

and policies throughout the organisation. Corrective

actions are taken to address control deficiencies and

other opportunities for improving the systems, as they are

identified. The Board, operating through its Audit

Committee, provides oversight of the financial reporting

process.

Internal auditThe internal audit function is an independent, objectiveassurance and consulting activity to add value andimprove DAWN’s operations through a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. The Audit Committee decided onthe appointment of Mr J Gamba as the Chief AuditExecutive (CAE) with effect from 1 October 2010 and isalso responsible for his performance appraisal. The CAEreports administratively to the Chief Executive Officer orhis nominated deputy, the Risk and Internal Audit Officerof the Company, and reports functionally to the AuditCommittee. The CAE has unlimited access to all officersof the Company, including the Chairmen of the Board andAudit Committee and the Chief Executive Officer and hasa standing invitation to all committee meetings, exceptthe Executive Committee and Board meetings. The CAEis not a member of sub-committees in order to protectindependence and has unrestricted access to allExecutive Committee members as well as to all directorsof the Board.

Internal audit assurance is provided through applying theStandards for the Professional Practice of InternalAuditing and the Code of Ethics of The Institute of InternalAuditors (IIA).

The annual allocation of internal audit resources is established on the basis of an approved internal auditplan. The Audit Committee is responsible for approvingthe plan based on the agreed scope of work that needsto be performed.

Opportunities for improving management control, profitability and the Group’s image may be identified during audits. These are communicated to the appropriate level of management.

In accordance with the recommendations of King III, internal audit:

• provided a written assessment regarding the effectiveness of the system of internal controls andrisk management to the Board to enable it to reporton the effectiveness of the system of internal control; and

• conducted a documented review of the key internal financial controls during the review yearand submitted the review to the Audit Committeeto enable the Committee to comment on the accounting practices and the internal financial control of the Company in terms of section94(7)(f)(iii) of the Companies Act and to make asubmission to the Board on the same in terms ofsection 94(7)(h).

The Audit Committee will annually assess the effectiveness of the internal audit function and the internalaudit function will be assessed against the following criterias:

• achievement of the annual internal audit plan;

• compliance with the IIA’s professional standards,inclusive of quality assurance assessments on thelevel of compliance achieved;

• achievement of reporting protocols through management to the Audit Committee;

• timeliness of reporting of findings and activities;

• responsiveness to changing business/operationalenvironment;

• management’s acceptance of the internal auditfindings;

• quality and relevance of the annual assessmentreports;

• level of cooperation and interaction with otherassurance providers within the agreed combinedassurance approach; and

• maintenance of adequate staffing/sourcing levels tomeet the requirements of the Internal Audit Chartersummarised below.

In compliance with King III, the Board will in future ensurethat the internal audit function is subject to independentquality review at periods of at least once every three yearsto ensure that the function remains effective, with the firstreview due in 2013.

CG16 <



Internal Audit Charter The mission of the internal audit function is to provide

independent assurance and consulting services designed

to add value and improve the Group’s operations. It

assists the Group in accomplishing its objectives by:

• evaluating the Company’s governance processes,

including ethics, especially the ‘tone at the top’;

• performing an objective assessment of the

effectiveness of risk management and the internal

control framework;

• systematically analysing and evaluating business

processes and associated controls; and

• providing a source of information, as appropriate,

regarding instances of fraud, corruption, unethical

behaviour and irregularities.

Internal audit determines whether the Group’s network of

risk management, control and governance processes, as

designed and represented by management, is adequate

and functioning in a manner to ensure:

• risks are appropriately identified, quantified and

managed;

• the reliability and integrity of financial and

operational information and the means used to

identify, measure, classify and report such

information;

• safeguarding of assets and, as appropriate,

verifying the existence of assets;

• adequate systems of internal control are

implemented and maintained and that their

continued effectiveness are monitored;

• interaction with the various governance groups

within the organisation occurs, as appropriate;

• significant financial, managerial and operating

information is accurate, reliable and timely;

• employees’ actions are in compliance with policies,

standards, procedures and applicable laws and

regulations;

• resources are acquired economically, used

efficiently, and adequately protected;

• programmes, plans and objectives are achieved;

• quality and continuous improvement are fostered in

the Group’s control processes; and

• significant legislative or regulatory issues impacting

the organisation are recognised and addressed

appropriately.

Internal audit co-ordinates its work with that of the other

assurance providers and the external auditors are

consulted in determining the activities of internal and

external audit to minimise duplication of audit effort.

Internal audit makes an assessment of the adequacy of

the combined assurance approach adopted by the

Company, which includes the adequacy of risks covered

by the different assurance providers and the reliability of

the assurance provided.

The Internal Audit Charter is updated annually or more

frequently as circumstances may necessitate.

The governance of risk

The Board is responsible for the total process of risk

management, as well as forming its own opinion on the

effectiveness of the process, and sets the risk strategy,

which is based on the need to identify, assess, manage

and monitor all known forms of risk across the Group, in

liaison with the executive directors and senior

management. These policies are clearly communicated to

all employees to ensure that the risk strategy is

incorporated into the language and culture of the Group.

The Board decides the Group’s appetite or tolerance for

risk and has the responsibility to ensure that the Group

has implemented an effective ongoing process to identify

risk, to measure its impact against a broad set of

assumptions and then to activate what is necessary to

proactively manage these risks. Risk management and

internal control are practised throughout the Group and

are embedded in day-to-day activities.

Risk is not only viewed from a negative perspective. The

review process also identifies areas of opportunity, such

as where effective risk management can be turned to

competitive advantage.

Pure risks are identified and risk awareness is promoted

at all business units and at the head office.

The Group has adopted an ongoing, systematic and

documented risk management process that ensures that

all material risks are identified, evaluated, effectively

managed, and where this is practical, quantified. This

> CG17



process is undertaken within each business unit as well

as by the Board and serves to ingrain a sustainable risk

awareness and culture at all levels. The assessments are

aligned to the short-, medium- and long-term strategic

and business objectives within each business entity, as

well as those of the Group as a whole. Ongoing business

sustainability is addressed as part of this process.

Further information on risk strategies, management and

indicators appear in the Integrated Report and in the

Sustainability Report.

The Group insures against losses arising from

catastrophic events, which include fire, flood, explosion,

earthquake and machinery breakdown, as well as

business interruption from these events. The Group

renews its insurance policies annually on 1 January.

The governance of InformationTechnology

The Board recognises the important role that information

technology (IT) governance plays in the management of

risks and the achievement of Group objectives. An IT

governance framework for the Group is currently being

developed by using COBIT, which provides management

with an IT governance model that helps in delivering value

from IT and understanding and managing the risks

associated with IT. COBIT will also help bridge the gaps

between business requirements, control needs and

technical issues and is a control model to meet the needs

of IT governance and ensure the integrity of information

and information systems.

An IT Steering Committee was established to assist the

Board in its responsibility for IT governance, which in turn

the Board has devolved to the Audit Committee. Its

members are JAI Ferreira, JA Beukes, RD Roos and

G Coetzee.

The IT Steering Committee, reporting to the Audit

Committee:

• provides strategic leadership for IT by aligning IT

strategic objectives and activities with enterprise

strategic objectives and processes;

• prioritises IT project initiatives and delivers IT

investment recommendation for Board approval;

• ensures that sufficient organisational capability

exists to enable the processes within its scope to

perform and deliver the results expected by the

business;

• exercises its authority in support of the IT process

owners’ endeavours to achieve the outcomes

expected and to periodically evaluate performance

and monitor remedial actions to remedy instances

of poor performance;

• works with the process owners to identify suitable

criteria that are to be used for decision-making

within the processes;

• ensures open communication between DAWN IT

and the other business units to promote

collaborative planning; and

• considers the annual IT assurance statement on

key IT projects and performance metrics.

IT Steering Committee terms of referenceFormal terms of reference for the IT Steering Committee

has been developed and approved by the Board. The IT

governance goals, outlined in the terms of reference, are:

• the management of business risks;

• high service availability;

• agility in responding to changing business

requirements;

• automation and integration of the enterprise value

chain; and

• compliance with internal policies, selected industry

standards, external laws and regulations.

In the attainment of these goals, key areas of

responsibility have been identified:

• Organisational structure, relationships,

frameworks and processes;

• Strategic alignment;

CG18 <



• Value delivery;

• Resource management;

• Risk management; and

• Performance management.

Compliance with laws, rules, codes andstandards

The legislative framework within which DAWN operates

has become increasingly complex. Amendments to

existing laws, new laws and pending Bills have to be

tracked and continuously assessed to ensure compliance.

Business processes have to be aligned to ensure

compliance.

In particular, DAWN has focused on the Consumer

Protection Act, the new Companies Act and the

Competition Act. Continuous attention is devoted to the

relevant environmental legislation which applies most

notably to the manufacturing entities in the Group.

ComplianceA compliance function has been established in the Group

and a Group Compliance Officer has been appointed,

responsible for advising and assisting the Board and

management with awareness and assessing compliance

with the regulatory environment. A comprehensive

compliance report is submitted to the Risk Committee

twice a year, which in turn reports to the Board.

The compliance function’s structure and approach enable

it to support management at all levels by leveraging off

specialised technical skills and business knowledge.

Compliance is structured into centralised and

decentralised functions. The centralised function is

responsible for Group-wide monitoring and forms the

centre of expertise on legislation and regulatory impact on

the Group. The decentralised function comprises

compliance officers who are deployed into the various

business clusters. They are responsible for operation-

specific monitoring, training and advice.

The two key areas of responsibility are:

• identifying and advising the Group on existing and

new legislation applicable to its business;

• facilitating compliance with relevant legislation and

assigning responsibility for areas of compliance.

Once new legislation is identified, management appoints a

task team to conduct an impact assessment. After that

project plans and timelines covering implementation and

training are agreed and implemented.

Consumer Protection Act

This Act aims to promote a fair, accessible and

sustainable marketplace for consumer products and

services. The Act will entrench national norms and

standards on consumer protection and provide for

improved standards of consumer information. The Act

prohibits certain unfair marketing and business practices

and promotes responsible consumer behaviour.

External service providers were engaged to provide

training to the marketing, sales and manufacturing units in

the Group to familiarise them with the requirements of the

Consumer Protection Act. Warranty policies are in place

for DAWN’s branded products, which are owned by the

Group, and assurance is gained from external suppliers

where products are purchased in, where any returns

revert back to the external supplier. Should any ambiguity

exist, the terms of trading and the trading agreements are

reviewed and aligned with the requirements of the Act. As

far as imported products are concerned, the Group

ensures that controls around quality exist at the source.

New Companies ActThe Act aims to simplify the registration of companies,

encourage entrepreneurship and high standards of

corporate governance, balance the rights and obligations

of shareholders and directors, and promote the efficient

and responsible management of a Company. It also

provides for increased liabilities for directors for breaches

of fiduciary duty or for any direct or indirect loss, damage

or costs sustained by the Company as a result.

DAWN’s Memorandum of Incorporation, as well as its

specific reference to shareholders’ agreements, is currently

being reviewed to align it with the requirements of the

new Companies Act, 2008.

> CG19



Competition ActThe Act aims to provide all South Africans equal

opportunity to participate fairly in a national economy and

to achieve a more effective and efficient economy in

South Africa by providing for markets in which consumers

have access to, and can freely select, the quality and

variety of goods and services they desire. A greater

capability is created as well as an environment where

South Africans can compete effectively in international

markets whilst restraining particular trade practices which

undermine a competitive economy and regulating the

transfer of economic ownership in keeping with public

interest.

Awareness and training on the requirements of the

Competition Act as well as review of current case law and

findings of the Competition Commission are provided to

Group companies bi-annually at the DAWN review

meeting. Each Group company monitors its compliance

with the Act in its interactions with customers and

suppliers and performs a self-certification, the related

documentation of which is submitted to Head Office.

This is an ongoing process which is renewed every six

months. Should any contentious matters arise, legal

opinion is obtained and, where necessary, terms and

trading policies are changed.

Corporate leniency

DPI Plastics was granted conditional leniency from

prosecution under the Competition Act by the

Competition Commission in relation to its involvement in

the plastic pipes cartel. This was in exchange for DPI

Plastics’ complete and truthful disclosure of market-

sharing arrangements between DPI Plastics and its

competitors in the period up to December 2007. The

Tribunal’s formal hearing into the matter ended on 20 April

2011, with the Tribunal reserving its decision, and no

administrative penalty was sought by the Commission

against DPI. The Commission has indicated that it will

grant DPI final immunity once the Tribunal delivers its

decision.

Environmental legislation

Formal environmental impact studies and reports are

conducted and compiled on a regular basis, the findings

of which are submitted to Head Office. External

assurance underpins internal reporting and evaluation.

Management’s assurance is obtained on any gaps that

exist and risk levels are monitored and attended to on an

ongoing basis to ensure compliance at the manufacturing

entities in particular.

General

Relevant subordinate legislation as well as applicable

codes and best practices are assessed and requirements

implemented.

King III

During the year a gap analysis between the Group’s

current practices and those recommended by King III

confirmed that many King III practices and

recommendations are already in place. Those areas

requiring corporate governance changes have been

identified and most gaps have been closed. Please refer

to pages CG40 to CG53 of the Corporate Governance

section for the gap analysis.

Share trading

The Group has a formal policy, established by the Board

and implemented by the Company Secretary, prohibiting

dealing in securities by directors, officers and other

selected employees from the end of the respective

reporting period to the date of the announcement of the

financial results or in any other period considered price

sensitive.

Key regulators

DAWN is regulated by several stakeholders including the

JSE Limited, Department of Trade and Industry,

Department of Water and Environmental Affairs and South

African Revenue Services. The Group seeks to maintain

relationships of trust and transparency with all regulators.

The compliance function guides business units before and

during submissions to and meetings with regulators. In

2012 will be maintained a log of all interactions with

regulators and this will be reported to the Risk Committee

on the outcomes of these interactions.

CG20 <



Governing stakeholder relationships

It is the policy of the Group to pursue dialogue with

stakeholders based on constructive engagement and the

mutual understanding of objectives taking due regard of

statutory, regulatory and other directives regulating the

dissemination of information by companies and their

directors.

The Board acknowledges that stakeholders’ perceptions

affect the Company’s reputation.

The Board accepts its duty to present a balanced and

understandable assessment of the Group’s position in

reporting to stakeholders, taking into account the

circumstances of the communities in which it operates

and the greater demands for transparency and

accountability regarding non-financial matters. Reporting

addresses material matters of significant interest and

concern to all stakeholders and presents a

comprehensive and objective assessment of the Group

so that all shareowners and relevant stakeholders with a

legitimate interest in the Group’s affairs can obtain a full,

fair and honest account of its performance.

DAWN is currently developing a stakeholder engagement

policy, which will align the Group’s engagement with its

stakeholders with the King III principles of:

• the Board:

– acknowledging that stakeholders’

perceptions affect the Company’s reputation;

– delegating to management to proactively

deal with stakeholder relationships;

– striving to achieve the appropriate balance

between its various stakeholder groupings,

in the best interests of the Company; and

– ensuring that disputes are resolved as

effectively, efficiently and expeditiously as

possible;

• the Company ensuring the equitable treatment of

shareholders; and

• transparent and effective communication with

stakeholders being essential for building and

maintaining stakeholders’ trust and confidence.

Stakeholders identified by the Board and the Group’s

engagement with them are disclosed in the Integrated

Report.

Deloitte & Touche Sponsor Services Proprietary Limited

acts as DAWN’s sponsor in compliance with the JSE

Limited Listings Requirements.

Annual general meetingThe agenda for the annual general meeting is set by the

Company Secretary and communicated to all

shareholders in the notice of the annual general meeting,

which accompanies the annual report. Consequently, the

notice of the annual general meeting is distributed well in

advance of the meeting and affords all shareholders

sufficient time to acquaint themselves with the effects of

any proposed resolutions. Adequate time is also provided

by the Chairman in the annual general meeting for the

discussion of any proposed resolutions. The conduct of a

poll to decide on any proposed resolutions is controlled

by the Chairman at the meeting and takes account of the

votes of all shareholders, whether present in person or by

proxy. A proxy form is included in the annual report for

this purpose.

The Group recognises the importance of its shareholders’

attendance at its annual general meeting. Explanatory

notes setting out the effect of all proposed resolutions

accompany the notice of the meeting.

The designated auditor and the Chairman of the Audit

Committee attend the annual general meeting to respond

to any questions relevant to the audit of the annual

financial statements.

In terms of section 63(1) of the Companies Act no 71 of

2008, as amended, any person attending or participating

in the annual general meeting of shareholders must

present reasonably satisfactory identification to the

Chairman presiding at the annual general meeting.

Integrated reporting and disclosure

The Board acknowledges its responsibility to ensure the

integrity of the Integrated Report and its responsibility

statement authorising the release of the Integrated Report

appears on page IR1 of the Integrated Report.

> CG21

The Audit Committee was established with terms of reference from the Board. The Audit Committee terms of reference areavailable for inspection at the Company’s registered office.

PurposeThe Audit Committee meets three times during the financial year to discuss issues of accounting, auditing, internal controlsand financial reporting.

The Audit Committee has written terms of reference that deal adequately with its membership, authority and duties.

The Committee is responsible for reviewing the functioning of the internal control system, the reliability and accuracy of thefinancial information provided by management as well as that provided for dissemination to other users of financial information, whether the Group should continue to use the services of the current external auditors, any accounting orauditing concerns identified as a result of the external audit, and the Group’s compliance with legal and regulatory provisions, its Memorandum of Incorporation, code of conduct, by-laws and the rules established by the Board. In F2012the Committee will recommend to the Board to engage external assurance providers on material sustainability issues.

The Committee has an independent role with accountability to both the Board and shareholders. The Committee does notassume the functions of management, which remain the responsibility of the executive directors, officers and other members of senior management.

The duties of the Audit Committee include reviewing the scope and results of the external audit and its cost effectiveness,as well as the independence and objectivity of the external auditors. Where the auditors supply non-audit services to theGroup, the Audit Committee reviews the nature and extent of such services, seeking to balance the maintenance of objectivity and value for money.

The Committee considers whether or not the interim report should be subject to an independent review by the auditors. Italso reviews the annual financial statements and the appropriateness of the accounting policies adopted by the Group.

The Committee fulfils an oversight role of the risk management process and specifically oversees:

• financial reporting risks;

• internal financial controls;

• fraud risks as it relates to financial reporting; and

• IT risks as it relates to financial reporting.

Further information on risk policies, strategies, management and indicators appear in the Corporate Governance Report onpages CG17 and CG18 as well as in the Integrated Report and in the Sustainability Report.

Year under reviewThe Audit Committee has carried out and has met periodically to consider and to act upon its statutory duties and functions and the Board confirms that the Committee has during the review year performed the duties mandated to it bythe Board.

The Committee oversaw the integrated reporting process and, in particular, the Committee:

• regarded all factors and risks that may impact on the integrity of the Integrated Report, including factors that may predispose management to present a misleading picture, significant judgements and reporting decisions made, aswell as any evidence that brings into question previously published information and forward-looking statements or information;

• reviewed the annual financial statements and summarised integrated information;


CG22 <

Audit Committeereport

Audit Committee reportcontinued

• commented in the annual financial statements on

the financial statements, the accounting practices

and the effectiveness of the internal financial

controls with regard to:

– accounting policies adopted and any

changes in accounting policies and

practices;

– significant financial estimates based on

judgement which are included in the annual

financial statements;

– the appropriateness of major adjustments

processed at the interim and at year-end;

– the going concern assumption;

– compliance with both local and international

accounting standards;

– whether the annual financial statements

present a balanced and understandable

assessment of the Company’s position,

performance and prospects;

– the directors’ statement included in the

annual financial statements, including the

statement on effectiveness of the systems of

internal control;

• reviewed the disclosure of sustainability issues in

the Sustainability Report and in the Integrated

Report to ensure that it is reliable and does not

conflict with the financial information;

• recommended the Integrated Report for approval

by the Board;

• reviewed the content of the summarised financial

information for whether it provides a balanced view;

and

• engaged the external auditors to provide assurance

on the summarised financial information.

The duties performed and responsibilities discharged

during the year under review also included:

• the annual review of the terms of reference;

• reviewing the expertise, resources and experience

of the Company’s finance function, the results of

which are disclosed on page CG25;

• considering the performance of the Group Financial

Director;

• evaluating the independence of the Company’s

external auditors;

• reviewing significant cases of employee conflicts of

interest, misconduct or fraud;

• considering other topics defined by the Board; and

• reviewing compliance with legal, statutory and

regulatory matters, particularly the Companies Act

no 71 of 2008, as amended, and King III.

The Board has assigned oversight of the Company’s risk

management function to the Risk Committee. The

Chairman of the Audit Committee is also the Chairman of

the Risk Committee and ensures that information relevant

to these committees is transferred regularly. The Audit

Committee fulfils an oversight role regarding financial

reporting risks, internal financial controls, fraud risk as it

relates to financial reporting and information technology

risks as it relates to financial reporting.

The Audit Committee terms of reference has been

reviewed and the scope thereof has been broadened to

be fully compliant with the requirements of King III and the

Companies Act no 71 of 2008, as amended.

Whistle-blowing

The Code of Ethical Conduct and whistle-blowing policy

are intended to assist individuals who believe they have

discovered serious malpractice or impropriety to take the

appropriate action. The Committee is assured that these

arrangements provide for proportionate and independent

investigation of matters reported and for suitable

follow-up action. The Committee is satisfied that

instances of whistle-blowing were appropriately dealt with

during the year under review. A copy of the Code of

Ethical Conduct and whistle-blowing policy are available

on the Company’s website www.dawnltd.co.za.


> CG23



MembershipDuring 2010 the Audit Committee was reconstituted and shareholder approval was obtained at the annual general meetingheld on 14 January 2011. The reconstituted Audit Committee comprises Messrs OS Arbee (Chairman – non-executive director), LM Alberts (independent non-executive director) and RL Hiemstra (non-executive director). The new BoardChairman, Mr Tak Hiemstra, is not independent due to him being a director on the board of Ukhamba Holdings ProprietaryLimited and is a member of the Audit Committee as the Board believes that the benefits of his extensive financial skills andknowledge outweigh any other consideration. The Chairman of the Audit Committee, Mr Osman Arbee, is not independent, but has significant financial acumen and offers an invaluable contribution to this critical function. The Boardhas therefore decided that, even though he is not independent, he will remain as Chairman of the Audit Committee. Thesedirectors’ biographical details can be found on pages CG04 and CG05 of the Corporate Governance Report.

The Board is satisfied that the directors’ integrity, impartiality and objectivity are not in any way compromised and as such satisfies the requirements of section 94(4) of the Companies Act, 2008.

Attendance at meetings held during the period 1 July 2010 to 2 September 2011 was as follows:

23 Aug 1 Mar 14 Jun 2 Sept2010 2011 2011 2011

OS Arbee √ √ √ √LM Alberts √ √ √ xRL Hiemstra √ √ √ √

The external auditors and appropriate members of executive management attend the meetings by invitation.

Internal audit attends Audit Committee meetings and provides reports to the Committee.

External auditIn terms of the Companies Act, the Committee had nominated PricewaterhouseCoopers Inc as the independent auditorand I Buys as the designated partner, for appointment for the 2011 audit. This appointment was approved by shareholdersat the annual general meeting on 14 January 2011. The Committee has satisfied itself through enquiry that the auditor ofDAWN is independent as defined by the Companies Act 2008, as amended, and as per the standards stipulated by theauditing profession.

Requisite assurance was sought and provided by the auditor that internal governance processes within the audit firm support and demonstrate the claim to independence.

The Committee, in consultation with executive management, agreed to the engagement letter, terms, nature and scope ofthe audit function and audit plan for the 2011 financial year. The budgeted fee is considered appropriate for the work thatcould reasonably have been foreseen at that time. The final adjusted fee will be agreed on completion of the audit. Auditfees are disclosed in note 4 on page FS36 of the 2011 annual financial statements.

There is a formal procedure that governs the process whereby the auditor is considered for non-audit services and eachengagement letter for such work is reviewed and approved by the Committee. Meetings are held with the auditor where management is not present and no matters of concern were raised. The external auditors have unrestricted access to theChairman of the Audit Committee.

The Committee has again nominated, for approval at the annual general meeting, PricewaterhouseCoopers Inc as theexternal auditor and I Buys as the designated auditor for the 2012 financial year. The Committee confirms that the auditorand designated auditor are accredited by the JSE Limited.

Internal auditThe Group internal audit function operates within defined terms of reference in accordance with the Internal Audit Charterand the Chief Audit Executive, who was appointed in October 2010, reports to the Director: Risk and Internal Audit onday-to-day activities and functionally to the Chairman of the Audit Committee. The internal audit function is regarded as

CG24 <



being sufficiently independent of activities audited. The internal audit plan is reviewed and adjusted on a continuous basisto ensure effectiveness and is based on the relevant degree of inherent risk. The internal audit plan for the 2012 financialyear was reviewed and approved by the Audit Committee.

In compliance with King III, the Board, through its Audit Committee, will in future ensure that the internal audit function is subject to independent quality review at periods of at least once every three years, with the first review scheduled for2013.

Internal controlThe Group maintains systems of internal control, which include financial, operational and compliance controls.

The Board of directors is accountable for establishing appropriate risk and control policies and executive management isresponsible for monitoring, reviewing and communicating these controls and policies through the organisation. Correctiveactions are taken to address control deficiencies and other opportunities for improving the systems, as they are identified.The Board, operating through its Audit Committee, provides oversight of the financial reporting process.

All processes have been in place for the year under review and up to the date of the approval of the annual financial statements and the directors are not aware of and there are no known material breakdown in the functioning of the internalfinancial controls that has occurred during the year under review to render the control environment ineffective.

Annual financial statements and accounting practicesThe Audit Committee has reviewed the accounting policies and the financial statements of the Company and is satisfiedthat they are appropriate and comply with International Financial Reporting Standards.

The Audit Committee fulfilled its mandate and recommended the annual financial statements for the year ended 30 June2011 for approval to the Board. The Board approved the annual financial statements on pages FS01 to FS94 on 13 September 2011 and the financial statements will be open for discussion at the annual general meeting.

Evaluation of the Group Financial Director and the finance functionThe Audit Committee confirms that it has satisfied itself of the appropriateness of the expertise and experience of theFinancial Director of the Group, Mr JAI Ferreira.

The Audit Committee has considered, and has satisfied itself of, the appropriateness of the expertise and adequacy ofresources of the finance function and experience of the senior members of management responsible for the finance function.

AssuranceThe Audit Committee is satisfied that the Company has optimised the assurance coverage obtained from managementand internal and external assurance providers in accordance with an appropriate combined assurance model.

ApprovalThe Report of the Audit Committee has been approved by the Board of Directors of DAWN.

Signed for and on behalf of the Audit Committee

OS ArbeeChairman of the Audit Committee

> CG25

Introduction

The Remuneration Report is intended to provide an overview and understanding of the Group’s remuneration philosophy

and practices with specific emphasis on executive and non-executive remuneration.

The Remuneration Committee

The Remuneration Committee assists the Board in ensuring that the Company remunerates directors and executives fairly

and responsibly and that the disclosure of director and executive remuneration is accurate, complete and transparent.

Terms of reference

The Remuneration Committee performs all the functions necessary to fulfil its role, including:

• overseeing the setting and administering of remuneration at all levels in the Company;

• overseeing the establishment of the remuneration policy which will promote the achievement of strategic objectives

and encourage individual performance;

• ensuring that the remuneration policy is put to a non-binding advisory vote at the annual general meeting of

shareholders once every year;

• reviewing the outcomes of the implementation of the remuneration policy for whether the set objectives are being

achieved;

• ensuring that the mix of fixed and variable pay, in cash, shares and other elements, meets the Company’s needs

and strategic objectives;

• satisfying itself as to the accuracy of recorded performance measures that govern the vesting of incentives;

• ensuring that all benefits, including retirement benefits and other financial arrangements, are justified and correctly

valued;

• considering the results of the evaluation of the performance of the Chief Executive Officer and other executive

directors, both as directors and as executives, in determining remuneration;

• selecting an appropriate comparative group when comparing remuneration levels;

• regularly reviewing incentive schemes to ensure continued contribution to shareholder value and that these are

administered in terms of the rules of the schemes;

• considering the appropriateness of early vesting of share-based schemes at the end of employment;


CG26 <

Remuneration report

Remuneration reportcontinued

• advising on the remuneration of non-executive

directors; and

• overseeing the preparation of the Remuneration

Report, to be included in the Integrated Report,

and recommending to the Board whether it is

accurate, complete and transparent, providing a

clear explanation of how the remuneration policy

has been implemented and providing sufficient

forward-looking information for the shareholders to

pass a special resolution in terms of section 66(9)

of the Companies Act, 2008, as amended.

The Committee has reviewed Group remuneration policies

to ensure that these are aligned with the Company’s

strategy and linked to individual performance.

MembershipThe Remuneration Committee comprised LM Alberts

(Chairman of the Remuneration Committee), DA Tod

(Chief Executive Officer) and OS Arbee (non-executive

director) during the 2011 financial year.

The Remuneration Committee meets at least annually and

the attendance at meetings held was as follows:

24 May 19 Oct 6 July

2010 2010 2011

LM Alberts √ √ √DA Tod √ √ √OS Arbee √ √ √

On 22 June 2011, in compliance with King III with specific

reference to the CEO not being a member of Board

sub-committees, the Committee was reconstituted to

comprise LM Alberts (Chairman), OS Arbee and

RL Hiemstra.

The CEO attends meetings by invitation.

Directors that are members of the Remuneration

Committee are excluded from the review of their own

remuneration.

Shareholders will be requested to approve the Company’s

remuneration policy, summarised below, through a

non-binding advisory vote at the annual general meeting.

Remuneration policy

The general objective of the Group’s remuneration policy

is to ensure that DAWN can attract, motivate and retain

appropriately skilled, qualified and experienced

employees. Remuneration is aimed at matching individual

contribution to Group performance, within the framework

of market forces, while protecting shareholders’ interests

and the Group’s financial health.

Principles of executive remunerationThe Group’s remuneration policy provides a flexible and

competitive remuneration structure, which is referenced to

appropriate benchmarks, reflects market practice and is

tailored to the specific circumstances of the Company.

The policy aims to attract and retain high-calibre

executives and to motivate them to develop and

implement the Group’s business strategy in order to

optimise long-term shareholder value creation.

Non-executive remuneration

Terms of serviceWhile shareholders appoint non-executive directors at

annual general meetings, interim Board appointments

may be made between annual general meetings in terms

of Group policy. Such interim appointees may not serve

beyond the following annual general meeting, though they

may make themselves available for re-election by

shareholders. Non-executive directors serve until such


> CG27



time as, in accordance with the Company’s Memorandum

of Incorporation, they are required to retire by rotation, at

which point they may seek re-election.

FeesNon-executive directors receive a fixed fee per year basedon attendance of Board and sub-committee meetings.Ordinary Board members receive a fixed amount (basefee) while the Chairmanship receives a multiplier thereof.Service on sub-committees of the Board may entitle members to additional payment, subject to work load andat the discretion of the Board.

Individual Board members may take on specific ad hoc

tasks outside the normal duties assigned by the Board. In

such cases the Board determines a fixed fee for the work.

Non-executive directors may from time to time be

members of DAWN’s Advisory Committee, for which a

fixed fee will apply.

Expenses such as travel and accommodation in relation

to Board approved activities, as well as relevant training,

are reimbursed.

Non-executive directors’ fees are reviewed annually and

are determined by the Board (following consultation with

the Remuneration Committee) having regard to fees paid

to non-executive directors of comparable companies, and

where considered necessary the Board may seek external

advice on this subject.

Executive directors’ and prescribed officers’remunerationRemuneration to the executives consists of a fixed andvariable salary, as well as the possibility of participation ina long-term incentive programme. These componentscreate a well balanced remuneration reflecting individualperformance and responsibility, both short-term and long-term, as well as the overall performance of the Group andindividual subsidiaries.

The objectives of the remuneration policy, in respect of

executive remuneration, are to:

• apply demanding key short-term and long-term

performance indicators including financial and non-

financial measures of performance;

• demonstrate a clear relationship between individual

performance and remuneration;

• apply an appropriate balance between fixed and

variable remuneration, reflecting the short- and

long-term performance objectives appropriate to

the DAWN Group’s circumstances and goals;

• link rewards to the creation of value to

shareholders; and

• ensure their total remuneration is competitive by

market standards.

The Company aims to reward the Group CEO and senior

executives with a level and mix of remuneration

commensurate with their position and accountability. The

mix of remuneration will include a fixed salary together

with both short- and long-term variable components.

Fixed salaryThe executives’ fixed salary shall be competitive and

based on the individual executive’s responsibilities and

performance.

The fixed salary is structured so that the senior executiveshave the option to receive their fixed annual remunerationin cash and a limited range of prescribed and electivefringe benefits such as travel allowance, medical aid andretirement benefits.

Variable salary

Short-termThe short-term incentive programme consists of a cash

bonus that is linked to the achievement of predefined

operational targets for each executive.

The operational targets consist of a number of KeyPerformance Indicators (KPIs) covering both financial andnon-financial measures of performance.

Typically KPIs and assessment criteria include:

• meeting of pre-determined growth in revenues andother financial performance indicators;

• meeting strategic and operational objectives; and

• assessed personal effort and contribution.

The rationale for non-financial performance bonuses is to

reward executives for strategic and sustainability

orientated achievements. However, poor performance in

the non-financial variables could override the good

performance in terms of financial criteria, ie unethical or

non-compliant behaviour cannot be compensated for by

good financial performance.

The short-term incentive programme may result in a

payout per year equal to a specified maximum amount or

may be uncapped, depending on the requirements of the

business as determined and recommended by the DAWN

Executive Committee and approved by the DAWN Board

of Directors and the Remuneration Committee.

CG28 <



Long-termThe Company’s long-term incentive plan is designed to

link senior executives’ reward with key performance

indicators that drive sustainable growth in shareholder

value over the long-term.

The DAWN Group’s long-term incentive plan takes theform of a share incentive scheme in terms of which seniorexecutives may, at the Board’s discretion and in accordance with the scheme rules, be granted performance rights which will only vest on the achievement of certain performance hurdles and serviceconditions.

Terms of serviceThe Company complies with relevant legislation in

determining minimum terms and conditions for

appointment of executive directors. Unless stated

otherwise in the contract of employment, a notice period

of one month applies.

External appointmentsExecutive directors are not permitted to hold external

directorships or offices without the approval of the Board.

If such approval is granted, directors may retain the fees

payable from such appointments.

Policy on employment contracts In relation to contracts with executive directors, the

Committee, subject to circumstances, will maintain the

following policy:

• Fixed term contracts should not exceed three yearsbut may provide for extension;

• All agreements should contain a restraint of trade

clause with a term of not less than a year, clearly

defining the Company’s protectable interest;

• Contracts should not commit the Company to pay

on termination arising from the director’s failure;

• Balloon payments on termination are not seen as

fair remuneration policy;

• If a director is dismissed because of a disciplinary

procedure, a shorter notice period should apply

without entitlement for compensation for the

shorter notice period. If a dismissal takes place as

a result of a gross misconduct, no notice period

should apply; and

• Contracts should not compensate directors for

severance because of change of control, unless

they are retrenched as a result.

Non-executive employeesRemuneration of non-executive employees may be

subject to regulatory requirements, such as bargaining

council agreements and collective agreements with trade

unions. In the absence thereof, remuneration is based on

individual and Company performance as well as market

trends. Remuneration may typically comprise elements of

fixed remuneration and performance-based (at-risk)

remuneration. Certain non-executive employees have an

element of their remuneration at-risk. The proportion of an

employee’s total remuneration that is at-risk increases

with seniority and with the individual’s ability to impact the

performance of the Company. An annual performance

review process assesses the degree to which each

qualifying employee is satisfying the requirements of

his/her role and the degree to which established

performance objectives have been achieved.

Setting remuneration and review procedures• DAWN and its subsidiaries review remuneration

packages once per annum at the start of the

financial year.

• The Board is responsible for making decisions in

respect to the remuneration of directors and, in

particular, the Group Chief Executive Officer. It does

so with the assistance and advice of the

Remuneration Committee. In determining the level

and make-up of the Group Chief Executive Officer’s

and senior executives’ remuneration, the

Remuneration Committee may obtain independent

advice on the appropriateness of remuneration

packages, given remuneration trends of other

companies, from which the recommendations are

made to the Board.

• Each year the Remuneration Committee will review

the remuneration of senior executives and make

recommendations to the Board for any changes to

those remuneration packages; recommend

proposed short-term incentive and/or long-term

incentive performance awards after performance

evaluation procedures and on the recommendation

of the Group Chief Executive Officer.

• The Group Chief Executive Officer is ultimately

responsible for recommendations to the Board

relating to the remuneration of executive directors

of all Group entities.

> CG29



Disclosure of remunerationWhere remuneration has to be disclosed in terms of regulatory requirements, total remuneration reported will include

appropriate values for all elements of remuneration, incorporating fixed remuneration, performance-based remuneration

comprising payments made or value provided for at risk components.

Re-election of directorsBoth executive and non-executive directors are subject to election by shareholders at the first annual general meeting

following their appointment and are then required to retire in accordance with the Board retirement plan.

The appointment of a non-executive director may be terminated without compensation if that director is not re-elected by

shareholders or otherwise in accordance with the Company’s Memorandum of Incorporation.

Directors’ remuneration and interest

Directors’ and senior managers’ emoluments paid by the subsidiaries for the year ended 30 June 2011 are outlined as

follows:

Non-executive directors’ remuneration

Committees

Remune- Ethics Board Audit ration and and

member and Nomi- Transfor-fees Advisory Risk nation mation Total

R’000 R’000 R’000 R’000 R’000 R’000

2011

OS Arbee 23 – 42 # 36 – 101 LM Alberts 182 # 85 61 61 # – 389 RL Hiemstra 91 – – – – 91VJ Mokoena *3 *5 70 – – – 24 # 94SD Mthembi-Mahanyele 90 – – – – 90

June 2011 456 85 103 97 24 765

2010

OS Arbee 83 – 39 33 – 155LM Alberts 165 # 77 55 55 # – 352AS Boynton-Lee *1 42 – – – – 42RL Hiemstra 83 – – – – 83AN Kendal *2 42 – – – – 42VJ Mokoena 83 – – – 30 113

June 2010 498 77 94 88 30 787

# Chairman.

*1 Resigned 15 December 2009.


*3 Resigned 14 January 2011.

*4 Appointed 1 May 2010.



CG30<



There are no short- or long-term incentive schemes for non-executive directors. Exceptions apply only where non-

executive directors previously held executive office and qualify for unvested benefits resulting from their period of

employment with the Company.

There are no pension benefits for non-executive directors.

Shareholders will be requested to approve the non-executive directors’ remuneration for the 2012 financial year at the

annual general meeting to be held on 15 December 2011. The remuneration proposed for non-executive directors for the

2012 financial year is:

R’000

Chairman 200

Non-executive directors 100

Chairman of Audit Committee and Chairman of Risk Committee 100

Chairman of Remuneration Committee and Chairman of Nomination Committee 65

Chairman of Ethics and Transformation Committee 40

Committee members – Audit; Risk 60

– Remuneration; Nomination 40

Executive remuneration

Retire-

ment and

medical Direc-

contri- tors’

Salary Bonus bution fees Total

R’000 R’000 R’000 R’000 R’000

Executive directors

2011

JA Beukes 1 806 150 340 – 2 2986

JAI Ferreira 1 241 360 176 – 1 777

RD Roos 1 130 82 171 – 1 383

DA Tod 3 090 1 122 577 – 4 789

June 2011 7 267 1 714 1 266 – 10 247

2010

JA Beukes 1 796 – 336 – 2 132

JAI Ferreira 1 075 – 159 – 1 234

GL Geldenhuis 420 – 79 – 499

RD Roos 890 – 139 – 1 029

DA Tod 2 798 – 526 – 3 324

June 2010 6 979 – 1 239 – 8 218

1 Share Appreciation Rights.2 Long-Term Incentive Plans.3 Deferred Bonus Plans.

> CG31



Executive remuneration continued

Retire-ment and

medical Direc-contri- tors’

Salary Bonus bution fees TotalR’000 R’000 R’000 R’000 R’000

Prescribed officers

2011CJ Bishop 1 795 – 218 – 2 013 GD Kotzee 1 636 136 297 – 2 069 R Straussner 1 582 800 135 – 2 517PJ van Niekerk 1 267 420 181 – 1 868R Haynes 765 – 155 – 920M Coetzee 1 354 – 200 – 1 554

June 2011 8 399 1 356 1 186 – 10 941

2010CJ Bishop # 594 – 73 – 667GD Kotzee 1 459 – 288 – 1 747RP Straussner 1 428 – 122 – 1 550PJ van Niekerk 1 149 – 172 – 1 321RP Haynes – – – – –M Coetzee 1 260 200 191 – 1 651

June 2010 5 890 200 846 – 6 936

* Appointed on 1 March 2010.

Executive directors’ and prescribed officers’ participation in incentive shares and share options

Unre-stricted

sharescheme

SAR 1 LTIP 2 DBP 3 funding’000 ’000 ’000 R’000

Executive directors

2011JA Beukes 160 286 18 –JAI Ferreira 160 1 074 22 1 793 RD Roos 160 959 3 1 126DA Tod 294 2 044 178 –

June 2011 774 4 363 221 2 919

2010JA Beukes 238 177 18 –JAI Ferreira 238 164 22 1 678RD Roos 238 139 3 1 046DA Tod 376 300 178 –

June 2010 1 090 780 221 2 724

1 Share Appreciation Rights2 Long-Term Incentive Plans3 Deferred Bonus Plans

CG32 <

Share options



Executive directors’ and prescribed officers’ participation in incentive shares and share options continued

Unre-stricted

sharescheme

SAR 1 LTIP 2 DBP 3 funding’000 ’000 ’000 R’000

Prescribed officers

2011CJ Bishop 160 1 360 – –GD Kotzee 188 632 – –R Straussner 113 128 – –PJ van Niekerk 89 470 – –RP Haynes 22 – – –M Coetzee 71 50 – –

June 2011 643 2 640 – –

2010CJ Bishop # – – – –GD Kotzee 238 102 – –R Straussner 119 52 – –PJ van Niekerk 47 38 – –M Coetzee – 25 – –

June 2010 404 216 – –

1 Share Appreciation Rights.2 Long-Term Incentive Plans.3 Deferred Bonus Plans.

All executive directors and senior management are eligible for an annual performance-related bonus linked to Group and

business sector targets. The structure of the individual annual bonus plans and awards are decided by the Group

Remuneration Committee.

The directors and senior management were issued shares under a deferred delivery scheme, for future delivery and

payment, in prior years. Formal contracts have been concluded with the participants in terms of the rules of the DAWN

Share Trust.

> CG33

Share options



Directors’ and prescribed officers’ interest in the share capital of the Company

2011 2010

Number of Number of

ordinary shares ordinary shares

Beneficial Beneficial

Direct Indirect Direct Indirect

Executive directorsJA Beukes 3 311 011 – 3 311 011 –JAI Ferreira 283 537 – 283 537 –RD Roos 280 143 – 280 143 –DA Tod 5 111 827 4 659 829 9 621 716 –

Non-executive directorsM Akoojee – – – –LM Alberts 1 766 285 – 1 715 800 –RL Hiemstra 1 197 998 – 1 197 998 –VJ Mokoena 3 590 – 3 590 –SD Mthembi-Mahanyele – – – –

Prescribed officersCJ Bishop – 30 246 – 30 246M Coetzee – – – –RP Haynes – – – –GD Kotzee 5 000 – 5 000 –R Straussner 3 500 – – –PJ van Niekerk – – – –

At 30 June 11 962 891 4 690 075 11 908 906 4 540 135

Interest of directors in contracts The directors have certified that they had no material interest in any transaction of any significance with the Company orany of its subsidiaries.

Share incentive schemesShares and options may not be encumbered, transferred or sold in any way before they have been released.

The Board, in terms of the DAWN Share Trust approved by the shareholders, makes recommendations for the award ofshare rights to directors and selected employees to increase proprietary interest of employees in the success of the Group,to encourage employees to promote the interest and the continued growth of the Group and to encourage employees tocontinue to render their best service to the Group.

The shareholders, in a general meeting on 6 December 2006, approved the proposed amendment to the DAWN ShareTrust’s deed allowing for the purchase of unrestricted shares in the equity of DAWN with funding provided by the DAWNShare Trust. In terms of this amendment the funding so provided must be repaid on the earlier of termination of employment or seven years from the date of the advance of the funding. The directors are entitled to require the relevantemployee to provide security for any funding provided, provided that the unrestricted shares may not be encumbered toprovide security for the funding.

Three share schemes, based on equity-settled share appreciation rights, conditional awards and a deferred bonus plan,were approved by shareholders in a general meeting on 6 December 2006.

CG34 <

DAWN annual report 2011DAWN annual report 2011


Participants are identified in terms of the rules of the three schemes and are invited to participate on the following bases:

Share Appreciation Rights (SARs)

Eligible employees receive annual grants of SARs, which are conditional rights to receive DAWN shares equal to the value

of the difference between the exercise price and the grant price. SARs vesting are conditional on the achievement of

market-related set performance requirements. SARs carry a vesting period of three years after which vested SARs become

exercisable. Unexercised SARs lapse four years after vesting.

Long-Term Incentive Plan (LTIP)

Eligible employees receive annual grants of conditional awards. Conditional awards vest after a three-year performance

period if, and to the extent that, set market-related performance conditions have been satisfied. If, and to the extent that

performance conditions have been satisfied at the vesting date, the relevant company in the DAWN Group procure the

delivery of DAWN shares to settle the value of the vested portion of the conditional awards.

Deferred Bonus Plan (DBP)

Eligible employees are permitted to use a portion of the after-tax component of their annual bonus to acquire DAWN

shares. A matching award is made to the participant after a three-year period on the condition that the participant retains

the DAWN shares for the full three-year period.

Approval

The Report of the Remuneration Committee has been approved by the Board of Directors of DAWN.

Signed for and on behalf of the Remuneration Committee

LM Alberts Chairman of the Remuneration Committee

> CG35

DAWN’s Ethics and Transformation Committee is chaired by Mr VJ Mokoena, Independent Non-Executive Director, with its

other members being RD Roos (Executive Director) and JA Beukes (Executive Director). The Group Ethics Officer, on

appointment, will have a standing invitation to Committee meetings, together with executive management members

L van de Venter, A Grobbelaar and D Madisa. The primary role of the Ethics and Transformation Committee is to assist the

Board in ensuring that it discharges its fiduciary duties and obligations in respect of the Group’s businesses’ transformation

in accordance with the Committee’s Terms of Reference as well as in compliance with BBBEE and employment equity

legislation.

The development and empowerment of previously disadvantaged South Africans is essential to the economic and social

sustainability of the country. DAWN acknowledges its role in the corporate environment and has taken progressive steps

towards ensuring compliance with the BBBEE Act, the BBBEE Codes and the Employment Equity Act.

The Committee’s terms of reference, which were updated during the year, govern the Committee’s responsibilities and

objectives.

The Committee’s transformation responsibilities include:

• making recommendations to the Board on the overall target empowerment rating and strategies in the Group;

• approving in advance the verification agency to be appointed to validate DAWN’s and its subsidiary companies’

empowerment ratings;

• monitoring the implementation of the transformation policy and objectives in the Group;

• monitoring DAWN’s adherence to and performance under the BBBEE Codes; and

• monitoring compliance with the requirements of the Department of Labour in respect of employment equity.

In November 2010, DAWN was recognised as a Level 6 contributor in accordance with the BBBEE Codes following an

independent verification by Empowerdex. The Group scored 48,96% (2010: 46,5%) equating to a BB rating with a

procurement recognition of 60%.


CG36 <

Ethics and Transformationreport

Ethics and Transformation reportcontinued

An overview of the Group’s rating is outlined below:

Verified Verified

scorecard scorecard

rating rating

DTI code 2011 2010

Ownership 18,26 18,26

Management control 2,50 2,50

Employment equity – –

Skills development 0,65 –

Preferential procurement 10,07 10,23

Enterprise development 12,48 10,50

Socio-economic development 5,00 5,00

Overall score (points) 48,96 46,49

Level 6 Level 6

Broad-based Black Economic Empowerment

OwnershipUkhamba Holdings Proprietary Limited has an effective interest of 33,5% in DAWN (including 2 million deferred ordinary

shares) through its wholly-owned subsidiaries, Dream World Investments 239 Proprietary Limited and Monyetla Marketing

Proprietary Limited. Ukhamba is a broad-based black-owned investment holding company whose beneficiaries include

some 15 000 historically disadvantaged individuals and a community trust.

Board representationDAWN’s current Board includes four black directors translating into 40% black representation.

OS ArbeeOsman is the representative director of the Group’s BBBEE partner, Ukhamba Holdings, on the DAWN Board and

contributes to the Board through his financial acumen, (gained amongst others as senior partner at Deloitte & Touche), and

business expertise, where he is currently the Chief Executive Officer of three of Imperial Holdings Limited’s divisions.

Osman chairs the DAWN Audit Committee and the DAWN Risk Committee.

M AkoojeeMohammed was recently appointed to the DAWN Board and the Group anticipates a valuable contribution on investor

relations matters as well as on strategic initiatives in DAWN, as these areas form part of Mohammed’s portfolio at Imperial

Holdings Limited, where he is a member of the Executive Committee. Mohammed is also the Ukhamba appointed

representative on the DAWN Board.


> CG37



VJ MokoenaVeli participates actively in DAWN’s ethics and transformation initiatives and also chairs the Ethics and Transformation

Committee.

SD Mthembi-MahanyeleSankie’s accolades are extensive and her contribution, in particular, to the housing industry has been widely acknowledged

with the pinnacle in this area being her holding the office of Minister of Housing between 1994 and 2002 and being

awarded the Scroll of Honour for high achievement in addressing homelessness and receiving an Honorary Doctorate from

the Central University of Technology in the Free State for the same. With DAWN’s participation in the residential market,

Sankie’s contributions are valued.

Employment equityDAWN prioritises the advancement of historically disadvantaged groups and promotes the achievement of employment

equity objectives in its recruitment and employee development policies. The status of employment equity targets are

reported to the Department of labour on an annual basis. Career advancement and skills development programmes are

aligned with each business’ employment equity targets.

As verified by Empowerdex, black employees constitute 76,42% of DAWN’s total employee base with black female

representation constituting 11,68%.

Functional employment equity committees represent operational and support staff at business cluster. Meetings take place

regularly and a standard agenda is used to steer discussions in accordance with the recommended criteria per the

BBBEE Codes for employment equity.

The Department of Labour concluded an audit of employment equity practices applied in the Group during March 2011.

DAWN’s compliance in this regard was considered to be satisfactory. Corrective action is being taken in response to

recommendations arising from the audit.

Skills developmentRefer to the skills development section in the Sustainability Report on pages SR23 and SR25.

Preferential procurementDAWN’s commitment to increasing procurement of goods and services from black-owned and/or black

female-owned businesses was reaffirmed during the year and concerted endeavours to grow the supplier base will

continue, despite the obstacles which prevent foreseeable achievement of the Department of Trade and Industry’s

target.

Approved suppliers are categorised in accordance with the BBBEE Codes and their status is monitored on a continuous

basis.

The Group continues to conduct supplier awareness sessions in an attempt to encourage its suppliers to seek

accreditation and further their BBBEE compliance levels.

CG38 <



The status of preferential procurement objectives for the year is set out below:

Enterprise developmentEnterprise development seeks to promote the development of black-owned and small, medium and micro businesses in

DAWN in support of expanding the pool of entrepreneurial skills in the country and increase the base of qualified suppliers

in South Africa. The Ethics and Transformation Committee pledged its commitment towards such initiatives and active

plans are in place to structure and implement enterprise development objectives with identified suppliers and service

providers. Senior executives have taken responsibility to accelerate enterprise development with selected partners.

Corporate Social DevelopmentRefer to the CSI section in the Sustainability Report on pages SR31 and SR32.

Ethics

A Code of Ethical Conduct was developed and approved by the Board on 22 June 2011. A workshop was held to

familiarise management with the Code of Ethical Conduct and the Code was signed by all relevant parties. The Annual

Work Plan is currently being drafted for implementation during the 2012 financial year.

SustainabilityThe Group embarked on a formalised sustainability data gathering process in accordance with the Global Reporting

Initiative Guidelines 3.1 and the results are shown and reported on in the Sustainability Report section of the annual report.

Signed for and on behalf of the Ethics and Transformation Committee

VJ MokoenaChairman of the Ethics and Transformation Committee

> CG39

Assessment point as Action taken Applied or

detailed in the Code Gap identified during 2011 explained

Chapter 1 – Ethical leadership and corporate citizenship

The table below details the key areas which have been addressed or which will be addressed during 2012.


CG40 <

Has the Company established a code ofconduct and related policies which set out thecore ethical values towhich the Company willadhere?

The Company’s Code ofEthics required revision assome of its principleswere not aligned to developments in corporate governanceand to some of theCompany’s key ethicalpolicies.

The Code of Ethics wasrevised and updated tobe a Code of EthicalConduct.

The Code of EthicalConduct was approvedby the Board on 22 June2011 following its reviewand approval by theExecutive Committee.The Code of EthicalConduct was communicated to all business entities and aworkshop was conducted.

A Group Ethics Officer willbe appointed with hisduties being the initiationand coordination of operational aspects of theethics management programme within theparameters set by theBoard and Ethics andTransformationCommittee.

Ethics Officers will be formally appointed ineach business unit toassist the Group EthicsOfficer.

Each business entity inthe Group will conduct atraining programme for itsemployees to familiarisethem with the Code ofEthical Conduct.

Have ethical standardsbeen incorporated intothe strategy and operations of theCompany, for example,has the Code of Conductbeen incorporated intoemployment and suppliercontracts?

The ethical standards setout in the Code ofConduct should be incorporated into employees’ contracts ofemployment and suppliercontracts to createawareness and bind theindividual in terms ofcompliance to the standards.

The scope of theTransformationCommittee’s terms of reference was broadenedand the Committee wasrenamed the Ethics andTransformationCommittee.

To ensure that the principles of the Code areembedded in day-to-dayactivities, copies of theCode will be appended tothe employment contractsissued to new employeesand made available tosuppliers, contractors andother business partners.

King III complianceGAP analysis

King III compliance GAP analysiscontinued


> CG41



Chapter 2 – Board of directors

Has the Board determined its own role,functions, duties and performance criteria?

Is the Chairman appointed by the Boardevery year (after anassessment of his independence)?

The Board Charter wasreviewed and areas wereidentified that requiredupdating and/or expansion.

The independence of allnon-executive directors,including the Chairman ofthe Board, should beassessed annually andthe outcomes announcedin the annual report.

The Chairman is, however, not appointed tothe position annually.

The Board Charter wasredrafted to more clearlydepict the role, functions,duties and performancecriteria of the Board inaccordance with King III.The Board Charter wasadopted by the Board on22 June 2011.

Mr Lou Alberts, who hasbeen the Chairman of theBoard for the past tenyears, resigned on 30 June 2011.

Mr Tak Hiemstra, a non-executive director, wasappointed Chairman ofthe Board with effect from1 July 2011, and willstand for election byshareholders at the annual general meeting.

Applied.

Mr Hiemstra is not independent due to himbeing a director on theboard of UkhambaHoldings ProprietaryLimited. This factor hasbeen weighed by theBoard against the positivefactors of Mr Hiemstra’scontribution to the Boardand his suitability asChairman. The Board hasconcurred that the benefits of his extensivefinancial skills and knowledge outweigh anyother consideration.

Due to Mr Hiemstra notbeing independent, theBoard will elect a leadindependent non-executive director in2012.



CG42 <

Assessment point as Action taken Applied ordetailed in the Code Gap identified during 2011 explained

Chapter 2 – Board of directors (continued)

Has the Chairman’s rolebeen formalised and isthere a job description forthe Chairman?

The role of the Chairmanis described in the BoardCharter and in theMemorandum ofIncorporation.

These roles should beconsolidated into a singledocument and approvedby the Board.

A new Chairman wasappointed on 1 July2011.

A formal role descriptionfor the Chairman of theBoard will be drafted bythe Company Secretaryduring 2012 and submitted to the Boardfor approval.

Does the Chairman chairthe Risk Committee orthe RemunerationCommittee?

The Chairman of theBoard during 2011 wasalso the Chairman of theRemunerationCommittee.

On the appointment of Mr Tak Hiemstra asChairman of the Board on1 July 2011, theChairman of the Board isno longer the Chairman ofthe RemunerationCommittee.

Applied.

If an independent serviceprovider is not used, doesthe Board appoint anindependent non-executive director on theBoard, to lead theprocess of the evaluationof the Chairman’s performance?

An independent serviceprovider was not appointed to evaluate theperformance of theChairman and thisprocess of evaluation wasperformed informally bythe members of theBoard.

A new Chairman wasappointed to the Boardon 1 July 2011 and theperformance of the newChairman will be evaluated formally.

To be applied in 2012.

Are yearly Board evaluations performed bythe Chairman or an independent serviceprovider?

Do the results of the performance evaluationsidentify training needs fordirectors?

Is an overview of theappraisal process, resultsand action plans disclosed in the annualreport?

Does the nomination forthe re-appointment ofdirectors occur after theevaluation of the performance and attendance of the director?

Board evaluations need tobe performed.

The Chairman of theBoard has been taskedwith the evaluation of individual Board members.




> CG43

Assessment point as Action taken Applied ordetailed in the Code Gap identified during 2011 explained


Is there a formal agreement between theCompany and the non-executive directors detailing their terms ofemployment?

The terms of appointmentof non-executive directorsare contained in a letter ofappointment. This shouldbe included in a formalagreement between thedirector and theCompany.

Formal agreements arebeing drafted betweeneach non-executive director and DAWN.

The process will be completed during 2012.

Are the majority of thenon-executive directorsindependent?

For the most part of the2011 financial year, themajority of the non-executive directors werenot independent and wasthe split between non-executive and independent non-executive directors even.

At the end of the financialyear, non-executive directors were appointedto the Board bringing thetotal number of non-executive directors to six,of whom three are independent.

As half the non-executivedirectors are independent,the Board will continuously evaluate theindependence of the non-executive directors.

It is likely that the majorityof the non-executivedirectors will be independent in the shortterm.

Are non-executive directors serving forlonger than nine yearsassessed annually forindependence?

One of the independentnon-executive director’sterm in office exceeds nine years.

Independence assessment questionnaires have to becompleted by all membersof the Board.

The Board reviewed theindependence of Mr LM Alberts and, afterdue consideration, concluded that his longassociation with theGroup has not impairedhis ability to act with independence.

Applied.

Independence, informallyassessed, will be formallydone in future.



CG44 <




Are the number of chairmanships/directorships consideredby the Board andChairman?

An informal considerationprocess existed for thenumber of chairmanships/directorships of Boardmembers.

This process was formalised through theestablishment of theNomination Committee.

Applied.

Does the Company havea Nomination Committee?

The RemunerationCommittee performed theduties of a NominationCommittee.

A Nomination Committeewas established on 22 June 2011 comprisingthree non-executive directors, one of whom isindependent.

Applied.

Does the NominationCommittee assist with theprocess of identifying suitable members of theBoard?

Procedures for appointments to theBoard should be formaland transparent andshould be a matter for theBoard as a whole, assisted by theNomination Committee,and subject to shareholder approval.

Terms of reference wasdeveloped for theNomination Committeeand approved by theBoard on 22 June 2011.

Applied.

Is there a formal inductionprogramme establishedfor new directors?

The induction programmefor new directors is aninformal process andtakes the form of an introduction to the Group.

A formal induction programme has to beestablished.

The drafting of a formalinduction programme,incorporating risk governance, commencedand will be finalised andimplemented in the 2012financial year.


Have formal terms of reference been established and approvedfor each Committee ofthe Board?

Terms of reference ofBoard Committees haveto be aligned to the requirements of theCompanies Act 2008, asamended, and to the recommendations of King III.

Formal terms of referencewere developed and/or updated and improved forthe Audit Committee,Risk Committee,Remuneration Committeeand NominationCommittee and wasapproved by the Boardon 22 June 2011.

The terms of reference ofthe Ethics andTransformationCommittee and the ITSteering Committee wereapproved by the Boardon 13 September 2011.

Applied – the review ofthe terms of reference ofBoard Committees will,however, recur annually.



> CG45




Does the CompanySecretary have an arm’slength relationship withthe Board? Is theCompany Secretary adirector of the Company?

The Company Secretaryshould not be a directorof the Company andshould have an arm’slength relationship withthe Board.

The Chief Financial Officerwas also the CompanySecretary.

On 22 June 2011 theBoard decided that theChief Financial Officershould no longer performthe role of the CompanySecretary and theDirector: Risk and InternalAudit was appointedCompany Secretary as afirst step to a formal arm’slength appointment withinthe next year.


Is the Company’s remuneration policytabled to shareholders fora non-binding advisoryvote at the annual generalmeeting?

The Company’s remuneration report complied with all therequirements of King IIIregarding content andcompleteness.

Shareholders were givenan opportunity at theannual general meetingheld on 14 January 2011to cast a non-bindingadvisory vote on theCompany’s remunerationpolicy.

The non-binding resolution on theCompany’s remunerationpolicy was passed with amajority of 95,97% at theannual general meetingheld on 14 January 2011.

Applied.

Has the Company disclosed the remuneration of each individual director and thetop three senior management membersby earnings level?

The Company has previously disclosed remuneration of its executive directors.

King III recommends thatthe three most highly paidemployees, who are notdirectors of the Company,should be disclosed.

In addition to the remuneration of the fourexecutive directors, whichcontinues to be disclosed,details of the remunerationof the three most highlypaid employees as well asthe remuneration of theremaining members of theExecutive Committee, havealso been disclosed in theRemuneration Report on pages CG32 of theCorporate Governancesection.

Applied.



CG46 <



Chapter 3 – Audit Committee

Is the Chairman of theBoard a member of theAudit Committee?

The former Chairman ofthe Board was a memberof the Audit Committeeas the Board thought itprudent to benefit fromhis wealth of experience.

The new Board Chairman,Mr Tak Hiemstra, is amember of the AuditCommittee as the Boardbelieves that the benefitsof his extensive financialskills and knowledge outweigh any other consideration.

The Chairman of theBoard will remain a member of the AuditCommittee.

Are all the members ofthe Audit Committeeindependent non-executive directors?

The Audit Committeecomprises three non-executive members, ofwhom one is independent. TheChairman of the AuditCommittee, Mr OsmanArbee, is not independentdue to his representationof a major shareholder ofthe Company. Mr TakHiemstra is also not independent as he is adirector on the board ofUkhamba HoldingsProprietary Limited.

The Chairman of theAudit Committee, MrOsman Arbee, is notindependent, but has significant financial acumen and offers aninvaluable contribution tothis critical function. The Board has thereforedecided that, eventhough he is not independent, he willremain as Chairman ofthe Audit Committee.

Mr Tak Hiemstra, eventhough he is a director onthe board of a majorshareholder, has been adirector on the DAWNBoard for thirteen years,and was appointed to theBoard six years beforeUkhamba became ashareholder. The Boardbelieves that the benefitsof his extensive financialskills and knowledge outweigh any other consideration.

The Chairman of theAudit Committee, MrOsman Arbee, is not independent.

Mr Tak Hiemstra, theChairman of the Board, isnot independent and is amember of the AuditCommittee.

Both Mr Arbee and MrHiemstra are proposed asmembers of the AuditCommittee for shareholder approval atthe annual general meeting.

The Board is satisfied thatthe directors’ integrity,impartiality and objectivityare not in any way compromised and assuch satisfies the requirements of section94(4) of the CompaniesAct, 2008.

Has the Board approvedthe Audit Committeeterms of reference?

The Audit Committee’sterms of reference wasreviewed to align it to therequirements of theCompanies Act 2008, asamended.

The Board approved theamended terms of reference of the AuditCommittee on 22 June 2011.

Applied.



> CG47



Chapter 3 – Audit Committee (continued)

Does the AuditCommittee understandhow the Board and theexternal auditor evaluatemateriality for integratedreporting purposes?

The Audit Committeeoversees the Company’sreporting and providesassurance to the Boardas to the accuracy andreliability of informationprovided in theSustainability Report andin the Integrated Reportas well as ensuring consistency of the information included inthe two reports.

In order to ensure thatinformation provided inthe Integrated Report ismaterial and relevant tothe needs of shareholders, a formalprocess should be established to determinemateriality on an annualbasis.

The Audit Committeeshould also approve theexternal assuranceprovider over material elements of theSustainability Report.

The Group’s firstIntegrated Report and aSustainability Report inaccordance to GlobalReporting Initiative guidelines were preparedfor the 2011 financialyear.

During 2012, the AuditCommittee will establish aprocess to determinemateriality for theSustainability Report.

The Committee will seekthe establishment of anindependent externalreview panel to providequalitative assurance onmateriality for theCompany’s sustainabilityreporting with effect fromthe 2012 financial year.

Does the AuditCommittee monitor theappropriateness of theCompany’s combinedassurance framework andensure that significantrisks facing the Companyare addressed adequately?

A combined assuranceframework must be developed and reportedon quarterly to the AuditCommittee.

This framework shouldprovide assurance to theCommittee that the significant risks facing theCompany are being managed adequately.

A combined assuranceframework was developed and presentedto the Audit Committee,who approved it on 14 June 2011.

Applied.



CG48 <



Chapter 4 – Governance of risk

Has the Board defined itsmateriality in terms of:

• risk management aswell as risk tolerance/appetite?

• setting levels of risktolerance?

• setting limits for riskappetite?

• monitoring that riskstaken are within thetolerance andappetite levels?

Risk management hasbeen a Board agendaitem, but the materialitylevels should be formalised.

A risk governance framework has to becompiled.

The risk governanceframework, including tolerance and appetitelevels with limits as wellas monitoring mechanisms, wasapproved by the Boardon 13 September 2011.

Applied.

Does the Board considerrisk factors in both internal and external business environments indetermining risk tolerance?

The risks considered bythe Board address thoserisks of both an internaland external nature, thoserisks specific to theCompany, those risks thatare industry specific andthose risks that affect theCompany directly or indirectly.

Risk management structures need to be formalised.

Historically the governance of risk wasoverseen by the Auditand Risk Committee. Atthe end of the financialyear, the Committee wassplit into an AuditCommittee and a RiskCommittee to enhancethe process of risk governance.

The heat risk mappingprocess was formalisedinto a structuredapproach and implemented at all operating entities as wellas at Group level.

This area will continue toreceive increased focus in2012.



> CG49



Chapter 4 – Governance of risk (continued)

Chapter 5 – Governance of information technology

Does internal audit provide the Board with awritten assessment of theeffectiveness of internalcontrols and risk management on an annual basis?

The Board should disclose its views on theeffectiveness of theCompany’s risk management in theIntegrated Report.

The Board is informed byInternal Audit’s assessment of risk management.

Internal audit should,through the AuditCommittee, provide areport annually on theCompany’s system ofinternal controls and riskmanagement to theBoard.

The Chief Audit Executive(CAE) was appointed inOctober 2010.

Reports on risk management and thecontrol environment havebeen provided to theBoard and will be provided annually.

Applied.

Is IT governance on theBoard’s agenda?

The Board recognises theimportant role that IT governance plays in themanagement of risks andthe achievement of Groupobjectives. IT governancestructures should thereforebe strengthened and formalised.

IT governance is now aregular item on theDAWN Board’s agenda.

With the assistance of theIT Steering Committee,who’s terms of referencewas adopted on 13 September 2011, theBoard will oversee riskand information technology matters.

The Committee will reportquarterly to the Board onthe discharge of its mandate.

Applied.



CG50 <



Chapter 5 – Governance of information technology (continued)

Chapter 6 – Compliance with laws, rules, codes and standards

Has the Board established and implemented an IT governance charter andpolicies?

An IT Governance framework for the Groupshould be developed andapproved by the Boardwith the assistance of theIT Steering Committee.

An IT governance framework, whichincludes formal terms ofreference for the ITSteering Committee, has been developed and was approved by theBoard on 13 September2011.

Applied.

Has the Board established the compliance framework forthe Company?

A compliance frameworkshould be drawn up forthe Group.

A compliance frameworkwas drafted to effectively monitor compliance with the relevant legislation.

The compliance framework will be finalised and submitted tothe Board for approval in 2012.

Does the Board take thenecessary steps to identify all laws, rules,codes and standardsapplicable to theCompany?

All laws, rules, codes andstandards which areapplicable to DAWN inthe various jurisdictionshave been identified anda compliance systemshould be put in placeand monitored continuously.

A compliance frameworkis being developed forsubmission to the Boardfor approval.

Compliance will be monitored by the GroupCompliance Officer andreported to the AuditCommittee twice a year.

See above.

Compliance officers willbe appointed at the business entities to assistthe Group ComplianceOfficer and external assurance will in future be obtained on environmental compliance.

Does the Board receiveindependent assuranceon the effectiveness ofthe IT internal controls?

The IT SteeringCommittee terms of reference stipulates thatindependent assurancebe obtained on key IT projects and performance metrics.

Internal assurance wasobtained from IT with alimited review by InternalAudit.

In future, a comprehensive review willbe carried out by InternalAudit and external assurance will beobtained.

Partially applied.



> CG51



Chapter 6 – Compliance with laws, rules, codes and standards (continued)

Chapter 7 – Internal audit

Is compliance with allapplicable laws, rules,codes and standardsincluded as a regular itemon the agenda of theBoard, even if thisresponsibility has beendelegated to a separatecommittee?

Compliance matters area regular agenda item forAudit Committee meetings.

Matters that required theBoard’s approval werereviewed by the AuditCommittee and recommendations weremade to the Board.

Compliance will beincluded as a standardBoard agenda item.

Applied.

Does the Chief AuditExecutive (CAE) confirmthe independence of theinternal audit function tothe Audit Committee atleast once a year?

The CAE should preparewritten confirmation of theindependence of the auditfunction annually andsubmit it to the AuditCommittee.

Internal Audit changedfrom an outsourced to anin-house function inOctober 2010.

Written confirmation ofthe independence of theaudit function will be submitted to the AuditCommittee annually from2012.

Does the CAE have astanding invitation toattend, as an invitee, anyof the ExecutiveCommittee or other committee meetings?

The CAE should receive astanding invitation tomeetings of the ExecutiveCommittee and the AuditCommittee.

The CAE has a standinginvitation to all committeemeetings, including theExecutive Committee andBoard meetings and has unrestricted access to allExecutive Committeemembers as well as to alldirectors of the Board.

Applied.



CG52 <



Chapter 8 – Governing stakeholder relationships

Has management developed a strategy andformulated policies witheach stakeholder grouping?

The Board should determine the key stakeholders of the Groupand strategies and policies surrounding theengagement with thesestakeholder groupingsshould be formulated.

Key stakeholders wereidentified by the Boardand the strategies andpolicies surrounding theengagement with thesestakeholders are beingdeveloped.

To be completed andimplemented during2012.

Has the Board adoptedformal dispute resolutionprocesses for internal andexternal disputes?

The Board should adopta formal dispute resolution process dealingwith both internal andexternal disputes. Thisprocess should definewhat is meant by disputeresolution, identify thevarious methods of dispute resolution and theareas within the Companythat will be affected.

The Group’s ComplianceOfficer, together with thelegal advisors, are establishing structuresand procedures for alternative dispute resolution as recommended by theCode.

To be completed during2012.



> CG53



Chapter 9 – Integrated reporting and disclosure

Has the Audit Committeeoverseen the provision of assurance over sustainability issues?

External assuranceshould be obtained onthe Sustainability Report.

The Group’s firstSustainability Report inaccordance with GRIGuidelines was preparedfor the 2011 financialyear. The financial information in theSustainability Report wasextracted from the annualfinancial statements,which were audited byPricewaterhouseCoopers.Empowerment data wasverified by Empowerdexand data on the Group’scarbon footprint wasassured by Global CarbonExchange.

Management and internalaudit provided assuranceon the other sustainabilityinformation and data contained in theSustainability Report.

During 2012 externalassurance will beobtained on all sustainability information.

DAWN has adopted a values-based approach

to sustainability imperatives and will ensure

that strategy and activities in this regard are

integrated with the vision, mission and value

system of the Group.


> SR01

SR02 >> Sustainability Report

SR36 >> GRI Index


Sustainability report

Strategy and analysis

DAWN recognises its responsibility to report financial and non-financial information

that is relevant and material to its stakeholders. The Group’s sustainability agenda is

supported by a commitment to incorporating social, environmental, economic and

ethical factors into the Group’s strategic decision-making. It extends to evaluating

how these factors affect the business – including all of its stakeholders – and what

risks and opportunities these factors present. The Group adopts measures to

mitigate risks and takes advantage of opportunities.

DAWN has adopted a values-based approach to sustainability imperatives and will

ensure that strategy and activities in this regard are integrated with the vision,

mission and value system of the Group.

This report should be regarded as complementary to DAWN’s Integrated Report.

The changing expectations regarding the role of business in society – reflected in

corporate citizenship, transformation, sustainable development and regulatory

imperatives – add to the complexity and cost of running a business. DAWN

recognises that its long-term success depends on how effectively and transparently

it addresses environmental and social issues, such as transformation, resource

depletion and climate change.

SR02 <

Sustainability reportcontinued

There are two strategic approaches to sustainability. The one is compliance-driven where enterprises follow what is

mandated and regulated, making minimal investments to operate within legal regulations and conform to minimum

expectations. The other is a pro-active approach to creatively search for new solutions to sustainability issues, which can

also be used as a source of competitive advantage. The Group’s approach is focussed on a pro-active approach

underpinned by a compliance base, while remaining cognisant of business imperatives.

In South Africa, we are faced with the dual challenge of transforming society as well as addressing the broader set of

social and environmental issues. The Group is committed to sustainable development and, to this end, DAWN’s

Transformation Committee’s terms of reference has been revised to include the broader scope of transformation, social,

ethics and sustainability responsibilities and the Committee was renamed the Ethics and Transformation Committee.

Discussions were held with the cluster heads and key members of management on what sustainable development means

in their businesses to assist them with integrating sustainability principles into their operations. In DAWN sustainable

development is about finding ongoing improvements in operational efficiencies, ensuring long-term profitability and refining

its collaboration model within the Group as well as with its stakeholders and in the wider communities in which it operates.

DA Tod

Chief Executive Officer


> SR03

Sustainability at DAWN

Indicator 2011 2010

Revenue (R’000) 3 792 631 3 618 391

Operating profit (R’000) 33 070 207 868

Operating margin (%) 1,87 5,7

Number of employees 3 733 3 872

Total training spend (R’000) 2 673 2 689

Number of employees trained 932 3 089

Training spend per employee trained (R) 2 868 870

Number of employees attending HIV/AIDS training 379 293

Lost time injury frequency rate 1,90 0,70

Disabling injury frequency rate 0,86 0,79

BBBEE procurement spend (R’000) * 1 410 473 693 720

Corporate social investment spend (R’000) * 1 350 637

Corporate social investment as a percentage of pre-taxation profit 4,08 0,31

Enterprise development spend (R’000) * 3 574 7 122

Total water usage (litres ’000) 210 934 188 122

Total electricity usage (MWh) 55 688 56 380

Petrol (litres) 661 152 533 777

Diesel (litres) 3 960 495 3 272 014

Total carbon emissions (CO2e tonnes) 88 436 91 925

Total carbon emissions per employee (CO2e tonnes) 23,69 23,74

* Ratings are for reported year, but data originates from prior year.

Note:

• Employee-related data includes non-permanent employees.

• Social and environmental data is for South Africa only and includes subsidiaries, but excludes associates and joint

ventures.

• The carbon footprint data is based on Scope II and Scope II emissions, which data has been verified by Global

Carbon Exchange.

• Financial data has been extracted from the annual financial statements and includes all businesses (subsidiaries,

associates, joint ventures and over-border operations). Intergroup transactions have been eliminated.

• Where information is not available, this has been marked with a “~”.


SR04 <




> SR05

Addressing sustainability-related challenges

The table below describes how the Group’s identified sustainability-related challenges are being addressed. More detail is

provided in the divisional reviews.

Key challenges Actions

Developing a comprehensive sustainability and

management framework and setting uniform sustainability

targets that suit DAWN’s organisational structure and

culture, without damaging its decentralised culture,

independence and entrepreneurial flair.

This is a work in progress, especially in view of the King III

requirement of integrated reporting. To assist this process,

the Group’s Transformation Committee’s terms of

reference has been changed and the Committee has been

renamed the Ethics and Transformation Committee with

one of its key areas of responsibility being sustainability.

Establishing more effective programmes for managing

HIV/AIDS in the workplace.

While HIV/AIDS remains a challenge, many businesses are

making steady progress in their efforts to manage the

impact of the disease and the individual companies in the

Group have HIV/AIDS policies and procedures. DAWN has

drafted a Group HIV/AIDS policy to further improve the

effectiveness of engagements.

Developing an effective sustainability data collection

system. DAWN’s decentralised and multi-faceted

structures make data collation a challenge.

The 2011 financial year was the first year during which

sustainability data was collected and compiled.

Improvements will be made to the data definitions and the

data collation process. Additional non-financial data will be

expanded and ongoing improvements will be made.

Continuing compliance with intensifying environmental

regulations.

Businesses are responsible for identifying local regulations

and national legislation relevant to their businesses and

this forms part of their risk management process. The

Group Compliance Officer regularly advises businesses of

new legislation. Where material, businesses have

dedicated staff to manage compliance.

Attracting and retaining senior HDIs. The DAWN Academy and divisional management and

leaderships programmes are used to develop senior HDIs.

Improved recruitment and retention strategies are

employed.

Skills shortages. Most businesses are affected by skills shortages and

invest in employee training and learnerships.

A number of the manufacturing businesses are large

employers of unskilled and semi-skilled staff and are

exposed to the effects of strike action.

Businesses ensure good employee relationships and offer

market-related remuneration packages and benefits.

Risk management

The Group’s key risks with control and/or mitigation strategies are outlined below.

Identified risk Control and/or mitigation strategy

Low sales volumes and pressure on margins as a result of

challenging market conditions and a weak economy with

the resultant low levels of disposable income.

All manufacturing entities are targeting projects to reduce

manufacturing costs at current volume throughput through

optimisation of production planning and product innovation

and re-engineering.

Performance recovery at loss-making subsidiaries –

DPI Plastics and Libra Bathrooms.

Major focus on performance improvement through a

combination of production and marketing initiatives

together with expense reduction.

Customer service levels – difficult to maintain due to erratic

demand patterns as well as unpredictability of market

requirements.

Major focus on customer service levels through market

surveys and customer visits. Strict measurement and

control of stock availability of commodity items.

Over-investment in stock due to change in customer

buying patterns towards cheaper and commodity items.

Major focus on stock models and agreed stock level

targets according to DAWN’s market.

High percentage of credit sales with a deteriorating

collection percentage with possible bad debts.

High focus on credit policies and strict application of credit

terms. Collection incentives. Strict policy of credit

insurance.

High dependence on government spending and civil

contracts.

Refocus product strategies towards more sustainable

markets and profitable products.

IT systems – implementation process of new software and

systems.

Reduce implementation risk through highly experienced

project implementation team and systematic phased

implementation approach.

Strong rand. Product innovation and product re-engineering across all

manufacturing operations with main aim of price

competitiveness without compromising on product quality.

Brand erosion – impact on achievement of sales and

margin expectations.

Product innovation and new product launches in all

manufacturing operations with the principle focus being

revitalised aesthetics as well as price competitiveness in

the mid-range and below. DAWN showrooms enhance

brand awareness.



SR06 <


Organisational profile Distribution and Warehousing Network Limited (DAWN) islisted in the Construction and Materials – BuildingMaterials and Fixtures sector of the JSE Limited and itshead office is based in Germiston.

The Group manufactures and distributes quality brandedhardware, sanitaryware, plumbing, kitchen, engineeringand civil products through a national, strategically positioned branch network in South Africa, as well as inselected countries in the rest of Africa and Mauritius.

DAWN has three operating segments, namely Building,Infrastructure and Solutions.

The Building segment consists of five clusters, namely theWholesale, Watertech, Sanitaryware, Kitchen andInternational divisions with two associates, Apex Valvesand Heunis Steel. The Infrastructure segment consists oftwo divisions, DPI Plastics and Incledon, and two associates, Sangio Pipe and Fibrex. The DAWN Solutionssegment comprises DAWN Logistics (DAWN Cargo andDAWN Distribution Centres), DAWN HR Solutions, DAWNIT, DAWN Marketing & Design, DAWN Merchandising andDAWN Packaging.

This focused cluster approach allows for the benefits ofsynergies and cost reduction, while capacity is optimisedat cluster operations. The Group’s Solutions segmentcontinued to provide a crucial competitive advantage,enabling distribution costs which are significantly belowthe logistics industry average. It also assists the Group tocontain costs across all businesses and to significantlyreduce stock losses.

Scope of the reportThe scope, structure and content of this report, whichcover the period from 1 July 2010 to 30 June 2011, havebeen guided by the G3 sustainability reporting guidelines of the Global Reporting Initiative (GRI) andmeet the Application Level A requirements. A GRI G3index is provided at the end of the report.

DAWN has considered the reporting boundaries havingspecific regard to where it is able to exercise influenceand for what it may be accountable. Furthermore, the significance of the entity in relation to the sustainabilityimpacts has also been factored into the overall assessment. The boundaries defined take into accountfactors and circumstances outside of traditional financialreporting considerations.

Based on an overall assessment of the rules for setting aboundary, as outlined in the GRI Boundary Protocol(January 2005), the Group has included all operations inSouth Africa, including the subsidiary companies, but hasexcluded joint ventures, associates and the over-borderbusinesses of the Group on environmental and social indicators. The economic indicators include all businesses(subsidiaries, associates, joint ventures and the over-border operations of the Group). Intergroup transactionshave been eliminated.

The report provides a balanced and reasonable

representation of DAWN’s multi-faceted and diverse

businesses. A general overview of the Group as a whole

is provided.

The Sustainability Report has not been externally assured

this year and this matter will be addressed in the 2012

report. The annual financial statements have been audited

by PricewaterhouseCoopers Inc. Empowerment data has

been verified by Empowerdex and the carbon footprint

data has been assured by Global Carbon Exchange.

Any questions about the data, or other feedback to this

report, can be directed to Mr Jan Beukes, Risk and

Internal Audit Officer at [email protected].

Awards

During the year DPI Plastics received the SABS twenty-

year loyalty award as well as ISO9000 re-certification and

OSHAS1800 (Safety) re-certification. DAWN Kitchen

Fittings cluster was awarded first place in the category

Exceptional Service to Association Ordinary Members by

the Kitchen Specialists Association two years running

and received the Sembel-It Supplier of the Year award in

the prior year. In 2011, Cobra received a silver award

from the Ekurhuleni Springs Chamber of Commerce for

40 years’ membership. [2.10]

Vision

DAWN’s success in its holistic approach to manufacturing

and distributing quality branded and globally competitive

products to the building, construction, infrastructure, DIY,

petrochemical and agricultural industries will promote the

future sustainability and growth of national economies.


> SR07



DAWN is committed to face the challenges in meeting theneeds of all its stakeholders and is well positioned to playa role in advancing sustainable development.

Processes are implemented to assess, measure andmanage the effectiveness and relevance of the Group’ssustainability strategy. The Group has embraced the philosophy that its ongoing growth and developmentdepend not only on economic factors, but on the wellbeing and upliftment of its people, the improvement ofsurrounding communities and its ongoing investment incorporate, social and environmental sustainability initiatives.

MissionDAWN continuously seeks to maximise returns to allstakeholders through its vision, which will be attainedthrough the following practices:

• Nurturing a strong management culture, which provides clear objectives to achieve acceptablegrowth and returns to all stakeholders

• Streamlining and investing in logistics and appropriate technologies to expand distributioninfrastructures and capabilities nationally and internationally in an environmentally responsibleway

• Acquiring appropriate manufacturing and tradingbusinesses to encourage continued job creation,employment opportunities and skills retention

• Inculcating in employees a culture of service excellence to all customers

• Optimising operational efficiencies and workingcapital investment by strategic investment in themanufacture of quality branded products

• Continuing expansion of product ranges and services to promote the growth of markets, penetrate additional sectors and contribute to thedevelopment of infrastructure

• Proactively participating in broad-based black economic empowerment

• Implementing ongoing skills and development programmes for employees

• Embracing the principles of sustainable development to achieve and effectively measureand manage integrated economic, social, environmental and business performance

Values

DAWN’s value system is reflected in and

underpinned by:

• the DAWN Pledge, which outlines the values the

Group continuously inculcates in its people;

• the Corporate Values, which reflect the approach of

the Board; and

• the Code of Ethical Conduct, which drives and

informs the way DAWN conducts its activities.

The DAWN Pledge

These six guiding principles are widely and continuously

shared with DAWN’s people and constitute the basis of its

daily conduct and decision-making.

• Total commitment to the cause:

understanding and supporting the greater purpose

of the Group to create an environment in which

every individual can prosper and provide for his or

her family’s needs and aspirations. Even more than

this, providing opportunities for people to grow and

to express their leadership abilities for the good of

all involved with the Group.

• Absolute honesty and integrity: requires that

each employee is honest with himself or herself by

living up to the Group’s requirements of conduct

and performance and treating the Group’s assets

with care and respect.

• Tenacity: having the stamina and persistence to

remain with the cause, even through difficult and

challenging times, knowing that the reward will

make the journey worthwhile.

• True leadership: is not about self-interest or

self-gratification. It requires the ability to co-ordinate

the resources of the Group in the best interest of all

involved in the Group.

• Drive: being goal and performance orientated

seeking fair reward and career fulfilment.

• Respect: treating one another with dignity and

the Group’s time, resources and assets with

respect.

SR08 <



Corporate values

This set of values guides and underpins the mindset and

approach of the Board of Directors.

• Accountability – extended to all stakeholders

and including ongoing communication with both

internal and external role players

• Care – exercising care in the affairs of the

Company

• Conscience – intellectual honesty, avoiding

conflicts of interest

• Commitment – acting diligently

• Competence – having the knowledge and skill

required to be directors of a company

• Courage – possessing the courage to make

decisions in the face of calculated risks

• Entrepreneurship – constantly innovating and

encouraging individual participation to build and

develop the business

• Equal opportunity and development –employing best employment practices,

empowerment policies and training to create an

environment where a positive work ethic is

encouraged and rewarded

• Fairness – ensuring that all stakeholders are

treated equitably

• Honesty – in all interaction with both internal and

external stakeholders

• Respect – for human rights, human dignity and

social justice

• Responsibility – for decisions and actions and

for employees

• Service excellence – reinforcing partnerships

and relationships and creating new ones by

standards of performance

• Transparency – providing comprehensive,

accurate, timeous communication with all

stakeholders

• Environmental protection – optimising

resource utilisation and implementing environmental

management to minimise waste and emission

The Board is comfortable that these values reflect their

approach to their accountability as the highest

decision-making body of the Group.

Code of Ethical Conduct

The manner in which the DAWN Group conducts its

activities is of critical importance and reflects its

commitment to enhancing the standards and quality of life

in the society and communities in which the Group

operates. To this end, a Code of Ethical Conduct has

been adopted by the Board.

The DAWN Board has established the following principles

of ethical conduct in support of, and by way of guidance

in relation to, the values governing the Group’s business

practices and corporate behaviour.

Community

• DAWN recognises the need to balance the pursuit

of economic benefit and the social and

environmental impact of its actions. The Group

strives to act in a manner that benefits all its

stakeholders and society as a responsible

corporate citizen, creating wealth and opportunity

for the benefit of investors, employees, suppliers

and the broader community.

• DAWN recognises the importance of its

contribution to society’s ability to manage, protect

and sustain environmental resources and will strive

to minimise any direct or indirect detrimental effect

its activities may have on such ability.

Equality

• DAWN is committed to respect human rights and

will not directly or indirectly promote or participate

in activities which compromise its commitment.

• DAWN appreciates the value of its employees and

endeavours to nurture their growth as individuals

within the workplace, by promoting an active

involvement in the organisation and engendering a

culture of personal responsibility for individual

actions.

• DAWN identifies and supports the potential of its

employees, placing particular emphasis on the

professional development of its staff members from

historically disadvantaged segments of society.

> SR09



• DAWN is a non-discriminatory organisation, dedicated to the development of its employees onthe basis of inclusive and shared values, with equal opportunity for all, where race, gender, religious beliefs, sexual orientation or physical disability have no influence on employment andadvancement opportunities.

• DAWN does not discriminate against, harass orwithhold services from any employee or other individual infected with the HIV virus or an AIDS-related condition.

• DAWN maintains a safe and healthy working environment for all its employees.

• DAWN recognises that an appropriate balancemust be struck between meeting its professionalobligations and maintaining an acceptable qualityof life in each individual’s personal capacity.

Quality

• DAWN focuses on the development and production of reliable and consistent products andservices that its customers require and charges itscustomers honestly and without prejudice for theprovision of products and services.

• DAWN provides the highest levels of serviceexpected by its customers and endeavours to continuously investigate new and improved meansof meeting their expectations, recognising and promoting honest endeavours in this respect andaccepting set-backs with encouragement and constructive criticism.

• DAWN appreciates the importance of its suppliers’contributions to the success of its business andundertakes to foster healthy, mutually beneficialand long-term relationships with them.

Integrity

• DAWN does not make commitments it cannotkeep.

• DAWN keeps the commitments that it makes.

• DAWN provides those with a legitimate interest inits activities with relevant, reliable, timely and meaningful information on its actions in an honestand transparent manner.

• DAWN at all times acts honestly and in good faith,treating its colleagues and those with whom it doesbusiness with dignity, courtesy and respect.

• DAWN complies with all laws and regulations towhich the Group, and those with whom it transacts, are subject.

• DAWN maintains the confidentiality of information

acquired during the course of its professional

activities and does not apply such information in

any way for its own or others’ personal gain or

advancement, other than in the legitimate conduct

of its business.

• DAWN neither offers, nor accepts any personal

incentive of whatsoever nature, financial or

otherwise, to unduly influence an individual’s

personal or DAWN’s performance, actions or

decisions.

• Employees avoid, or where unavoidable, discloseany situation where their personal interests, financial or otherwise, come into or are likely tocome into conflict with DAWN’s interests.

• DAWN believes in healthy free-market competitionand non-abuse of power. In observing applicablecompetition laws, the Group does not try to prevent others from competing in its market. TheGroup does not directly refer to its competitors’operations, management or products in anunfavourable manner.

• DAWN co-operates with other industry players in

collectively discussing and lobbying common

interests within the industry to relevant

authorities/bodies.

• Employees apply all tangible and intangible assetsbelonging to DAWN responsibly and solely for thebusiness purpose for which they are intended.

• Employees understand and acknowledge that theyare at all times representative of DAWN and conduct themselves in such a way as to protectDAWN from damage or harm of any kind to itsstanding and reputation.

Policy

The Board may from time to time discuss and determinepolicy relating to behaviour considered acceptable for theprotection and enhancement of DAWN’s reputation.

Representatives of major stakeholder constituencies willbe involved in deliberation to inform any decision by theBoard to revise the Code of Conduct.

Compliance

The Chief Executive Officer is responsible to the Board formonitoring and overseeing compliance with the Code ofConduct. The Chief Executive Officer is supported in thisrespect by the Group Compliance Officer, the GroupEthics Officer and designated ethics officers in the business clusters.

SR10 <



Queries, concerns, doubts and requests for guidanceregarding DAWN’s tolerance and/or acceptance of certainbehaviour are directed to the Group Ethics Officer. Ifdeemed necessary, the Group Ethics Officer will refer atopic through the Chief Executive Officer to the Board fordiscussion and resolution.

All suspected violations of the Code of Ethical Conductare formally reported to the Group Ethics Officer, either in person, or, if preferred, anonymously using the whistle-blowing facility which is independently monitored byKPMG. Internal audit is responsible for ensuring that anyreported issues are handled in the strictest confidenceand that appropriate action is taken to investigate,address and correct the identified breach.

DAWN adopts a strict policy of zero tolerance for violations by employees of the Code of Ethical Conduct.All alleged violations are investigated and may lead to disciplinary proceedings. These may, in turn, lead to dismissal.

Governance, commitments and engagementGovernance structure

The Board of DAWN sets the tone at the top by engagingwith the concept of sustainability, setting overall policyguidelines and ensuring that management is an integralpart of the overall business strategy and has ownership ineach line function of the business.

The formal structures, systems and governance cultureencompass economic, environmental and social responsibility. The Corporate Governance Report isdetailed on pages CG01 to CG21 of the CorporateGovernance section of the annual report.

Commitments to external initiatives

Precautionary Approach

The identification of risks and opportunities is robust, systematic and involves every level of the organisation. Acomprehensive risk management policy is entrenchedthroughout the Group.

Having regard to the fact that managing risk is an inherentpart of the Group’s activities, risk management and theongoing improvement in corresponding control structuresremain a key focus of management in building a successful and sustainable business.

The structure of the Group promotes the active participation of executive management in all of the operational and strategic decisions affecting their business units. This creates a strong culture of ownershipand accountability.

Risk management is therefore imbedded in operationalplanning as well as in the development and introductionof new products.

Externally developed charters

The Group has to date not been involved in the external

development of economic, environmental and social

charters.

Memberships

The Group is a member of the following organisations:

• Business Unity South Africa (attend meetings by

invitation)

• Copper Development Association (the CEO of the

Watertech cluster is a board member)

• Ekurhuleni Chamber of Commerce

• Institute of Foundrymen

• Institute of Municipal Engineering South Africa

• Institute of Plumbing (Platinum member)

• Kitchen Specialists Association

• Manufacturers Trade and Tariff Association

• Manufacturing Circle

• Metal and Engineering Industries Bargaining

Council

• Mogale Chamber of Commerce

• The National Economic Development and Labour

Council ( through a representative and attend

meetings by invitation)

• Plastic Converters Association of South Africa

• Plastic Institute of South Africa

• Plastics Federation of South Africa

• Plumbers and Engineers Brassware Association

• South African Bureau of Standards (The CEO of

the Infrastructure cluster is involved on committees

for specification standards for plastic pipes and

fittings)

• South African Irrigation Institute

• South African Valve and Actuator Manufacturers

Association

• Southern African Plastic Pipe Manufacturers

Association (The CEO of the Infrastructure cluster is

on the SAPPMA Management Committee)

• Steel and Engineering Industries Federation of

South Africa

• Water Institute of South Africa

> SR11



Stakeholder engagement

The DAWN Group recognises that the sustainability of thebusiness is wholly dependent on successful interactionswith its stakeholders. Communicating with, and listeningto, entities or individuals on whom the Group has animpact, or who in turn impact on DAWN, is good business practice. Engaging with stakeholders helps identify the issues that affect DAWN’s business. Itimproves an understanding of its stakeholders' expectations and interests, and strengthens the trust thathas been established with them.

This good business practice is recognised in King III,which identifies the need for boards to become moreaware of the issues and processes around stakeholderrelationships, and to have mechanisms for stakeholderconcerns to be brought to their attention.

King III promotes a stakeholder inclusive model of corporate governance and recommends that boards“should consider the legitimate interests and expectationsof stakeholders other than shareholders ... on the basis

that this is in the best interests of the company and notmerely as an instrument to serve the interests of theshareholder.”

King III furthermore stipulates six key principles governingstakeholder relationships:

1. The Board should appreciate that stakeholders’perceptions affect a company’s reputation.

2. The Board should delegate to management toproactively deal with stakeholder relationships.

3. The Board should strive to achieve the appropriatebalance between its various stakeholder groupings,in the best interests of the Company.

4. Companies should ensure the equitable treatmentof shareholders.

5. Transparent and effective communication withstakeholders is essential for building and maintaining their trust and confidence.

6. The Board should ensure disputes are resolved aseffectively, efficiently and expeditiously as possible.

The DAWN Board has identified seven key stakeholdergroups with whom it engages in a structured manner,being:

• Shareholders and investment community• Banks, funders and insurance companies• Customers• Suppliers

• Employees• Trade unions• Media• Regulators• Government – national, provincial and local

DAWN’s engagement with these stakeholders is detailedin the Integrated Report on pages IR13 to IR14.

MediaShareholdersand investingcommunity

Regulators

Government –national,

provincial andlocal

Communities

NGOs, CBOs

BEE partners

Advocacy groups

Producers andbusiness partners

Suppliers

Customers

BEE suppliers

Producerassociations

Trade unions

Employees

Banks, funders,insurance companies

End-users

End-users

End-users

SR12 <

The diagram below depicts the various stakeholder groups identified by DAWN.



Economic indicators Economic performance

Value added statement [EC1]

Group

2011 2010R’000 % R’000 %

Revenue from goods and services 3 792 631 3 618 391

Less: Cost of goods and services (3 035 182) (2 770 884)

Value added from activities 757 449 847 507

Add: Interest received on investments 28 629 27 332

Total value added 786 078 100 874 839 100

Utilised as follows:

Employees

Salaries and benefits 658 223 84 580 435 66

Providers of capital

Interest on borrowings 75 160 9 83 843 10

Government – company tax 14 689 2 42 088 5

Current 31 626 59 813

Deferred (17 091) (17 853)

Secondary tax on companies 154 128

748 072 706 366 81

Retained for reinvestment

Depreciation and amortisation 68 331 59 296 7

Income retained in the business (30 325) 109 177 12

38 006 5 168 473 19

Total utilisation of value added 786 078 100 874 839 100

Employees Government Retained for reinvestmentProviders of capital

84%

9%

2%5%

2011

66%10%

5%

19%

2010

> SR13

Exchanges with government including amounts collected on their behalf

2011 2010

R’000 R’000

Employee taxes 106 420 74 914

Company taxes 20 732 62 130

Value added tax and sales tax 78 701 76 570

Customs and excise duty 56 331 23 082

Financial implications of climate change

Opportunities are created for DAWN flowing from an increased awareness of the implications ascribed to climate change.Water and energy are some of the most valuable resources and Cobra is playing a pivotal role towards more environmentally friendly designs that save energy and conserve water. These include innovations such as Cobra’s solarheating solutions, accessories, electronic taps and mixers, metered and demand taps, water-saving shower heads, waterfilters, pressure reducing valves and toilet flush mechanisms. Vaal Sanitaryware has also launched a low-flush system,which contributes to substantial water saving compared to a standard flushing system. The trading in energy-saving products contributes to the scope of the Wholesale cluster’s product range. DPI Plastics is the leading manufacturer ofPVC and HDPE water reticulation and draining pipe and fitting systems, products which are widely used in water andsewer infrastructure development. [EC2]

Defined contribution and benefit plan obligations

Defined contribution plan obligations

The policy of the Group is to provide retirement benefits to its employees. The contributions paid by the Group companiesto fund obligations for the payment of retirement benefits are charged against the Income Statement as and whenincurred. The Group contributed R25,5 million (2010: R22,3 million) for the year under review. 2 353 employees (2010: 2 254 employees) are members of the fund, which is classified as a defined contribution fund.

Defined benefit plan obligations

Furthermore, 44 (2010: 51) of the employees of DPI Plastics Proprietary Limited of whom 26 (2010: 26) are continuationmembers and 18 (2010: 25) are eligible employees, are entitled to post-retirement medical aid benefits in terms of the DPIgroup of companies post-retirement medical benefit plan. The plan is unfunded. DAWN disclosed the obligation, whichamounted to R5,9 million, under long-term liabilities in respect of the 2011 year and included the obligation in respect ofthe 2010 year, amounting to R5,7 million under trade and other payables in that year. [EC3]

Government grants

The Group does not receive any financial assistance from government. [EC4]

Market presence

The DAWN Group does not discriminate in any way in terms of gender when it comes to remuneration of employees.Furthermore, in all cases all companies in the Group adhere to industry-regulated minimum wage levels, contained inindustry agreements where applicable. Some of the Group companies, which do not form part of any industry wageagreements, have collective bargaining agreements in place with majority unions, which have negotiation rights. [EC5]

As a direct result of DAWN’s commitment to BBBEE and DAWN Board directives, all Group companies focus on procurement from appropriately qualified suppliers, preferably from a local source. [EC6]

Local support

DAWN’s business strategy is based on the supply of locally manufactured quality products, either owned or through third-party suppliers, with a defensive approach on imports, mainly to protect market share. By purchasing local products,job opportunities are created in local communities. Furthermore, DAWN’s senior management is hired from the local community at significant locations of the operation. [EC7]



SR14 <

Indirect economic impacts

DAWN’s operations and activities have a significant

economic impact in the communities where they are

located. In addition to local employment, DAWN

supports local manufacturers and will only import

products as a defensive strategy or when the equivalent

product is not available locally. Enterprise development

initiatives also support the growth of businesses owned

by historically disadvantaged individuals.

DAWN furthermore supports several initiatives that are

designed to benefit society and the environment. These

programmes include skills development and training as

well as DAWN’s principal membership of the World

Wildlife Foundation.

DAWN’s investment and services for the public include

donations to Boys and Girls Town, MaAfrika Tikkun (an

organisation striving for the upliftment of children in South

Africa’s townships) and the SA Medical Association (Cape

Town). [EC8]

DAWN’s operations employ over 4000 people and

support a much wider network of people in its supply

chain. Measuring the indirect impact to this network of

people and communities is a much more difficult

endeavour. DAWN hopes to be in a position to report on

its progress in this area in future updates of the

Sustainability Report. [EC9]

Environmental indicators

Environmental policy and management systems

Regular annual environmental audits are conducted in

manufacturing businesses through a formal process by

authorised inspection authorities to ensure that any

impact on the environment by any of the companies

within the DAWN Group is minimised. The Group

constantly assesses its operations in relation to the

National Road Traffic Act, no 93 of 1996, and its

amendments, and the National Environmental

Management Act, 1998.

Materials

The Material Safety Data Sheets specifications govern the

purchase of all materials and the operational practices

applied in utilising them. Environmentally safe purchases

and practices are enforced by extensive audits and

training.

Data has not been collated on materials used by weightor volume and the percentage of materials used that arerecycled input materials has also not been calculated.[EN1] [EN2] These matters will be addressed in the 2012Sustainability Report.

Energy

Optimum energy management promotes operational efficiencies in using energy sources and implementingsafety practices in line with the relevant acts, regulationsand local authority guidelines. The Group’s energy consumption is discussed under Carbon Footprint onpage SR18 .

Initiatives to provide energy efficient or renewable energy-based products include solar heating solutionsoffered by Cobra. [EN6]

The Group has not commented on initiatives to reduceindirect energy consumption and will report on this infuture Sustainability Reports. [EN7]

Water

Environmental impact studies are conducted to ensurethat any pollution of natural resources through manufacturing operations is limited. Where appropriate,environmental management organisations are appointed.Manufacturing entities operate water treatment plants andeffluent clean-up practices to prevent unacceptable levelsof contamination in water returned to catchments areas.

The water consumption of DAWN and its South Africansubsidiaries during 2011 was 210 934 kilolitres (2011: 188 122 kilolitres). [EN8] Water sources were notsignificantly affected by the Group’s withdrawal of water.[EN9] Water that was re-used or recycled amounted to700 000 kilolitres. [EN10]

Biodiversity

None of the operations or products of the Group is likelyto have an adverse impact on biodiversity. [EN11 toEN15]

Emission, effluents and waste

Manufacturing operations conduct bi-annual risk assessments to ensure compliance with relevant legislation and emissions, effluent and waste disposalrequirements. Registered and accredited institutions supply the businesses with approved disposal certificateswhich verify that waste is separated and disposed of.Stacked emission certificates verify that all emissions havebeen analysed. Effluent treatment plants deal with all effluents in line with local and national regulations.



> SR15



Data has not been compiled on the following:

• Total direct and indirect greenhouse gas emissions by weight [EN16]

• Other relevant indirect greenhouse gas emissions by weight [EN17]

• Emissions of ozone-depleting substances by weight [EN19]

• NO, SO and other significant air emissions by type and weight [EN20]

The Group will endeavour to report on these in future Sustainability Reports.

Initiatives

Initiatives to reduce greenhouse gas emissions included a reduction in electricity, gas and diesel consumption with areduction from 88 436 CO2e tonnes to 91 925 CO2e tonnes year-on-year. [EN18]

Some of the initiatives undertaken include:

• Electricity

– The Department of Trade and Industry, through the CSIR’s division, NCPC, have funded cleaner productionassessments at ten of the large business sites in the Group. The information obtained is being used to drive implementation initiatives through Eskom.

– DAWN has submitted an application to register as an ESCO with Eskom.

– DAWN has submitted an application to participate in the Eskom IDM programme.

• Gas

– Gas consumption at Vaal has been reduced by the recycling of effluent gas for space heating.

• Diesel

– Concept ideas are being discussed to reduce diesel consumption.

Water discharge

Waste-water discharged by Group companies increased to 8 330 kilolitres from 7 800 kilolitres in the prior year. [EN21]

Waste disposal

SR16 <


10

20

30

40

50

60

70

80

90

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

DPI Plastics – Industrial and domestic waste

Industrial

Cost

Tonnes Cost



> SR17


1

2

3

4

5

6

Plastic

Cardboard

DPI Plastics – Plastic and cardboard

Vaal Sanitaryware


10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000

100 000

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000

100 000


Waste Water Effluent Sludge Old OilGeneral Sand Asbestos Tubes

0

Cobra Watertech


100 000

200 000

300 000

400 000

500 000

600 000

700 000Ceramic

Fire clay

Mould

Plastic

General

Sludge

Cardboard (Mondi)

No of Loads

Kgs

Kgs Litres



The Group’s activities do not result in spills of hazardous

materials, due to the nature of manufacturing operations

and products manufactured. [EN23]

The Group does not transport, import, export or treatwaste deemed hazardous under the terms of the BaselConvention and this guideline is therefore not applicableto the Group. [EN24]

None of the operations or products of the Group is likelyto have an adverse impact on biodiversity and it hastherefore not been determined whether discharges ofwater and runoff impose on the biodiversity value of waterbodies and related habitats. [EN25]

Carbon footprint

The DAWN Group’s activities from the wholly-ownedSouth African operations for FY2011 resulted in a carbonfootprint of 88 436 CO2e (Carbon Dioxide equivalent)tonnes. The primary contributor to the carbon footprintemanated from Scope II emissions in the form of electricity consumption of 55 090MWh, resulting in 51916 CO2e tonnes of carbon (59% of the total carbon footprint). [EN3] Electricity is used at all of the 50 locations across the Group, with large consumption beingrecorded at the manufacturing entities. The second mostsignificant individual contributor to the carbon footprint forthe year was in the form of natural gas consumption of179 435 GJs, resulting in a carbon footprint of 9 310CO2e tonnes. This energy source is used to power kilns,furnaces and boilers at three of the manufacturing locations. Diesel was the third most important energy carrier with 3,272 million litres of diesel being used, resulting in a carbon footprint of 8 732 CO2e tonnes.Diesel is primarily used in the transportation componentof the distribution model to get manufactured goods to

wholesale locations as well as to deliver goods to retailcustomers. A small amount (6%) of diesel is being used in factories and warehouses by forklifts. In summary, energyin the form of electricity, natural gas and diesel accountedfor 69 959 CO2e tonnes of carbon emissions, whichamounted to 79,1% of the total carbon footprint for theGroup’s wholly-owned South African operations.

Scope I and II emissions have been verified by Global

Carbon Exchange, an independent carbon emission

verification company. Scope III, or indirect emissions, have

been excluded from the verification process. [EN4] The

rationale is to focus on the key emission drivers and

develop and implement initiatives that will make a

significant contribution to the reduction of energy usage

as well as reduce operational expenditure at the same

time. Petrol consumption, small amounts of LPG gas

used and fugitive emissions from the refill of air-

conditioners and refrigeration plants made up the

remainder of the Scope I and Scope II emissions. The

carbon footprint generated by the use of these products

amounted to 4 756 CO2e. The verified emissions in Scope

I and II therefore represented 74 715 CO2e tonnes and

84% of the Group total.

Three companies used 83% of the DAWN Group’s totalelectricity consumption. In order of magnitude these were DPI Plastics (19 054MWh), Cobra Watertech (13 578MWh) and Vaal Sanitaryware (9 445MWh). Furtheranalysis indicated that 96% of electricity was consumedat twelve locations. An initiative has been launched tobecome more energy efficient. As part of this initiative,DAWN is in the process of registering as an ESCO withEskom. In conjunction with this application, a first projectto eliminate 1 500MWh of electricity per annum at theDAWN Distribution Centre in Germiston is being finalised.

SR18 <


20

40

60

80

100

120

0

100

200

300

400

500

600

Paper/cardboard

Waste – Mixed, office and display boards

Plastic

Isca – Packaging

Tonnes Kgs



This first project in energy efficiency will not only reducethe dependency on electricity and the operational expenses at the distribution centre, but will reduce thecarbon footprint by 1 545 tonnes of CO2e. A fundamentalpart of the energy efficiency and electricity reduction programme is the measurement and monitoring of consumption. The installation of technology to monitor theconsumption and the demand profile of electricity in realtime is in the process of being installed at the twelvelargest electricity consuming sites. [EN5]

The segmental analysis of the carbon footprint indicatethat the Building segment generated a carbon footprint of47 813 CO2e tonnes (54% of total), the Infrastructure segment generated a carbon footprint of 25 903 tonnesof CO2e (29% of total) and the Solutions segment generated a carbon footprint of 14 720 tonnes of CO2e(17% of total).

Products and services

DAWN’s sanitaryware products are continuously assessed

for its effectiveness and ‘green’ products receive

particular focus in view of the Group’s imbedded

sustainability values in its day-to-day activities. As water is

one of the most valuable resources, water-saving

technologies are explored and enhanced on an ongoing

basis. To this end Vaal Sanitaryware has introduced a

flushing system in its products which uses significantly

less water than standard systems. Cobra focuses on

environmentally-friendly designs that save energy and

conserve water through its solar heating solutions,

accessories, electronic taps and mixer, metered and

demand taps, water-saving shower heads, water filters,

pressure reducing valves and toilet flush mechanisms.

The Group strives to ensure that the impact of its

products and services is beneficial to the environment.

[EN26]

The Group is currently reviewing its packaging materials

and packaging concepts with a view to reducing

superfluous packaging materials and establishing effective

recycling and reuse systems as well as mitigating

problems and costs related to disposal. [EN27]

Compliance

There were no significant fines or non-monetary sanction

for non-compliance with environmental laws and

regulations brought against DAWN or any of its

subsidiaries during the year under review. [EN28]

Transport

Distribution of products is core to DAWN’s business. To

limit emissions or other harmful discharges from vehicles,

route plans are assessed to minimise distances, and

regular service and maintenance schedules are

maintained for optimum fuel consumption. Diesel

consumption in the distribution fleet in 2011 was 3 545

kilolitres translating into a carbon footprint of 9 460 CO2e

tonnes. Petrol consumption, which relates mainly to

transportation of employees, was 1 626 kilolitres

rendering a carbon footprint of 3 790 CO2e tonnes. Petrol

was calculated on petrol card transactions. The data

relating to the transport of employees who do not have

petrol cards and who make use of their own transport or

public transport has not yet been gathered. A process for

the collection of this data is being developed. [EN29]

Suppliers

Environmental management requirements are addressed

with suppliers whose products and manufacturing

processes may fall into high environmental risk categories.

> SR19

9 310

2011

8 732

3 725Scope I – Gas

Scope I – Petrol

Scope I – Diesel

Scope I – LPG gas

Scope I – Fugitive emmissions

Scope II – Electricity

Scope III – Other

41989

51 916

13 722

DAWN’s carbon footprint for FY 2011 – 88 436 CO2e



Environmental incidents

The Group has no knowledge of any significant environmental incidents that occurred in any of the manufacturing

businesses during the year under review.

Overall

Total environmental protection expenditures and investments by type will be reported in the 2012 Sustainability Report.

[EN 30]

Social indicators

Labour practices and decent work

Employment

The Group (including subsidiaries) employs 3 733 (2010: 3 872) people and the segmental breakdown of employees are

set out below:

2011 2010

DIVISIONAL SEGMENTS

Building 680 665

Infrastructure 2 341 2 475

Solutions 694 718

Other 18 14

3 733 3 872

EMPLOYMENT SEGMENTS

Full time 3 513 3 824

Part time 220 48

3 733 3 872

These figures reflect companies where DAWN has the majority shareholding.

The Group disclosed employees per divisional segment, as well as full time or part time employment above. The levels of

employment are disclosed in the Sustainable Development Performance Data. [LA1]

The number and rate of employee turnover are disclosed in the Sustainable Development Performance Data. Data

collection for 2011 did not include the specification of data by age group, gender and region, but will be addressed in

2012. [LA2]

Benefits

The DAWN Group does not discriminate in terms of benefits available to permanent and temporary employees.

Outsourced labour utilised, in very selected situations, does not qualify for Group benefits. In certain cases temporary

employees will have a waiting period applied to qualify for benefits. All benefits applicable are reflected in each employee’s

letter of employment. [LA3]

Parental leave

All employees receive the statutory regulated parental leave allocations and employment is secured after any parental leave

has been taken. Paternity leave is handled through the family responsibility statutory regulations. The return to work and

retention rates have not been collated for this year and will be addressed in future. [LA15]

SR20 <

Disciplinary practices

Codes of best practice have been integrated into the well-established disciplinary procedures in compliance with all

applicable acts and regulations.

Security practices

Ongoing security audits ensure compliance with all security practices throughout the Group to protect the lives and

well-being of employees and the integrity of Group assets.

During the year there were 28 security incidents as opposed to 24 incidents in 2010. These incidents relate mainly to petty

theft. There were two incidents of armed robbery which were reported to the South African Police Service and one arrest

was made.

Employment equity

The Group has consulted with the respective skills and employment equity forums in the divisional entities on the

development of employment equity plans, as required by the Employment Equity Act and Skills Development Act. These

plans, aimed at creating diversity in the workplace, are being monitored on an ongoing basis.

Equity and practices

The Group’s employment equity strategy includes:

• recruitment practices to employ talented employees from historically disadvantaged groups at all levels;

• human resource development programmes that are aimed at enhancing the skills of employees from historically

disadvantaged groups;

• the acceleration of the advancement of historically disadvantaged individuals at all levels throughout the Group; and

• compliance with relevant legislative requirements and targets.

Historically disadvantaged South African employees’ career paths and skills development plans

The Group’s commitment to the development of all employees and providing equal opportunities in the workplace by

making the best use of human resources with due regard to the need for building on existing strengths and employee

potential, subscribes to the following principles:

• elimination of discrimination from the workplace;

• advancement of historically disadvantaged employees through employment equity and skills development

programmes;

• economic empowerment of DAWN’s historically disadvantaged employees as well as the wider community; and

• social upliftment of historically disadvantaged employees.

Reporting

Employment equity reports are submitted to the Department of Labour and skills development reports to the relevant Skills

Authorities (SETAs) as required by law.



> SR21

DA

WN

H

ead

Off

ice

So

lutio

ns

Incl

edo

n

DP

I Pla

stic

s

Saf

fer

Inte

rnat

iona

l

DA

WN

Kitc

hen

div

isio

n

Acr

ylic

Cer

amic

Isca

Co

bra

WH

S

Watertech

INFRA-STRUCTURE

SEGMENT DA

WN

SO

LUT

ION

SS

EG

ME

NT

BUILDING SEGMENT

Sanitaryware

Tota

l



Labour/management relations [IA4]

Trade unionisation 38 462 77 308 81 21 0 150 65 421 0 1 623SATAWU 1 0 0 0 0 0 0 0 0 70 0 71SACCAWU 37 0 0 0 0 0 0 0 0 335 0 372NUMSA 0 324 71 0 0 20 0 90 65 11 0 581SAEWA 0 2 0 0 0 1 0 0 0 2 0 5MWU 0 54 0 0 0 0 0 0 0 2 0 56UASA 0 82 6 0 0 0 0 0 0 0 0 88BCAWU 0 0 0 167 0 0 0 0 0 0 0 167NUM 0 0 0 141 25 0 0 0 0 1 0 167CEPPAWU 0 0 0 0 0 0 0 16 0 0 0 16GIWUSA 0 0 0 0 0 0 0 41 0 0 0 41SOLIDARITY 0 0 0 0 0 0 0 3 0 0 0 3Other 0 0 0 0 56 0 0 0 0 0 0 56Non-unionised

number of employees 377 496 131 67 138 134 11 209 270 259 18 2 110

Total 415 958 208 375 219 155 11 359 335 680 18 3 733

Definitions:

SATAWU – South African Transport and Allied Workers Union

SACCAWU – South African Commercial, Catering and Allied Workers Union

NUMSA – National Union of Metalworkers of South Africa

SAEWA – South African Equity Workers Association

MWU – Mine Workers Union

UASA – United Association of South Africa

BCAWU – Building, Construction and Allied Workers Union

NUM – National Union of Mine Workers

SOL – Solidarity

GIWUSA – General Industries Workers’ Union of South Africa

CEPPAWU – Chemical, Energy, Paper, Printing, Wood and Allied Workers Union

There are several forums which serve as communication platforms and develop positive relationships between

management and labour representatives, dealing with operational, employment equity, skills development and conditions

of service issues.

The number of employees covered by collective bargaining agreements are listed above and constitutes 43,47% of the

Group’s South African subsidiary workforce. [LA4]

The DAWN Group companies all adhere strictly to all statutory minimum notice periods in terms of changes to conditions

of employment, notices of possible restructuring or in all cases of termination of contracts. These notice periods are

determined by collective bargaining agreements, industry bargaining agreements or employment contracts. [LA5]

SR22 <



Occupational health and safety

Health and safety

Policy, strategy, procedures and infrastructure are in place

to cater for all environmental and occupational health and

safety issues. Considerable emphasis is placed on

preventing workplace accidents and fatalities. Risk

assessments ensure ongoing compliance with the

Occupational Health and Safety Act

Safety committees

The DAWN divisional entities have established health and

safety committees, assisted by the centralised DAWN HR

Solutions business. These committees attend to health

and safety issues and make recommendations to

management to continuously improve the working

environment of the employees.

HIV/AIDS

While conscious of the serious impact of the HIV/AIDS

pandemic, the DAWN Group is also aware of the threat of

other diseases which could cause significant risk and

does not limit its efforts to managing HIV/AIDS.

Healthcare promotion does not concentrate purely on

HIV/AIDS, but addresses other infectious and lifestyle

diseases as well. Mobile clinics travel to all business units

on a regular basis.

The HIV/AIDS management programme is administered

and controlled by a third party service provider and is

available to all employees on a voluntary basis. It includes

free testing, counselling and wellness drugs.

Confidentiality is strictly observed and employees may

participate on an anonymous basis. HIV/AIDS

awareness and education campaigns are conducted

annually.

The manufacturing operations have medical clinics at

most plants, staffed by qualified health practitioners who

have developed comprehensive strategies for HIV/AIDS

management.

All DAWN Group companies have a formal Health and

Safety joint management/worker committee infrastructure.

It is the mandate of these committees to monitor all

activities within the mandate and scope of the

committees and to devise action plans to ensure proper

regulation and pro-active actions to minimise any risk

identifies. Monthly reporting by these committees flow

through to senior management of each company to

appropriate actions to be initiated. [LA6]

An calculation was done on the South African Subsidiary

companies disabling injury frequency rate, which resulted

in a rate of 0,86% calculated on 7 700 622 hours worked

with 33 disabling injuries. [LA7]

Occupational and healthcare clinics are operated by some

of the DAWN Group companies, which focus on specific

occupational diseases inherent in the specific operations.

These programmes include hearing loss, tuberculosis,

HIV/AIDS, silicoses, hypertension, diabetes and lung

function monitoring as well as medical programmes

supported by occupationally qualified medical

practitioners and support staff. [LA8]

The Group has no official agreements with any union

covering any specific health and safety programme. [LA9]

Training and education

Skills development and employment equity are extremely

closely aligned. The employment equity committees in the

various businesses of the DAWN Group have set up

systems and procedures within which they operate.

The process of planning and implementation of training

within the DAWN Group is streamlined and refined to gain

maximum benefit from the various SETAs. The workplace

skills plans and training reports are open for debate at

skills and equity meetings. Training and development are

planned with the purpose to be of practical use in the

short- and long-term. The skills development facilitator of

the business entity and the employment equity manager

of the Group review the training requirements with the

skills and equity committees and management on an

ongoing basis.

The Group acknowledges that skills development is key

to the organisation as a whole. Several training initiatives,

from technical training to management development

initiatives, are planned and conducted on an annual basis

and development of future talent for the organisation is a

stated objective. Records of planned and actual training

are maintained on an ongoing basis to ensure that skills

shortages can be identified and addressed timeously.

Apprentice training and SETA-sponsored learnerships are

addressed for the long-term development of, particularly,

the youth within the Group. Learnerships are registered

and managed in association with the SETAs to which the

Group belongs.

> SR23



DAWN Academy

The establishment of the DAWN Academy is a direct

result of DAWN’s commitment to growing and developing

its employees to ensure an appropriate flow of a well

qualified and experienced talent pool for the achievement

of the strategic objectives of DAWN. The growth and

development of the DAWN Academy are the responsibility

of the skills development facilitator based at DAWN HR

Solutions. The virtual operational style of the DAWN

Academy allows it to be flexible in its approach and to

focus on the needs identified in the different operational

units of the Group while simultaneously keeping pace with

ever-changing demands and a dynamic environment. The

integrated HR strategies developed for all companies

have, as one of its pillars, employee training and

development and the DAWN Academy plays a pivotal role

in supporting and driving the attainment of that specific

strategic objective.

The mission of DAWN Academy states that:

• We are committed to identify the development and

training needs of our in-house clients.

• We will research and deliver quality development

programmes to nominated persons and groups in

good time.

• We will embrace change and thus devote ourselves

to initiate and promote excellent learning

programmes.

• We endeavour to surpass expected delivery

training standards.

• We will adhere to the statutory requirements of

good labour practices and Group strategies.

Training and development programmes presented in the

Group, including courses presented by external trainers,

are done under the guidance of the above mission. The

training is mainly conducted by external facilitators with

exemplary reputations of knowledge, integrity and ability

to fast-track the growth and development of the learners.

All these selected suppliers are accredited and registered

to ensure full compliance and spending advantage to all

training and development investments. All records of

training are recorded and this information is published in

the reports to the SETAs, the Department of Labour

(through the Employment Equity Reports), accreditation

bodies, who are working on BBBEE data, and any other

accredited body requiring such information. The records

will assist individuals and management with succession

planning and the growth and development of the Group

as a whole.

Skills development

All companies have established skills development forums

which are combined with the employment equity forums

and consultation regarding workplace skills plans and

progress reports is channelled through the forums.

A standard procedure has been developed for these

forums and includes a constitution through which they

work. The constitution guides the contributing members

on the policies and procedures of the Group and the

equity issues which may be perceived to exist and need

to be rectified. The fairness regarding training and

development issues are critical to the input and the

functioning of the committee.

The DAWN Group operates a Management Development

Programme (MDP), one each for the trading and the

manufacturing operations. The long-established trading

MDP entered its seventh year during the financial year

and, to date, approximately half of new management

appointments in the trading businesses have come from

MDP graduates. The manufacturing MDP is now in its

third year and similar results have been achieved as in the

trading MDP. Both these programmes are presented by

an accredited external supplier and are delivering

excellent results for the Group. Adult Basic Education and

Training (ABET) is relevant to all companies in the Group.

The responsibility of the success of these programmes is

shared between the learners and the company

representatives who make themselves available as

sponsors and supporters of the programme. Many of the

participants of this programme are now in a position to

apply for promotion positions within the group. Ongoing

customer care programmes (internal and external

customers) benefit all employees, who are reminded of

their duty to be knowledgeable, supportive and willing to

go the extra mile. Sales people, receptionists, finance and

administrative staff and warehouse staff have received

training from a variety of experts over the past year.

Several technical skills training initiatives are continuously

being conducted within DAWN companies to ensure

expertise levels are kept up to date. Individual

development plans have also been developed for specific

employees or employee groupings to assist and drive

personal development as well as to drive the succession

planning within the Group. [LA11]

SR24 <



Training hours

During 2011 a total of 9 858 hours was spent on internal and external training of employees, with the number of hours

reducing by 20% from 12 403 hours in 2010. The number of employees that were trained reduced from 3 089 in 2010 to

932, due to the reduction in employee numbers, cost reduction programmes and to an extent the uncertainty pertaining to

the SETAs and the grant claiming delays and procedures. A focussed approach was also employed on training to ensure a

solid return on investment. The training spend per employee trained, therefore, increased by 230% from R870 to R2 868.

The data has not been collated by gender and by employee category for the year under review and will be addressed in

the 2012 Sustainability Report. [LA10]

All senior and middle management employees of the DAWN Group form part of the Group’s performance management

programme. This programme aims to ensure the alignment of management’s objectives to those of the Group and

individual companies. All applicable participants of this programme receive, on an annual basis, a clear and agreed

performance charter linked to the companies’ and Group’s strategic objectives and supported by the companies’ incentive

programme. Official bi-annual review discussions are held to align performance with expectations. Furthermore, the

performance of all other employees is monitored through productivity ratios and measurements inherent in the monthly

measurements of the companies. [LA12]

Diversity and equal opportunity

Diversity in the workplace is encouraged by targeted employment practices and internal development opportunities areprovided for identified employees.

Employee composition

The composition of governance bodies is outlined in the Integrated Report on page s IR09 to IR11. The breakdown ofemployees per category according to gender and minority group membership, including their representation at management level, is disclosed in the Sustainable Development Performance Data. [HR4]

Equal remuneration for women and men

There is no discrimination within the Group in terms of any remuneration or benefits between the genders. [LA14]

Human rights

As a responsible corporate citizen and employer, the DAWN Group fulfils all the requirements of the various acts, rules andregulations governing labour, including the Constitution, the Labour Relations Act, the Employment Equity Act, the SkillsDevelopment Act and the Basic Conditions of Employment Act.

Consequently:

• forced and compulsory labour is not practised; [HR7]

• child labour is not practised; [HR6]

• the working environment and working conditions are safe and healthy;

• freedom of association is respected; and

• the guidelines of the International Labour Organisation are complied with.

The Group will not hesitate to terminate agreements and relationships with contractors or suppliers who act in contravention of international human rights standards.

Investment and procurement practices

Significant investment agreements that include human rights clauses or that have undergone human rights screening arenot reported this year. [HR1] Therefore, the Group is also not in a position to report on significant suppliers and contractorsthat have undergone screening on human rights and actions taken. [HR2] These matters will be addressed in the 2012Sustainability Report.

> SR25

Employees, on entering employment at DAWN, attend aninduction course which includes elements such as theGroup’s Code of Ethical Conduct as well as the Group’spolicies and procedures regarding aspect of human rightsthat are relevant to all operations. During the year 41employees (2010: 123 employees) attended the inductionprogramme. [HR3]

Non-discrimination

The Group adheres to a policy of non-discrimination,excepting only specific strategies which are developed toaddress stated Group objectives. [HR4]

Freedom of association and collective bargaining

Employees have the right to belong to collective bargaining associations which are recognised accordingto clearly defined criteria. Several forums enhance communication and develop relationships between management and labour representatives. Regular consultation and negotiation with representative associations and majority unions take place on relevantissues.

No operations were identified in which the right to exercise freedom of association and collective bargainingmay be at significant risk. [HR5]

Security practices

Security at the Group’s operations are outsourced tosecurity companies and these companies are informed ofDAWN’s policies and procedures concerning aspect ofhuman rights that are relevant to operations to ensurethat the security personnel provided by the securitycompanies are properly trained and are aware of DAWN’s practices. [HR8]

No incidents of violations involving rights of indigenouspeople were reported. [HR9]

Assessment

None of the Group’s operations that have been subject tohuman rights reviews and/or impact assessments. [HR10]

Remediation

No grievances relating to human rights were filed againstDAWN or any of its subsidiary companies in South Africa.[HR11]

Society

Local Communities

DAWN sees its employees as key stakeholders andstrives to create a safe, humane, ethical work

environment. As employees are recruited from the localcommunities where DAWN’s operations are based, thisapproach extends to the communities in which the Groupoperates. The Group’s environmental and social responsibility principles guide its daily decision-makingand govern how it enters, operates in and exits a community. With the dearth of skills in South Africa,DAWN’s initiatives focus on skills development with a viewto enabling individuals to enter the workplace, particularlyin the industry in which the Group operates. To this endtraining materials were developed for the training ofplumbers and DAWN has partnered with a number ofinstitutions, where the training materials are supplied byDAWN and a contribution is made for the required equipment to facilitate the training, in a number of communities where the Group operates. [SO1]

Corruption

The DAWN Group is implacably opposed to bribery andcorruption and has implemented anti-corruption policies.Employees are discouraged from accepting any gifts orfavours from suppliers that obligate them in any way to reciprocate. It has implemented a system to encourageemployees to report all incidences or suspicion of fraud,theft, corruption and similar unethical behaviour through a confidential and secure “whistle-blowing” line. The Groupcomplies with all the requirements of the Anti-Fraud andCorruption Act and the Protected Disclosures Act.

The objectives of the policy are to ensure that fraud isaddressed both pro-actively and reactively in a structuredmanner.

DAWN’s policy is founded on the following fundamentalfraud prevention principles:

• promoting a set of values, complemented by soundethical behaviour and a supporting code of ethics;

• pro-active identification of fraud risks through structured fraud risk assessment;

• prevention strategies to limit the risk of fraud;

• strategies for early detection of fraud;

• investigation approaches when incidents of frauddo occur;

• comprehensive resolution and remediation afterinvestigations; and

• programmes to create awareness of the policy.

The percentage and total number of business unitsanalysed for risks related to corruption is not reported this



SR26 <

year. [SO2] The percentage of employees trained in the organisation’s anti-corruption policies and procedures relates tothe induction training programme, where all new employees are introduced to the Group’s fraud and prevention mechanisms. During the review year 1,10% (2010: 3,18%) were trained in these matters. [SO3] No incidents of corruptionwere reported during the year. [SO4]

Public policy

During the year the Group did not participate in public policy development and lobbying. [S05]

The Group does not contribute to any political parties and no such contributions have been made in the year under review.[SO6]

Anti-competitive behaviour

The Group supports and encourages free external and internal competition in all business units, subsidiaries and associatecompanies. [SO7]

No legal action was brought against DAWN or any of its subsidiary companies for anti-competitive behaviour, anti-trust

and monopoly practices. [SO7]

Compliance

There were no significant fines or non-monetary sanction for non-compliance with laws and regulations brought against

DAWN or any of its subsidiaries during the year under review. [SO8]

Product responsibility

The Consumer Protection Act aims to promote a fair, accessible and sustainable marketplace for consumer products and

services. The Act will entrench national norms and standards on consumer protection and provide for improved standards

of consumer information. The Act prohibits certain unfair marketing and business practices and promotes responsible

consumer behaviour.

External services providers were engaged to provide training to the marketing, sales and manufacturing units in the Group

to familiarise them with the requirements of the Consumer Protection Act. Warranty policies are in place for DAWN’s

branded products, which are owned by the Group, and assurance is gained from external suppliers where products are

purchased in, where any returns revert back to the external supplier. The terms of trading and the trading agreements are

reviewed and aligned with the requirements of the Act. As far as imported products are concerned, the Group ensures that

controls around quality exist at the source.

Customer health and safety

Customers are advised of the statutory health and safety requirements in accordance with applicable legislation. Business

entities in the Group who deal directly with customers have policies to preserve customer health and safety. Each business

unit is responsible for formulating and applying its own policy that is appropriate for the environment in which it operates.

The products manufactured by the Group do not pose a risk to customers’ health and safety. [PR1]

Non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services

during their life cycle is not applicable on the Group. [PR2]



> SR27

Product and service labelling

The manufacturing businesses in the Group provide labelling and product information in compliance with local regulations.

Appropriate measures are introduced to ensure that the information or labelling be inadequate from a marketing, safety or

regulatory perspective.

Products

DAWN companies supply a wide range of products to residential and non-residential construction projects through

builders and sanitaryware merchants. Water and sewer products in civil pipeline infrastructure are also key elements in its

manufacturing and supply offering. [PR 3]

Labelling

DAWN’s manufactured product ranges conform to SANS and ISO specifications where quality, packaging, labelling,

marking and application codes of practice are clearly defined. Regulations regarding many of these applications are

defined in the National Building Standard. Civil pipeline applications are specified by professional engineers. [PR3] There

were no incidents of non-compliance with regulations and voluntary codes concerning products and service information

and labelling. [PR4]

Customer satisfaction

Quality of customer service is frequently measured by the trading companies as well as by the manufacturing companies in

the Group. Policies and procedures in respect of quality and customer service have evolved over time and the Group is

presently reviewing a central approach to this kind of research. DAWN’s marketing and advertising communications are

professionally created and deal broadly with benefits and application. The Group is closely aligned to industry associations

and offers a wide variety of training in the use and application of its products. [PR 5]

Marketing communications

Advertising is conducted through a variety of mediums by the business entities within the DAWN Group, targeting the

markets and customers which are appropriate to each business unit. The Group has no record of charges having been

laid by the public or competitors regarding misleading or unfair practices or advertisements.

Programmes for adherence to laws, standards, and voluntary codes related to marketing communications, including

advertising, promotion and sponsorship, are implemented through DAWN Marketing & Design and the external advertising

agencies and marketing specialists contracted by Group companies. [PR 6]

No incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including

advertising, promotion and sponsorship were reported during the year. [PR 7]

Customer privacy

There were no substantiated complaints regarding breaches of customer privacy and losses of customer data during the

year under review. [PR8]

Compliance

The Group received no significant fines for non-compliance with laws and regulations concerning the provision and use of

DAWN’s products and services. [PR9]



SR28 <

QualityThe manufacturing operations in the Group are accredited as follows:

Business Entity Accreditation

Cobra ISO 9001:2008 – Quality Management System

SABS SANS 1056-2 and 1056-3 – Ball Valves, Heavy-duty Valves (not fire-safe) and

Light-duty Valves (not fire-safe)

SABS SANS 752 – Float Valves

SABS SANS 226 – Water Taps (metallic bodies)

SABS SANS 776 – Copper Ally Gate Valves (heavy-duty)

SABS SANS 1067-1 and 1067-2 – Copper-based Fittings for Copper Tubes,

Compression Fittings and Capillary Solder Fittings

SABS SANS 1240 – Automatic Shut-off Valves for Water Closets and Urinals

SABS SANS 1480 – Single Control Mixer Taps

SABS SANS 198 – Functional-control Valves and Safety Valves for Domestic Hot and

Cold Water Supply Systems

SABS SANS 1808-35,66 & 9 – Electronic Mixer, Demand Tap, Metering Taps and

Accessories

SABS SANS 1808-10 & 53 – Check Valves and Drain Cocks

SABS SANS 151 – Hot Water Cylinders

SABS SANS 15875 – Single Layer Pipe System

Heat pumps and solar have passed the SABS test results and Cobra is currently

awaiting the certificates.

DPI Plastics ISO 9001:2000 – Quality Management System

SABS SANS 11 – Unplasticised Polyvinyl Chloride (PVC-U) Components for External

Rainwater Systems

SABS SANS 791 – Unplasticised Polyvinyl Chloride (PVC-U) Sewer and Drain Pipes and

Fittings

SABS SANS 966-1 – Unplasticised Polyvinyl Chloride (PVC-U) Pressure Pipe Systems

SABS SANS 966-2 – Modified Polyvinyl Chloride (PVC-M) Pressure Pipe Systems

SABS SANS 967 – Unplasticised Polyvinyl Chloride (PVC-U) Soil, Waste and Vent Pipes

and Pipe Fittings

SABS SANS 1283 – Modified Polyvinyl Chloride (PVC-M) Pressure Pipe and Couplings

for Cold Water Services in Underground Mining

SABS SANS 1601 – Structured Wall Pipes and Fittings of Unplasticised Polyvinyl

Chloride (PVC-U) for Buried Drainage and Sewerage Systems

SABS SANS 1808-85 – Oriented Polyvinyl Chloride (PVC-O) Pressure Pipes for

Underground Use

SABS SANS 4427 – Polythelene (PE) Pipes for Water Supply – Specifications



> SR29



Business Entity Accreditation

Isca ISO 9001:2000 – Quality Management System

SABS 226 – Water Taps (Metallic Bodies)

SABS 1480 – Single Control Mixer Taps

SABS 1808-35 – Electronic Operated Valves and Taps on Specific Products

Libra All products conform to the international quality standard EN198

Sangio Pipe SABS ISO 4427 – Polyethylene Pipes

SABS 1315 – Water Supply for Hot and Cold Water

PE63, PE80 and PE100 – Water Supply

Vaal ISO 9001:2000 – Quality Management System

SABS 497:2006 – Vitreous China and Fireclay Sanitaryware

Broad-Based Black Economic EmpowermentThe DAWN Group acknowledges that for black economic empowerment to be sustainable, it must be broad-based. The

Group adopts a holistic approach to empowerment addressing skills development, employment equity, promotion in the

workplace, procurement practices which support developing businesses and suppliers, enterprise creation and equity

ownership in the Group.

In order for the Group to remain competitive, improve market position and leverage new business opportunities, thereby

enhancing profitability, it is imperative that it not only complies with the requirements of the Broad-Based Black Economic

Empowerment Act and related Codes of Good Practice, but that transformation is accelerated to bring the majority of

historically disadvantaged individuals into the mainstream economy by also providing meaningful economic participation

and to share in wealth creation resulting from economic activities.

Measuring performance – BBBEE Scorecard

During the review year, Distribution and Warehousing Network Limited achieved a BB Level 6 BBBEE contributor rating

which remains valid until 23 November 2011.

Weighting 2011

Core components BBBEE elements points %

Direct empowerment Ownership 20 18,26

Management control 10 2,50

Human resource empowerment Employment equity 15 0,00

Skills development 15 0,65

Indirect empowerment Preferential procurement 20 10,07

Enterprise development 15 12,48

Socio-economic development 5 5,00

Total 100 48,96

Empowerment level BB level 6

SR30 <



DAWN’s Broad-Based Black EconomicEmpowerment policy

DAWN has completed a comprehensive BBBEE rating

exercise for all Group companies. DAWN achieved an

overall level 6 (BB) contributor status and focussed

actions are in place to further improve on the position by

the next reporting period.

Subsequent to the Codes of Good Practice being

gazetted, the Group has developed structures and

processes aimed at implementing Broad-Based Black

Economic Empowerment plans agreed to by the

respective Group companies.

Equity ownership

Ukhamba Holdings Proprietary Limited owns 33,5% of

DAWN’s shareholding (including 2 million deferred

ordinary shares) through its wholly-owned subsidiaries,

Dream World Investments 239 Proprietary Limited and

Monyetla Marketing Proprietary Limited. Ukhamba is a

broad-based black-owned investment holding company

whose beneficiaries include some 15 000 historically

disadvantaged individuals and a community trust. 40% of

the DAWN Board comprises directors from historically

disadvantaged backgrounds.

Enterprise development

Various initiatives are in place as part of the Group’s

enterprise development strategy. The highly successful

owner-driver scheme implemented in DAWN Cargo

increased its number of owner-drivers to twelve during the

review year, with the target being to have 50% of the fleet

as owner-drivers by 2014.

The DAWN Group has a contract with a black-owned

business to recycle pallets. The Soweto School for the

Blind undertakes merchandising pre-packaging in the

Gauteng area. The manufacturing companies outsource

assembling functions to Sunfield Homes and Cripple

Care. Further contracts have been established with

canteen operations, security companies and local

transport companies (taxis).

The Company has adopted a strategy of investing time,

money and other resources into fledgling black-owned

start-up businesses. Through these initiatives such

businesses are developed into self-sustaining, successful

enterprises whilst DAWN benefits from their products and

services. These businesses also receive preferential

settlement terms from DAWN in order to assist them with

their cash flow.

Black Economic Empowerment procurement

Procurement is evaluated in a socially responsible manner

and embraces assessment of suppliers who are not

involved in non-discretionary spend. Black-empowered

organisations provide a percentage of the Group’s

requirements. The companies in the DAWN Group are in

the process of increasing procurement from BBBEE

providers and accrediting suppliers and service providers.

Identified suppliers and service providers are supported

with targeted orders and technical assistance to promote

their growth.

SMME development and job creation

The Group (including subsidiaries) now employs 3 839

(2010: 3 966) people. This number excludes all

companies where DAWN has involvement, but not

majority shareholding.

The divisional businesses contribute to SMME development by outsourcing certain non-core activities tothese entities.

Corporate Social Investment

The Corporate Social Investment (CSI) initiatives are being

managed centrally, by the Ethics and Transformation

Committee, comprising of senior marketing and HR

executives, as well as DAWN Board members and is

chaired by VJ Mokoena. This Committee is a sub-

committee of the Board and is tasked to oversee and

drive the transformation strategy, including BBBEE and

CSI objectives.

The CSI programme is based on three main pillars.

Pillar one – Communities and the environment

Touch Africa is a unique, innovative concept that uplifts

impoverished villages and communities within the borders

of southern Africa. Within the Eastern Cape in the

communities of Loerie, Willowmore, Storms River,

Kareedouw and Saaimanshoek both artisans and

labourers are employed and, together with the Touch

Africa project team, renovation of schools, clinics and

community halls are done. The project is based on

refurbishment. DAWN participates by supplying products,

financial sponsorships and training of artisans.

DAWN is a principal member of the World WildlifeFoundation, South Africa (WWF-SA) and subscribes to itsvision being – “to inspire collective custodianship of ournatural heritage with passion, integrity and enthusiasm”.Conservation projects include education, marine, freshwater, fynbos, climate change, grasslands, forests,species and Karoo.

> SR31

DAWN also supports The People Upliftment Programme

(POPUP), a non-profit organisation which is primarily a

training facility providing skills development and training

for unemployed and disempowered individuals with a

holistic approach to the upliftment of under-privileged

communities. People without work (literally from the

streets) are given two weeks’ life skills training and food

for which they pay a token R50,00 in the first phase. The

second phase is focused on more specific training such

as secretarial and catering with plumbers training due to

commence in 2012. DAWN will contribute training

materials for the training of plumbers to POPUP and will

also help them with the building of plumber training

facilities. POPUP’s success rate of placing of individuals in

suitable jobs, after having completed the second phase of

training, is 60%. Individuals who participate in POPUP’s

upliftment and training programmes have the ability to

enter the workplace with a certificate stating their skills as

well as with a good set of values.

Pillar two – Industry

The second CSI initiative is a partnership between DAWN,

the Institute of Plumbing Institute Registration Board and

Watersmith Training Institute. It involves the development

of training materials for the development of plumbers and

solar installation specialists. The focus is on trainees from

historically disadvantaged communities and simultaneously

contributes to capacity building in the industry where

DAWN’s products are utilised. During the year under

review the partnership was extended to the Plumbing

Industries Registration Board, a body created recently to

regulate the work and output standards of the plumbing

trade.

Pillar three – Ad hoc financial contributions

Several ad hoc financial support donations are also made

annually to deserving charities, ie Boys and Girls Town,

MaAfrika Tukken and SA Medical Association (Cape

Town) and many others.

Sustainable development performancedata

Data has been collated for DAWN’s South African

operations, including all South African subsidiaries, but

excluding joint ventures, associates and over-border

operations, for the period 1 July 2010 to 30 June 2011,

which coincides with DAWN’s financial reporting cycle.

Every effort has been made to ensure data accuracy and

completeness. There is, however, the possibility of small

inconsistencies due to human error in recording and

collating, and differences in interpretation of definitions.

Where the analysis refers to racial categories, “Black” in

that context includes black, Indian and coloured.

Employee-related data includes non-permanent, contract

employees.

Data is only reported where it is considered to be of suffi-

cient accuracy and is reported according to the G3 GRI

guidelines. Ongoing efforts are being made to improve the

data quality and to broaden the range of indicators.

Where information is not available, this has been

marked with a “~”.

Health and safety indicators

• Definitions relating to occupational health and

safety are in line with the GRI’s G3 guidelines. This

data is reported as ‘lost-time injury frequency rate’

and ‘work-related fatalities’.

• A ‘lost time injury’ is defined as a work-related

injury occurring while on duty and is reported if an

employee is not able to return to their normal

duties the day following the day on which the injury

occurred. The ‘lost time injury rate’ expresses the

frequency of injuries relative to the total time

worked by the total workforce for the reporting

period.

• A ‘disabling injury’ is an injury that can result in

death, permanent disability or any degree of

temporary total disability beyond the day of the

injury. It disables a person from performing the

tasks he/she was doing earlier in the normal

course. Temporary total disability is an injury that

does not result in death or permanent disability, but

that renders the injured person unable to perform

regular duties or activities after the day of the injury

The Disabling Injury (including illness) Frequency

Rate is based upon the total number of deaths,

permanent total, permanent partial and temporary

total disabilities which occurred during the period

1 July 2010 to 30 June 2011. The rate relates

those injuries/illnesses to the employee-hours

worked during the period and expresses the

number of such injuries/illnesses in terms of a

million man-hour unit.



SR32 <

Sustainable development performance data continued

2011 2010

ECONOMIC

Revenue (R’000) 3 792 631 3 618 391

Operating profit (R’000) 33 070 207 868

Operating margin (%) 2,7 5,5

Broad-based black economic empowerment procurement *

BBBEE procurement spend (R’000) 1 410 473 693 720

Corporate social investment *

CSI spend (R’000) 1 350 637

CSI as % of pre-taxation profit 4,08 0,31

Enterprise development spend (R’000) * 3 574 7 122

ENVIRONMENTAL PARAMETERS

Total water usage (litres ’000) 210 934 188 122

Waste-water discharged (litres ’000) 8 330 7 800

Groundwater extracted (borehole) (litres ’000) – usage and permitted 1 100 ~

Water reuse or recycling (litres ’000) 700 ~

Total electricity usage (MWh) 55 688 56 380

Petrol (litres) 661 152 533 777

Diesel (litres) 3 171 810 3 272 014

Total carbon emissions (CO2e tonnes) 88 436 91 925

Carbon emissions per employee (CO2e tonnes) 23,69 23,74

Waste volumes disposed of (tonnes per month) 552 576

EMPLOYEES AND THEIR COMPOSITION

Total number of employees 3 733 3 872

Number of full-time employees 3 513 3 824

Proportion of DAWN Group (South African subsidiaries) employees (%) 94,11 98,76

Growth (%) (8,13) (4,51)

Number of part-time employees 220 48

Proportion of DAWN Group (South African subsidiaries) employees (%) 5,89 1,24

Growth (%) 358 (70)

Employee benefits and remuneration (R’000) 638 444 559 186

Growth (%) 14,17 0,66

Employment by gender profile

Group 3 733 3 872

Male 2 683 2 806

Female 1 050 1 066

Female employment (Group) 1 050 1 066

Directors 17 15

Management 53 58

Other employees 980 991

* Rating relates to reported year; data pertains to prior year.



> SR33


2011 2010

Employment equity profile by race 3 733 3 872

Black 2 314 2 433

White 882 943

Indian 143 122

Coloured 394 372

Employment equity by race and gender 3 733 3 872

Black male 2 153 2 271

White male 534 575

Black female 683 691

White female 363 335

Management representation

DAWN Group board representation 10 8

Black male 3 2

White male 5 5

Black female 1 –

White female 1 1

DAWN divisional board representation 36 37

Black male 3 3

White male 30 32

Black female – –

White female 3 2

Top management 57 59

Black male 10 5

White male 31 41

Black female 3 1

White female 13 12

Senior management 127 123

Black male 22 26

White male 78 79

Black female 5 4

White female 22 14

LABOUR PRACTICES

Staff turnover rate – (%) 24,76 26,55

Staff complement 1 July 3 858 4 261

Staff complement 30 June 3 733 3 872

Average staff complement for the year – 1 July to 30 June 3 784 3 929



SR34 <


2011 2010

LABOUR PRACTICES (continued)

Movement (126) (370)

Number of retrenchments 61 289

Number of resignations 629 493

Number of replacements 739 607

Number of new positions 59 85

Number of transfers 12 70

Number of dismissals 235 191

Number of labour disputes, strikes, grievances, CCMA 59 64

Number of disabled employees 40 40

TRAINING

SDL spend (R’000) 5 570 5 394

% total training investment as % of payroll 0,02 0,02

Total training spend (R’000) 2 673 2 689

Number of employees trained 932 3 089

Training spend per employee (R’000) 2 868 870

Total training hours 9 858 12 403

Training hours per employee trained 10,58 4,02

Bursaries, internships, Executive and Board training (R’000) 946 1 199

Safety, health and environmental training (R’000) 266 235

Supplier or customer training (R’000) 100 252

HEALTH AND SAFETY

Medical examination – pre-employment, periodical and exit medicals conducted 545 498

Induction training – employees, visitors, contractors 41 123

Lost time injury frequency rate 1,90 0,70

Disabling injury frequency rate 0,86 0,79

Number of security incidents 28 24

HIV/Aids

HIV/AIDS training spend (R’000) 17 17

Number of employees who received HIV/AIDS training 379 293

HIV/AIDS training spend per employee (R) 45 58

HIV/AIDS training hours 18 288

HIV/AIDS training hours per employee 3 6

Employee percentage that participated in HIV/AIDS related training and awareness programmes 10,15 7,57



> SR35


SR36 <

DAWN followed the GRI’s G3.1 sustainability reporting guidelines. This table provides cross-references to where GRI

performance indicators are discussed.

Where DAWN did not report on a GRI indicator, this does not necessarily mean that the issue is not addressed by DAWN

business units. Non-reporting could be due to the difficulty of gathering this level of detailed information given the Group’s

multi-faceted nature. Ongoing efforts will be made to improve indicator coverage and data collation.

Profile Pagedisclosure Description Reference/section no/s

1. Strategy and analysis

1.1 Statement from the most senior decision-maker Sustainability Report. SR01 toof the organisation. SR02

1.2 Description of key impacts, risks and opportunities. Integrated Report. SR06Sustainability Report. IR15 to

IR17

2. Organisational profile

2.1 Name of the organisation. Sustainability Report. SR07

2.2 Primary products, brands and/or services. Integrated Report. IR07

2.3 Operational structure of the organisation, including Sustainability Report; SR07main divisions, operating companies, subsidiaries, Integrated Report; IR07and joint ventures. Integrated Report; IR08 to

IR09Annual Financial Statements – FS92 toDetails of subsidiaries, associates FS94and joint ventures.

2.4 Location of organisation’s headquarters. Shareholders’ Information – Corporate Information. SI14

2.5 Number of countries where the organisation operates Group at a Glance. GAG01 toand names of countries with either major operations GAG16or that are specifically relevant to the sustainability Sustainability data has only beenissues covered in the report. collated for South African operations.

2.6 Nature of ownership and legal form. Sustainability Report. SR07

2.7 Markets served (including geographic breakdown, Annual Financial Statements – FS34 tosectors served and types of customers/beneficiaries). Segmental Analysis – Note 2. FS35

Group at a Glance – Geographical. GAG10

2.8 Scale of the reporting organisation. Annual Financial Statements for the FS01 toyear ended 30 June 2011. FS94

2.9 Significant changes during the reporting period Annual Financial Statements – FS04 toregarding size, structure or ownership. Directors’ Report. FS08

2.10 Awards received in the reporting period. Sustainability Report. SR07

GRIindex


> SR37

GRI indexcontinued


3. Report parameters

3.1 Reporting period (eg fiscal/calendar year) for 1 July 2010 to 30 June 2011.information provided.

3.2 Date of most recent previous report. This is DAWN’s first Sustainability Report in accordance with GRI guidelines.

3.3 Reporting cycle. Annual.

3.4 Contact point for questions regarding the report or Sustainability Report. SR07its contents.

3.5 Process for defining report content. Sustainability Report. SR07

3.6 Boundary of the report (eg countries, divisions, Sustainability Report. SR07subsidiaries, leased facilities, joint ventures, suppliers).

3.7 State any specific limitations on the scope or Sustainability Report. SR07boundary of the report.

3.8 Basis for reporting on joint ventures, subsidiaries, Annual Financial Statements – FS15 toleased facilities, outsourced operations, and other Accounting Policies. FS33entities that can significantly affect comparability from period to period and/or between organisations.

3.9 Data measurement techniques and the bases of Financial data is extracted from thecalculations, including assumptions and techniques Annual Financial Statements. underlying estimations applied to the compilation of the Indicators and other information in the report. Details of estimates and judgements Explain any decisions not to apply, or to substantially made by management are explaineddiverge from, the GRI Indicator Protocols. in the Accounting Policies.

Employee information is collectedand reported on by the Group HR departments.

3.10 Explanation of the effect of any re-statements of This is DAWN’s first Sustainability information provided in earlier reports, and the Report in accordance with GRI reasons for such re-statement (eg mergers/ guidelines.acquisitions, change of base years/periods, nature of business, measurement methods).

3.11 Significant changes from previous reporting periods This is DAWN’s first Sustainability in the scope, boundary or measurement methods Report in accordance with GRI applied in the report. guidelines.

3.12 Table identifying the location of the Standard Sustainability Report – GRI Index. SR36 toDisclosures in the report. SR45

Contents. Inside frontcover

3.13 Policy and current practice with regard to seeking The Annual Financial Statements external assurance for the report. have been audited by independent

audit firm, PricewaterhouseCoopersInc.

Empowerment data has been verified by Empowerdex.

Carbon footprint data has beenassured by Global Carbon Exchange.


GRI indexcontinued


4. Governance, commitments and engagement

4.1 Governance structure of the organisation, including Integrated Report. IR09 tocommittees under the highest governance body IR12responsible for specific tasks, such as setting strategy or organisational oversight.

4.2 Indicate whether the Chair of the highest governance The Board is chaired by a body is also an executive officer. non-executive Chairman.

4.3 For organisations that have a unitary board structure, Corporate Governance – CG04 tostate the number of members of the highest Directorate. CG07governance body that are independent and/or non-executive members.

4.4 Mechanisms for shareholders and employees to There is an annual general meetingprovide recommendations or direction to the highest of shareholders.governance body.

4.5 Linkage between compensation for members of the Corporate Governance – CG26 tohighest governance body, senior managers, and Remuneration Committee. CG35executives (including departure arrangements), and the organisation’s performance (including social and environmental performance).

4.6 Processes in place for the highest governance body Directors’ interests in contracts areto ensure conflicts of interest are avoided. required to be disclosed at all

Board meetings.

4.7 Process for determining the qualifications and Corporate Governance – CG13expertise of the members of the highest governance Nomination Committee.body for guiding the organisation’s strategy on economic, environmental and social topics.

4.8 Internally developed statements of mission or values, Sustainability Report. SR07 tocodes of conduct, and principles relevant to SR11economic, environmental and social performance and the status of their implementation.

4.9 Procedures of the highest governance body for Corporate Governance – CG22 tooverseeing the organisation’s identification and Audit Committee; CG25management of economic, environmental and social Corporate Governance – CG11 toperformance, including relevant risks and Risk Committee; CG13opportunities, and adherence or compliance with Corporate Governance – CG14 tointernationally agreed standards, codes of conduct, Ethics and Transformation CG15;and principles. Committee. CG36 to

CG39

4.10 Processes for evaluating the highest governance Corporate Governance. CG10body’s own performance, particularly with respect to economic, environmental and social performance.

4.11 Explanation of whether and how the precautionary Sustainability Report. SR11approach or principle is addressed by the organisation.

4.12 Externally developed economic, environmental and Sustainability Report. SR11social charters, principles or other initiatives to which the organisation subscribes or endorses.

SR38<


GRI indexcontinued


4.13 Memberships in associations (such as industry Sustainability Report. SR11associations) and/or national/international advocacy organisations in which the organisation:• has positions in governance bodies;• participates in projects or committees;• provides substantive funding beyond routine

membership dues; or• views membership as strategic.

4.14 List of stakeholder groups engaged by the Sustainability Report; SR12organisation. Integrated Report. IR13 to

IR14

4.15 Basis for identification and selection of stakeholders Sustainability Report; SR12with whom to engage. Integrated Report. IR13

4.16 Approaches to stakeholder engagement including Corporate Governance; CG21frequency of engagement by type and by stakeholder Integrated Report. IR13 togroup. IR14

4.17 Key topics and concerns that have been raised Integrated Report. IR13 tothrough stakeholder engagement and how the IR14organisation has responded to those key topics and concerns, including through its reporting.

Economic

Economic performance

EC1 Direct economic value generated and distributed, Sustainability Report – Value SR13including revenues, operating costs, employee Added Statement.compensation, donations and other community investments, retained earnings and payments to capital providers and governments.

EC2 Financial implications and other risks and Sustainability Report. SR14opportunities for the organisation’s activities due to climate change.

EC3 Coverage of the organisation’s defined benefit plan Sustainability Report; SR14obligations. Annual Financial Statements –

Note 28. FS71

EC4 Significant financial assistance received from No financial assistance is receivedgovernment. from government.

Market presence

EC5 Range of ratios of standard entry level wage Sustainability Report. SR14compared to local minimum wage at significant locations of operation. Range of ratios not reported.

EC6 Policy, practices, and proportion of spending on Sustainability Report. SR14locally-based suppliers at significant locations of operation.

EC7 Procedures for local hiring and proportion of senior Sustainability Report. SR14management hired from the local community at significant locations of operation.

> SR39


GRI indexcontinued


Indirect economic impacts

EC8 Development and impact of infrastructure investments Sustainability Report. SR15and services provided primarily for public benefit through commercial, in-kind or pro bono engagement.

EC9 Understanding and describing significant indirect Sustainability Report. SR15economic impacts, including the extent of impacts.

Environmental Performance Indicators

Aspect: Materials

EN1 Materials used by weight or volume. Not reported.

EN2 Percentage of materials used that are recycled input Not reported.materials.

Aspect: Energy

EN3 Direct energy consumption by primary energy source. Sustainability Report. SR18

EN4 Indirect energy consumption by primary source. Sustainability Report. SR18

EN5 Energy saved due to conservation and efficiency Sustainability Report. SR18improvements.

EN6 Initiatives to provide energy-efficient or renewable Sustainability Report. SR15energy based products and services and reductions in energy requirements as a results of these initiatives.

EN7 Initiatives to reduce indirect energy consumption and Sustainability Report. SR15reductions achieved.

Aspect: Water

EN8 Total water withdrawal by source. Sustainability Report. SR15

EN9 Water sources significantly affected by withdrawal of Sustainability Report. SR15water.

EN10 Percentage and total volume of water recycled and Sustainability Report. SR15reused.

Aspect: Biodiversity

EN11 Location and size of land owned, leased, managed in, Not applicable.or adjacent to, protected areas and areas of high biodiversity value outside protected areas.

EN12 Description of significant impacts of activities, Not applicable.products and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.

EN13 Habitats protected and restored. Not applicable.

EN14 Strategies, current actions and future plans for Not applicable.managing impacts on biodiversity

EN15 Number of IUCN Red List species and national Not applicable.conservation list species with habitats in areas affected by operations, by level of extinction risk.

SR40<


GRI indexcontinued


Aspect: Emissions, Effluents and Waste

EN16 Total direct and indirect greenhouse gas emissions Not reported.by weight.

EN17 Other relevant indirect greenhouse gas emissions Not reported.by weight.

EN18 Initiatives to reduce greenhouse gas emissions and Sustainability Report. SR16reductions achieved.

EN19 Emissions of ozone-depleting substances by weight. Not reported.

EN20 NOx, SOx and other significant air emissions by type Not reported.and weight.

EN21 Total water discharge by quality and destination. Sustainability Report. SR16

EN22 Total weight of waste by type and disposal method. Sustainability Report. SR16 toSR17

EN23 Total number and volume of significant spills. Sustainability Report. SR18

EN24 Weight of transported, imported, exported or treated Not applicable.waste deemed hazardous under the terms of the Basel Convention Annex I, II, III and VIII, and percentage of transported waste shipped internationally.

EN25 Identity, size, protected status and biodiversity value Not applicable.of water bodies and related habitats significantly affected by the reporting organisation's discharges of water and runoff.

Aspect: Products and Services

EN26 Initiatives to mitigate environmental impacts of Sustainability Report. SR19products and services and extent of impact mitigation.

EN27 Percentage of products sold and their packaging Sustainability Report. SR19materials that are reclaimed by category.

Aspect: Compliance

EN28 Monetary value of significant fines and total number None reported.of non-monetary sanctions for non-compliance with environmental laws and regulations.

Aspect: Transport

EN29 Significant environmental impacts of transporting Sustainability Report. SR19products and other goods and materials used for the organisation’s operations and transporting members of the workforce.

Aspect: Overall

EN30 Total environmental protection expenditures and Not reported.investments by type.

> SR41


GRI indexcontinued


Social: Labour practices and decent work

Employment

LA1 Total workforce by employment type, employment Sustainability Report. SR33 tocontract and region. SR34

LA2 Total number and rate of employee turnover by Sustainability Report. SR33 toage group, gender and region. Employee turnover is not reported SR34

by age group, gender and region.

LA3 Benefits provided to full-time employees that are not Sustainability Report. SR20provided to temporary or part-time employees, by major operations.

Labour/management relations.

LA15 Return to work and retention rates after parental Sustainability Report. SR20leave, by gender. Retention rates not reported.

LA4 Percentage of employees covered by collective Sustainability Report. SR22bargaining agreements.

LA5 Minimum notice period(s) regarding significant Sustainability Report. SR22operational changes, including whether it is specified in collective agreements.

Occupational health and safety

LA6 Percentage of total workforce represented in formal Sustainability Report. SR23joint management-worker health and safety committees that help monitor and advise on Percentage of workforce notoccupational health and safety programmes. reported.

LA7 Rates of injury, occupational diseases, lost days, and Sustainability Report. SR23absenteeism and number of work-related fatalities by region.

LA8 Education, training, counselling, prevention, and risk- Sustainability Report. SR23 tocontrol programmes in place to assist workforce SR24members, their families or community members Percentage of workforce not regarding serious diseases. reported.

LA9 Health and safety topics covered in formal There are no official agreements withagreements with trade unions. any union to do any specific training

programme.

Training and education

LA10 Average hours of training per year per employee by Sustainability Report. SR25employee category. Employee categories are not reported.

LA11 Programmes for skills management and lifelong Sustainability Report. SR24learning that support the continued employability of employees and assist them in managing career endings.

LA12 Percentage of employees receiving regular Sustainability Report. SR25performance and career development reviews. Percentage not reported.

SR42 <


GRI indexcontinued


Diversity and equal opportunity

LA13 Composition of governance bodies and breakdown Sustainability Report. SR33 toof employees per category according to gender, age SR34group, minority group membership and other indicators of diversity.

Equal remuneration for women and men

LA14 Ratio of basic salary of men to women by employee Sustainability Report. SR25category. Ratio is not reported.

Social: Human Rights

Investment and procurement practices

HR1 Percentage and total number of significant investment Not reported.agreements that include human rights clauses or that have undergone human rights screening.

HR2 Percentage of significant suppliers and contractors Not reported.that have undergone screening on human rights and actions taken.

HR3 Total hours of employee training on policies and Sustainability Report. SR26procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.

Non-discrimination

HR4 Total number of incidents of discrimination and No incidents reported. SR26actions taken.

Freedom of association and collective bargaining

HR5 Operations identified in which the right to exercise No significant risks identified. SR26freedom of association and collective bargaining may be at significant risk and actions taken to support these rights.

Child labour

HR6 Operations identified as having significant risk for No operations have significant risk. incidents of child labour and measures taken to Operations are subject to review bycontribute to the elimination of child labour. the HR department.

Forced and compulsory labour

HR7 Operations identified as having significant risk for No operations have significant risk. incidents of forced or compulsory labour and Operations are subject to review bymeasures to contribute to the elimination of forced or the HR department.compulsory labour.

Security practices

HR8 Percentage of security personnel trained in the Security is outsourced.organisation’s policies or procedures concerning aspects of human rights that are relevant to Sustainability Report. SR26operations.

> SR43


Indigenous rights

HR9 Total number of incidents of violations involving rights None reported.of indigenous people and actions taken.

Aspect: Assessment

HR10 Percentage and total number of operations that have None reported.been subject to human rights reviews and/or impact assessments.

Aspect: Remediation

HR11 Number of grievances related to human rights filed, None reported.addressed and resolved through formal grievance mechanisms.

Social: Society

Local communities

SO1 Nature, scope and effectiveness of any programmes Sustainability Report. SR26and practices that assess and manage the impacts of operations on communities, including entering, operating and exiting.

Corruption

SO2 Percentage and total number of business units Not reported.analysed for risks related to corruption.

SO3 Percentage of employees trained in the organisation’s All new employees are required to SR27anti-corruption policies and procedures. attend a formal induction

programme.

SO4 Actions taken in response to incidents of corruption. None reported.

Public policy

SO5 Public policy positions and participation in public None reported.policy development and lobbying.

SO6 Total value of financial and in-kind contributions to None reported.political parties, politicians and related institutions by country.

Anti-competitive behaviour

SO7 Total number of legal actions for anti-competitive None reported.behaviour, anti-trust and monopoly practices and their outcomes.

Compliance

SO8 Monetary value of significant fines and total number of None reported.non-monetary sanctions for non-compliance with laws and regulations.

SO9 Operations with significant potential or actual negative None.impacts on local communities.

SO10 Prevention and mitigation measures implemented in Not applicableoperations with significant potential or actual negative impacts on local communities.

GRI indexcontinued


SR44 <


Social: Product Responsibility

Customer health and safety

PR1 Life cycle stages in which health and safety impacts Sustainability Report. SR27of products and services are assessed for improvement and percentage of significant products and services categories subject to such procedures.

PR2 Total number of incidents of non-compliance with Sustainability Report. SR27regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes.

Product and service labelling

PR3 Type of product and service information required by Sustainability Report. SR28procedures, and percentage of significant products and services subject to such information requirements.

PR4 Total number of incidents of non-compliance with Sustainability Report. SR28regulations and voluntary codes concerning product and service information and labelling, by type of outcomes.

PR5 Practices related to customer satisfaction, including Sustainability Report. SR28results of surveys measuring customer satisfaction.

Marketing communications

PR6 Programmes for adherence to laws, standards, and Sustainability Report. SR28voluntary codes related to marketing communications,including advertising, promotion and sponsorship.

PR7 Total number of incidents of non-compliance with None identified. SR28regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes.

Customer privacy

PR8 Total number of substantiated complaints regarding None reported.breaches of customer privacy and losses of customer data.

Compliance

PR9 Monetary value of significant fines for non-compliance None reported.with laws and regulations concerning the provision and use of products and services.


> SR45

GRI indexcontinued


The Board of Directors acknowledges its responsibility to ensure the integrity of the

integrated report. The Board has accordingly applied its mind to the Integrated Report and in

the opinion of the Board the Integrated Report addresses all material issues, and presents

fairly the integrated performance of the organisation and its impacts. The Integrated Report

has been prepared in line with best practice pursuant to the recommendations of the King III

Code. The Board authorised the Integrated Report for release on 18 November 2011.

Signed by RL Hiemstra and DA Tod, who have been duly authorised thereto by the Board.

RL Hiemstra DA TodChairman Chief Executive Officer

The creation and improvement ofcapacity extrapolate optimaleconomies of scale from the supplychain which ensure a sustainableresilience in the market segments inwhich the Group competes.

> IR01

Integratedreport

REPORT PROFILEDAWN’s first Integrated Report addresses the South

African operations (including subsidiary companies) on

sustainability matters and all businesses (including the

over-border operations, joint ventures and associates) in

the financial reporting elements. All businesses will be

included in the 2012 Integrated Report’s addressing of

the sustainability of the Group as the over-border

businesses complements the local volumes generated by

the Group, thereby enhancing the economies of scale of

the DAWN Group, expanding its geographic footprint and

contributing to its global competitiveness while providing

an entrance to global markets.

The sustainability data was collected from all the business

units and then consolidated into the operating clusters

with the final consolidation into the DAWN Group.

The reporting cycle coincides with the financial year, being

1 July 2010 to 30 June 2011.

Combined assuranceA combined assurance model is applied to provide a

coordinated approach to all assurance activities.

The combined assurance model aims to optimise the

assurance coverage obtained from management, internal

assurance providers and external assurance providers on

the risk areas affecting the Group. Within DAWN there are

a number of assurance providers that either directly or

indirectly provide the Board and management with certain

assurances over the effectiveness of those controls that

mitigate the risks as identified during the risk assessment

process described in the operating environment on pages

IR12 and IR13. Collectively the activities of these assur-

ance providers are referred to as the combined assurance

model.

DAWN Group has taken an approach designed to meet

the objectives of combined assurance in a pragmatic and

cost-effective manner.

The following basic steps were taken to develop the

combined assurance model:

Step 1: Risk identificationEach operating entity has identified the key risks it faces

and documented these in its risk register as described on

page IR15 TO IR17. These risks are linked to the

achievement of strategic objectives. The risk registers of

the business entities plus the DAWN Group risk register

thus form the basis of the combined assurance

framework. In addition, risks exist that are inherently

embedded within the financial and IT processes. These

risks do not necessarily have a direct link to the

achievement of Company objectives, but need to be

managed on an ongoing basis in order to support

operations. It is also important for the Audit Committee to

obtain assurance over those processes that underpin the

preparation of the financial statements. Therefore these

risks have been added to each risk register so that all the

risks are collected in one framework. It should be noted

that the risks will be continually kept under review by

management, particularly to identify risks in the “risk

universe” which may have been omitted from the registers

or to address any changes in the risk priorities.

Step 2: Identification of controlsAssurance is provided over those controls that mitigate

the identified risks and not over the risks themselves. If

there are no controls that can be identified, no assurance

can be provided. Alternatively, the assurance provider

could indicate that control(s) are not designed properly or

do not operate consistently. The identification, design and

implementation of controls that mitigate identified risks are

the responsibility of management and do not form part of

combined assurance activities. Combined assurance will

highlight areas where insufficient controls are identified. It

is also important not to confuse the activities of assurance

providers with “control activities” for example the activities

of external and internal auditors do not constitute a

control function but rather provide assurance over

particular controls.

IR02 <


Integrated reportcontinued

The controls taken into account during the development

of the DAWN combined assurance model were those that

had already been identified and reported by management

in their risk registers. For financial controls, certain

assumptions were made based on a generic

understanding of these processes.

Step 3: Identification of assurance providersThe nature and significance of risks vary and will require

assurance providers with the necessary expertise and

experience to provide assurance that risks are adequately

mitigated. Assurance providers include external audit,

internal audit, regulators, sustainability assurance

providers etc.

There are four role players in the assurance framework

with each providing a different level and degree of

assurance. Collectively these work together to obtain the

optimum level of assurance needed as follows:

1. Management-based assurance: Management oversight including strategy implementation, performance measurements, control self-assessments and continual monitoring mechanismsand systems;

2. Internal assurance: Risk management (adopting aneffective enterprise risk management framework),legal, compliance, health and safety, and qualityassurance are normally included. They are responsible for maintaining policies, minimum standards, oversight and risk management performance and reporting;

3. Independent assurance: Independent and objectiveassurance of the overall adequacy and effectivenessof risk management, governance and internal controlwithin the organisation. This is predominantly the roleof internal audit, external audit and other credibleassurance providers.

4. Oversight committees: Properly mandated committees which are predominantly the Audit andRisk Committees as well as the Ethics andTransformation Committee.

For the purposes of developing the DAWN combined

assurance model, adequate assurance providers under

each of the above categories (role players) were identified.

The assurance providers identified have been

documented in the combined assurance framework.

Step 4: Assess assurance activities againstcontrolsOnce the model had been populated with the risks,

related controls and various assurance providers, the next

step was to link each control to an assurance provider,

where applicable. It was important that the model be

completed to represent the current state as opposed to

the desired state and care was taken not to make

unjustified assumptions over the level of assurance

provided by assurance providers. Once the model was

completed, the following could be identified:

1. Risk areas where no/insufficient controls have been

identified.

2. Risk areas where controls have been identified yet

insufficient assurance is provided over such (gaps).

3. Risk areas where duplicate or “excess” assurance is

provided (duplication).

Management was asked to validate the initial estimation

of assurance provision and then maintain the framework

as part of the ongoing risk management process.

Step 5: Conclude and develop action plansFrom the above exercise, management was able to conclude on the completeness and appropriateness ofthe current assurance activities per risk identified. A ratingscale was developed to conclude on each:

• Sufficient cover – no improvement required.

• Limited cover – improvement required.

• No/inadequate cover – significant improvementrequired.

• Potential inefficiencies – oversight/assurance

overload.

> IR03




Audit CommitteeThe Audit Committee has reviewed the combined assurance framework for the Group to satisfy itself withmanagement’s initial conclusions and will continue toreview it as part of its role in oversight of risk management.

In the light of its review of the combined assurance framework, the Audit Committee has recommended tothe Board that appropriate assurance activities are inplace in relation to the controls operating over each riskidentified in the risk management process.

Internal auditInternal audit is an independent appraisal function, whichexamines and evaluates the activities and the appropriateness of the systems of internal control, riskmanagement and governance processes. The AuditCommittee is satisfied that internal audit has met itsresponsibilities for the year with respect to its terms of reference.

The Chief Audit Executive (CAE) reports to the Director:

Risk and Internal Audit on day-to-day matters, and

functionally to the Chairman of the Audit Committee.

Audit plans are presented in advance to the Audit

Committee and are based on an assessment of risk areas

involving an independent review of the Group’s own risk

assessments. The CAE attends and presents its findings

to the Audit Committee.

The objective of internal audit is to assist the Board in the

effective discharge of its responsibilities. Internal audit is a

key assurance provider and provides the Board with a

report of its activities which, along with other sources of

assurance, is used by the Board reporting on its

assessment of the Company’s system of internal controls

and risk management.

External auditThe Audit Committee is responsible for recommending

the external auditor for appointment by shareholders and

for ensuring that the external auditor carries out an annual

audit of all the Group’s subsidiaries in accordance with

international auditing standards and reports in detail on

the results of the audit both to the financial reporting and

compliance committees of the Group’s divisions and to

the Audit Committee. The external auditor is the main

external assurance provider for the Board in relation to

the Group’s financial results for each financial year.

The Audit Committee regularly reviews the external

auditor’s independence and maintains control over the

non-audit services provided by the external auditors.

Pre-approved permissible non-audit services performed

by the external auditors include taxation and due

diligence services. The external auditors are prohibited

from providing non-audit services including valuation and

accounting work where their independence might be

compromised by later auditing their own work. Other

non-audit services provided by the external auditors are

required to be specifically approved by the Audit

Committee.

The external auditor rotates the designated audit partner

every five years.

Board assessment of the Group’s systems ofinternal controls and risk managementNothing has come to the attention of the Board or arose

out of the internal control self-assessment process,

internal audit or year-end external audits that causes the

Board to believe that the Group’s systems of internal

controls and risk management are not effective or that the

internal financial controls do not form a sound basis for

the preparation of reliable financial statements. The

Board’s opinion is based on the combined assurances of

external and internal auditors, management and the Audit

Committee as well as central Group IT and HR functions.

ORGANISATIONAL OVERVIEW, BUSINESSMODEL AND GOVERNANCE STRUCTURE

Organisational overviewDistribution & Warehousing Network Limited (DAWN)

manufactures and distributes quality branded hardware,

sanitaryware, plumbing, kitchen, engineering and civil

products through a national, strategically positioned

branch network in South Africa, as well as in selected

countries in the rest of Africa and Mauritius.

The Building segment consists of five clusters, namely the

Wholesale, Watertech, Sanitaryware, Kitchen and

International divisions, with two associates and one joint

venture. The Infrastructure segment consists of two

divisions, DPI Plastics and Incledon, two associates and

two joint ventures.

IR04 <



The DAWN Solutions segment comprises DAWN

Logistics (DAWN Cargo and DAWN Distribution Centres),

DAWN HR Solutions, DAWN Information Technology,

DAWN Marketing & Design, DAWN Merchandising and

DAWN Packaging.

This focused cluster approach allows for the benefits of

synergies and cost reduction, while capacity is optimised

at cluster operations. The DAWN Solutions segment

continued to provide a crucial competitive advantage,

enabling distribution costs which are significantly below

the logistics industry average. It also assists the Group to

contain costs across all businesses and to significantly

reduce stock losses.

DAWN distributes approximately 40 000 products

sourced through more than 2 500 suppliers to over

12 000 customers in the building and infrastructure

sectors. DAWN Logistics offers just-in-time break-bulk

distribution through its fleet of more than 135 vehicles on

a national basis with over-border deliveries to Botswana,

Namibia, Swaziland and Lesotho.

Products are distributed through a national, strategically

positioned distribution network in South Africa as well as

in sub-Saharan African countries such as Angola, Nigeria,

Mozambique, Botswana, Swaziland, Lesotho, Namibia,

Tanzania, Zambia and Zimbabwe, and Indian Ocean

islands such as Mauritius. Manufacturing operations have

been established in Botswana and Namibia with joint

venture manufacturing operations in Mauritius and

Tanzania and an associate in Angola.

Business modelThe distribution fleet of the Group, the establishment of

centralised distribution centres in all major areas and

strong relationships with both customers and suppliers as

well as the key enabling ability of its systems, give DAWN

its competitive edge.

Creating and growing wealth for DAWN’s stakeholders

through a value-adding distribution channel is a central

and strategic business objective for the Group. The

creation and improvement of capacity extrapolate optimal

economies of scale from the supply chain which ensure a

sustainable resilience in the market segments in which the

Group competes.

DAWN’s collaboration model for sustainable business,

with the various divisions adding to the Group’s

efficiencies, combined with DAWN Solutions’ offering of

shared services functions, extends to suppliers and

customers where the Group becomes an extension of

their distribution capabilities through the sharing of

objectives, core competencies and roles to grow market

share of the product range and raise barriers to entry.

Market share is further maximised through high level

customer service, differentiated by effectiveness in DAWN

Solutions without the concurrent cost implications.

The market is reached effectively through an integrated

model where infrastructure development evolves into

building activities. Focused businesses offering plumbing

and sanitaryware products sweep first with bulk orders

requiring larger lead times which enhance the

effectiveness of the manufacturing process. The second

sweep originates from the trading businesses offering

just-in-time distribution to merchants, thereby assisting

them to manage their stockholding efficiently.

The model enables customers to obtain maximum direct

benefits from DAWN’s manufacturing capacity as well as

indirect benefits from the Group’s distribution and

marketing capabilities.

DAWN’s business strategy is based on the supply of

locally manufactured quality products and brands, either

owned or through third-party suppliers, with a defensive

approach to imports, mainly to defend market share.

DAWN’s business model has three main pillars, namely

backward integration into manufacturing, superior

distribution capability and cross-border expansion.

Backward integrationThe strategy of backward integration provides DAWN with

a number of key benefits: ownership of premium brands

and strategic suppliers; optimisation of the supply chain;

diversification of sources of revenue and a defensive

capability against imports.

Backward integration also allows DAWN to capture the

value chain in the plumbing, hardware, kitchen,

engineering and civil industries.

> IR05



Premium brand ownership and building of owned and external suppliers’ brands form a fundamental part of the strategy.

The showroom facilities offer brand building opportunities and provide suppliers with a venue to showcase their products

in a lifestyle environment which accommodates trends effectively. The specifications department, with its turnkey solutions

offering, increases the value of DAWN’s products which are specified into projects.

The Group intends to further enhance the benefits derived from backward integration and to continue to pursue acquisition

opportunities for related products.

Distribution capabilityDAWN’s distribution capability is at the core of its business model and renders it with a competitive advantage and

constitutes a formidable barrier to entry.

DAWN’s ownership of arguably the most cost effective, consistent and extensive distribution network in its industry in

southern Africa offers suppliers an economical route to market anywhere in South Africa and its neighbouring territories

and increasingly into Africa, as well as the opportunity to reduce costs through access to a volume absorbing distribution

mechanism.

Customers benefit from, and are showing a greater dependence on, the just-in-time break-bulk distribution capacity,

attributable to the challenging economic environment. The product range, with its extensive line item offering, provides a

one-stop shop opportunity with added working capital management advantages.

Improvement in efficiency and costs of the DAWN distribution capability enables the Group to add value to all suppliers in

the industry and to consolidate its competitive advantage.

The establishment of centralised distribution centres enhances and expands the distribution capability of the Group and

both the manufacturing and trading businesses are enabled to significantly improve distribution levels and associated time

schedules.

Cross-border expansionThe growth of African economies is providing new opportunities as incomes are rising and economic reform and the

rebuilding and upgrading of infrastructure create favourable business conditions.

DAWN International, which constitutes Saffer International, Africa Swiss Trading (AST), exports from the various operating

units and the over-border manufacturing operations of DPI Plastics, has been established as the vehicle through which

these markets can most effectively be accessed.

The combination of a complete product package and a turnkey solution offering underpinned by a presence in the country,

positions the Group to be the supplier and manufacturer of choice for merchants and on projects.

AST operates through distribution centres in Mozambique, Nigeria, Angola, Zambia, Mauritius and Zimbabwe.

Through AST, DAWN offers both its internal and external suppliers an effective and economical route into African and the

adjacent Indian Ocean islands markets.

A weakening exchange rate will strengthen DAWN’s position as it forms a barrier to importers, supports the export drive

and creates import substitution opportunities.

IR06 <



Organisational structure

> IR07


Building Infrastructure

DAWN Solutions

Associate

*

* The over-border operations of DPI Plastics enhance DAWN International’s geographical footprint.

– Joint Venture

– Joint Venture

– Associate

– Subsidiary

– Subsidiary

DPI over-border operations

Joint Venture

Apex Valves

Associates



The DAWN Group has three operating segments namely,Building, Infrastructure and DAWN Solutions.

BuildingThe Building segment comprises:

Wholesale division – Trading (Saffer Bathroom &

Plumbing and WHDsa)

– Business Development (DAWN

Power Tools, Electroline, Wholesale

Tile Supplies, Wholesale Building

Materials, Stability)

DAWN Watertech (Cobra and Isca)

DAWN Sanitaryware (Ceramic: Vaal Sanitaryware and

Acrylic: Libra Bathrooms and Plexicor)

DAWN Kitchen Fittings (Roco and AFF)

DAWN International (AST (joint venture) and Saffer

International)

Apex Valves (associate)

Heunis Steel (associate)

The Building segment saw a sound revenue performance

but profit before interest and tax declined as a result of:

• extreme margin competition for an overall smaller pie;

• lower volumes with consequential reduced

efficiencies;

• over-stocking resulting from volatile customer demand

patterns;

• increased overheads, particularly catch-up salary

increases after no increases were awarded for a

period of 18 months;

• time-crucial expansion initiatives relating to, for

example, the development of six new suites of Vaal

products and efficiency enhancing investments at

Cobra and Vaal; and

• the rand strengthening by an average of 8% against

the US dollar in F2011 vs F2010 – this not only had a

negative effect on the translation of export earnings,

but also increased the import competition (with even

mass retailers now starting to import), placing further

downward pressure on margins.

DAWN InternationalChallenges to the international operations included slowerinfrastructure spend, availability of foreign currency (mainlyUS$), the postponement of major contracts andincreased competition. Opportunities in Africa, however,remain attractive due to the vast infrastructure needs invarious countries on the continent. The Group is continuing a concerted thrust into these markets.

InfrastructureThe Infrastructure segment comprises:

DPI Plastics

Incledon

Sangio Pipe (associate)

Fibrex (associate in Angola)

DPI Simba (joint venture in Tanzania)

Aqualia DPI (joint venture in Mauritius)

NPC (subsidiary in Namibia)

Pipex (subsidiary in Botswana)

The backlog of water and sanitation infrastructure needsin South Africa and Africa is urgent and critical andremains DAWN’s motivation for originally entering theinfrastructure sector. Historically government infrastructureexpenditure stimulated economies, thereby making infrastructure counter-cyclical to building. However, infrastructure businesses have been impacted not only bythe consequences of the global financial crisis and the2010 World Cup projects draining local governmentbudgets, but also government’s and its related parties’inability to spend effectively on infrastructure needs.

The Infrastructure market therefore continued to experience much lower volumes, with the value of civilcontract awards 20% lower than the 2009 average.

Against these challenges and with delays in implementinga corrective market strategy in DPI, the business achievedcost reductions, mainly retrenchments, through focusingon improving the efficiency of raw material consumption,reducing headcount and reducing transport costs.

Incledon saw a marked turnaround in the second half ofthe year, mainly due to increased volumes supported byimproved debtor management and a two basis pointimprovement in gross margins.

IR08 <



DAWN SolutionsThe DAWN Solutions segment comprises:

DAWN Logistics (DAWN Cargo and DAWN Distribution Centres)

DAWN HR Solutions



DAWN Merchandising

DAWN Packaging

Collaboration is a cornerstone principle driven assertively throughout the Group and, in taking the Support Services

segment to the next level of value-add, a decision was taken during the year under review to change its identity to reflect a

more proactive, partnership-based approach to in-house customer relationships. The segment is now known as DAWN

Solutions and has made progress this year in implementing a strategy focused on moving beyond service level agreements

with the Group companies to alliance relationships.

The DAWN Solutions segment continued to provide a crucial competitive advantage, enabling distribution costs which are

half the logistics industry average. It also assists the Group to contain costs across all businesses and to significantly

reduce stock losses.

Governance structureThe Group, upon implementation of its compliance programme, adopted the King III guideline stipulating that the Chief

Executive Officer should not be a member of Board Committees and should only attend by invitation. The Board

Committees were therefore reconstituted as follows and a Nomination Committee was also established. In accordance

with King III, the members of the Risk Committee were expanded to include executive directors. The Board and Board

Committees on 1 July 2011 are therefore as follows:

Ethics

and

Remune- Transfor-

Audit Risk ration Nomination mation

Board Committee Committee Committee Committee Committee

RL Hiemstra Non-Executive Chairman Member Member Member Member

DA Tod Chief Executive Officer Member

JA Beukes Risk and Internal Audit Officer Ex officio Member

Company Secretary member

JAI Ferreira Financial Director Member

RD Roos Executive Director Member

M Akoojee Non-Executive Director

LM Alberts Independent Non-Executive Director Member Member Chairman Member

OS Arbee Non-Executive Director Chairman Chairman Member Member

VJ Mokoena Independent Non-Executive Director Chairman

Dr SD Mthembi-

Mahanyele Independent Non-Executive Director

> IR09



IR10 <

DAWN BOARD

SHAREHOLDERS

EXECUTIVECOMMITTEE

RISK COMMITTEE

AUDIT COMMITTEE

REMUNERATION COMMITTEE

WHOLESALETRADINGCLUSTER

TradingBoard

TradingExco


Board


Exco

ASTBoard

Apex ValvesBoard

Heunis Steel Board

ASSOCIATES

WATERTECHCLUSTER

Cobra Board

CobraExco

Isca Board

WatertechBoard

ElectrolineBoard

IscaExco

SanitarywareExco

SANITARYWARECLUSTER

CeramicBoard

Acrylic Board

DKF Board

DKF Exco

BUILDING

DAWN INTERNATIONAL

DAWN KITCHENFITTINGS

(DKF)

Governance structure

AST (Angola)Board

AST(Mozambique)

Board

AST (Zambia)Board

AST (Mauritius)Board

ASTIZ(Zimbabwe)

Board



> IR11

NOMINATIONCOMMITTEE

ETHICS & TRANSFORMATION

COMMITTEE

IT STEERINGCOMMITTEE

INFRASTRUCTURECLUSTER

DPI PlasticsBoard

DPI PlasticsExco

IncledonExco

ASSOCIATES

DPI Simba(Tanzania)

Board

DPI Aqualia(Mauritius)

Board

Fibrex (Angola)Board

Sangio PipeBoard

JOINT VENTURES

Pipex (Botswana)Board

NPC (Namibia)Board

OVER-BORDERSUBSIDIARIES

INFRASTRUC-

DAWN SOLUTIONS

DAWN HRBoard

DAWN SOLUTIONS

Exco

SOLUTIONS



The DAWN Board is supported by various sub-committees with specified terms of reference to assist it inthe fulfilment of its duties. Details of the sub-committees,including their summarised terms of reference, authoritylevels and functions are included in the CorporateGovernance Report.

Operational boards at cluster level ensure that responsiblecorporate governance and sustainability practices are formalised and implemented at all levels in the Group. Thecluster executive committees, apart from its operationalfunctions, have the following compliance responsibilities:

• health and safety

• environmental

• ethics and transformation

• risk management

Officers, in each of these disciplines, have been appointed at the cluster operations to ensure compliance,monitoring and implementation and to assist and reportto the Group Ethics Officer and the Group ComplianceOfficer.

UNDERSTANDING THE OPERATING CONTEXTActivity levels in the building and construction marketshave a material impact on the performance of the Group’sBuilding segment, which during F2011 accounted for62% of DAWN’s revenue. The Building segment benefitsmainly from residential activity, which constitutes approximately 65% of the market (and where the bulk ofDAWN’s products are targeted, ie finishing), compared tonon-residential activity, where DAWN’s involvement is limited to technical and specified products. DAWN companies extract significant benefit from activity in theupgrade and renovations market due to the higher percentage spend on finishing.

The size of the building materials market in which DAWNparticipates is estimated at R120 billion per annum byBMI, namely products supplied to the market via merchants, with recorded building activity at R44 billion in2010 (residential: R28 billion). Recorded additions andalterations was R11 billion in 2010 with unrecorded additions and alterations estimated at R35 billion perannum by BMI.

The value of building plans completed (at nominal value)for the six months to June 2011 at R20,9 billion (2010:R20,9 billion), supported by growth in building planspassed for the last two semesters (December 2010+2,1% to R33,5 billion; June 2011 +4,9% to R30,9 billion)should be an indication of improvement in recorded building activities from this point, albeit from a

substantially lower base. Whilst the year to June 2011reflected a negative performance in building plans completed of -R6 billion, all of this negative trendoccurred during the six months to December 2010.

Indications of recovery in building activity are further supported by a recovery in cement sales.

In DAWN’s key markets of residential and additions andalterations:

• recorded residential new building activity continued todecline in H2 F2011, but at a much slower rate (-3%vs -21% in H12011);

• additions and alterations, although down a further 5%in H1 F2011, showed a strong increase of 11% in H2F2011.

DAWN is therefore pleased with its market share gains. Inthe first half of F2011, the Group gained market share asvolumes fell 6% against a 21% decline in buildings completed and again in the second half, with volumesincreasing 2% and buildings completed remaining flat.

The most significant impact on the building industry, however, was the change in the lending criteria of financialinstitutions which resulted in a drastic reduction in newmortgage finance over the last three years. This remainsthe biggest constraint for recovery in the building industryto gain momentum.

The negative sentiment impacted on the outlook of industry merchants which resulted in a destocking of theindustry pipeline stock. Merchants are operating with minimum stock levels and rely on quick replenishmentfrom shorter manufacturing lead times as well as just-in-time wholesalers.

Prospects indicated through Building Plans Passed

IR12 <

F2008 F2009 F2010 F2011

0

30

60

90

0

20

40

60

Total Building Plans Passed (right-hand side)

Non-residential Residential Additions and Alterations^

^These numbers represent only recorded additions and alterations



Historical trends confirm that building plans passed, a

leading indicator of future building activity (building in the

pipeline), convert into activity after nine to twelve months.

From the graph on page IR12, it is therefore expected that

building activities in the residential sector should start to

reflect year-on-year growth from the third quarter of 2011.

Non-residential building activity trends however lag resi-

dential building by twenty-four months, and non-

residential is therefore expected to continue its declining

trend during 2011.

As a major industry stockist, the Group thrives from price

inflation when it benefits from increased margin on

existing stockholding. During the past three years this

historical trend was reversed into a deflationary cycle with

resultant pressure on trading margins. The strengthening

rand also contributed to this situation, with decreasing

landed cost of imported goods. Trends in PPI and CPI

however suggest a movement back to an inflationary

environment which will support margin improvement.

In the infrastructure sector there is a significant

overcapacity on PVC and HDPE and low market demand,

mainly from public sector civil spending. Difficult trading

conditions with low margins and factory under recoveries

are the order of the day with significant losses being

incurred by all main industry participants. The closure of

one of the major participants provided some relief with

improved order books in the Group’s Infrastructure

segment and significantly improved factory loading at

Sangio Pipe. Post-election demand from water-related

civil contracts as well as increasing mining activity also

contributed to order book improvement.

The opportunities presented by the over-border markets

in which DAWN International operates, remain attractive,

particularly as they are liberated through globalisation and

establishment of democracies.

The DAWN Solutions cluster represents the pinnacle of

DAWN’s philosophy of collaboration, through which the

Group establishes its competitive edge by leveraging

economies of scale, obtained from consolidating and

centralising critical service functions.

Stakeholder relationshipsDAWN supplies information to the public and its

shareholders with due regard to relevance, openness,

promptness and substance over form. Reporting is

balanced by providing both the positive and negative

aspects of the Group’s performance.

The Group has developed strategies, policies, processes

and other mechanisms to support meaningful

engagement with key stakeholder groups. There are

established formal and informal communication channels

with all key stakeholder groupings, which are monitored,

measured and reported on in different ways. The Board

adopted a formal policy on stakeholder engagement on

13 September 2011.

The DAWN Board has identified nine key stakeholder

groups with whom it engages in a structured manner,

being:

• Shareholders and investment community

• Banks, funders and insurance companies

• Customers

• Suppliers

• Employees

• Trade unions

• Media

• Regulators

• Government – national, provincial and local

The stakeholder engagement methodologies are

summarised below.

Shareholders and investment communityFormal engagement with investors and shareholders

occurs through the Stock Exchange News Service

(SENS), the DAWN website (which provides financial

information, including the annual report, media releases,

annual and interim results presentations and analyses),

the formal results presentations, investor updates,

workshops and specific meetings. Regular meetings were

held with shareholders and analysts during F2011 to

pursue dialogue with participants.

Key investor sentiments are sourced from discussions

with analysts and investor reports. These are summarised

and provided to the Executive Committee and notable

issues are referred to the Board. This exercise is also

completed immediately prior to the interim and annual

results presentations to ensure that key sentiments are

addressed.

> IR13



Regular presentations and meetings are held with

investors and analysts to communicate the strategy and

performance of the Group.

Shareholders are also given the opportunity to put

questions to the Board at annual general meetings. A list

of the major shareholders in the Group is shown on

page SI01 of the annual report.

Banks, funders and insurance companiesManagement has monthly meetings with funders

regarding performance against covenants and funders are

supplied with management accounts as well as rolling

cash flow forecasts. Frequent contact with providers of

finance ensures that they are kept abreast of conditions in

the market sectors in which DAWN operates.

Management also engages with bankers in respect of the

Group’s potential future funding requirements.

CustomersThe customers of the Group comprise the building,

construction, infrastructure, DIY, mining, petrochemical

and agricultural industries.

The DAWN Call Centre provides added support services

to in-Group companies, focusing on customer service

issues, including:

• Evaluation of customer satisfaction;

• Effective, timeous resolution of customer queries,

concerns and problems;

• Promotion of a culture of customer service excellence

throughout the Group; and

• Customer visits by senior management.

SuppliersDAWN corresponds regularly with suppliers through

on-site meetings, presentations and supplier forums.

Information sessions with new and existing suppliers are

held to establish and strengthen relationships and inform

suppliers of DAWN's procurement processes and

requirements. DAWN interacts with approximately 2 500

suppliers and business partners on a monthly basis.

EmployeesDAWN’s employees and their representative bodies are

viewed as key stakeholders as the Group recognises that

successful businesses are built on loyal, motivated and

happy employees. Employees are kept abreast of

developments in the Group through the quarterly

newsletter, Eyethu. The DAWN Intranet will be launched

in 2012 and will substantially enhance communication

with employees.

Trade unionsUnion representatives are elected to liaise with management on matters affecting union members andhuman resource managers are responsible for managingthe relationship with the employee unions and relevantindustrial labour organisations. Meetings are held with theBargaining Councils as required.

MediaInterviews and press briefings are given to specific members of the media. These take the form of one-on-one time with DAWN executives and key spokespeopleacross the Group, and regular update sessions to discusspertinent issues relevant to the Group's business activities.

Other means of engaging the media include proactivepress releases, targeted interventions through specialistagencies, and use of digital and social media platforms.Finally, the communications team ensures that any customer complaints received via the media are investigated and that an appropriate response is provided.

RegulatorsDAWN is regulated by several stakeholders including theJSE Limited, Department of Trade and Industry,Department of Water and Environmental Affairs and SouthAfrican Revenue Services. The Group seeks to maintainrelationships of trust and transparency with all regulators.

The compliance function guides business units before andduring submissions to and meetings with regulators. In2012 a log of all interactions with regulators will be maintained and the outcomes of these interactions will bereported to the Risk Committee.

Government – national, provincial and local

DAWN, through its participation in infrastructure

development, engages with both local and provincial

government on these projects, either directly or indirectly.

Manufacturing businesses engage with local government

on matters such as energy consumption and constructive

strategies on the management of power outages.

Relationships with government departments are generally

very good. This applies across the three spheres of

government, with particular relevance for the

developmental activities of local government and respect

and support for the democratic process at this level.

IR14 <



Risk managementIdentifying risks and opportunitiesThe identification of risks and opportunities is robust, systematic and involves every level of the organisation. A comprehensive risk management policy is entrenchedthroughout the Group.

Having regard to the fact that managing risk is an inherentpart of the Group’s activities, risk management and theongoing improvement in corresponding control structuresremain a key focus of management in building a successful and sustainable business.

The Board recognises that risk management is a dynamicprocess and that the risk framework should be robustenough to effectively manage and react to change in anefficient and timeous manner.

Formalisation of a risk management framework is theresponsibility of the Group’s Board of Directors. Theframework ensures:

• efficient allocation of capital across various activities inorder to maximise returns and diversification ofincome streams;

• risk taking within levels acceptable to the Group as awhole and within the constraints of the relevant business units;

• efficient liquidity management and control of fundingcosts; and

• improved risk management and control.

DAWN has, with the guidance of external consultants,performed a strategic risk review at both Group and divisional level. The results of this exercise have allowedmanagement and the Board to focus on risk mitigationstrategies and processes. The Risk Committee monitorsthe progress of the implementation of the above processes, with written submissions and presentationsbeing done by management at least annually.

The structure of the Group promotes the active participation of executive management in all of the operational and strategic decisions affecting their business units. This creates a strong culture of ownershipand accountability.

Senior management plays an active role in the risk management process and is responsible for the implementation, ongoing maintenance of and ultimatecompliance with the risk process as it applies to eachbusiness unit. The Board is kept abreast of developmentsthrough formalised reporting structures, ongoing communication with management, regular management

meetings at operating entity level and through representation of executive members of the Board on certain of the forums responsible for the management ofrisk at an operating entity level.

The Group remains committed to employing the highestcalibre of staff to ensure a strong financial and operationalinfrastructure within each of the business units.

The key risks identified by the Group, together with control and/or mitigation strategies, are set out below:

Challenging economic environment and market conditionsThe effect of the prolonged economic slowdown on theGroup’s businesses, customers and suppliers as well asthe low sales volumes and pressure on margins togetherwith low levels of disposable income will extend therecession and/or impede growth. A high percentage ofGroup sales is on credit with increasing pressure on collections and bad debts.

Control and/or mitigation strategy• Inflationary pressures are carefully monitored and

managed, as appropriate, in each business.

• Costs are reduced and operating efficienciesimproved.

• Working capital is reduced, capital expenditure limitedand cash flow improved.

• Adequate committed borrowing facilities to besecured.

• Projects to be targeted in all manufacturing entities to

reduce manufacturing costs at current volume

throughput through optimisation of production

planning and product innovation and re-engineering.

• Customers’ ability to spend and access credit to be

monitored.

• Maintain high levels of credit insurance.

• Focus and discipline of cash flow management.

Loss-making subsidiariesPerformance recovery at loss-making subsidiaries, DPI

Plastics and Libra Bathrooms, is critical.

Control and/or mitigation strategy

• There is a major focus on performance improvementthrough a combination of production and marketing initiatives together with expense reduction.

• The Libra Bathrooms operation in Meyerton has beenmothballed until recovery of market volumes.

> IR15



Customer service levelsThe Group is dependent on a number of customers andsuppliers. The Group’s success is therefore linked to theirongoing financial stability, the competitiveness and qualityof their products and the availability thereof to meet customers’ needs. Customer service levels are difficult tomaintain due to erratic demand patterns as well as unpredictability of market requirements.


• Continually improve and build relationships with customers and suppliers and attempt to ensure thatDAWN is the preferred distributor.

• Focus on operational efficiencies and staff training toimprove service and the provision of innovative solutions to customers.

• Build smart partnerships with customers.

• Align strategies and targets with those of DAWN’smajor suppliers, as far as possible.

• Customer service levels receive foremost attentionthrough market surveys and customer visits.

• Strict measurement and control of stock availability ofcommodity items in accordance with customerdemand patterns.

Availability of both trade and funding facilitiesThe availability of both trade and funding facilities arestrategic to the ongoing performance and success of theGroup.

Control and/or mitigation strategy• The Board monitors and controls the availability of

both trade and funding facilities on an ongoing basis.

• This has become a greater focus since the global liquidity crunch and its resultant impact on the worldbanking systems and consequently on the Group’scustomers and suppliers.

• Credit policy disciplines with credit insurance, whererelevant, are being enforced as well as a strict application of credit terms with collection incentivesbeing offered. The nature of customers in certainbusiness entities is a challenge as contractors areoften undercapitalised and to this end DAWN hasnegotiated with local government, in certaininstances, to receive physical confirmation of the allocation of tenders or the awarding of tenders andto obtain cessions for the material components oftenders.

• The non-current debtor in respect of the sale andlease-back agreement intends to settle early and abank guarantee to this effect has been obtained.

Stock levelsThere is an over-investment in stock due to a change incustomer buying patterns towards low-priced and commodity items.

Control and/or mitigation strategy• Strict measurement and control of stock availability of

commodity items.

• Stock models and agreed stock level targets areaggressively monitored.

Reduction in infrastructure spendThe Group has a high dependence on governmentspending and civil contracts.

Control and/or mitigation strategyRefocus product strategies towards more sustainablemarkets and profitable products. as well as increasedmarket share.

Information technology The implementation risk of the with new software carriesits own challenges.

Control and/or mitigation strategy• The implementation risk will be reduced through the

deployment of a highly experienced project implementation team and a systematic phased implementation approach.

Opportunities• The productivity which will be generated through the

implementation of the Warehouse ManagementSystem and the Transport Management System willenable a greater investment in Customer RelationshipManagement and result in a more proactive management system.

• An effective bar-coding system in the warehousecombined with system updates through the handheldscanners will raise service levels exponentially as customers will receive electronic alerts on the statusof orders in real time.

• A positive chain of events will flow from improvedservice levels facilitated by the system as the customer will experience a partnership with DAWN.

• DAWN’s collaboration strategy is system-driven andsystems have to be able to integrate to ensure theeffective roll-out of the strategy – a process which thenew software will facilitate, thereby unlocking significant opportunities and growth capacity at alower cost structure with exponential returns.

• The accessibility of intelligent data and information willunlock quicker decision-making capabilities.

IR16 <



Strong randDAWN’s procurement philosophy is that it supports localmanufacturers and only imports as a defensive strategy toprotect market share where there is no alternative localproduct in that bracket, typically more at the lower end ofthe market. The strength of the rand increases theGroup’s exposure to importers who are able to be morecompetitive.

Control and/or mitigation strategy• Product innovation and product re-engineering across

all manufacturing operations are key focus areas withthe main aim of price competitiveness without compromising on product quality.

• DAWN’s brand investment through its backward integration strategy as well as its third party supplierbase creates demand for the products due to theproduct brand and status, the after-sales service levels and warranties.

Brand erosion Erosion of the brands impact on the achievement of salestargets and margin expectations.


• Product innovation and new product launches are pursued in all manufacturing operations, with themain aim being revitalised aesthetics as well as price competitiveness in the mid-range and below.

• An increased effectiveness of marketing and advertising campaigns.

• Showrooms utilised for increased brand awareness.

STRATEGIC OBJECTIVES, COMPETENCIES,KEY PERFORMANCE INDICATORS and KEYRISK INDICATORS

Affirmation of strategic positioningThe Group experienced its toughest trading environmentto date during the 2011 financial year, with a continueddecline in volumes and very competitive pricing.Notwithstanding the difficult market conditions experienced over the last few years, DAWN remains solidon its strategic positioning.

The Group’s strategy remains one of optimising the mix oftrading, brands and manufacturing to maximise theeconomies of scale created as the largest, low cost SouthAfrican building and infrastructure industry distributor. Thestrategic rationale for acquisition and capacity expansionremains:

• gaining control of premium brands;

• sharing in the higher margins traditionally available inmanufacturing;

• adding further economies of scale to DAWN’s distribution capability;

• accessing better market intelligence; and

• utilising untapped opportunities to use DAWN’s superior distribution capability to positively influencethe performance of the manufacturing businesses.

Infrastructure demand in South Africa and Africa remainan urgent and critical requirement and remains DAWN’smotivation for entering this sector to access particularlywater and sanitation spend. Historically government infrastructure expenditure stimulated economies, therebymaking infrastructure counter-cyclical to building.However, infrastructure businesses have been impactednot only by the consequences of the global financial crisis, but also government’s and its related parties’ inability to spend effectively on infrastructure needs.

DAWN remains committed to its strategy of pursuingactivities in both the building and infrastructure sectorsand, even though the Group’s operations have beenadjusted to current activity levels and certain excess commodity capacity has been mothballed, the Group hasensured the ability to take up opportunities immediatelywhen they present themselves.

DAWN is committed to growing the business in a

transparent and socially responsible way, ensuring that it

delivers a healthy return to investors and is sustainable for

all stakeholders over the long term.

The Group’s growth is underpinned by:

• Strong structure and control;

• Clear financial KPIs;

• Resource and operational controls; and

• Careful risk management.

Key performance indicatorsDAWN monitors and challenges financial performance at

all levels to probe the health and progress of its

businesses and promote accountability. Profitability as

well as a range of financial measures are used at Group

level. Collectively they form an integral part of building

value for DAWN’s shareholders on a consistent basis over

the long term.

> IR17



The key performance indicators (KPIs) the Board has selected to monitor the progress of the Group are:

Annualised key ratios

Achieved in Medium-term

F2011 H1 2011 F2010 goal

Group operating margin (%) 0,9 3,4 5,7 8 to 10 *(2,7)^

Free cash flow (excluding interest) (R’million) 57 113 157 >100 *(rolling 12 months)

Cash conversion ratio (%) 55,9 75,8 75,6 >75 *(rolling 12 months)

Net debt : equity ratio (%) 30,3 28,7 21,1 <50 *

Net working capital : revenue (%) 22,8 23,6 19,1 <25 *(rolling 12 months)

Return on invested capital (%) 1,6 7,9 11,3 >15 *(rolling 12 months) (6,7)^

Return on assets (%) 1,3 4,5 6,0 >10 *(rolling 12 months) (6,3)^

* Goal ratios can only be achieved when the market moves into a sustained market cycle^ Excluding impairments and once-off costs

The executive team of the Group monitors the above listed key financial performance indicators against medium-termobjectives. The focus is driven by the level of invested capital required to generate desired levels of returns. Each businessunit in the Group has clearly outlined performance objectives and results are tracked accordingly.

The adverse trading environment negatively impacted the Group’s results. As a result all the ratios are significantly belowthe medium-term goals, except for the gearing and net working capital ratios which are within the medium-term goalranges.

The decision was taken not to reset the medium-term goals as these goals represent where the Group’s performance willbe in a normalised year.

Productivity at the manufacturing operations is measured at both gross margin and net margin levels. Factory recoveryrates are key to the performance of the businesses and scrap rates, especially in an environment where volumes are underpressure, are critical.

Free cash flow

2011 2010R’000 R’000

EBITDA (excluding impairments and derecognitions of investments) 170 110 258 447Capital expenditure 94 271 63 518Net working capital 861 688 862 155

Free cash flow amounted to R57 million, well below the minimum threshold of R100 million. The main impact on the

Group’s free cash flow was firstly, the significant drop in EBITDA to R170 million (2010: R258 million), secondly, the R94

million capital expenditure during the course of the year, and thirdly, the R31 million cost to step up the Group’s

shareholding in Cobra from 94% to 100%.

This drop in free cash flow negatively impacted the cash conversion ratio which dipped below 75% of operating profit.

IR18 <



The Group’s return on invested capital and return on assets for the 2011 financial year declined further to 1,6% and 1,3%,respectively.

It is the clear objective of the executive team to restore the Group’s actual performance to more acceptable levels in theshort term.

Working capital analysis

June 2011 2010 Comment on working capital days

Creditors 65 52 Funding from suppliers increased by 13 days, mainly as a result of a strongerfocus on managing invested capital required in a volatile market. It would be unrealistic to expect creditors’ days to remain at this level.

Stock 101 94 Stock increased by 7 days due to volatile market demand, mainly attributable toCobra and Isca with long manufacturing lead times. A key focus area for F2012 is to reduce the number of stock days.

Debtors 51 50 Debtors’ days increased by 1 day as a result of increased sales towards the year-end. Bad debts were maintained a less than 0,1% of revenue.

Net working There has been an improvement towards the net working capital target of 80 capital days 87 92 days.

Note: all days compare to F2010, the date from which all working capital days were calculated using closing balances,instead of average balances.

Key risk indicatorsBanks’ lending criteriaThe industry in which DAWN operates is exposed to banks’ lending criteria as it has a direct impact on building activities,with its consequential effect on demand for the Group’s products.

Building plans passedWith any decrease in the value of building plans passed, it is inevitable that formal building activities will reduce. The size ofthe recorded building market is R64,4 billion, with unrecorded building activities estimated at approximately R35 billion.

Government spendingCapacity constraints, in particular at local government level, have an effect on the evaluation and awarding of tenders forinfrastructure projects, with the resultant lagging demand in the Group’s infrastructure businesses.

Interest ratesFluctuations in interest rates have a direct impact on the levels of disposable income of end-users of the Group’s products.

> IR19

Reportable turnover (rolling 12 months) (right-hand side)

`Target of 25% (left-hand side)

Working capital ratio (left-hand side)


2

4

6

20

25

30



ACCOUNT OF THE ORGANISATION’S PERFORMANCE

Summary financial information2011 2010

R’000 R’000

INCOME STATEMENTSRevenue 3 792 632 3 618 391

Operating profit 33 070 207 868

Before depreciation and amoritsation 101 400 267 164Depreciation and amortisation (68 330) (59 296)

Net finance charges (46 531) (56 511)Share of results of associates (net of impairment) (706) 5 211

(Loss)/profit before income tax (14 167) 156 568Attributable earnings (30 325) 109 177Headline earnings 38 085 98 914

Business confidence indexThe Business Confidence Index comprises the following sub-indices:

• Average monthly weighted exchange rate of the rand against the US dollar, the euro and the British pound as well asthe volatility of the rand exchange rate;

• Core consumer inflation rate for metropolitan and urban areas;

• The real predominant prime overdraft rate;

• Retail sales volumes;

• Rate of change in real credit extension to the private sector;

• Average weighted US dollar price of gold and platinum;

• Merchandise import volumes;

• Merchandise export volumes;

• New vehicle sales;

• Liquidations of companies and closed corporations;

• Volume of manufacturing production;

• Real value of private sector building plans passed; and

• All-share Price Index of the JSE Securities Exchange.

Due to the composition of the index, it is a good indicator for the Group of market changes and gives early warning signals

of potential impacts on the Group as well as impending opportunities.

In developing further the non-financial metrics, the Board intends to review the environmental, employee and social

aspects of the Group operations and adopt the most appropriate metrics from the Global Reporting Initiative (GRI)

framework for reporting on these in future.

IR20 <



2011 2010R’000 R’000

STATEMENTS OF FINANCIAL POSITIONCapital and reserves 1 173 669 1 197 163Non-controlling interests 1 261 18 797

Total equity 1 174 930 1 215 960

Non-current liabilities 116 802 398 886

Interest-bearing borrowings 40 027 252 022Non-interest-bearing borrowings 835 16 563Deferred profit 37 735 61 536Derivative financial instrument 6 990 6 526Retirement benefit obligation 5 979 –Deferred tax liabilities 25 236 62 239

Current liabilities 1 267 065 883 690

Borrowings 476 186 215 712Other 790 879 667 978

Total equity and liabilities 2 558 797 2 498 536

Non-current assets 737 819 827 448

Property, plant and equipment 373 996 353 986Intangible assets 218 099 271 253Deferred tax assets 57 308 77 934Trade and other receivables – 36 825Investments in associates 88 416 87 450

Current assets 1 178 512 1 671 087Held for sale assets 42 466 –

Total assets 2 558 797 2 498 536

ORDINARY SHARE STATISTICSWeighted average shares ('000)

For earnings per share 233 681 202 235For fully diluted earnings per share 233 681 216 676

Shares in issue ('000) 240 243 240 243Shares held in treasury ('000) (8 718) 8 258Deferred ordinary shares ('000) 2 000 2 000Market capitalisation (R'000) 1 535 152 1 849 870Market price (cents) 639 770Headline earnings per share (cents) 16,30 48,91Attributable earnings per share (cents) (12,98) 53,99Fully diluted earnings per share (cents) (12,98) 50,39Asset value per share (cents)

Net asset value 488,53 511,64Net tangible asset value 397,75 395,71

> IR21



2011 2010R’000 R’000

RETURNS ON PROFITABILITYReturn on ordinary shareholders’ funds (2,53) 13,28

Return on total assets 1,29 8,32

Asset turnover ratio 2,9 2,3

Operating profit margin 0,87 5,74

Turnover per employee (R’000) 923 854

SOLVABILITY AND LIQUIDITYFinancing cost cover (times) 0,71 3,68

Financial gearing ratio 30,30 21,10

Current ratio 1,40 1,89

Acid-test ratio 0,76 1,05

Debt:equity ratio 118 0,51

Financial review The downturn in the economy had a material impact on DAWN’s results. Although revenue increased by 4,8% to

R3,8 billion (2010: R3,6 billion), the organic growth amounted to 2,5%, despite a volume decrease of 1%. Operating profit

decreased by 84,1% to R33 million (2010: R208 million) mainly as a result of investment in new capacity and people. A

substantial portion of the revenue of the Group is eliminated on consolidation. The Group eliminated a total of R952 million

(2010: R908 million) of inter-group revenue.

Earnings per share at a loss of 12,98 cents (2010: profit of 53,98 cents) were 124% lower, with headline earnings per

share of 16,30 cents (2010: 48,91 cents ) declining by 67%. Headline earnings per share has been adjusted, mainly for a

loss from the derecognition of Africa Swiss Trading joint venture and an impairment of goodwill to the value of R49 million

relating to Vaal Sanitaryware (R27 million), the Acrylic division (Libra Bathrooms and Plexicor) (R19 million) and AST Angola

(R3 million). The impairments do not form part of headline earnings. Refer note 13.

The Group operating margin reduced to 2,7% (before impairment and derecognition adjustments) (2010: 5,5%), mainly

due to further deterioration in the building market as confirmed by the buildings completed data, where market volumes

decreased by a further 21% during the year. The Infrastructure segment improved its performance marginally, however, it is

still in a loss position. The Building segment net margin before impairments and derecognition of previously held interests

amounted to 6,7% and the Infrastructure margin a loss of 2,2%.

Working capital management continued to be a focus area during a challenging cycle. Bad debts increased slightly, but

remained below 0,1% of revenue. The volatile demand patterns placed increased pressure on inventory management,

resulting in an expansion in investment in inventory to R852 million (2010: R746 million). The strong focus on working

capital management limited the growth in net investment in working capital. Cash generated from operations, after

working capital, remained a focus area and amounted to R145 million (2010: R219 million), down mainly as a result of the

R97 million decrease in operating profit before impairments and derecognitions.

IR22 <



Interest cost cover (at normalised EBITDA level) at 3,7 (2010: 4,0 times) and a debt service (including total capital and

interest repayments) covered by free cash flow generated by the Group in the financial year of 0,5 times (2010: 1,37

times), reflect the tough economic environment the Group operates in. The Group’s funding agreement with The Standard

Bank of South Africa Limited and FirstRand Bank Limited (“lenders”) specifies that certain liquidity ratios need to be

complied with as at 30 June 2011. Not all ratios were met and placed the Group in breach of the requirement stipulated in

the funding agreement. Accordingly, the Group discloses R194 million of borrowings as current at 30 June 2011 in the

Statement of Financial Position. The lenders have agreed not to take any action in respect of the breach, but reserved their

right to do so. It was further confirmed by the lenders that it is their intention to continue to provide term debt facilities on

terms to be negotiated. Refer to note 23 for more details of the covenants.

Acquisitions During the year, the Group acquired the remaining shares from non-controlling shareholders in DPI Fike Proprietary Limited,

Wholesale Housing Supplies (East London) Proprietary Limited and Electroline Proprietary Limited at a cost of R2,8 million.

In addition, a non-controlling interest in Apex Valves (South Africa) Proprietary Limited was acquired for R4,2 million.

Segmental analysis The Group experienced its toughest trading environment to date during the 2011 financial year. The Group

experienced a R32 million operating loss (2010: R34 million operating loss) in the Infrastructure segment (DPI Plastics and

Incledon), which had a negative impact on Group results. The Building segment, which provided the strong support to the

Group’s earnings in the prior financial year, also came under pressure due to a further decline in volumes, combined with

inflationary cost pressures. The Building segment operating profit amounted to R116 million (2010: R247 million). DAWN

Solutions experienced inflationary pressures on its predominantly fixed expense base and incurred a loss of R10,5 million

(2010: R8,3 million profit).

> IR23



Operating OperatingRevenue profit/(loss) Impairment profit/(loss)

after Depre- before of afterinter- ciation impairments intangibles impairments

segment and and and and Financeeliminations amorti- derecog- derecog- derecog- income/

Revenue reallocated sation nitions nitions ** nitions (expense)R’000 R’000 R’000 R’000 R’000 R’000 R’000

2011Building 2 494 827 2 489 600 (32 690) 168 858 (53 039) 115 819 (52 282)Infrastructure 1 315 544 1 297 271 (17 902) (32 481) 133 (32 348) 2 088DAWN Solutions 241 083 5 760 (15 826) (10 547) – (10 547) (1 643)Head office and

consolidation (258 823) – (1 913) (24 051) (15 803) (39 854) 5 306

3 792 631 3 792 631 (68 331) 101 779 (68 709) 33 070 (46 531)

2010Building 2 434 015 2 425 864 (27 666) 238 134 8 717 246 851 (29 850)Infrastructure 1 213 701 1 183 517 (17 018) (33 514) – (33 514) (9 105)Support Services 213 755 9 010 (13 622) 8 269 – 8 269 (2 599)Head office and

consolidation* (243 080) – (990) (13 738) – (13 738) (14 957)

3 618 391 3 618 391 (59 296) 199 151 8 717 207 868 (56 511)

Share ofprofit/(loss)

ofassociates(including

impair- Net Netment of profit/(loss) Tax profit/(loss) Capital

associate) before tax expense after tax Assets Liabilities expenditureR’000 R’000 R’000 R’000 R’000 R’000 R’000

2011Building (983) 62 554 (32 899) 29 655 1 881 157 1 241 896 56 069Infrastructure 277 (29 983) 14 765 (15 218) 770 613 508 463 23 377DAWN Solutions – (12 190) (1 782) (13 932) 322 181 335 186 13 915Head office and

consolidation – (34 548) 5 227 (29 321) (415 154) (701 678) 910

(706) (14 167) (14 689) (23 856) 2 558 797 1 383 867 94 271

2010Building 3 810 220 811 (59 421) 161 390 1 848 536 1 286 139 35 817Infrastructure 1 401 (41 218) 11 529 (29 689) 659 352 431 662 13 208Support Services – 5 670 (378) 5 292 184 606 206 092 11 734Head office and

consolidation* – (28 695) 6 182 (22 513) (193 958) (641 317) 2 759

5 211 156 568 (42 088) 114 480 2 498 536 1 282 576 63 518

* Head office and consolidation predominantly include elimination of intergroup sales, profits and losses and intergroup receivables and payables and other unallocated assets and liabilities contained with the vertically integrated Group.

** Includes impairment of assets and derecognition of previously held interest.

IR24 <



Value createdThe wealth created by the organisation amounted to R786 million, which was distributed as follows:

FUTURE PERFORMANCE OBJECTIVES DAWN remains confident that the longer term will provide strong growth prospects in both the building and infrastructure

markets. The short-term outlook remains however difficult to predict. In this context, the Group is placing increased focus

on improving returns, which were at unacceptable levels at year-end.

Over the last three years, the Group has focused on right-sizing, cost management, market share growth and correcting

the Statement of Financial Position. Management believes that there is still room for improvement, mainly relating to

inventory management. To this end, Group executive intervention in working capital management, forecasting and

monitoring will be enforced at the individual companies in the Group. Getting the stock levels right is the key focus for

F2012. Despite efforts to reduce stockholdings, the Group will continue to ensure its just-in-time stock availability offering

to merchants, which is a key competitive advantage. In addition, the Group’s sophisticated stock systems are being further

improved through the enhancement of customer sales history analysis to strengthen stock availability.

Profit levels in respect of assets employed will be monitored across the Group to ensure that the capital invested in each

entity is at an optimal level.

Cash is now paramount and by reducing working capital levels and converting it into cash, DAWN’s cash position will be

improved. All actions are geared towards improving the ratio of debt service covered by free cash flow generated by the

Group.

> IR25

Employees Government Retained for reinvestmentProviders of capital

84%

9%

2%5%

2011

66%10%

5%

19%

2010



The other side of the returns equation is getting the profits up. The Group will increase market share further as the benefits

from the development of new products at all manufacturing entities flow through. Aesthetics and ‘green’ product

development will receive particular focus to expand the Group’s offering and ability to attract a wider scope of available

business.

Success in growing market share will translate into increased volumes which will ensure further economies of scale.

A turnaround at the non-profitable businesses, DPI Plastics and the Sanitaryware cluster, even to just break-even, would

impact the bottom line. Both businesses need a higher margin sales mix and, to this end, Vaal has launched a number of new

products and cost-saving initiatives in the factories. The commodity bath plant in the Acrylic division has been mothballed to

improve recoveries. DPI Plastics will see further cost reductions and there will be a continued focus to improve the swing in the

sales mix towards higher margin fittings products.

DAWN’s executives and management teams will, in the year ahead, apply aggressive energy to ensure results.

REMUNERATION POLICIESThe general objective of the Remuneration Policy is to ensure that DAWN can attract, motivate and retain appropriately skilled,

qualified and experienced employees. Remuneration is based on conditions that are market competitive whilst simultaneously

aligned with shareholders’ interests.

Setting remuneration and review procedures• DAWN and its subsidiaries review remuneration packages once per annum at the start of the financial year.

• The Board is responsible for making decisions in respect to the remuneration of directors and, in particular, the Group

Chief Executive Officer. It does so with the assistance and advice of the Remuneration Committee. In determining the level

and make-up of the Group Chief Executive Officer’s and senior executives’ remuneration, the Remuneration Committee

may obtain independent advice on the appropriateness of remuneration packages, given remuneration trends of other

companies, from which the recommendations are made to the Board.

• The Board, on the recommendation of the Remuneration Committee, proposes the remuneration to be paid to non-

executive directors for approval by shareholders in the annual general meeting.

• Each year the Remuneration Committee will review the remuneration of senior executives and make recommendations to

the Board for any changes to those remuneration packages; recommend proposed short-term incentive and/or long-term

incentive performance awards after performance evaluation procedures and the recommendation of the Group Chief

Executive Officer.

• The Group Chief Executive Officer is ultimately responsible for recommendations to the Board relating to the

remuneration of executive directors of all Group entities. Responsibility for decisions relating to remuneration of non-

executive staff is delegated to line management within the different business units.

IR26 <



• The responsibilities of managers/supervisors in respect to remuneration for non-executive employees are:

– Ensuring that accurate role descriptions are in place, with sufficient detail on elements required to allow consistent

assessments and comparison to be undertaken;

– Conducting effective assessments of employee performance; and

– To optimise alignment with the Company’s remuneration practices and other employment matters.

For further information on the remuneration policy and the detailed remuneration of directors and prescribed officers refer

to the Remuneration Report on pages CG26 to CG35.

ANALYTICAL COMMENTARY DAWN’s executive regards inclusivity as more than a stakeholder engagement process, but rather from the broader

perspective of a commitment to be accountable to those on whom DAWN has an impact and who have an impact on

DAWN, a collaboration at all levels, including governance, to achieve better outcomes. DAWN’s engagement and

participation provide comprehensive and balanced involvement that results in strategies, plans, actions and outcomes that

address and respond to issues and impact in an accountable manner. Materiality is defined as determining the relevance

and significance of an issue to DAWN and its stakeholders, with a material issue being that issue that will influence the

decisions, actions and performance of DAWN or its stakeholders. Responsiveness pertains to how DAWN demonstrates

its response to its stakeholders and its accountability to them. The communications process reflects the needs and

expectations of stakeholders, identifies shortcoming and prevents material misstatements and is accessible to

stakeholders.

DAWN established policies and procedures during the year to enhance its stakeholder inclusive approach, thereby

ensuring a structure within which to determine materiality. The material issues defined and its responses thereto will be

published in the F2012 Integrated Report.

ASSURANCEThe data in this report has been assured to the extent set out below. The Group accepts that this limited assurance is not

ideal, but DAWN’s approach to combined assurance is at an early stage.

The annual financial statements appearing on pages FS04 to FS94 have been audited by the independent auditors,

PricewaterhouseCoopers Inc, and their audit report appears on page FS03 of the annual financial statements.

DAWN’s directors are responsible for the preparation and presentation of the identified sustainability information, as

incorporated in the 2011 Sustainability Report, and for the information contained in the Integrated Report, in accordance

with their internally defined procedures. DAWN’s directors are also responsible for maintaining adequate records and

internal controls that are designed to support the reporting process.

The Audit Committee has reviewed the sustainability issues in the Sustainability Report and in the Integrated Report to

ensure that they are reliable and that there is no conflict with the financial information.

The GRI reporting level A application has not been independently assured by an external assurance provider. However,

information contained within the Sustainability Report and disclosures from certain external sources have been

independently verified, such as the carbon footprint report (Global Carbon Exchange) and broad-based black economic

empowerment rating (Empowerdex). Independent assurance will be sought for the 2012 Sustainability Report.

> IR27

Contents FS01 Statement of Compliance by Company Secretary

FS02 Statement of responsibility and approval by the Board of Directors

FS03 Report of the independent auditors

FS04 Directors’ report

FS09 Income Statements

FS10 Statements of Comprehensive Income

FS11 Statements of Financial Position

FS12 Group Statement of Changes in Equity

FS13 Company Statement of Changes in Equity

FS14 Statements of Cash Flows

FS15 Accounting policies (note 1)

FS34 Notes to the annual financial statements

LEVEL OF ASSURANCE

These annual financial statements have been audited in compliance with the applicable requirements of the Companies Act of South Africa.

AUDITORS

PricewaterhouseCoopers Inc.Registered Auditors

PREPARER

JAI FerreiraChief Financial Officer

PUBLISHED

13 September 2011


> FS01

I certify that the Company has lodged with the Companies and Intellectual PropertyCommission (CIPC) in respect of the year ended 30 June 2011, all such returns asrequired to be lodged by a public company in terms of the Companies Act as amended,and that all such returns are true, correct and up to date.

JA BeukesCompany Secretary

Johannesburg13 September 2011

Statement of compliance by the company secretary

Statement of responsibilityand approval of the Board of Directors

The directors are required in terms of the Companies Act of South Africa to maintain adequate accounting records and

are responsible for the content and integrity of the annual financial statements and related financial information included

in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of

the Group as at the end of the financial year and the results of its operations and cash flows for the period then ended,

in conformity with International Financial Reporting Standards. The external auditors are engaged to express an

independent opinion on the annual financial statements.

The annual financial statements are prepared in accordance with International Financial Reporting Standards and in the

manner required by the Companies Act of South Africa, as amended, as well as AC 500 Standards as issued by the

Accounting Standards Board and are based upon appropriate accounting policies consistently applied and supported

by reasonable and prudent judgments and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by

the Group and place considerable importance on maintaining a strong control environment. To enable the directors to

meet these responsibilities, the Board of Directors sets standards for internal control aimed at reducing the risk of error

or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined

framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk.

These controls are monitored throughout the Group and all employees are required to maintain the highest ethical

standards in ensuring the Group’s business is conducted in a manner that in all reasonable circumstances is above

reproach. The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known

forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by

ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within

predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of

internal control provides reasonable assurance that the financial records may be relied on for the preparation of the

annual financial statements. However, any system of internal financial control can provide only reasonable, and not

absolute, assurance against material misstatement or loss.

The directors have reviewed the Group’s cash flow forecast for the next 12 months and, in the light of this review and

the current financial position, they are satisfied that the Group has or has access to adequate resources to continue in

operational existence for the foreseeable future. The going concern basis has therefore been adopted in preparing the

annual financial statements.

The external auditors are responsible for independently reviewing and reporting on the Group’s annual financial

statements. The annual financial statements have been examined by the Group’s external auditors and their report is

presented on page FS03.

The annual financial statements set out on pages FS04 to FS94, which have been prepared on the going concern

basis, were approved by the Board of Directors on 13 September 2011 and were signed on its behalf by:

RL Hiemstra DA Tod JAI FerreiraChairman Chief Executive Officer Chief Financial Officer

FS02 <


Report of the independent auditorsto the members of Distribution and Warehousing Network Limited

We have audited the consolidated annual financial statements and annual financial statements of Distribution andWarehousing Network Limited, which comprise the consolidated and separate statements of financial position as at 30 June2011, and the consolidated and separate income statements and consolidated and separate statements of comprehensiveincome, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies andother explanatory information, and the directors’ report, as set out on pages FS04 to FS94.

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 the requirements of the Companies Act of South Africa,and for such internal control as the directors determine is necessary to enable the preparation of financial statements thatare free from material misstatements, whether due to fraud or error.

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit inaccordance with International Standards on Auditing. Those standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of materialmisstatement 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 todesign audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentationof 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, the financial statements present fairly, in all material respects, the consolidated and separate financial positionof Distribution and Warehousing Network Limited as at 30 June 2011, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with InternationalFinancial Reporting Standards and the requirements of the Companies Act of South Africa.

PricewaterhouseCoopers Inc.Registered AuditorPer: I Buys2 Eglin RoadSunninghill

13 September 2011

> FS03


Directors’ reportfor the year ended 30 June 2011

The directors have pleasure in presenting their report, which forms part of the audited annual financial

statements for the year ended 30 June 2011. The financial statements presented on pages FS09 to FS94 set out fully

the financial position, results of operations and cash flows of the Group for the financial year ended 30 June 2011.

GROUP PROFILE

Distribution and Warehousing Network Limited (DAWN) manufactures and distributes mainly local quality, branded

hardware, sanitaryware, plumbing, kitchen, engineering and civil products through a national, strategically positioned

branch network in South Africa as well as in selected African countries and Mauritius.

DAWN adds significant value to the distribution channel through its logistics services that reduce duplication and

enhance efficiencies between the production and distribution of the Group’s products. Through selective equity

ownership, DAWN is able to share in the value of the optimised supply-chain that is created.

The Group’s subsidiary businesses complement each other’s product ranges and therefore create significant

cross-selling opportunities and a package offering. Service functions such as warehousing, distribution and other

shared services allow for maximum efficiency through economies of scale.

GROUP RESULTS SUMMARY

2011 2010 %

R’000 R’000 change

Statement of Financial Position

Total assets 2 558 797 2 498 536 2

Total liabilities 1 383 867 1 282 576 8

Financial gearing ratio (%)* 30,3 21,1 44

Net asset value per share (cents) 488,53 512,13 (5)

Net tangible asset value per share (cents) 397,75 396,22 –

Income Statement

Revenue 3 792 631 3 618 391 5

Operating profit before finance charges 33 070 207 868 (84)

Net finance charges (46 531) (56 511) (18)

Income tax expense (14 689) (42 088) (65)

Attributable earnings (30 325) 109 177 (128)

Headline earnings 38 085 98 914 (61)

Earnings per share (cents) (12,98) 53,98 (124)

Headline earnings per share (cents) 16,30 48,91 (67)

* Includes cash and cash equivalents.

The Group’s operations are classified into three main operating segments, namely Building, Infrastructure and Solutions

(previously Services). The Building segment carries a predominant exposure to residential and commercial building

activity in the South African market, whereas the Infrastructure segment carries its dominant exposure to the civil

market activity, specifically the water infrastructure and related market activity.

Details of the segmental analysis of the Group are set out in note 2.

FS04 <


Directors’ report continued

for the year ended 30 June 2011

The downturn in the economy had a material impact on DAWN’s results. Although revenue increased by 4,8% to R3,8 billion (2010: R3,6 billion), the organic growth amounted to 2,5%, despite a volume decrease of 1%. Operatingprofit decreased by 84,1% to R33 million (2010: R208 million) mainly as a result of a R69 million impairment of goodwilland other non-operational non-recurring write-offs as well as investment in new capacity and people. A substantial portion of the revenue of the Group is eliminated on consolidation. The Group eliminated a total of R952 million (2010:R908 million) of inter-group revenue.

Earnings per share at a loss of 12,98 cents (2010: profit of 53,98 cents) were 124% lower, with headline earnings pershare of 16,30 cents (2010: 48,91 cents ) declining by 67%. Headline earnings per share has been adjusted, mainly fora loss from the derecognition of Africa Swiss Trading joint venture and an impairment of goodwill to the value of R49 million relating to Vaal Sanitaryware (R27 million), the Acrylic division (Libra Bathrooms and Plexicor) (R19 million) andAST Angola (R3 million). The impairments do not form part of headline earnings. (Refer note 13)

The Group operating margin reduced to 2,7% (before impairment and derecognition adjustments) (2010: 5,5%), mainlydue to further deterioration in the building market as confirmed by the buildings completed data, where market volumesdecreased by a further 21% during the year. The Infrastructure segment improved its performance marginally, however,it is still in a loss position. The Building segment net margin before impairments and derecognition of previously heldinterests amounted to 6,7% and the Infrastructure margin a loss of 2,2%.

Working capital management continued to be a focus area during a challenging cycle. Bad debts increased slightly, butremained below 0,1% of revenue. The volatile demand patterns placed increased pressure on inventory management,resulting in an expansion in investment in inventory to R852 million (2010: R746 million). The strong focus on workingcapital management limited the growth in net investment in working capital. Cash generated from operations, afterworking capital, remained a focus area and amounted to R145 million (2010: R219 million), down mainly as a result ofthe R97 million decrease in operating profit before impairments and derecognitions.

Interest cost cover (at normalised EBITDA level) at 3,7 (2010: 4,0 times) and a debt service (including total capital andinterest repayments) covered by free cash flow generated by the Group in the financial year of 0,5 times (2010: 1,37times), reflect the tough economic environment the Group operates in. The Group’s funding agreement with TheStandard Bank of South Africa Limited and FirstRand Bank Limited (“lenders”) specifies that certain liquidity ratios needto be complied with as at 30 June 2011. Not all ratios were met and placed the Group in breach of the requirementstipulated in the funding agreement. Accordingly, the Group discloses R194 million of borrowings as current at 30 June2011 in the Statement of Financial Position. The lenders have agreed not to take any action in respect of the breach,but reserved their right to do so. It was further confirmed by the lenders that it is their intention to continue to provideterm debt facilities on terms to be negotiated. Refer to note 23 for more details of the covenants.

REVIEW OF ACTIVITIES

The Group experienced its toughest trading environment to date during the 2011 financial year. The Group experienceda R32 million operating loss (2010: R34 million operating loss) in the Infrastructure segment (DPI Plastics and Incledon),which had a negative impact on Group results. The Building segment, which provided the strong support to theGroup’s earnings in the prior financial year, also came under pressure due to a further decline in volumes, combined with inflationary cost pressures. The Building segment operating profit amounted to R116 million (2010: R247 million). DAWN Solutions experienced inflationary pressures on its predominantly fixed expense base andincurred a loss of R10,5 million (2010: R8,3 million profit).

During the year, the Group acquired the remaining shares from non-controlling shareholders in DPI Fike Mining SuppliesProprietary Limited, Wholesale Housing Supplies (East London) Proprietary Limited and Electroline Proprietary Limitedat a cash cost of R2,8 million. In addition, a non-controlling interest in Apex Valves (South Africa) Proprietary Limitedwas acquired for R4,2 million.

> FS05




SPECIAL RESOLUTIONS

At the annual general meeting of the Company held on 14 January 2011, shareholders approved a special resolution to

grant the Company a general authority for the repurchase of its own shares.

DIVIDEND

The Board considers it prudent to conserve cash until the market recovers and therefore do not propose a dividend in

respect of the 2011 financial year.

SHARE CAPITAL

In the prior financial year, the Company successfully concluded a capital raising through a rights issue of 41 666 666

ordinary shares at a price of R7,20 per share on 14 December 2009. The rights offer was fully underwritten by

Coronation Asset Management.

Cumulatively up to 30 June 2011, eight million deferred ordinary shares have been converted into ordinary shares with

two million deferred ordinary shares to be converted into ordinary shares in five tranches of 400 000 shares with the

last conversion taking place on 1 July 2014.

A subsidiary holds 8,7 million shares in treasury which is disclosed as a reduction in equity in the Statement of

Changes in Equity.

Further details of the authorised and issued share capital of the Company are provided in note 19 to the annual

financial statements.

DAWN SHARE TRUST

The aggregate number of shares which may be utilised for the trust is limited to 20% of the total issued shares of the

Company. All the shares have been taken up.

2011 2010

‘000 ‘000

Aggregate number of shares available to the trust 18 793 18 793

Shares issued (15 964) (11 380)

Shares available but not issued 2 829 7 413

Shares subject to the trust have been dealt with as follows:

Shares subject to the trust at beginning of year – 12 967

Less: Released to participants – (12 967)

Shares subject to the trust at end of year – –

FS06 <




DIRECTORSDate of Date

Full details of directors Nationality Official appointment resigned

LM Alberts ^ South African Chairman (Resigned as 30 August 2001Chairman on 30 June 2011)

DA Tod * South African Chief Executive Officer 30 June 1998M Akoojee ** South African 23 June 2011OS Arbee ** South African 15 December 2004JA Beukes * South African 20 August 1998JAI Ferreira * South African Chief Financial Officer 30 November 2007RL Hiemstra ** South African Appointed as Chairman 30 June 1998

on 1 July 2011VJ Mokoena ^ South African 22 June 2011 14 January 2011SD Mthembi-Mahanyele ^ South African 1 May 2010RD Roos * South African 14 December 2009

* Executive. ** Non-executive. ^ Independent non-executive.

In terms of the Company’s Memorandum of Incorporation, Messrs JA Beukes and RL Hiemstra retire by rotation at theforthcoming annual general meeting. All the retiring directors are eligible and available for re-election.

SECRETARY

The secretary of the Company is JA Beukes, appointed on 22 June 2011.

DIRECTORS’ AND PRESCRIBED OFFICERS’ SHAREHOLDING

The directors held an aggregate direct and indirect beneficial interests of 6,9% (2010: 6,8%) in the issued share capitalof the Company at the end of the reporting period. The Company has not been notified of any material change in theseinterests during the period 30 June 2011 to the date of this report.

The beneficial direct and indirect interests of the directors in office at the date of this report is as follows:

Number of ordinary shares

Beneficial

Direct Indirect Total

At 30 June 2011 11 962 891 4 690 075 16 652 966

At 30 June 2010 11 908 906 4 540 135 16 449 041

Comprising:

Executive directors 11 954 391 4 659 829 16 614 220

JA Beukes 3 311 011 – 3 311 011JAI Ferreira 283 537 – 283 537DA Tod 5 111 827 4 659 829 9 771 656RD Roos 280 143 – 280 143

Non-executive directorsLM Alberts 1 766 285 – 1 766 285RL Hiemstra 1 197 998 – 1 197 998VJ Mokoena 3 590 – 3 590

Prescribed officers 8 500 30 246 38 746

CJ Bishop – 30 246 30 246M Coetzee – – –RP Haynes – – –GD Kotzee 5 000 – 5 000R Straussner 3 500 – 3 500PJ van Niekerk – – –

> FS07


DIRECTORS’ EMOLUMENTS

Details of the directors’ emoluments are set out in note 42.

DIRECTORS’ INTEREST IN CONTRACTS

No material contracts involving directors’ interest were entered into during the review year.

SHAREHOLDING ANALYSIS

Details of the Company’s shareholding are set out on page SI02.

SUBSIDIARIES, ASSOCIATE COMPANIES AND JOINT VENTURES

Details of the holding Company’s interest in subsidiaries, associate companies and joint ventures are set out on pagesFS92 and FS93. Details of indebtedness to the holding Company are set out on page FS88.

EVENTS AFTER THE REPORTING PERIOD

Subsequent to the end of the reporting period, the Group has entered into negotiations with its lenders to restructurethe term debt on terms more appropriate to the economic cycle in which the Group currently operates. Furthermore,on 8 July 2011 DAWN disposed of its 49% stake in AST to Kwikot Proprietary Limited, for a purchase consideration ofR24,5 million (subject to certain guarantees and warranties) which was settled in cash.

AUDITORS

The auditors, PricewaterhouseCoopers Inc., have indicated their willingness to continue in office for the ensuing year.The Audit Committee has satisfied itself of the independence of the auditors and of the designated auditor, Mr I Buys. A resolution to reappoint them as auditors will be proposed at the next annual general meeting scheduled totake place on 15 December 2011.



FS08 <


> FS09


Income statementsfor the year ended 30 June 2011

Group Company

2011 2010 2011 2010Note R’000 R’000 R’000 R’000

Revenue 3 3 792 631 3 618 391 – –Cost of sales 4 (2 848 747) (2 713 656) – –

Gross profit 943 884 904 735 – –Operating expenses 4 (871 462) (733 874) – –

Administrative and selling expenses (449 189) (394 455) – –Distribution and warehousing expenses (394 234) (300 954) – –Other operating expenses (28 039) (38 465) – –

Other net income 5 29 357 28 290 – 9 202

Operating profit before impairments andderecognition of investments 101 779 199 151 – –

Impairment of goodwill and property, plantand equipment 4 (49 446) – – –

Net (loss)/gain on derecognition of previously held interests 4 (19 263) 8 717 – –

Operating profit 33 070 207 868 – 9 202 Finance income 6 28 629 27 332 – 36Finance expense 7 (75 160) (83 843) – (2)

(Loss)/profit after net financing costs (13 461) 151 357 – 9 236Impairment of associate 15 (625) – – –Results of associates 15 (81) 5 211 – –

(Loss)/profit before income tax (14 167) 156 568 – 9 236Income tax expense 9 (14 689) (42 088) – (10)

(Loss)/profit for the year (28 856) 114 480 – 9 226

(Loss)/profit attributable to:Owners of the parent 11 (30 325) 109 177 – 9 226Non-controlling interest 1 469 5 303 – –


Attributable earnings per share (cents)Basic 11 (12,98) 53,98Diluted 11 (12,98) 50,38

Statements of comprehensive income for the year ended 30 June 2011

Group Company

2011 2010 2011 2010Note R’000 R’000 R’000 R’000


Other comprehensive income:Exchange differences on translating foreign

operations (1 190) (14 221) – – Effects of cash flow hedges 1 563 (5 893) – –Taxation related to components of other

comprehensive income (306) 1 650 – –

Other comprehensive income for the year net of taxation 10 67 (18 464) – –

Total comprehensive (loss)/income (28 789) 96 016 – 9 226

Total comprehensive (loss)/income attributable to:

Owners of the parent (30 077) 90 713 – 9 226Non-controlling interest 22 1 288 5 303 – –

(28 789) 96 016 – 9 226

FS10 <


Statements of financial positionas at 30 June 2011

Group Company

2011 2010 2011 2010Note R’000 R’000 R’000 R’000

ASSETSNon-current assetsProperty, plant and equipment 12 373 996 353 986 – – Intangible assets 13 218 099 271 253 – –Investments in subsidiaries 14 – – 481 372 481 372Investments in associates 15 88 416 87 450 – –Deferred tax assets 26 57 308 77 934 – – Other receivables 17 – 36 826 – –

737 819 827 449 481 372 481 372

Current assetsInventories 16 852 424 746 636 – – Trade and other receivables 17 773 497 725 471 – – Cash and cash equivalents 18 150 903 198 980 – – Derivative financial instruments 24 165 – – –Current tax receivable 33 1 523 – – –

1 778 512 1 671 087 – –

Assets held for saleSubsidiary held for sale 37 42 466 – – –

Total assets 2 558 797 2 498 536 481 372 481 372

EQUITY AND LIABILITIESEquityCapital and reserves attributable to equityholders of the CompanyShare capital 19 2 422 2 422 2 422 2 422Share premium 19 373 748 373 748 373 748 373 748Retained income 818 603 848 928 105 192 105 192Treasury shares and incentive trust 20 (14 859) (11 337) – –Share-based payment reserve 21 20 591 15 667 – –Hedging reserve (2 986) (4 243) –Foreign currency translation reserve (7 286) (26 869) – –Transactions with non-controlling interest reserve 22 (16 564) (1 153) – –

Share capital and reserves 1 173 669 1 197 163 481 362 481 362 Non-controlling interest 22 1 261 18 797 – –

Total equity 1 174 930 1 215 960 481 362 481 362

LiabilitiesNon-current liabilitiesBorrowings 23 40 862 268 585 – –Deferred profit 25 37 735 61 536 – –Deferred tax liabilities 26 25 236 62 239 – –Retirement benefit obligation 28 5 979 – – –Derivative financial instruments 24 6 990 6 526 – –

116 802 398 886 – –

Current liabilitiesTrade and other payables 27 766 601 646 389 – –Borrowings 23 476 186 215 712 – –Derivative financial instruments 24 464 67 – –Deferred profit 25 8 150 – – –Current tax payable 33 15 664 21 522 10 10

1 267 065 883 690 10 10

Total liabilities 1 383 867 1 282 576 10 10

Total equity and liabilities 2 558 797 2 498 536 481 372 481 372

> FS11


Group statement of changes in equityfor the year ended 30 June

Attributable to equity holders of the Company

Tran- Treasury

sactions shares

Foreign with and Share- Non-

currency share- incentive based control-

Share Share translation Hedging holders share payment Retained ling Total

capital premium reserve reserve reserve trust reserve income Total interest equity

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

GROUP

Balance at 1 July 2009 2 006 88 532 (2 021) – – (15 727) 9 327 739 751 821 868 17 832 839 700

Total comprehensive

income for the year – – (14 221) (4 243) – – – 109 177 90 713 5 303 96 016

Income for the year – – – – – – – 109 177 109 177 5 303 114 480

Other comprehensive income – – (14 221) (4 243) – – – – (18 464) – (18 464)

Total contributions by

and distributions to

owners of the Company

recognised directly in

equity 416 285 216 (10 627) – (1 153) 4 390 6 340 – 284 582 (4 338) 280 244

Rights issue 416 299 588 – – – – – – 300 004 – 300 004

Share issue expenses – (14 372) – – – – – – (14 372) – (14 372)

Shares purchased – – – – – (4 605) – – (4 605) – (4 605)

Acquisition of non-controlling

interest in subsidiaries – – – – (1 153) – – – (1 153) (3 540) (4 693)

Incentive trust distribution – – – – – 8 995 – – 8 995 – 8 995

Share-based payment charge – – – – – – 6 340 – 6 340 – 6 340

Loss of control – – (10 627) – – – – – (10 627) – (10 627)

Changes in ownership interest –

control not lost – – – – – – – – – (798) (798)

Balance at 1 July 2010 2 422 373 748 (26 869) (4 243) (1 153) (11 337) 15 667 848 928 1 197 163 18 797 1 215 960

Total comprehensive

loss for the year – – (1 009) 1 257 – – – (30 325) (30 077) 1 288 (28 789)

Loss for the year – – – – – – – (30 325) (30 325) 1 469 (28 856)

Other comprehensive income – – (1 009) 1 257 – – – – 248 (181) 67

Total contributions by

and distributions to

owners of the Company

recognised directly in

equity – – 20 592 – (15 411) (3 522) 4 924 – 6 583 (18 824) (12 241)

Treasury shares acquired – – – – – (3 522) – – (3 522) – (3 522)

Acquisition of non-controlling

interest in subsidiaries – – – – (15 411) – – – (15 411) (18 469) (33 880)

Recycling of foreign currency

translation reserve on

derecognition of joint venture – – 18 126 – – – – – 18 126 – 18 126

Recycling of foreign currency

translation reserve on

derecognition of subsidiary – – 2 466 – – – – – 2 466 – 2 466

Share-based payment charge – – – – – – 4 924 – 4 924 – 4 924

Dividends – – – – – – – – – (355) (355)

Balance at 30 June 2011 2 422 373 748 (7 286) (2 986) (16 564) (14 859) 20 591 818 603 1 173 669 1 261 1 174 930

Note 19 19 22 20 22

FS12 <


Company statement of changes in equityfor the year ended 30 June

Attributable to equity holders of the Company

Tran- Treasury

sactions shares

Foreign with and Share- Non-

currency share- incentive based control-

Share Share translation Hedging holders share payment Retained ling Total

capital premium reserve reserve reserve trust reserve income Total interest equity

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

COMPANY

Balance at

1 July 2009 2 006 88 532 – – – – – 95 966 186 504 – 186 504

Total comprehensive

income for the year – – – – – – – 9 226 9 226 – 9 226

Rights issue 416 299 588 – – – – – – 300 004 – 300 004

Share issue expenses – (14 372) – – – – – – (14 372) – (14 372)

Balance at

30 June 2010 2 422 373 748 – – – – – 105 192 481 362 – 481 362

Total comprehensive

income for the year – – – – – – – – – – –

Balance at

30 June 2011 2 422 373 748 – – – – – 105 192 481 362 – 481 362

Note 19 19

> FS13


Statements of cash flowsfor the year ended 30 June

Group Company

2011 2010 2011 2010Note R’000 R’000 R’000 R’000

Cash flows from operating activitiesCash receipts from customers 3 746 528 3 602 632 – –Cash paid to suppliers and employees (3 601 690) (3 383 424) – –

Cash generated from operations 32 144 838 219 208 – –Dividends received – – – 9 202Finance income received 22 162 20 438 – 36Finance expense paid (72 958) (82 746) – (2)Income tax paid 33 (37 688) (62 130) – –

Net cash from operating activities 56 354 94 770 – 9 236

Cash flows from investing activitiesAdditions to property, plant and equipment 34 (94 271) (63 518) – –Proceeds from disposal of property, plant

and equipment 35 8 302 38 018 – –Purchase of other intangible assets 13 (139) – – –Increase in investment in subsidiary – – – (4 594)Movement in loans to subsidiaries – – – (290 274)Treasury shares purchased 20 (3 522) (4 605) – –Disposal of associate held for sale – 70 000 – –Incentive trust receipts 20 – 8 995 – –Derecognition of joint venture bank balances 3 211 – – –Acquisition of associate 15 (4 165) – – –Financing of joint ventures and associates (485) (16 106) – –Recapitalisation of associate – (5 733) – –Acquisition of businesses 36 (1 257) (11 004) – –

Net cash from investing activities (92 326) 16 047 – (294 868)

Cash flows from financing activitiesNet proceeds on rights issue 19 – 285 632 – 285 632Transaction with non-controlling interest holders 22 (33 628) (4 594) – –Repayment of borrowings (64 284) (296 299) – –Proceeds from borrowings 59 811 222 893 – –Dividend paid to non-controlling interest holders (355) (798) – –

Net cash from financing activities (38 456) 206 834 – 285 632

Total cash movement for the year (74 428) 317 651 – –Cash at the beginning of the year 18 39 902 (277 749) – –

Total cash at the end of the year 18 (34 526) 39 902 – –

FS14 <


Notes to the annual financial statementsfor the year ended 30 June 2011

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe principal accounting policies adopted in the preparation of these consolidated financial statements are setout below. These policies have been consistently applied to all the years presented, unless otherwise stated.

1.1 Basis of preparation

The consolidated financial statements have been prepared in accordance with International FinancialReporting Standards (“IFRS”) and the requirements of the South African Companies Act, as amended. These consolidated financial statements have been prepared under the historical costconvention as modified by the revaluation of financial assets and financial liabilities at fair valuethrough profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain criticalaccounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or com-plexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 1.26 to the accounting policies.

Going concern

The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current financing.After making enquiries, the directors have a reasonable expectation that the Group has adequateresources to continue in operational existence for the foreseeable future.

The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.

Accounting policy developments

Accounting policy developments include new standards issued, amendments to standards, and interpretations issued on current standards. These developments resulted in the first time adoption ofnew and revised standards which require additional disclosures.

Standards, amendments and interpretations effective in 2011

Amendments to IFRS 2 Group Cash-Settled Share-Based Payment Transactions

IFRS 2 was amended to provide more clarity on vesting conditions and cancellations.

The amendment deals with two matters. It clarifies that vesting conditions are service and performance conditions only. Other features of a share-based payment are not vesting conditions. Italso specifies that all cancellations, whether by the entity or other parties, should receive the sameaccounting treatment.

The amendment had no impact on the Group.

IFRS 5 – Non-Current Assets Held for Sale and Discontinued Operations

This amendment clarifies the disclosures of non-current assets or disposal groups classified as heldfor sale or discontinued operations.


IFRS 8 – Operating Segments

This amendment clarifies the disclosure of information about segment assets.

The amendment has been adopted by the Group.

> FS15


Notes to the annual financial statements continued


1.1 Basis of preparation continued

IAS 1 – Presentation of Financial Statements

This amendment clarifies the classification of current versus non-current convertible instruments.


IAS 7 – Statements of Cash Flows

This amendment clarifies the classification of expenditures on unrecognised assets.


IAS 17 – Leases

This amendment clarifies the classification of leases of land and buildings.


IAS 18 – Revenue

This amendment clarifies the principles when determining whether an entity is acting as a principal oras an agent.


IAS 36 – Impairment of Assets

This amendment clarifies the unit of accounting method to be used for goodwill impairment tests.


IAS 38 – Intangible Assets

This amendment deals mainly with the changes when measuring the fair value of an intangible assetacquired in a business combination.


IAS 39 – Financial Instruments: Recognition and Measurement

This amendment mainly deals with treating loan prepayment penalties as closely related embeddedderivatives; it details some scope exemption for business combination contracts and clarifies theprinciples of cash flow hedge accounting.


IFRIC 9 – Reassessment of Embedded Derivatives

This amendment deals mainly with whether an embedded derivative is required to be separated fromthe host contract and accounted for as a derivative when the entity first becomes a party to the contract.


IFRIC 16 – Hedges of a Net Investment in a Foreign Operation

This amendment relates to the restriction on the entity that can hold hedging instruments.


Standards and amendments issued but not effective

The Group has evaluated the effect of all new standards, amendments and interpretations that havebeen issued but which are not yet effective. Based on the evaluation, management does not expectthese standards, amendments and interpretations to have a significant impact on the Company’sresults and disclosures. The expected implications of applicable standards, amendments and interpretations are dealt with below.

FS16 <





Amendment to IAS 24 – Related Party Disclosures

This amendment provides partial relief from the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. It alsoclarifies and simplifies the definition of a related party.

The amendment will currently have no impact on the Group.

Amendments to IFRS 1, ‘First-Time Adoption’ on Hyperinflation and Fixed Dates

The first amendment replaces references to a fixed date of ‘1 January 2004’ with ‘the date of transition to IFRSs’, thus eliminating the need for companies adopting IFRSs for the first time torestate derecognition transactions that occurred before the date of transition to IFRSs. The secondamendment provides guidance on how an entity should resume presenting financial statements inaccordance with IFRSs after a period when the entity was unable to comply with IFRSs because itsfunctional currency was subject to severe hyperinflation.

The amendment is not applicable to the Group.

Amendment to IFRS 7 Disclosures – Transfer of Financial Assets

The amendments are intended to address concerns raised during the financial crisis by the G20,among others, that financial statements did not allow users to understand the ongoing risks the entity faced due to derecognised receivables and other financial assets.


Amendment to IAS 12, ‘Income Taxes’ on Deferred Tax

Currently IAS 12, ‘Income Taxes’, requires an entity to measure the deferred tax relating to an assetdepending on whether the entity expects to recover the carrying amount of the asset through use orsale. It can be difficult and subjective to assess whether recovery will be through use or through salewhen the asset is measured using the fair value model in IAS 40 Investment Property. Hence thisamendment introduces an exception to the existing principle for the measurement of deferred taxassets or liabilities arising on investment property measured at fair value. As a result of the amendments, SIC 21, ‘Income Taxes-recovery of Revalued Non-depreciable Assets’, would nolonger apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC 21, which is accordingly withdrawn.


IFRS 9 – Financial Instruments (2009)

This IFRS is part of the IASB’s project to replace IAS 39. IFRS 9 addresses classification and measurement of financial assets and replaces the multiple classification and measurement models inIAS 39 with a single model that has only two classification categories: amortised cost and fair value.

Management is currently considering the effect of the change.

IFRS 9 – Financial Instruments (2010)

The IASB has updated IFRS 9 ‘Financial instruments’ to include guidance on financial liabilities andderecognition of financial instruments. The accounting and presentation if financial liabilities and derecognition of financial instruments has been relocated from IAS 39 ‘Financial Instruments:Recognition and Measurement’, without change, except for financial liabilities that are designated atfair value through profit or loss.


> FS17



IFRS 10 – Consolidated Financial Statements

This standard builds on existing principles by identifying the concept of control as the determiningfactor in whether an entity should be included within the consolidated financial statements. The standard provides additional guidance to assist in determining control where this is difficult to assess.This new standard might impact the entities that a group consolidates as its subsidiaries.


IFRS 11 – Joint Arrangements

This standard provides for a more realistic reflection of joint arrangements by focusing on the rightsand obligations of the arrangement, rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where a joint operator hasrights to the assets and obligations relating to the arrangement and hence accounts for its interest inassets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights tothe net assets of the arrangement and hence equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed.


IFRS 12 – Disclosures of Interests in Other Entities

This standard includes the disclosure requirements for all forms of interests in other entities, includingjoint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.

The standard will currently have no impact on the Group.

IFRS 13 – Fair Value Measurement

This standard aims to improve consistency and reduce complexity by providing a precise definition offair value and a single source of fair value measurement and disclosure requirements for use acrossIFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend theuse of fair value accounting but provide guidance on how it should be applied where its use isalready required or permitted by other standards within IFRSs and US GAAP.


IAS 27 (revised 2011) – Separate Financial Statements

This standard includes the provisions on separate financial statements that are left after the controlprovisions of IAS 27 have been included in the new IFRS 10.

The standard will have no impact on the Group.

IAS 28 (revised 2011) – Associates and Joint Ventures

This standard includes the requirements for joint ventures as well as associates, to be equityaccounted following the issue of IFRS 11.


IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments

This IFRIC clarifies the accounting when an entity renegotiates the terms of its debt with the resultthat the liability is extinguished through the debtor issuing its own equity instruments to the creditor.A gain or loss is recognised in the profit and loss account based on the fair value of the equity instruments compared to the carrying amount of the debt.




FS18 <



Amendments to IFRIC 14: Pre-Payments of a Minimum Funding Requirement

This amendment will have a limited impact as it applies only to companies that are required to makeminimum funding contributions to a defined benefit pension plan. It removes an unintended consequence of IFRIC 14 related to voluntary pension prepayments when there is a minimum funding requirement.


Annual Improvements Project

Improvements to IFRSs were issued in May 2010 as part of the ‘annual improvements process’resulting in the following amendments to standards issued, but not effective for 30 June 2011 year-ends:

The following standards have been affected by the project:

• IFRS 1 – First-Time Adoption of International Financial Reporting Standards

• IFRS 3 – Business Combinations

• IFRS 7 – Financial Instruments: Disclosures

• IAS 1 – Presentation of Financial Statements

• IAS 27 – Consolidated and Separate Financial Statements

• IAS 34 – Interim Financial Reporting

• IFRIC 13 – Customer Loyalty Programmes

Management is currently considering whether any of these changes have an effect.

1.2 Consolidation

Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has the powerto govern the financial and operating policies generally accompanying a shareholding of more thanone half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Investments in subsidiaries are carried at cost in the separate financial statements of the parent company.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and areno longer consolidated from the date that control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by theGroup. The consideration transferred for the acquisition of a business is measured as the fair value ofthe assets transferred, equity instruments issued and liabilities incurred or assumed at the date ofexchange. The consideration transferred includes the fair value of any asset or liability resulting froma contingent consideration arrangement. Acquisition-related costs are expensed as incurred.Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair valueor at the non-controlling interest’s proportionate share of the acquiree’s net assets. Subsequently, thecarrying amount of non-controlling interest is the amount of the interest at initial recognition plus thenon-controlling interest’s share of the subsequent changes in equity. Total comprehensive income isattributed to non-controlling interest even if its results in the non-controlling interests having a deficitbalance.



> FS19


1.2 Consolidation continued

Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect

changes in consideration arising from contingent consideration amendments. Costs also include

direct attributable costs of investments.

The excess of the consideration transferred the amount of any non-controlling interest in the

acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the

fair value of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair

value of the nets assets of the subsidiary acquired in the case of a bargain purchase, the difference

is recognised directly in the Statement of Comprehensive Income.

Intercompany transactions, balances and unrealised gains on transactions between Group

companies are eliminated on consolidation. Unrealised losses are also eliminated but considered as

an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been

changed, where necessary, to ensure consistency with the policies adopted by the Group.

Transactions and non-controlling interests

The Group treats transactions with non-controlling interests as transactions with equity owners of the

Group. For purchases from non-controlling interests, the difference between any consideration paid

and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in

equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

When the Group ceases to have control or significant influence, any retained interest in the entity is

remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair

value is the initial carrying amount for the purposes of subsequently accounting for the retained

interest as an associate, joint venture or financial asset. In addition, any amounts previously

recognised in other comprehensive income in respect of that entity are accounted for as if the Group

had directly disposed of the related assets or liabilities. This may mean that amounts previously

recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in an associate is reduced but significant influence is retained, only a

proportionate share of the amounts previously recognised in other comprehensive income are

reclassified to profit or loss where appropriate.

Associates

Associates are all entities over which the Group has significant influence, but not control, generally

accompanying a shareholding of between 20% and 50% of the voting rights. Investments in

associates are accounted for using the equity method of accounting and are initially recognised at

cost. The Group’s investment in associates includes intangible assets (net of any accumulated

impairment loss) identified on acquisition (refer note 15).

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income

statement, and its share of post-acquisition movements in other comprehensive income is

recognised in other comprehensive income. The cumulative post-acquisition movements are

adjusted against the carrying amount of the investment. When the Group’s share of losses in an

associate equals or exceeds its interest in the associate, including any other unsecured receivables,

the Group does not recognise further losses, unless it has incurred obligations or made payments on

behalf of the associate.



FS20 <


1.2 Consolidation continued

Unrealised gains on transactions between the Group and its associates are eliminated to the extentof the Group’s interest in the associates. Unrealised losses are also eliminated unless the transactionprovides evidence of an impairment of the asset transferred. Accounting policies of associates havebeen changed, where necessary, to ensure consistency with the policies adopted by the Group.

Dilution gains and losses arising in investments in associates are recognised in the income statement.

Joint ventures

The Group’s interest in jointly controlled entities is accounted on a proportionate consolidation basis.The Group combines its shares of the joint ventures’ individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group’s financial statements.The Group recognises the portion of gains and losses on the sale of assets by the Group to the jointventure that is attributable to the other ventures. The Group does not recognise its share of profits orlosses from the joint venture that result from the Group’s purchase of assets from the joint ventureuntil it resells the assets to an independent party. However, a loss on the transaction is recognisedimmediately if the loss provides evidence of a reduction in the net realisable value of the currentassets, or an impairment loss.

Common control transactions

Where applicable, common control transactions are accounted for on a predecessor accountingbasis.

1.3 Black Economic Empowerment (“BEE”)

Shares were issued to Ukhamba at par value during December 2004. These shares vested uponissuance. The Group elected to apply the exemption available in IFRS 1 to share-based payment transactions. The BEE transaction with Ukhamba was therefore not subject to the provisions of IFRS 2as the rights to the shares were granted and vested prior to 1 January 2005.

1.4 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to thechief operating decision-maker. The chief operating decision-maker, who is responsible for allocatingresources and assessing performance of the operating segments, has been identified as the Boardthat makes strategic decisions.

1.5 Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Rands, which is the Company’sfunctional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange ratesprevailing at the dates of the transactions. Foreign currency balances are translated into the functional currency using the exchange rates prevailing at the statement of financial position date.Foreign exchange gains and losses resulting from the settlement of such transactions and from thetranslation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement, except when deferred in other comprehensiveincome as qualifying cash flow hedges and qualifying net investment hedges.



> FS21


1.5 Foreign currency translation continued

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are

presented in the income statement within ‘finance income or cost’. All other foreign exchange gains

and losses are presented in the income statement within ‘other (losses)/gains – net’.

Changes in the fair value of monetary securities denominated in foreign currency classified as

available for sale are analysed between translation differences resulting from changes in the

amortised cost of the security and other changes in the carrying amount of the security. Translation

differences related to changes in amortised cost are recognised in profit or loss, and other changes

in carrying amount are recognised in other comprehensive income.

Translation differences on non-monetary financial assets and liabilities such as equities held at

fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss.

Translation differences on non-monetary financial assets, such as equities classified as available for

sale, are included in other comprehensive income.

Group companies

The results and financial position of all the Group entities (none of which has the currency of a

hyperinflationary economy) that have a functional currency different from the presentation currency

are translated into the presentation currency as follows:

• assets and liabilities for each Statement of Financial Position presented are translated at the

closing rate at the date of that Statement of Financial Position;

• income and expenses for each income statement are translated at average exchange rates

(unless this average is not a reasonable approximation of the cumulative effect of the rates

prevailing on the transaction dates, in which case income and expenses are translated at the

dates of the transactions); and

• all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign

operations are taken to other comprehensive income. If a foreign entity were to be sold, such

exchange differences would be recognised in the Income Statement as part of the gain or loss on

sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets

and liabilities of the foreign entity and are translated at the closing rate.

1.6 Property, plant and equipment

Property, plant and equipment are tangible assets held by the Group for use in supply of goods or

for administrative purposes and are expected to be used during more than one period.

Land and buildings comprise mainly of factories and offices. Land and buildings are shown at

historical cost less depreciation for buildings and impairments. Property, plant and equipment are

stated at historical cost less depreciation and impairment. Historical cost includes expenditure that is

directly attributable to the acquisition of the items.



FS22 <


1.6 Property, plant and equipment continued

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as

appropriate, only when it is probable that future economic benefits associated with the item will flow

to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced

part is derecognised. All other repairs and maintenance are charged to the Income Statement during

the financial period in which they are incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to

allocate their cost to their residual values over their estimated useful lives, as follows:

Item Estimated useful life

Buildings 10 to 25 years

Plant and machinery 10 to 25 years

Furniture and fixtures 3 to 5 years

Motor vehicles – delivery vehicles 6 years; 20% residual

– other 5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each

statement of financial position date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s

carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amounts and

are included in the income statement.

1.7 Intangible assets

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share

of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill

on acquisition of subsidiaries is included in ‘intangible assets’. Goodwill is tested annually for

impairment and is carried at cost less accumulated impairment losses. Any impairment is recognised

immediately in profit or loss, in the income statement, and is not subsequently reversed. Gains and

losses on the disposal of an entity include the carrying amount of goodwill allocated to the entity

sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is

made to those cash-generating units or groups of cash-generating units that are expected to benefit

from the business combination in which the goodwill arose, identified according to operating

segment.

Trademarks, brand names and customer relationships

Trademarks, brand names and customer relationships are recognised at fair value of the intangible

assets acquired in business combinations. Certain trademarks and brand names have been

assessed by management as indefinite useful life intangible assets. These indefinite life intangible

assets are tested for impairment annually.



> FS23


1.7 Intangible assets continued

Amortisation is calculated using the straight-line method to allocate the cost of intangible assets over

their estimated useful lives. The useful lives of trademarks, brand names and customer relationships

are assessed annually. The trademarks and brand names have estimated useful lives of between ten

and twenty years and the customer relationships useful lives have been estimated between five and

ten years.

1.8 Impairment of non-financial assets

Assets that have indefinite useful lives or intangible assets that are still in development are not

subject to amortisation and are tested annually for impairment. Assets that are subject to

amortisation are reviewed for impairment whenever events or changes in circumstances indicate that

the carrying amount may not be recoverable. An impairment loss is recognised for the amount by

which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the

higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing

impairment, assets are grouped at the lowest levels for which there are separately identifiable cash

flows (cash-generating units). The identified cash-generating units are not bigger than the identified

operating segments. Non-financial assets other than goodwill that could suffered suffer potential

impairment are reviewed for possible reversal of the impairment at each reporting date.

1.9 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial

position when there is a legally enforceable right to offset the recognised amounts and there is an

intention to settle on a net basis or realise the asset and settle the liability simultaneously.

1.10 Impairment of financial assets

Assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective evidence that a

financial asset or group of financial assets is impaired. A financial asset or a group of financial assets

is impaired and impairment losses are incurred only if there is objective evidence of impairment as a

result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and

that loss event (or events) has an impact on the estimated future cash flows of the financial asset or

group of financial assets that can be reliably estimated.

The criteria that the Group uses to determine that there is objective evidence of an impairment loss

include:

• significant financial difficulty of the issuer or obligor;

• a breach of contract, such as a default or delinquency in interest or principal payments;

• the Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to

the borrower a concession that the lender would not otherwise consider; and

• it becomes probable that the borrower will enter bankruptcy or other financial reorganisation.

The Group first assesses whether objective evidence of impairment exists.



FS24 <


1.10 Impairment of financial assets continued

For loans and receivables category, the amount of the loss is measured as the difference between

the asset’s carrying amount and the present value of estimated future cash flows (excluding future

credit losses that have not been incurred) discounted at the financial asset’s original effective interest

rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the

consolidated income statement. If a loan has a variable interest rate, the discount rate for measuring

any impairment loss is the current effective interest rate determined under the contract. As a

practical expedient, the Group may measure impairment on the basis of an instrument’s fair value

using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be

related objectively to an event occurring after the impairment was recognised (such as an

improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss

is recognised in the consolidated income statement.

1.11 Financial instruments

Derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and

are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss

depends on whether the derivative is designated as a hedging instrument, and if so, the nature of

the item being hedged. The Group designates certain derivatives as either:

• Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value

hedge); or

• Hedges of a particular risk associated with a recognised asset or liability or a highly probable

forecast transaction(cash flow hedge)

The Group documents at the inception of the transaction the relationship between hedging

instruments and the hedged items, as well as its risk management objectives and strategy for

undertaking various hedging transactions. The Group documents its assessments, both at hedge

inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions

are highly effective in offsetting changes in fair value or cash flows of hedged items.

The fair value of various derivative instruments used for hedging purposes is disclosed in note 24.

Movements on the hedging reserve in shareholders’ equity are shown in the statement of changes in

other comprehensive income.

The full fair value of a hedging derivative is classified as a non-current asset or liability when the

remaining hedged item is more than twelve months, and as a current asset or liability when the

remaining maturity of the hedged item is less than twelve months. Trading derivatives are classified

as a current asset or liability.

Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designed and qualify as cash

flow hedges is recognised in other comprehensive income.



> FS25


1.11 Financial instruments continued

The gain or loss relating to the ineffective portion is recognised immediately in the Income Statementwithin finance income/cost. Amounts accumulated in equity are reclassified to profit or loss for theperiod when the hedged item affects profit or loss. However, when the forecast transaction that ishedged results in the recognition of a non-financial asset or liability, the gain and losses previouslydeferred in equity are transferred from equity and included in the initial measurement of the cost ofthe asset or liability.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria forhedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and isrecognised when the forecast transaction is ultimately recognised in the Income Statement. When aforecast transaction is no longer expected to occur, the cumulative gain or loss that was reported inequity is immediately transferred to the Income Statement.

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are

recorded in the income statement, together with any changes in the fair value of the hedged asset or

liability that are attributed to the hedged risk.The Group only applies fair value hedge accounting for

hedging fixed interest risk on borrowings. The gain or loss relating to the effective portion of interest

rate swaps hedging fixed rate borrowings is recognised in the Income Statement within ‘finance

costs’. The gain or loss relating to the ineffective portion is recognised in the Income Statement.

Changes in the fair value of the hedge fixed rate borrowings attributable to interest rate risk are

recognised in the Income Statement within ‘finance costs’.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying

amount of a hedged item for which the effective interest method is used is amortised to profit or loss

over the period to maturity.

Trade and other receivables

Trade receivables are amounts due from customers for merchandise sold or service rendered in the

ordinary course of business. If collection is expected within one year (or in the normal operating

cycle)is longer, they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are recognised initially at fair value and subsequently measured at

amortised cost using the effective interest method, less provision for impairment. A provision for

impairment of trade receivables is established when there is objective evidence that the Group will

not be able to collect all amounts due according to the original terms of receivables. Significant

financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial

reorganisation, and default or delinquency in payments are considered indicators that the trade

receivable is impaired. The amount of the provision is the difference between the asset’s carrying

amount and the recoverable amount. The amount of the provision is recognised in the Income

Statement within other ‘operating expenses’. If collection is expected in one year or less, they are

classified as current assets. If not, they are presented as non-current assets.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term

highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank

overdrafts are shown within borrowings in current liabilities on the statement of financial position.



FS26 <


1.11 Financial instruments continued

Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary

course of business from suppliers. Accounts payable are classified as current liabilities if payment is

due within one year or less. If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at

amortised cost using the effective interest rate method.

1.12 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is predominantly determined

on a weighted average cost basis. The cost of finished goods and work-in-progress comprises raw

materials, direct labour, transport and handling costs, other direct costs and related production

overheads (based on normal operating capacity) and excludes borrowing costs. Net realisable value

is the estimated selling price in the ordinary course of business, less applicable variable selling

expenses.

1.13 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction,

net of tax, from the proceeds.

1.14 Treasury shares

Shares in the Company held by wholly-owned subsidiaries, are classified as treasury shares and are

held at cost on consolidation. These shares are disclosed as a deduction from the issued and

weighted average number of shares and the cost price of these shares is deducted from the

Group’s equity.

Dividends received on treasury shares are eliminated on consolidation.

1.15 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are

subsequently stated at amortised cost and any difference between the proceeds (net of transaction

costs) and the redemption value is recognised in the income statement over the period of the

borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer

settlement of the liability for at least twelve months after the statement of financial position date.

1.16 Tax

Current income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the Income

Statement, except to the extent that it relates to items recognised in other comprehensive income or

directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in

equity, respectively.



> FS27


1.16 Tax continued

The current income tax charge is calculated on the basis of the tax laws enacted or substantively

enacted at the balance sheet date in the countries where the company and its subsidiaries operate

and generate taxable income. Management periodically evaluates positions taken in tax returns with

respect to situations in which applicable tax regulation is subject to interpretation. It establishes

provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax assets and liabilities

Deferred income tax is recognised, using the liability method, on temporary differences arising

between the tax bases of assets and liabilities and their carrying amounts in the consolidated

financial statements. However, deferred tax liabilities are not recognised if they arise from the initial

recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of

an asset or liability in a transaction other than a business combination that at the time of the

transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined

using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date

and are expected to apply when the related deferred income tax asset is realised or the deferred

income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable

profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and

associates, except for deferred income tax liability where the timing of the reversal of the temporary

difference is controlled by the Group and it is probable that the temporary difference will not reverse

in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset

current tax assets against current tax liabilities and when the deferred income taxes assets and

liabilities relate to income taxes levied by the same taxation authority on either the same taxable

entity or different taxable entities where there is an intention to settle the balances on a net basis.

1.17 Employee benefits

Pension obligations

A defined contribution plan is a pension plan under which the Group pays fixed contributions into a

separate entity (a fund). The Group has no legal or constructive obligations to pay further

contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to

employee service in the current and prior periods. The Group pays the contributions to publicly

administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has

no further payment obligations once the contributions have been paid. The contributions are

recognised as an employee benefit expense in the income statement when they are due.

Other post-employment obligations

The Group provides post-employment medical care for certain of their retirees. The expected costs

of these benefits are accrued over the period of employment using a methodology similar to that of

defined benefit pension plans. Typically, defined benefit plans define an amount of benefit that an

employee will receive on retirement, usually dependent on one or more factors such as age, years of

service and compensation.



FS28 <


1.17 Employee benefits continued

The liability recognised in the Statement of Financial Position in respect of defined benefit post

retirement medical aid obligations is the present value of the defined benefit obligation at Statement

of Financial Position date adjusted for actuarial gains or losses.

The present value of the expected future defined benefit obligation is determined by discounting the

estimated future cash outflows using interest rates of Government bonds. The expected costs of

these benefits are accrued over the period of employment.

Actuarial profit and losses arising from experience adjustments, and changes in actuarial

assumptions are charged or credited to profit or loss in the period in which they arise.

Valuations of these obligations are carried out on a periodic basis by professionally qualified

independent actuaries using the projected unit credit method. The post-employment obligations are

not funded.

Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal

retirement date, or whenever an employee accepts voluntary redundancy in exchange for these

benefits. The Group recognises termination benefits when it is demonstrably committed to either:

terminating the employment of current employees according to a detailed formal plan without

possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage

voluntary redundancy. Benefits falling due more than twelve months after the end of the reporting

period are discounted to present value.

Profit-sharing and bonus plans

The Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula

that takes into consideration the profit attributable to the Company’s shareholders after certain

adjustments. The Group recognises a provision where contractually obliged or where there is a past

practice that has created a constructive obligation.

Short-term employee benefits

Employee entitlements to annual leave and long service awards are recognised when they accrue to

employees. An accrual is made for the estimated liability for annual leave and long service awards as

a result of services rendered by employees up to the Statement of Financial Position date.

Staff incentive scheme

Other share incentives

The Group also operates a staff incentive scheme through Share Appreciation Rights, Long-Term

Incentive Plans and Deferred Bonus Plans. In terms of these schemes the beneficiaries are offered

incentives for contributing towards the Group's overall performance with specific reference to

earnings growth expectations and share performance in comparison to peer groups. These schemes

have vesting periods of three years and lapse after seven years, if not exercised. The Group's

intension is to settle these schemes with equity. IFRS 2 (share-based payments) is applied to

account for these schemes. The IFRS 2 value is recognised in the income statement over the vesting

period attached to each tranche of allocations. An IFRS 2 equity reserve is created in anticipation of

settling the obligations created in terms of the abovementioned equity-settled schemes.



> FS29


1.18 Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a resultof past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for futureoperating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the sameclass of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settlethe obligation using a pre-tax rate that reflects current market assessments of the time value ofmoney and the risks specific to the obligation. The increase in the provision due to passage of timeis recognised as an interest expense.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 30.

1.19 Revenue recognition

The Group recognises revenue when the amount of revenue can be reliably measured, it is probablethat future economic benefits will flow to the entity and when specific criteria have been met for eachof the Group’s activities as described below. The amount of revenue is not considered to be reliablymeasurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transactionand the specifics of each arrangement.

Revenue comprises the fair value of the consideration received or receivable for the sale of goods

and services in the ordinary course of the Group’s activities. Revenue is shown, net of value-added

tax, estimated returns, rebates and discounts and after eliminating sales within the Group. Revenue

is recognised as follows:

Sales of goods

Sales of goods are recognised when a Group entity has delivered products to the customer, the

customer has accepted the products and all risks and rewards associated with them, there is now

further Group management involvement in the products and collectability of the related receivables is

reasonably assured. Sales are recorded net of volume discounts.

Products are often sold with a right of return. Accumulated experience is used to estimate and

provide for such returns at the time of sale.

Services rendered

Services rendered are recognised in the accounting period in which the services are rendered, by

reference to completion of the specific transaction assessed on the basis of the actual service

provided as a proportion of the total services to be provided.

Interest income

Interest income is recognised on a time-proportion basis using the effective interest rate method.

When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount,

being the estimated future cash flow discounted at original effective interest rate of the instrument,

and continues unwinding the discount as interest income. Interest income on impaired loans is

recognised using the original effective interest rate.



FS30 <


1.19 Revenue recognition continued

Dividend income

Dividend income is recognised when the right to receive payment is established.

Deferred profit on sale-and-operating leaseback transactions

Profit in respect of properties sold in terms of sale-and-operating leaseback transactions are

recognised in the income statement on a straight-line basis over the term of the lease.

1.20 Cost of sales

Cost of sales includes the historical cost of merchandise and overheads appropriate to the

distribution thereof.

1.21 Leases

Finance leases

The Group leases certain property, plant and equipment. Leases of property, plant and equipment,

where the Group has substantially all the risks and rewards of ownership, are classified as finance

leases. Finance leases are capitalised at the lease’s commencement at the lower or the fair value of

the leased property and the present value of the minimum lease payments. Each lease payment is

allocated between the liability and finance charges to achieve a constant rate on the finance balance

outstanding. The corresponding rental obligations, net of finance charges, are included in long-term

payables. The interest element of the finance cost is charged to the Income Statement over the

lease period so as to produce a constant periodic rate of interest on the remaining balance of the

liability for each period.

Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor

are classified as operating leases. Payments made under operating leases (net of any incentives

received from the lessor) are charged to the Income Statement on a straight-line basis over the

period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to

be made to the lessor by way of a penalty is recognised as an expense in the period in which

termination takes place.

1.22 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group's

financial statements in the period in which the dividends are approved by the Company’s

shareholders.

1.23 Borrowing costs

Borrowing costs, incurred in respect of assets that require a substantial period to prepare for their

intended use, are capitalised up to the date that the development of the asset is ready for its

intended use. The amount of borrowing costs eligible for capitalisation is the actual borrowing costs

incurred on the borrowing during the period less any investment income on the temporary

investment of these borrowings. Other borrowing costs are recognised directly in the Income

Statement when incurred.



> FS31


1.24 Related parties

Individuals or entities are related parties if one party has the ability, directly or indirectly, to control theother party in making financial and/or operating decisions, has an interest that provides significantinfluence or has joint control. Related parties include key management which includes all directors,both executive and non-executive.

1.25 Non-current assets held for sale

Non-current assets are classified as held for sale when the carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are stated at the lowerof carrying amount and fair value less costs to sell.

1.26 Critical accounting estimates and judgements

Management makes judgements, estimates and assumptions in the preparation of the financialstatements that affect the disclosures and amounts of assets, liabilities, income, expenses and equity.

Estimates and judgements are continually evaluated and are based on historical experience andother factors, including expectations of future events that are believed to be reasonable under thecircumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptionsthat have a significant risk of causing a material adjustment to the carrying amounts of assets andliabilities within the next financial year are discussed below.

Estimated impairment of goodwill and intangible assets classified as having indefinite useful lives

The Group tests annually whether goodwill and intangible assets with indefinite lives have sufferedany impairment, in accordance with the accounting policy stated in note 1.7. The recoverableamounts of certain cash-generating units have been determined based on value-in-use calculations.These calculations require the use of estimates (refer note 13).

Demand forecasting impacting on working capital investment

The Group has made investment in working capital based on management’s assumptions and estimates of future demand for the Group's products and the customers’ ability to settle outstandingdebts for credit sales when it becomes due.

Residual values and useful lives

The useful economic lives and residual values of items of property, plant and equipment and tangibleassets are estimated annually. The actual lives and residual values may vary depending on a varietyof factors.

IFRS 2

Equity-settled schemes

IFRS 2 adjustments were calculated based on option pricing models for the share option schemes inoperation. The charge is based on certain assumptions applied to the calculation models such asvesting period and conditions, risk-free interest rate, volatility factors and dividend yields. It is estimated that the current and projected non-market vesting conditions relating to tranches 1 to 5 ofthe Share Appreciation Rights (“SARs”) scheme are unlikely to be achieved. Previous IFRS 2 chargeshave therefore been reversed to the income statement and no additional charges have been madefor the SARs. Refer to note 21 for the major assumptions made on the new share incentive scheme.



FS32 <


1.26 Critical accounting estimates and judgements continued

Deferred profit

The deferred profit realised on the sale of property is recognised in the Income Statement on a

straight-line basis over the term of the lease. The term of the lease is based on management’s best

estimate of the period of occupation, being the shortest renewable lease period from

commencement (refer note 25).

Retirement benefit obligation

Certain of the employees of DPI Plastics Proprietary Limited are entitled to post-retirement medical

aid benefits. The present value of the obligation is based on the ‘projected unit credit basis’ and

depends on a number of factors that are determined on an actuarial basis using a number of

assumptions. Any changes in these assumptions will impact the carrying amount of the obligations.

Updated actuarial valuations are carried out at least every three years. Additional information is

disclosed in note 28.

Taxation

Judgement is required in determining the provision for income taxes due to the complexity of

legislation in various jurisdictions where the Group operates. There are many transactions and

calculations for which the ultimate tax determination is uncertain during the ordinary course of

business. The Group recognises liabilities for anticipated tax audit issues based on estimates of

whether additional taxes will be due. Where the final tax outcome of these matters is different from

the amounts that were initially recorded, such differences will impact the income tax and deferred

tax provisions in the period in which such determination is made.

The Group recognises the net future tax benefit related to deferred income tax assets to the extent

that it is probable that the deductible temporary differences will reverse in the foreseeable future.

Assessing the recoverability of deferred income tax assets requires the Group to make significant

estimates related to expectations of future taxable income. Estimates of future taxable income are

based on forecast cash flows from operations and the application of existing tax laws in each

jurisdiction. To the extent that future cash flows and taxable income differ significantly from

estimates, the ability of the Group to realise the net deferred tax assets recorded at the end of the

reporting period could be impacted.

1.27 Estimates made of contingent liabilities

By their nature, contingencies will only be resolved when one or more future events occur or fail to

occur. The assessment of such contingencies inherently involves the exercise of significant

judgement and estimates of the outcome of future events. Disclosure is made in note 30 of the

contingent liabilities that the Group is exposed to.

1.28 Estimates regarding the recognition and measurement of financial instruments

The fair value of the interest rate swap described in note 24 is estimated by discounting the future

contractual cash flows at the current market interest rate that is available to the Group for similar

financial instruments.



> FS33


2. SEGMENT INFORMATIONThe operating segments are based on reports reviewed by the Executive Committee, who makes the strategicdecisions of the Group, and who is therefore the Chief Operating Decision-making body of the Group.

Operating OperatingRevenue profit/(loss) Impairment profit/(loss)

after Depre- before of afterinter- ciation impairments intangibles impairments

segment and and and and Financeeliminations amorti- derecog- derecog- derecog- income/

Revenue reallocated sation nitions nitions ** nitions (expense)R’000 R’000 R’000 R’000 R’000 R’000 R’000

2011Building 2 494 827 2 489 600 (32 690) 168 858 (53 039) 115 819 (52 282)Infrastructure 1 315 544 1 297 271 (17 902) (32 481) 133 (32 348) 2 088DAWN Solutions 241 083 5 760 (15 826) (10 547) – (10 547) (1 643)Head office and

consolidation (258 823) – (1 913) (24 051) (15 803) (39 854) 5 306

3 792 631 3 792 631 (68 331) 101 779 (68 709) 33 070 (46 531)

2010Building 2 434 015 2 425 864 (27 666) 238 134 8 717 246 851 (29 850)Infrastructure 1 213 701 1 183 517 (17 018) (33 514) – (33 514) (9 105)DAWN Solutions 213 755 9 010 (13 622) 8 269 – 8 269 (2 599)Head office and

consolidation* (243 080) – (990) (13 738) – (13 738) (14 957)

3 618 391 3 618 391 (59 296) 199 151 8 717 207 868 (56 511)

Share ofprofit/(loss)

ofassociates(including

impair- Net Netment of profit/(loss) Tax profit/(loss) Capital

associate) before tax expense after tax Assets Liabilities expenditureR’000 R’000 R’000 R’000 R’000 R’000 R’000

2011Building (983) 62 554 (32 899) 29 655 1 881 157 1 241 896 56 069Infrastructure 277 (29 983) 14 765 (15 218) 770 613 508 463 23 377DAWN Solutions – (12 190) (1 782) (13 972) 322 181 335 186 13 915Head office and

consolidation – (34 548) 5 227 (29 321) (415 154) (701 678) 910

(706) (14 167) (14 689) (28 856) 2 558 797 1 383 867 94 271

2010Building 3 810 220 811 (59 421) 161 390 1 848 536 1 286 139 35 817Infrastructure 1 401 (41 218) 11 529 (29 689) 659 352 431 662 13 208DAWN Solutions – 5 670 (378) 5 292 184 606 206 092 11 734Head office and

consolidation* – (28 695) 6 182 (22 513) (193 958) (641 317) 2 759

5 211 156 568 (42 088) 114 480 2 498 536 1 282 576 63 518

* Head office and consolidation predominantly include elimination of intergroup sales, profits and losses and intergroup receivables and payables and other unallocated assets and liabilities contained with the vertically integrated Group.

** Includes impairment of assets and derecognition of previously held interest – refer to Income Statement.



FS34 <


2. SEGMENT INFORMATION continued

Reportable segments

The Group was organised into three main reportable segments:

• Building: Consists of manufacture and wholesale trading of hardware, sanitaryware, bathroomware, plumbing, kitchen and other building materials;

• Infrastructure: Consists of manufacture and wholesale trading of engineering, civil products, piping systems, valves and related accessories; and

• DAWN Solutions: Consists of services such as warehousing, distribution, marketing, IT support, pre-packing, merchandising and HR provided mainly to Group companies.

Management has determined that the operating segments are sufficiently aggregated.

The Board assesses the performance of these operating segments based on operating profit.

Head office and consolidation mainly comprise head office and other operating segments not meeting thequantitative thresholds required by IFRS 8.

Building segment

The Building segment includes the following:

Wholesale Housing Supplies (trading as Saffer Bathroom & Plumbing and WHDsa), DAWN BusinessDevelopment – a division of Wholesale Housing Supplies (trading as Wholesale Building Materials, WholesaleTile Supplies, DAWN Power Tools, Electroline and Stability) and Saffer International – a division of WholesaleHousing Supplies), DAWN Kitchen Fittings (trading as AFF and Roco), Cobra Watertech, Vaal Sanitaryware,Libra Bathrooms (trading as Libra and Plexicor), Isca, Africa Swiss Trading (AST) (including the associate –Saffer Union West Nigeria) and two associates, Apex Valves and Heunis Steel.

Infrastructure segment

The Infrastructure segment includes the following:

DPI (trading as DPI Plastics and Incledon), DPI foreign operations and two associates, Sangio Pipe and Fibrex.

Solutions segment

The DAWN Solutions segment includes the following:

DAWN Cargo, DAWN Distribution Centre, DAWN HR Solutions, DAWN Marketing & Design, DAWN IT andDAWN Packaging.

General

Intersegment transactions are entered into under the normal commercial terms and conditions. The revenuefrom external parties is measured in a manner consistent with that in the Income Statement.

Refer to note 13 for details of the impairment of goodwill of R49 million (2010: Rnil) in the Building segment. Anet loss on the derecognition of previously held interest of R19,3 million was recognised (2010: R8,7 milliongain) of which R15,8 million relates to AST. Property, plant and equipment of R0,7 million was impaired duringthe year. There has been no further impact on the measurement of the Group’s assets and liabilities.

Segment assets consist primarily of property, plant and equipment, intangible assets (including goodwill), investments in associates, deferred tax assets, inventories, trade and other receivables and cash and cashequivalents.

Segment liabilities comprise borrowings, deferred profit, deferred tax liabilities, derivative instruments, trade andother payables and income tax liabilities.

Capital expenditure comprises additions to property, plant and equipment (refer note 12).

The entity is domiciled in South Africa. The result of revenue from external customers in South Africa is R3,2 billion (2010: R3,2 billion) and the total revenue from external customers from other countries is R159 million(2010: R105 million).

The total of non-current assets, other than financial instruments and deferred tax assets located in South Africais R684 million (2010: R768 million).



> FS35


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

INCOME STATEMENTS

3. REVENUE

Sale of goods 3 786 871 3 609 381 – –Services rendered 5 760 9 010 – –

3 792 631 3 618 391 – –

4. EXPENDITURE BY NATURE

4.1 Cost of salesCost of goods and services soldCost of inventories expensed during

the year 2 568 758 2 454 997 – –Employee compensation and benefit

expense (refer note 8) 212 748 200 105 – –Transportation expenses 39 924 32 925 – – Depreciation 27 317 25 629 – –

2 848 747 2 713 656 – –

4.2 Operating expensesa. Depreciation on property, plant and

equipmentDepreciation for the Group 62 051 53 451 – –Less: Depreciation included in cost

of sales (27 317) (25 629) – –Less: Depreciation included in

transportation expenses (5 630) (5 725) – –

29 104 22 097 – –

b. AmortisationIntangible assets 6 280 5 845 – –

c. Auditors’ remunerationAudit fees 9 354 9 884 – –Taxation services 107 68 – –Expenses 231 229 – –Other services 768 53 – –

10 460 10 234 – –

d. Operating lease rentalsLand and buildings 62 555 59 360 – –Plant, equipment and vehicles 10 477 13 240 – –

73 032 72 600 – –



FS36 <


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

4. EXPENDITURE BY NATURE continued

e. Operating expensesEmployee compensation and benefit

expense (refer note 8) 445 475 380 330 – –Transportation expenses (including

depreciation) 97 857 68 780 – –Repairs and maintenance 17 313 17 389 – –Telephone and fax 15 730 13 786 – –Advertising costs 15 473 16 290 – –Computer expenditure 13 032 12 186 – –Insurance 13 023 11 479 – –Net foreign exchange loss 12 276 5 272 – –Security 12 176 9 485 – –Travel 10 640 10 825 – –Postage, printing and stationery 10 151 8 730 – –Consultancy services 9 442 8 856 – –Legal fees 5 610 4 735 – –Bank charges 5 270 4 191 – –Loss on disposal of property, plant and

equipment 252 99 – –Other expenses 68 866 50 665 – –

752 586 623 098 – –

f. Impairments and loss/(gain) on derecognition of joint venture/subsidiaries

Impairment of goodwill (refer note 13) 48 714 – – –Impairment of property, plant and

equipment (refer note 12) 732 – – –

Impairments 49 446 – – –

Loss/(gain) on derecognition (previously held interest in AST) (refer note 37) 15 803 (13 586) – –

Loss on derecognition of Saffer Angola (subsidiary) (refer note 37) 3 188 4 869 – –

Loss on derecognition of Electroline (associate) (refer note 37) 863 – – –

Gain on derecognition of Fike (joint venture) (refer note 37) (591) – – –

Derecognitions 19 263 (8 717) – –

68 709 (8 717) – –

Total cost of sales, distribution costs, other operating expenses, impairments and derecognitions 3 788 918 3 438 813 – –



> FS37


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

5. OTHER NET INCOME

Deferred profit released (refer note 25) 15 650 16 574 – –Rental income 1 648 1 806 – –Profit on disposal of plant and equipment 1 252 2 460 – –Bad debt recovered 859 1 279 – –Drawback of duties 3 222 – – –Investment income – dividends received – – – 9 202Other income 6 726 6 171 – –

29 357 28 290 – 9 202

6. FINANCE INCOMEBank deposits 16 603 11 217 – – Interest capitalised (refer note 17) 5 813 6 894 – –Related party loans (refer note 41) 3 377 3 050 – –Trade and other receivables 2 649 5 623 – – Other interest 187 548 – 36

28 629 27 332 – 36

7. FINANCE EXPENSESBank borrowings 64 714 72 143 – – Instalment sale agreements 4 429 5 298 – – Finance lease agreements 1 204 1 453 – –Related party loans (refer note 41) 373 592 – –Other interest 4 440 4 357 – 2

75 160 83 843 – 2

8. EMPLOYEE BENEFIT EXPENSESalaries and wages 556 791 483 588 – – Commissions to sales force 42 510 41 427 – – Pension costs – defined contribution plans 37 642 33 033 – – Medical aid expenses 16 100 15 500 – – Net share-based payment charge/(reversal) 4 923 6 340 – – Post-retirement medical aid charge 257 547 – –

658 223 580 435 – –

Directors’ emoluments are included in the above and also disclosed separately in note 42.



FS38 <


Group Company

2011 2010 2011 2010Number Number Number Number

8. EMPLOYEE BENEFIT EXPENSEcontinued

Number of persons employed by the Group at year-end

SubsidiariesFull-time 3 625 3 914 – – Part-time 214 52 – –

3 839 3 966 – –

Botswana 50 51 – – Namibia 52 43 – – South Africa 3 737 3 872 – –

3 839 3 966 – –

Joint venturesFull-time 270 268 – – Part-time 1 3 – –

271 271 – –

Angola 15 13 – – Mauritius 74 66 – – Mozambique 28 29 – – South Africa 24 36 – – Tanzania 106 114 – – Zambia 14 8 – – Zimbabwe 10 5 – –

271 271 – –

9. INCOME TAX EXPENSENormal tax expense

Current tax

Local income tax – current period 34 026 57 135 – 10Local income tax – prior periods (2 400) 857 – –Foreign income tax or withholding

tax – current period – 1 821 – –Secondary Tax on Companies 154 128 – –

31 780 59 941 – 10

Deferred tax

Originating and reversing temporary differences – current year (12 121) (16 852) – –

Deferred tax arising from prior period adjustments (4 970) (1 001) – –

(17 091) (17 853) – –

Tax charge for the year 14 689 42 088 – 10



> FS39


Group Company

2011 2010 2011 2010% % % %

9. INCOME TAX EXPENSE continued

Reconciliation of rate of taxationSouth African normal tax rate 28,0 28,0 28,0 28,0

Adjusted for:Disallowed expenditure * (177,9) 2,8 – –Exempt income 2,0 (6,1) – –Prior year adjustments

Current tax 17,8 0,6 – –Deferred tax 36,9 (0,7) – –

Tax losses utilised 6,0 – – – Tax losses for which no deferred tax

asset was recognised ** (15,7) – – –Foreign tax rate difference *** (5,1) – – –Foreign income tax – 0,9 – – Secondary tax on companies (1,1) 0,1 – –Capital gains tax – 2,2 –

Effective rate (109,1) 27,8 28,0 28,0

* Disallowed expenditure mainly relates to impairment of goodwill and net losses on derecognition of previously held interests not allowed as a deduction for tax purposes.

** The Group did not recognise deferred tax assets of R2,5 million (2010: R0,6 million) in respect of losses amounting toR9,2 million (2010: R2,1 million) which can be carried forward against future taxable income.

*** The effective tax rate reconciliation base rate is the South African statutory tax rate of 28%. The foreign tax rate differenceadjustment relates to the difference between the South African tax rate and the various tax rates of other countries.

Before Net tax and before

non- non- Non-controlling controlling controlling

interest Tax interest interest NetR’000 R’000 R’000 R’000 R’000

10. OTHER COMPREHENSIVE INCOMEGroup

Components of other comprehensive income

2011

Exchange differences on translating foreign operations

Exchange differences arising during the year (1 009) – (1 009) (181) (1 190)

Total (1 009) – (1 009) (181) (1 190)

Effects of cash flow hedgesGains/(losses) on cash flow hedges

arising during the year 1 563 (306) 1 257 – 1 257

Total 554 (306) 248 (181) 67



FS40 <


Before Net tax and before

non- non- Non-controlling controlling controlling

interest Tax interest interest NetR’000 R’000 R’000 R’000 R’000

10. OTHER COMPREHENSIVE INCOME continued

Components of other comprehensive income

2010

Exchange differences on translating foreign operations

Exchange differences arising during the year (14 221) – (14 221) – (14 221)

Total (14 221) – (14 221) – (14 221)

Effects of cash flow hedgesGains/(losses) on cash flow hedges

arising during the year (5 893) 1 650 (4 243) – (4 243)

Total (20 114) 1 650 (18 464) – (18 464)

Group

2011 2010

11. EARNINGS PER ORDINARY SHAREBasic

Basic earnings per ordinary share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company, incentive shares and held as treasury shares.

Diluted

Diluted earnings per ordinary share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

Weighted average number of ordinary shares in issue (’000)

Number of shares in issue at the end of the year 240 243 240 243Less: Issue of ordinary shares during the year – (41 667)

240 243 198 576Less: Treasury shares held in a subsidiary at the end of the year (weighted) (8 562) (7 847)Add: Deferred ordinary shares in issue at the end of the year 2 000 2 000Less: Shares held by the DAWN Share Trust at the end of the year – (12 967)Add: Rights offer – 22 473

Weighted average number of ordinary shares in issue (’000) 233 681 202 235Add: Shares to be issued in terms of share incentive trust and

share option schemes – 14 441

Weighted average number of ordinary shares for diluted earnings per share (’000) 233 681 216 676



> FS41


Group

2011 2010

11. EARNINGS PER ORDINARY SHARE continued

Attributable earnings per share (cents) (12,98) 53,98

Attributable earnings (R’000) (30 325) 109 177Weighted average number of ordinary shares in issue (’000) 233 681 202 235

Fully diluted earnings per share (cents) (12,98) 50,38 *

Attributable earnings (R’000) (30 325) 109 177Weighted average number of ordinary shares in issue (’000) 233 681 216 676

Headline earnings (R’000)

Attributable earnings (30 325) 109 177

Adjustment for the after-tax and non-controlling effects of:Profit on disposal of plant and equipment (720) (1 546)Loss/(gain) on derecognition of subsidiary 19 263 (8 717)Impairment of intangible assets 48 714 –Impairment of associate 625 –Impairment of property, plant and equipment 528 –

38 085 98 914

Headline earnings per share (cents) 16,30 48,91

Headline earnings (R’000) 38 085 98 914 Weighted average number of ordinary shares in issue (’000) 233 681 202 235

* Dilutionary impact of shares to be issued in terms of the Share Incentive Trust and Share Option Scheme.

STATEMENTS OF FINANCIAL POSITION

Furniture Land and Plant and and Motorbuildings machinery fixtures vehicles Total

R’000 R’000 R’000 R’000 R’000

12. PROPERTY, PLANT AND EQUIPMENT

Group

Year ended 30 June 2011Opening balance 78 828 210 676 32 561 31 921 353 986Additions 28 137 31 960 23 434 10 740 94 271Additions through business combinations – 74 8 36 118Disposals (111) (5 903) (208) (1 080) (7 302)Transfers (1) 1 384 (1 371) (12) –Foreign exchange movements (363) (778) (83) (139) (1 363)Derecognition of joint venture (1 462) (325) (448) (696) (2 931)Depreciation (6 154) (26 766) (19 613) (9 518) (62 051)Impairment (266) (466) – – (732)

Total 98 608 209 856 34 280 31 252 373 996

At 30 June 2011Cost 125 054 462 312 103 404 77 600 768 370Accumulated depreciation (26 446) (252 456) (69 124) (46 348) (394 374)

Carrying value 98 608 209 856 34 280 31 252 373 996



FS42 <


Furniture Land and Plant and and Motorbuildings machinery fixtures vehicles Total

R’000 R’000 R’000 R’000 R’000

12. PROPERTY, PLANT AND EQUIPMENT continued

Year ended 30 June 2010Opening balance 68 084 227 312 22 487 39 606 357 489Additions 16 442 16 521 22 622 7 933 63 518Additions through business combinations – 7 896 351 706 8 953Disposals (5 841) (4 432) (101) (6 181) (16 555)Derecognition of subsidiary (1 393) (609) (238) (451) (2 691)Transfers 9 332 (9 534) 93 109 –Foreign exchange movements (899) (1 762) (165) (451) (3 277)Depreciation (6 897) (24 716) (12 488) (9 350) (53 451)

Total 78 828 210 676 32 561 31 921 353 986

At 30 June 2010Cost/valuation 99 888 444 046 84 144 73 043 701 121Accumulated depreciation (21 060) (233 370) (51 583) (41 122) (347 135)

Carrying value 78 828 210 676 32 561 31 921 353 986

Assets subject to finance lease

At 30 June 2011Cost/valuation (1) 12 289 14 539 680 27 507Accumulated depreciation – (2 857) (10 431) (338) (13 626)

Carrying value (1) 9 432 4 108 342 13 881

At 30 June 2010Cost/valuation 392 12 289 10 318 605 23 604Accumulated depreciation (19) (1 908) (5 614) (212) (7 753)

Carrying value 373 10 381 4 704 393 15 851

A register containing the information required by Regulation 25(2) of the Companies Regulations, 2011 is available for inspection at the registered office of the Company.

Depreciation expense of R27,3 million (2010: R25,6 million) has been charged in cost of goods and servicessold, R5,6 million (2010: R5,7 million) in transportation expenses and R29,1 million (2010: R22,1 million) inadministrative expenses (refer note 4).

Property, plant and equipment has been pledged as security over borrowings (refer note 23).

A register giving details of land and buildings is available for inspection at the registered office of the Company.

Assets acquired under instalment sale and finance lease agreements are encumbered as security for repaymentof the instalment sale and finance lease liabilities (refer note 23).

Lease rentals amounting to R62,6 million (2010: R59,4 million) relating to the lease of land and buildings andR10,5 million (2010: R13,2 million) relating to the lease of plant, equipment and vehicles are included in theIncome Statement (refer note 4).



> FS43


Indefinite life Defined life

Trademarksand Customer

brand- Trade- relation-Goodwill names marks ships Total

R’000 R’000 R’000 R’000 R’000

13. INTANGIBLE ASSETSGroup

Year ended 30 June 2011Opening balance 151 849 78 694 11 986 28 724 271 253Additions – 29 – 110 139Additions through business combinations 405 – 1 300 804 2 509Foreign exchange movements 36 – – – 36Derecognition of joint venture (844) – – – (844)Amortisation – – (1 413) (4 867) (6 280)Impairment loss (48 714) – – – (48 714)

Total 102 732 78 723 11 873 24 771 218 099

At 30 June 2011Cost/valuation 151 768 78 723 17 701 43 771 291 963Accumulated amortisation and impairment (49 036) – (5 828) (19 000) (73 864)

Carrying value 102 732 78 723 11 873 24 771 218 099

Year ended 30 June 2010Opening balance 153 074 78 694 12 204 33 401 277 373Additions through business combinations 1 462 – 950 – 2 412Derecognition of subsidiary (2 726) – – – (2 726)Foreign exchange movements 39 – – – 39Amortisation – – (1 168) (4 677) (5 845)

Total 151 849 78 694 11 986 28 724 271 253

At 30 June 2010Cost/valuation 151 849 78 694 16 401 42 856 289 800Accumulated amortisation and impairment – – (4 415) (14 132) (18 547)

Carrying value 151 849 78 694 11 986 28 724 271 253

Trademarks have been pledged as security over borrowings.

Amortisation expense of R6,3 million (2010: R5,8 million) is included in administrative expenses (refer note 4).

June 2011

Additions to intangibles through business combinations of R1,0 million and R1,5 million in the current year relateto the acquisition of additional interest in DPI Fike and Electroline respectively (refer note 37).

Goodwill to the value of R48,7 million was impaired during the year (refer below).

Africa Swiss Trading Group joint venture was derecognised resulting in the derecognition of goodwill of R0,8million in the current year. (Refer note 37).

June 2010

During the prior year, the Group acquired the business of Plexicor on 1 January 2010 and was integrated withLibra Bathrooms Proprietary Limited to further enhance synergies and cost savings (refer note 37). This resulted in an addition of R1,5 million to goodwill in the prior year.

Africa Swiss Trading Group was derecognised as a subsidiary and accounted for as a joint venture. This resulted in the derecognition of goodwill of R2,7 million in the prior year.



FS44 <


13. INTANGIBLE ASSETS continued

General

Goodwill, trademarks and brand names are allocated to their respective underlying cash-generating units. Therespective companies acquired are defined as the underlying cash-generating units which support the valuationof the goodwill, trademarks and brand names. Where a cash-generating unit is identified as a separate unitwithin a business, this unit is classified as a separate cash-generating unit.

Trademarks and brand names are recognised as indefinite useful life intangible assets when an analysis of therelevant underlying factors confirm that there is no foreseeable limit to the period over which the asset isexpected to generate net cash inflows for the entity. This assumption is further underpinned by the strong presence these trademarks and brand names carry in the marketplace.

Goodwill is recognised as the excess of the purchase price over the fair value of identifiable net tangible andintangible assets, liabilities and contingent liabilities acquired in a business combination.

Goodwill is allocated to each of the cash-generating units, or groups of cash-generating units that are expectedto benefit from the synergies of the business combination.

Goodwill and indefinite life intangible assets are allocated to the following cash-generating units:

Indefinite life goodwill and intangible assets

Trademarks and Goodwill brand names

2011 2010 2011 2010R’000 R’000 R’000 R’000

Building 62 327 111 850 61 541 61 512

Cobra Watertech Proprietary Limited 12 838 12 838 30 841 30 841Isca Proprietary Limited 18 480 18 480 18 484 18 455DAWN Kitchen Fittings Proprietary Limited * 30 927 30 927 – –Wholesale Housing Supplies Proprietary Limited 82 – – –Wholesale Housing Supplies (East London)

Proprietary Limited – 82 – – Vaal Sanitaryware Proprietary Limited – 27 262 12 216 12 216 Libra Bathrooms Proprietary Limited ** – 19 025 – –Africa Swiss Trading (Angola) Limitada – 2 306 – –Africa Swiss Trading (Mozambique) Limitada – 808 – –La-Co Africa Marketing Proprietary Limited – 122 – –

Infrastructure 40 273 39 867 17 182 17 182

Incledon *** 40 273 39 867 17 182 17 182

DAWN Solutions and others 132 132 – –

DAWN Human Resources Solutions Proprietary Limited 132 132 – –

102 732 151 849 78 723 78 694

* Includes the acquisition of the business of Roco Fittings.

** Includes the acquisition of the business of Plexicor.

*** A division of DPI Plastics Proprietary Limited.



> FS45


13. INTANGIBLE ASSETS continued

Goodwill amounting to R48,7 million was impaired in the following cash-generating units: Vaal Sanitaryware (R27,3million), the Acrylic division (Libra and Plexicor) (R19,0 million), AST Angola (R2,3 million) and La-Co (R0,1 million). No other class of intangible asset other than goodwill was impaired.

The impairment test for goodwill and intangible assets identifies the recoverable amount of a cash-generatingunit determined based on value-in-use.

Value-in-use calculations use pre-tax cash flow projections based on financial budgets approved by management and cover a three-year period. The estimated growth rates applied are in line with that of the industry in which the cash-generating unit operates and are materially similar to assumptions of external marketsources. The cash-generating units’ recoverable amount is most sensitive to the growth rate assumptionsapplied. Growth rates for impairment testing purposes beyond three years were assumed at six percent.Assumptions were based on management’s past experience and best estimates regarding forecasts.Management determined budgeted gross margin based on past performance and its expectations of marketdevelopments. The discount rates used are pre-tax and reflect the appropriate risk associated with the industryand respective businesses.

A segment-level summary of the key assumptions used for value-in-use calculations is as follows:

DAWNInfra- Solutions/

Building structure other % % %

30 June 2011

Growth rate1

5,9 6,0 6,0Discount rate

215,5 15,7 14,0

30 June 2010

Growth rate1

3,0 3,0 3,0Discount rate

215,6 15,8 14,0

1 Compounded weighted average growth rate used to extrapolate cash flows beyond the budget period.2 Weighted average pre-tax discount rate applied to cash flow projections.

Intangible assets with defined useful lives are tested for impairment if conditions are identified which might be indicative of a potential reduction in the value in use or net realisable value compared to its carrying value.

Amortisation of intangible assets carried at defined useful lives

Intangible assets recognised as defined life intangible assets are carried at cost less accumulated amortisation.Amortisation is calculated using the straight-line method to allocate the cost of these assets over their usefullives. Trademarks are amortised over periods ranging from ten to twenty years and customer relationship overperiods ranging from five to ten years.

Intangible assets with defined useful lives are tested for impairment if conditions are identified which might beindicative of a potential reduction in the value in use or net realisable value compared to its carrying value.

The impairment calculations were tested for sensitivity to significant changes in the key assumptions used. The basis for sensitivity testing was a reduction of up to 20% in the budgeted operating profit used in the value-in-use calculation and a reduction of 1% in the weighted average cost of capital.

If budgeted operating profits used in the value-in-use calculations had been 20% lower, it would have resultedin a further impairment in the Building segment of a maximum of R21,7 million.

FS46 <




Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

14. INVESTMENTS IN SUBSIDIARIES

Shares at cost less amounts written off – – 50 358 36 674Net loans receivable from subsidiaries – – 431 014 444 698

Net investment in subsidiaries – – 481 372 481 372

A listing of the Group’s principal subsidiaries is set out on pages FS92 and FS93 of the annual financial statements.

15. INVESTMENTS IN ASSOCIATES

Reconciliation of investments in associatesBalance at beginning of the year 87 450 81 253 – – Acquisitions during the year 4 165 – – – Results of associates 81 5 211 – –

Share of profits prior to amortisation of intangible assets 1 110 6 403 – –

Amortisation of intangible assets (1 191) (1 192) – –

Impairment of associate * (625) – – – Repayment of loan receivable from associate – (800) – – Recapitalisation – 5 733 – –Adjustment to acquisition costs – 191 – –Loss on derecognition of associate ** (988) – – –Foreign currency translation reserve and

other movement (1 505) (4 138) – –

Balance at the end of the year 88 416 87 450 – –

* Investment in Saffer Union West Nigeria of R0,6 million was impaired.

** Derecognition of investment in Electroline of R1,0 million.

> FS47




15. INVESTMENTS IN ASSOCIATES continued

Investments in associates include intangible assets comprising:

Trade Customer

names relationships

(Defined (Defined

Goodwill life) life) Total

R’000 R’000 R’000 R’000

Sangio Pipe Proprietary Limited 1 373 1 048 1 012 3 433

Heunis Steel Proprietary Limited 18 860 3 467 2 509 24 836

Apex Valves (South Africa) Proprietary Limited 1 225 – 675 1 900

21 458 4 515 4 196 30 169

Balance at beginning of the year 20 672 5 854 4 598 31 124

Acquisition of associate 1 225 – 784 2 009

Derecognition of associate (439) (629) (264) (1 332)

Amortisation charge for the year – (710) (922) (1 632)

Balance at the end of the year 21 458 4 515 4 196 30 169

30 June 2011

Acquisition of Apex Valves

The Group acquired a 49% interest in Apex Valves (South Africa) Proprietary Limited, an assembling of valves

business, for a consideration of R4,2 million on 1 February 2011.

Acquisition of further interest in Electroline

An additional 41% shareholding in Electroline Proprietary Limited was purchased on 31 December 2010.

Consequently, Electroline Proprietary Limited was derecognised as an associate and a loss of R0,9 million was

realised. Electroline was subsequently recognised as a subsidiary of the Group in line with the requirements of

IFRS 3 (revised): Business Combinations. Refer to the Business Combinations note 37 for further information.

30 June 2010

A recapitalisation of Saffer Union (West Africa) Limited in Nigeria to the amount of R9 million was concluded.



FS48 <


15. INVESTMENTS IN ASSOCIATES continued

The Group’s results of its principal associates, all of which are unlisted, and its share of the assets and liabilitiesare as follows:

Invest-ment in

Ope- asso-rating ciates

Liabi- profit/ carry InterestCountry of Assets lities Revenues (loss) value held

Name incorporation R’000 R’000 R’000 R’000 R’000 %

30 June 2011

Sangio Pipe ProprietaryLimited South Africa 94 707 76 591 161 803 4 029 10 544 49

Heunis Steel Proprietary Limited South Africa 103 062 74 264 167 073 15 794 61 886 49

Fibrex S.A.R.L. Angola 96 853 71 538 79 495 11 968 10 996 33Saffer Union (West Africa)

Limited Nigeria 7 333 29 046 9 529 (8 328) – 50Apex Valves (South Africa)

Proprietary Limited South Africa 13 566 6 577 15 192 2 563 4 990 49

315 521 258 016 433 092 26 026 88 416

30 June 2010

Sangio Pipe ProprietaryLimited South Africa 72 070 55 406 114 926 (2 248) 10 041 49

Heunis Steel Proprietary Limited South Africa 93 873 73 749 154 207 (10 929) 59 957 49

Fibrex S.A.R.L. Angola 124 144 68 640 77 183 15 568 12 727 33Saffer Union (West Africa)

Limited Nigeria 19 799 34 909 11 822 (4 299) 3 403 50Electroline Proprietary

Limited South Africa 15 070 15 200 31 288 (166) 1 322 49

324 956 247 904 389 426 (2 074) 87 450

There are no contingent liabilities relating to the Group’s interest in associates.

Saffer Union (West Africa) Limited is treated as an associate on the basis that the Group does not have thepower to govern the financial and operating policies of the Company. Saffer Union (West Africa) Limited is anassociate of the AST Group, treated as a joint venture and derecognised at year-end.

The year-end for Saffer Union (West Africa) Limited and Fibrex S.A.R.L. is 31 December, as required by legislation in Nigeria and Angola, respectively.

The Group has not recognised losses amounting to Rnil million (2010: R2,0 million) for Saffer Union (WestAfrica) Limited. The accumulated losses not recognised were Rnil million (2010: R2,8 million).



> FS49


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

16. INVENTORIESThe amounts attributable to the different categories are as follows:

Raw materials 44 599 54 864 – – Components and consumables 49 165 40 937 – – Work-in-progress 113 971 76 420 – – Finished goods 644 689 574 415 – –

852 424 746 636 – –

Inventory balances are presented at the lower of cost and net realisable value.

The cost of inventories recognised as an expense and included in ‘cost of goods sold’ amounted to R2,6 billion(2010: R2,5 billion).

A write-down of inventories of R12,2 million (2010: R14,4 million) was recognised.

Inventory has been pledged as security over borrowings (refer note 23).

Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

17. TRADE AND OTHER RECEIVABLESTrade receivables 659 724 610 958 – – Less: Provision for receivables impaired,

discounts allowed and credit notes (24 144) (19 002) – –

Trade receivables – net 635 580 591 956 – – Rebates receivable 37 285 25 154 – – Prepayments 16 598 15 850 – – Related party loans (refer note 41) 16 025 42 491 – –Other receivables 25 370 50 020 – –

Trade and other receivables (excluding amount due on disposal of property) 730 858 725 471 –

Amount due on disposal of property 42 639 36 826 – –

Balance outstanding at beginning of year 36 826 29 932 – –Interest capitalised (refer note 6) 5 813 6 894 – –

Total trade and other receivables 773 497 762 297 – –



FS50 <


17. TRADE AND OTHER RECEIVABLES continued

The receivable in respect of disposal of property relates to the outstanding sale proceeds that originated fromthe disposal of the Germiston property and is unsecured, bears interest at 6% per annum and was repayableby December 2013. The fair value of the amount receivable from the sale of property is based on cash flowsdiscounted using market-related interest rates at the date of the transaction. The fair value of amount receivablehas been transferred to current as a result of management’s expectations of settlement in less than 12 monthsfrom the reporting date.

Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

The analysis of trade and other receivables isas follows:

773 497 762 297 – –

Non-current – 36 826 – –Current 773 497 725 471 – –

The fair values of current trade and other receivables approximate their carrying values.

Trade receivables have been ceded to banks as security for borrowings (refer note 23).

Trade receivables that are within the prescribed trading terms are considered to be fully performing. As at

30 June 2011, trade receivables of R514,9 million (2010: R484,6 million) were fully performing.

Trade receivables can be categorised in the following performance categories:

Past due Impaired

Fully and not and partially

R’000 performing impaired provided for Total

30 June 2011

Building 318 635 78 996 12 040 409 671

Infrastructure 194 665 50 480 2 764 247 909

DAWN Solutions – 251 – 251

Head Office and other 1 591 302 – 1 893

514 891 130 029 14 804 659 724

30 June 2010

Building 327 990 52 983 10 772 391 745

Infrastructure 156 575 51 106 11 429 219 110

DAWN Solutions 37 66 – 103

484 602 104 155 22 201 610 958



> FS51


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000


Trade receivables past due but not impaired

As at 30 June 2011, trade receivables of R130,0 million (2010: R104,2 million) were past due but not impaired. These relate to a number of independent customers for whom there is norecent history of default. Payment cessions over contractors and credit insurance exist over these trade receivables. The ageing analysis of these trade receivables is as follows:

Up to three months 97 979 67 460 – – Three to six months 32 050 36 695 – –

Total past due but not impaired 130 029 104 155 – –

Trade and other receivables impaired

As at 30 June 2011, trade receivables of R14,8 million (2010: R22,2 million) were impaired and the risk component of R11,4 million (2010: R7,2 million) was provided for.

The individually impaired receivables mainly relate to independent customers, which are in difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered.

The ageing of these receivables is as follows:

Three to six months 10 226 19 847 – – Over six months 4 578 2 354 – –

Total impaired and partially provided for 14 804 22 201 – –

There is no concentration of credit risk with respect to trade receivables, as the Group has a large and fragmented number of customers.



FS52 <


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000


The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies (all balances aredisclosed in South African Rand):

South African Rand 726 311 697 676 – – US Dollar 12 965 20 776 – – Tanzanian Shilling 9 021 10 645 – – Namibian Dollar 7 506 5 340 – – British Pound 6 901 7 497 – – Mauritian Rupees 4 606 5 908 – – Botswana Pula 4 343 5 614 – – Euro 1 844 1 180 – – Mozambican Metical – 3 456 – – Zambian Kwacha – 2 177 – –Angolan Kwanza – 2 028 – –

773 497 762 297 – –

Movements on the Group provision for impairment of trade receivables are as follows:

Balance at beginning of year 7 190 8 405 – – Unused amounts reversed (711) (579) – – Provision for receivables impaired 8 130 3 511 – – Receivables written off as uncollectible (2 736) (4 079) – – Foreign exchange movements on conversion (68) (68) – –Derecognition of joint venture (436) – – –

Balance at end of year 11 369 7 190 – – Provision for discount allowed and credit notes 12 775 11 812 – –

24 144 19 002 – –

The creation and usage of provision for impaired receivables have been included in other operating expenses inthe Income Statement. Amounts charged to the provision account are generally written off, when there is noexpectation of recovering additional cash.

The other classes within trade and other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above.



> FS53


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

18. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of:

Bank balances 150 707 196 402 – –

Short-term bank deposits 196 2 578 – –

150 903 198 980 – –

For purposes of the cash flow statement,

cash and cash equivalents include the following:

Cash at bank and on hand and short-term

bank deposits 150 903 198 980 – –

Bank overdrafts and call loans (185 429) (159 078) – –

(34 526) 39 902 – –

The Group’s bank balances are managed through a cash management process and interest is charged on a

net basis.

The effective interest rate on short-term bank deposits averaged 5,5% (2010: 3,3%) for the year under review.

The short-term banking facilities of R250 million form part of the total borrowing facilities. Security over total

banking facilities are disclosed in note 23.

The Group’s general short term banking facilities are shared between Standard Bank of South Africa Limited

and FirstRand Bank Limited amounting to R250 million (refer note 23).

Unutilised bank overdraft facilities amounted to R215 million at 30 June 2011 (2010: R250 million). Bank

overdraft facilities carry an interest rate at the prime lending rate minus 100 basis points (2010: prime lending

rate minus 100 basis points).



FS54 <


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

18. CASH AND CASH EQUIVALENTScontinued

The carrying amounts of the Group’s cash and cash equivalents are denominated in the following currencies (all balances aredisclosed in South African Rand):

South African Rand 138 341 182 741 – – US Dollar 5 984 35 – – Botswana Pula 3 981 8 542 – –Namibian Dollar 1 000 2 578 – – Mauritian Rupees 859 182 – – Euro 588 4 – – Tanzanian Shilling 142 114 – – British Pound 8 1 – – Angolan Kwanza – 1 949 – – Mozambican Metical – 96 – – Other currencies – 2 738 – –

150 903 198 980 – –

19. SHARE CAPITAL Authorised725 893 603 ordinary shares of 1 cent each 7 259 7 259 7 259 7 259 25 856 397 8% cumulative redeemable

preference shares of 1 cent each 259 259 259 259 10 000 000 deferred ordinary shares of

1 cent each 100 100 100 100

Balance at the end of the year 7 618 7 618 7 618 7 618

IssuedShare premium 373 748 373 748 373 748 373 748

DeferredNumber of Ordinary Number of ordinary Share Treasury

ordinary shares deferred shares premium shares TotalIssued shares R’000 shares R’000 R’000 R’000 R’000

At 30 June 2009 198 576 238 1 986 2 000 000 20 88 532 (6 732) 83 806Ordinary shares issued

during the year 41 666 666 416 – – 299 588 – 300 004Share issue expenses – – – – (14 372) – (14 372)Treasury shares acquired – – – – – (4 605) (4 605)

At 30 June 2010 240 242 904 2 402 2 000 000 20 373 748 (11 337) 364 833Treasury shares acquired – – – – – (3 522) (3 522)

At 30 June 2011 240 242 904 2 402 2 000 000 20 373 748 (14 859) 361 311

The remaining unissued shares are under the control of the directors until the next annual general meeting, subject to the Listings Requirements of the JSE Limited.



> FS55


19. SHARE CAPITAL continued

R100 000 of the authorised share capital of the Company, comprising of 10 000 000 ordinary shares of onecent each, was converted into 10 000 000 deferred ordinary shares of one cent each and issued at par forcash to Dream World Investments 239 Proprietary Limited in terms of a Black Economic Empowerment initiative by the Company on 15 December 2004.

During the five-year period commencing on 1 July 2004, 2 000 000 deferred ordinary shares shall convert intoordinary shares on a one-for-one basis every year on achievement by DAWN of a 17,5% cumulative compoundheadline earnings per share (“HEPS”) growth rate on the actual HEPS of 30,53 cents achieved to 30 June2004, subject further thereto that a minimum HEPS growth rate of 9% must be achieved on the previous yearHEPS. All shares not so converted, will convert into ordinary shares in equal tranches over the five-year periodcommencing on 1 July 2005.

The holder of the deferred ordinary shares is restricted from selling the deferred ordinary shares or any converted ordinary shares until all the deferred ordinary shares are converted into ordinary shares.

The deferred ordinary shares shall not participate in any dividends or capital distributions distributed by theCompany, but shall rank pari passu in all respects with the ordinary shares with regard to voting rights.

On 19 December 2005, the first tranche of 2 000 000 deferred ordinary shares of one cent each was convertedto ordinary shares and were issued to Dream World Investments 239 Proprietary Limited. The second, third andfourth tranche of 2 000 000 deferred ordinary shares of one cent each were converted to ordinary shares andwere issued to Dream World Investments 239 Proprietary Limited on 7 November 2006, 26 November 2007and 26 November 2008. The issue of the ordinary shares represents a one-for-one conversion of the first, second, third and fourth tranche of 2 000 000 deferred ordinary shares respectively in terms of section 143 ofthe Memorandum of Incorporation of the Company.

The remaining 2 000 000 deferred ordinary shares will be converted into ordinary shares in five tranches of 400 000 shares with the last conversion taking place on 1 July 2015.

On 1 December 2006, 7 569 993 ordinary shares of one cent each were issued at 30 cents per share, 1 686 668 ordinary shares of one cent each were issued at 50 cents per share, 500 000 ordinary shares of onecent each were issued at 125 cents per share and 2 830 000 ordinary shares of one cent each were issued at200 cents per share, to the DAWN Share Trust in order for the Trust to fulfil its obligations in terms of shares purchased by employee participants to the scheme under the DAWN Share Trust’s deed. All shares held by theTrust have vested and have been transferred to participants.

On 17 December 2008 DAWN shareholders were advised that they were entitled to elect to receive a cash dividend alternative of 35 cents per share in lieu of a capitalisation award. DAWN shareholders holding 99 903 567 shares have not elected to receive a cash dividend alternative and 5 112 014 new ordinary ordinaryshares of one cent each were issued at R6,84 per share in terms of the capitalisation award.

The Group undertook a rights issue during 2010 whereby 41 666 666 ordinary shares in the Company wereoffered to existing shareholders at R7,20 per share. The fully underwritten rights issue was successfully concluded on 15 December 2009 and raised net proceeds of R285 million of equity. The shares were issued atthe prevailing market price and at a R7,19 premium to the par value of R0,01 per share. The premium arisingfrom the issue was transferred to the share premium account.

Shares repurchased by a subsidiary and held in treasury amounted to 8 718 012 (7 726 146 since 2004)shares at year-end, which are disclosed as a reduction of equity in the Statement of Changes in Equity. Duringthe 2010 and 2011 financial years a further 531 430 and 304 374 shares, respectively were acquired in order tocover the various Group companies’ obligations in terms of the share incentive schemes at a total average costof R8,66 per share (2010) and R7,65 per share (2011).



FS56 <


Group

Treasury Incentiveshares shares TotalR’000 R’000 R’000

20. TREASURY SHARES AND INCENTIVESHARE TRUST

At 30 June 2009 (6 732) (8 995) (15 727)Treasury shares acquired (4 605) – (4 605)Incentive trust payment – 8 995 8 995

At 30 June 2010 (11 337) – (11 337)Treasury shares acquired (3 522) – (3 522)

At 30 June 2011 (14 859) – (14 859)

21. SHARE INCENTIVE SCHEMES (EQUITY SETTLED) Share incentives in the form of Share Appreciation Rights (SARs), Long-Term Incentive Plan (LTIPs) awards andDeferred Bonus Plan (DBPs) awards are offered to directors and to qualifying employees and aim to retain keyskills in the Group and to create a proper reward system for above average market performance of the Group.The schemes have a vesting period of three years, with the first tranche vesting in June 2009, the secondtranche vesting in June 2010 and the third tranche vesting in June 2011, the fourth tranche vesting in June2013 and the fifth tranche vesting in June 2014.

The grant price of these rights and awards are equal to the five days weighted average traded market price ofthe shares preceding the date of the grant. Rights and awards are conditional on performance conditions beingmet. The conditions focus on the Group’s earnings growth and share price performance compared to theGroup’s peers. The exercise price of these rights and awards is the five days weighted average traded marketprice of the shares preceding the date of exercise.

Movements in the number of share options outstanding and their related weighted average grant prices are asfollows:

Grant price Valuation Totalper right per number

and award right per of rightsGrant Vesting per share share granteddate date cents cents ’000

Share Appreciation Rights2008 rights granted 7 November 2008 30 June 2011 951 318 –2009 rights granted 31 December 2009 30 June 2012 720 141 3 6412011 rights granted 24 June 2011 30 June 2014 628 169 933

4 574

Long-Term Incentive Plans2006 rights granted 6 December 2006 30 June 2009 1 116 588 5032007 rights granted 29 June 2007 30 June 2010 1 687 742 2952008 rights granted * 7 November 2008 30 June 2011 951 485 –2009 rights granted ** 31 December 2009 30 June 2012 720 282 6632011 rights granted

– Dec 2010 31 December 2010 30 June 2013 628 388 4 3252011 rights granted

– June 2011 24 June 2011 30 June 2014 628 277 5 343

11 129



> FS57


21. SHARE INCENTIVE SCHEMES (EQUITY SETTLED) continued

Grant price Valuation Totalper right per number

and award right per of rightsGrant Vesting per share share granteddate date cents cents ’000

Deferred Bonus Plans2007 rights granted 25 October 2007 25 October 2010 1 687 1 598 1102008 rights granted 7 November 2008 30 June 2011 951 461 151

261

* The total number of rights granted for 2008 changed from 1 072 to 0 for the LTIP scheme and 4 484 to 0 for the SARscheme. This is mainly because all the options were not taken up.

** The total number of rights granted for 2009 changed from 724 to 663 for the LTIP scheme and 4 041 to 3 641 for theSAR scheme. This is mainly because all the options were not taken up.

If the performance conditions are met, the options vest. The valuation per right is the fair value net of pre-vesting forfeitures.

The following table sets out the reconciliation of the share-based payment reserve:

SAR LTIP DBP TotalR’000 R’000 R’000 R’000

Share-based payment reconciliationOpening balance 1 185 11 126 3 356 15 6672008 rights granted – 2 311 263 2 5742009 rights granted (1 185) 815 – (370)2010 rights granted – 2 720 – 2 720

Closing balance – 16 972 3 619 20 591

It is estimated that the current and projected non-market vesting conditions relating to the SARS are unlikely tobe achieved. Previous IFRS 2 changes have been reversed to profit and loss and no charges were made in thecurrent year.

Group

2011 2010’000 ’000

Aggregate number of shares available to the new schemes 36 540 36 540Shares applied in Dawn Share Trust (old schemes) (17 747) (17 747)Share rights and awards granted (new schemes) (29 702) (19 101)Shares not taken up 13 738 25 468

Number of share rights and awards available, but not engaged 2 829 25 160

The weighted average fair value of the rights and awards granted during the period was determined using amodified binomial tree model to value the SARs and the Monte Carlo valuation model for the valuation of theLTIPs.

2011 2010% %

Risk-free interest rate SAR 7,60 8,71LTIP 6,33 7,82

Dividend yield 1,69 3,93Volatility* 36,03 to 36,97 38,43 to 40,27

* The volatility input to the pricing model is a measure of the expected price fluctuations of the Dawn share price over the life

option structure. Volatility is measured as the annualised standard deviation of the daily price changes in the underlying shares.



FS58 <


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

22. NON-CONTROLLING INTERESTBalance at the beginning of the year 18 797 17 832 – – Transactions with non-controlling interests (18 469) (3 540) – – Share of attributable earnings for the year 1 469 5 303 – – Dividends (355) (798) – –Foreign currency translation reserve movement (181) – – –


Transactions with non-controlling interest reserve

Balance at the beginning of the year (1 153) – – – Cobra Watertech Proprietary Limited (14 181) (1 054) – – Wholesale Housing Supplies (East London)

Proprietary Limited (978) – – –Electroline Proprietary Limited (252) – – –Libra Bathrooms Proprietary Limited – (99) – –

Balance at the end of the year (16 564) (1 153) – –

Transactions with non-controlling interest holders include the purchase of an additional 5% (2010: 1%) of the non-controlling interest in Cobra Watertech Proprietary Limited for R31,7 million, decreasing the non-controlling interest to 0% (2010: 5%).

During the year the remaining 24% minority shareholding in Wholesale Housing Supplies (East London) Proprietary Limited was acquired for R2,0 million and the business transferred to Wholesale Housing Supplies Proprietary Limited.

The transactions with non-controlling interestsreserve arises out of the excess premium paid for the shareholding acquired in subsidiaries, which did not result in a change of control.

23. BORROWINGSNon-current

Interest-bearing borrowings Bank borrowings 1 604 208 888 – –Instalment sale liabilities 32 374 34 603 – –Finance lease liabilities 6 049 8 531 – –

40 027 252 022 – –

Non-interest-bearing borrowings Related party and non-controlling

shareholders’ loans 835 16 563 – –

835 16 563 – –

Total non-current borrowings 40 862 268 585 – –



> FS59


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

23. BORROWINGS continued

Current

Interest-bearing borrowings

Bank borrowings 227 335 23 695 – –Bank overdrafts and call loans 185 429 159 078 – –Other borrowings 11 518 – – –Directors’ and family members’ loans 4 476 5 189 – –Instalment sale liabilities 17 711 17 138 – –Finance lease liabilities 5 224 6 345 – –Acquisition vendors (Franke AG) 24 250 – – –

475 943 211 445 – –

Non-interest-bearing borrowings

Acquisition vendors 243 2 915 – –Loans from related parties and non-controlling

interests – 1 352 – –

243 4 267 – –

Total current borrowings 476 186 215 712 – –

Total borrowings 517 048 484 297 – –

Borrowings include secured liabilities (finance leases, instalment sales and bank borrowings) of a total amountof R290,3 million (2010: R299,2 million).

Other secured borrowings bear an interest rate of 3% and are repayable by December 2011.

Debt restructure

During the prior year the Group concluded a debt restructuring programme whereby firstly, total debt for theGroup was reduced by R400 million, and as the final step in the process matched the current/non-current portion of total borrowings to the Group’s cash flow profile whilst leaving sufficient headroom for funding growthand expansion over the medium-term.

The Group has total borrowing facilities of R546,9 million (2010: R545,5 million) which are secured by:

• a guarantee provided by the Group and various subsidiaries in favour of each lender;

• a guarantee provided by a security special purpose vehicle (SPV) in favour of the lenders in terms of whichthe SPV will guarantee the obligations of the Group; and

• various Group entities have provided cross-guarantees in respect of the borrowing facilities.



FS60 <


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000


The security provided can be summarised as follows:

Fixed properties Mortgage Bond 63 576 41 922 – –Other movable assets General Notarial Bonds 258 763 266 485 – –Trademarks General Notarial Bonds 90 596 90 680 – –Inventory General Notarial Bonds 826 407 734 117 – –Accounts receivable General Notarial Bonds 583 190 591 437 – –

1 822 532 1 724 641 – –

The security listed in the table covers the Group’s:

Term debt 226 875 225 500 – –General short-term banking facilities 250 000 250 000 – –Asset finance 70 000 70 000 – –

546 875 545 500 – –

The facilities outlined are shared between The Standard Bank of South Africa Limited and FirstRand BankLimited (“the lenders”). The Group’s borrowing facilities are subject to covenant clauses, whereby the Group isrequired to meet certain key performance indicators. As at 30 June 2011 only the EBITDA/interest cover indicator was met. However, the debt service cover ratio and the interest cover ratio were not met. As part ofthe loan agreement with the lenders, the Group undertook to comply with certain liquidity and solvency measures. The Group failed to comply with these measures. This placed the Group in breach of the requirementstipulated in the funding agreement. Accordingly, the Group disclosed the related borrowings of R194 million ascurrent at 30 June 2011 in the Statement of Financial Position. It was further confirmed by the lenders that it istheir intention to continue to provide term debt facilities to the Group, subject to reserving their rights, on termsto be negotiated after the end of the reporting period. Management has taken the appropriate action to remedythe position, which includes a focus on reducing the level of investment in less productive capital as well ascost containment, which will result in improved cash generation. The details of the covenant are as follows:

Covenant measures Required 2011 2010

Debt service cover ratio >1,3 : 1 0,5 : 1 1,37 : 1Net debt to EBITDA <1,75 : 1 (2010 : 2,2) 1,97 : 1 1,06 : 1Interest cover >3,5 : 1 3,67 : 1 4,73 : 1



> FS61


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000


The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the end of the reporting period is as follows:

Six months or less 416 268 186 879 – – Six to twelve months 35 425 24 565 – – One to five years 39 885 251 557 – – Over five years 142 466 – –

491 720 463 467 – –

The maturity of non-current borrowings is as follows (excluding instalment sale and finance lease liabilities):

Later than one year and no later than two years 467 30 625 – – Later than two years and no later than five years 995 179 999 – – Later than five years 977 14 827 – –

2 439 225 451 – –

Instalment sale liabilities – minimum payments:

No later than one year 21 473 20 817 – – Later than one year and no later than five years 35 197 38 808 – –

56 670 59 625 – – Future finance charges (6 585) (7 884) – –

Present value of instalment sale liabilities 50 085 51 741 – –

The present value of instalment sale liabilities is as follows:

No later than one year 17 711 17 138 – – Later than one year and no later than two years 13 356 17 109 – – Later than two years no later than five years 19 018 17 494 – –

50 085 51 741 – –

Gross finance lease liabilities – minimum lease payments:

No later than one year 6 223 8 640 – –Later than one year and no later than five years 6 411 9 734 – –

12 634 18 374 – –Future finance charges (1 361) (3 498) – –

Present value finance lease liabilities 11 273 14 876 – –



FS62 <


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000


The present value of finance lease liabilities is as follows:No later than one year 5 224 6 345 – –Later than one year and no later than two years 5 313 8 054 – –Later than two years no later than five years 736 477 – –

11 273 14 876 – –

% % % %The effective annual interest rates at the end of the reporting period were as follows:

Bank borrowings Working capital facilities 8,8 9,0 – – Long-term debt 10,0 11,1 – – Short-term debt 10,0 12,1 – –

Loans from shareholders, directors and family members 7,0 8,0 – –

Instalment sale liabilities 8,8 12,3 – – Finance lease liabilities 8,6 10,0 – –

Carrying amounts Fair values

2011 2010 2011 2010R’000 R’000 R’000 R’000

The carrying amounts and fair values of non-current borrowings of the Group are as follows:

Bank borrowings 1 604 208 888 1 604 208 888Instalment sale liabilities 32 374 34 603 32 374 34 603Finance lease liabilities 6 049 8 531 6 049 8 531Related party loans 835 16 563 835 6 987

40 862 268 585 40 862 259 009

The fair values of bank borrowings and related party loans are based on discounted cash flows using an appropriate market rate of interest at the reporting date.

The carrying amounts of current borrowings approximate their fair values, as the impact of discounting is notsignificant.

The fair values of finance lease and instalment sale obligations are estimated as the present value of future cashflows, discounted at the market rate of interest at the reporting date.



> FS63


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000


The carrying amounts of the Group’s borrowings are denominated in the following currencies (all balances are disclosed as South African Rands):

South African Rand 499 437 465 789 – –Tanzanian Shilling 7 619 5 551 – –US Dollar 3 532 3 602 – –Namibian Dollar 2 570 2 978 – –Mauritian Rupees 2 371 2 273 – –Botswana Pula 1 519 1 621 – –Mozambican Metical – 2 313 – –Angola Kwanza – 101 – –Other currencies – 69 – –

517 048 484 297 – –

Borrowing powersDAWN has unlimited borrowings powers permitted in terms of the Company’s Memorandum of Incorporation.

Borrowing facilitiesThe Group has the following contracted borrowing facilities:

Floating rateExpiring within one year 435 698 200 608 – –Expiring beyond one year 39 061 251 365 – –

474 759 451 973 – –

Fixed rateExpiring within one year 15 994 10 837 – –Expiring beyond one year 967 657 – –

16 961 11 494 – –

Total interest-bearing borrowings excluding acquisition vendors 491 720 463 467 – –



FS64 <


24. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments – net fair values

The table below analyses financial instruments carried at fair value, by valuation method. The different levelshave been defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, eitherdirectly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)(level 3).

Group

2011 2010Assets Liabilities Assets Liabilities

Level R’000 R’000 R’000 R’000

Derivative financial instruments – net fair values

Forward foreign exchange contracts – held for trading valued at fair value through profit/(loss) 2 165 464 – 67

Interest rate swaps valued at fair value asa cash-free hedge through other comprehensive income 2 – 6 990 – 6 526

2 165 7 454 – 6 593

The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates to terminate the contracts at the Statement of Financial Position date.

The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows.

Forward exchange contracts

Open forward exchange contracts (at contracted rates) can be analysed as follows:

Weightedaverageforward

Rand Foreign exchange amount amount rate

’000 ’000 %

30 June 2011

US Dollar – buy 25 716 3 739 6,87US Dollar – sell 683 99 6.86Euro – buy 6 536 662 9,89Euro – sell 1 498 152 9,83British Pound – buy 4 830 430 11,24British Pound – sell 3 687 327 11,26

The settlement dates on open forward exchange contracts ranged between one and six months from 30 June 2011.

30 June 2010

US Dollar – buy 5 292 678 7,79US Dollar – sell 1 583 160 9,89

The settlement dates on open forward exchange contracts ranged between three months and one year from30 June 2010.



> FS65


24. DERIVATIVE FINANCIAL INSTRUMENTS – NET FAIR VALUES continued

Interest rate swaps

The full fair value of the hedging instrument is classified as a non-current liability as the remaining maturity of thehedged instalment is more that twelve months.

During the prior year, the Group entered into an interest rate swap agreement simultaneously to the conclusionof the debt restructuring (refer to note 23). The interest rate swap matches the term debt repayment profile overthe five-year term of the debt. The interest rate swap has the effect of swapping the floating JIBAR exposure fora fixed JIBAR exposure of 8,25% per annum. This instrument is recorded at fair value at each reporting dateand gains/losses are recognised in the hedging reserve in equity through other comprehensive income. Thegains/losses will be continuously released to the Income Statement within finance cost until the repayments ofthe bank borrowings (refer note 23). At year-end, the instrument had a negative value and accordingly a non-current liability of R6,9 million was recognised in the Statement of Financial Position, following the maturity profile of the hedge. The maturity date of the interest rate swap is 29 January 2015.

Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

25. DEFERRED PROFIT

Deferred profit – non-current portion 37 735 61 536 – – Deferred profit – current portion 8 150 – – –

45 885 61 536 – –

The analysis of deferred profit is as follows:Opening balance 61 536 59 008 – – Additions – 19 102 – –Deferred profit released (15 650) (16 574) – –


Deferred profit arose from the sale and operating lease-backs of the Plexicor (Pietermaritzburg) and WholesaleHousing Supplies (Bloemfontein and Polokwane) properties during the prior financial year. The balance of thedeferred profit consists of the sale and operating lease-back of the Germiston property during 2009. Thedeferred profit is released to profit and loss on a straight-line basis over management’s estimate of the remaining lease term.

Germiston property

The deferred profit arose from the sale and operating lease-back on the Germiston property in 2008. Thedeferred profit is recognised in profit and loss on a straight-line basis over management’s estimate of the leaseterm being five years.

The lease is renewable at the option of the Group. The full lease period including all renewals is twenty years.The occupation/lease period was reassessed during the current year and it is the intention of the Group tooccupy the property for a total period of ten years and therefore the remaining balance will be amortised over aperiod of seven years. The change in circumstances and requirements of the Group is reflected in the profitamortisation period and is assessed on an annual basis.



FS66 <


25. DEFERRED PROFIT continued

Pietermaritzburg property

The property was acquired by Libra Bathrooms Proprietary Limited in addition to the Plexicor acquisition during January 2010. The property was sold in April 2010 to an external party and leased back from the purchaser. The initial lease period is for ten years and Libra has the option to renew the lease for a further fiveyears. The intention of the Group is to occupy the property for ten years after which the change in circumstances and requirements of the Group will be reconsidered.

Polokwane property

The property was sold during April 2010 and leased back from the purchaser. The initial lease period was forthree years. There is no renewal option. A new lease agreement was entered into with the lessor for an alternative property and the full deferred profit was realised during the current year.

Bloemfontein property

The property was sold during May 2010 and leased back from the purchaser. The initial lease period was forfive years. There is no renewal option. A new lease agreement was entered into with the lessor for an alternativeproperty and it is expected that the full deferred profit will be realised during the 2012 financial year.

Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

26. DEFERRED TAX

Deferred tax assets and liabilitiesDeferred tax is calculated on all temporary differences under the liability method using a principal tax rate of 28% (2010: 28%).

The following amounts are shown in the consolidated Statement of Financial Position (aggregated based on subsidiary companies):

The gross movement on the deferred tax account is as follows:

Opening balance 15 695 (2 221) – – Acquisition of subsidiary (301) – – – Disposal of subsidiary – (1 672) – –Income statement charge 12 121 16 852 – – Charged directly to equity 306 1 650 – –Prior year adjustments 4 970 1 001 – – Foreign exchange movement on conversion 85 85 – –Derecognition of joint venture (804) – – –


The Group did not recognise deferred tax assets of R2,5 million (2010: R0,6 million) in respect of losses

amounting to R9,2 million (2010: R2,1 million) which can be carried forward against future taxable income.



> FS67


26. DEFERRED TAX continued

Movement in deferred tax assets and liabilities

The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred tax liabilities

Intangible Capital assets and Foreign

allowances other entities TotalR’000 R’000 R’000 R’000

At 1 July 2009 (19 018) (29 131) (3 176) (51 325)(Debited)/credited to the income statement (14 093) 4 119 647 (9 327)Exchange difference – – 85 85Derecognition of subsidiary – – (1 672) (1 672)

At 1 July 2010 (33 111) (25 012) (4 116) (62 239)(Debited)/credited to the income statement (2 451) (1 363) – (3 814)Acquisition of businesses (14) – – (14)Deferred tax on intangible assets acquired

in business combinations – (590) – (590)Exchange differences – – 85 85Derecognition of joint ventures (refer note 37) 32 – (30) 2Foreign entities deferred tax integrated into

all categories (4 061) – 4 061 –

At 30 June 2011 (39 605) (26 965) – (66 570)

Deferred tax assets

Assessed Deferred losses

Provisions profit and other TotalR’000 R’000 R’000 R’000

At 1 July 2009 21 538 16 522 11 044 49 104 Debited to the income statement 9 991 708 16 481 27 180Credited to equity – – 1 650 1 650

At 1 July 2010 31 529 17 230 29 175 77 934 (Debited)/credited to the income statement 7 878 (4 382) 17 409 20 905Acquisition of businesses 11 – 294 305Derecognition of joint ventures (867) – 59 (808)Credited to equity – – 306 306

At 30 June 2011 38 551 12 848 47 243 98 642



FS68 <




Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

26. DEFERRED TAX continued

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority.

The analysis of deferred tax assets and deferred tax liabilities is as follows:

Total deferred tax assets 57 308 77 934 – –Total deferred tax liabilities (25 236) (62 239) – –

Net deferred tax assets 32 072 15 695 – –

Recognition of deferred tax asset

The Group discloses a deferred tax asset on

the basis where:

• 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

that such deferred tax assets are expected

to be utilised within a period not exceeding

five years; 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.

27. TRADE AND OTHER PAYABLES

Trade payables 626 309 476 354 – –

Accrued expenses and payables 77 142 106 906 – –

Rebates and leave pay accrual 49 674 45 097 – –

Lease smoothing accrual 13 476 12 310 – –

Post-retirement medical aid benefits – 5 722 – –

766 601 646 389 – –

Trade and other payables are unsecured and are payable within a period of twelve months.

The carrying amounts of trade and other payables approximate their fair value.

The post-retirement medical aid benefit obligation has been disclosed under long-term liabilities – R6,0 million in

respect of 2011; and included under trade and other payables – R5,7 million in respect of 2010.

> FS69




Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

27. TRADE AND OTHER PAYABLEScontinued

The carrying amounts of the Group’s trade and other payables are denominated in the following currencies (all balances are disclosed in South African Rand):

South African Rand 581 618 483 725 – –US Dollar 58 824 39 918 – –Mauritian Rupees 6 053 3 872 – –Euro 5 010 3 929 – –Namibian Dollar 4 136 2 007 – –Tanzanian Shilling 423 623 – –Botswana Pula 153 2 931 – –British Pound 34 61 – –Angolan Kwanza – 424 – –Mozambican Metical – 94 – –Zambian Kwacha – 86 – –Other currencies 63 181 – –

656 314 537 851 – –

The carrying amounts of the Group’s trade

and other payables which are not financial

instruments are denominated in South

African Rand and consist of:

Rebates and leave pay accrual 49 674 45 097 – –Accrued expenses 47 137 45 409 – –Lease smoothing accrual 13 476 12 310 – –Post-retirement medical aid benefits – 5 722 – –

110 287 108 538 – –

Total trade and other payables 766 601 646 389 – –

FS70 <


Group

2011 2010R’000 R’000

28. RETIREMENT BENEFIT OBLIGATION Certain of the employees of DPI Plastics Proprietary Limited are entitled to medical aid benefits in terms of the DPI group of companies post-retirement medical benefit plan. The plan is unfunded. The obligation has been disclosed under long-term liabilities in respect of 2011 and included under trade and other payables in respect of 2010.

The amounts recognised in the Statement of Financial Position are determined as follows:

Present value of unfunded obligations 5 979 5 722

Movement for the yearBalance at beginning of year 5 722 5 266Benefits paid – (91)Net expense recognised in profit or loss 257 547

Balance at end of year 5 979 5 722

The amounts recognised in the Income Statement were as follows:Current service cost 113 112Interest cost 518 490Net actuarial gain recognised in the year (374) (55)

Total included in employee benefits expense 257 547

Increase DecreaseR’000 R’000

The effects of a 1% movement in the assumed healthcare cost inflation rate were as follows:Effect on the defined benefit obligation 170 56

The effects of a 1% movement in the assumed discount rate were as follows:Effect on the defined benefit obligation 461 575

The latest actuarial valuation of the post-employment medical benefit plan was carried out on 30 June 2011. The Group performs such a valuation every three years.

Group

2011 2010% %

The principal assumptions used in the valuation were as follows:Discount rates used 8,50 9,25Healthcare cost inflation 8,00 8,25Continuation of membership at retirement 100,00 100,00Consumer price index inflation 6,00 6,25

Average retirement age 65 years 65 years



> FS71


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

28. RETIREMENT BENEFIT OBLIGATION continued

Mortality

Various assumptions regarding future mortality experience were made. These are based on PA (90) ultimate tables for interest of mortality after retirement and SA 70-90 (light) ultimate tables for rates of mortality before retirement.

29. COMMITMENTS

Capital commitments

Capital expenditure contracted for at the end ofthe reporting period but not yet incurred and recognised in the financial statements is as follows:

Plant and equipment 9 962 9 872 – – Furniture and fittings 480 – – – Motor vehicles 6 170 – – – Land and buildings – 17 100 – –

16 612 26 972 – –

Capital expenditure authorised but not contracted for at the reporting date is as follows:

Plant and equipment 205 18 831 – – Furniture and fittings 47 6 274 – –Motor vehicles – 2 255 – –Land and buildings 105 8 848 – –

357 30 208 – –

Total capital commitments 16 969 63 180 – –

It is intended to finance capital expenditure from working capital generated within the Group and availablefinance facilities.

Operating lease commitments

The Group leases various offices, warehouses and factories under non-cancellable operating lease agreements.The leases have varying terms, escalation clauses and renewal rights (refer note 1.21).

The Group also leases various items of plant and machinery and office equipment under non-cancellable operating lease agreements. The leases have varying terms and escalation clauses. The lease expenditurecharged to the Income Statement during the year is disclosed in note 4.



FS72 <


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

29. COMMITMENTS continued

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Not later than one year 67 912 74 172 – – Later than one year and not later than five years 285 754 258 546 – – Later than five years 105 685 86 574 – –

459 351 419 292 – –

30. CONTINGENCIESThe Group has contingent liabilities in respect of bank and other guarantees and other matters arising in the ordinary course of business. It is not anticipated that any material liabilities will arise from the contingent liabilities.

Bank guarantees issued 2 088 20 181 – –Suretyships and other cessions 14 152 31 084 8 000 –Other 13 004 – – –

29 244 51 265 8 000 –

The Company has provided suretyship in favour of the lessor for the lease obligations in terms of the Germistonproperty (refer note 17).

DPI Plastics was granted conditional leniency from prosecution under the Competition Act by the CompetitionCommission in relation to its involvement in the plastic pipes cartel. The Tribunal’s formal hearing into the matterended on 20 April 2011, with the Tribunal reserving its decision, and no administrative penalty was sought bythe Commission against DPI. The Commission has indicated that it will grant DPI final immunity once theTribunal delivers its decision. No additional provisions for potential liabilities have been made as managementconsiders the likelihood of the exposure to be remote.

The Group has pending indirect and direct tax assessments with Mozambican, Angolan and South AfricanRevenue authorities. Formal assessments were performed which included legal and tax opinions. No additionalprovisions for potential tax liabilities have been made as management considers the likelihood of the exposureto be remote.

31. RETIREMENT FUNDThe policy of the Group is to provide retirement benefits to its employees. The Group has been participating inthe Alexander Forbes Retirement Fund (provident section) since 1 September 2002. The Alexander ForbesRetirement Fund is an umbrella provident fund administered by Alexander Forbes, which is governed by thePension Fund Act of 1956.

The contributions paid by the Group companies to fund obligations for the payment of retirement benefits arecharged against the Income Statement as and when incurred. The Group contributed R25,5 million (2010:R22,3 million) for the year under review. 2 353 employees (2010: 2 254 employees) are members of theAlexander Forbes Retirement Fund.

The Alexander Forbes Retirement Fund is valuation exempt. An asset/liability reconciliation is performed everysix months. The asset/liability reconciliation as at 30 June 2011 revealed that the fund was in sound financialcondition; being 100,17% (2010: 100,19%) funded. The fund is classified as a defined contribution fund. TheGroup has no legal or constructive obligation to fund any shortfall in the fund.



> FS73


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

CASH FLOW STATEMENTS

32. RECONCILIATION OF PROFIT BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS

(Loss)/profit before taxation (14 167) 156 568 – 9 236

Adjustments for:Depreciation 62 051 53 451 – – Amortisation 6 280 5 845 – – Impairment of property, plant and equipment 732 – – – Impairment of other assets 2 387 – – –Impairment of goodwill 48 714 – – – Net share-based payment (reversal)/charge 4 923 6 340 – – Net profit on disposal of property, plant

and equipment (1 000) (2 361) – – Deferred profit released (15 650) (16 574) – –Dividends received – – – (9 202)Finance income (28 629) (27 332) – (36)Finance expense 75 160 83 843 – 2Smoothing of leases 1 166 – – – Derecognition of associate (Electroline) 863 – – – Results of associates 706 (5 211) – – Other employee benefit charges 975 3 340 – –Derivative movement 232 (1 388) – – Loss/(gain) on derecognition (previously

held interest in AST) 15 803 (13 586) – –Loss on derecognition of Saffer

Angola (subsidiary) 3 188 – – –Gain on derecognition of Fike (joint venture) (591) – – –Acquisition cost expensed – 933 – –Post-retirement benefit obligation 257 – – –

Changes in working capital (Increase)/decrease in inventories (118 757) 15 399 – – (Increase)/decrease in trade and other

receivables (37 717) (15 759) – – Decrease/(increase) in trade and

other payables 137 912 (24 300) – –

144 838 219 208 – –



FS74 <


Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000

33. RECONCILIATION OF INCOME TAX PAID DURING THE YEAR

Income tax liability at beginning of year (21 522) (22 323) (10) –Current tax for the year recognised in

profit or loss (31 780) (59 941) – (10)Interest and other movements 1 473 (1 388) – –Income tax liability at the end of the year 14 141 21 522 10 10

Income tax paid during the year (37 688) (62 130) – –

34. ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT

Land and buildings 28 137 16 442 – – Plant and machinery 31 960 16 521 – – Furniture and equipment 23 434 22 622 – – Motor vehicles 10 740 7 933 – –

Total property, plant and equipment additions 94 271 63 518 – –

35. PROCEEDS FROM DISPOSALOF PROPERTY, PLANT AND EQUIPMENT

Net book amount of assets disposed of 7 302 16 555 – – Profit on disposal of plant and equipment 1 252 2 460 – – Loss on disposal of property, plant and

equipment (252) (99) – –Deferred profit on disposal of property – 19 102 – –

8 302 38 018 – –

36. ACQUISITION OF BUSINESSES Fair value of assets acquiredProperty, plant and equipment 118 8 953 – –Intangible assets 2 104 950 – –Net current assets 11 262 8 078 – – Deferred tax liabilities (301) – – –Borrowings (10 198) (11 443) – – Costs directly attributable to the acquisition

included in the income statement – 933 – –

Total net asset value 2 985 7 471 – – Goodwill 405 1 462 – –

Purchase consideration 3 390 8 933 – – Fair value of previous interest held (1 924) – – –Non-controlling interest (143) – – –Cash/(overdraft) acquired (66) 2 071 – –

Net cash outflow from acquisition 1 257 11 004 – –



> FS75


37. BUSINESS COMBINATIONS30 June 2011

DPI Fike Mining Supplies Proprietary Limited (joint venture to subsidiary)

On 1 July 2010, the Group acquired an additional 44% of the shares of DPI Fike Minings Supplies ProprietaryLimited, a supplier of pipes and pipe fittings to mainly the mining industry in the North West. The business wasintegrated with DPI Plastics Proprietary Limited from date of acquisition to further enhance synergies and costsavings.

The remaining 44% shareholding was acquired for a total purchase consideration of R3,0 million. The fair value

of these assets and liabilities amounted to R2,6 million (including intangibles identified) and resulted in goodwill

of R0,4 million being recognised at acquisition date. The Group recognised a gain of R0,6 million as a result of

measuring at fair value its 56% previously held joint venture interest. The gain is included in other income in

profit and loss. DPI Fike was consolidated as a subsidiary from the acquisition date (1 July 2010).

DPI Fike Mining Supplies contributed profit of R0,6 million and revenue of R10,7 million since the acquisition

date. The fair value of assets and liabilities have been determined by management and the value of intangible

assets have been determined by qualified valuators and management. The fair values are set out on page

FS75.

Electroline Proprietary Limited, previously Castle King Investments 1012 Proprietary Limited (associate to

subsidiary)

On 31 December 2010, the Group acquired an additional 41% of the shares of Electroline Proprietary Limited

(previously Castle King Investments 1012), a pre-packaging and assembling of electrical components business,

for a total purchase consideration of R0,4 million. The fair value of the assets and liabilities amounted to

R0,4 million.

The Group recognised a loss of R0,9 million as a result of measuring at fair value its 49% previously held

interest in associate, Electroline. The loss is included in other income in profit and loss. Electroline was

consolidated as a subsidiary from 31 December 2010.

The acquired business contributed revenues of R15,7 million and operating profit of R1,3 million to the yearended 30 June 2011, and its assets and liabilities at 30 June 2011 were R13,5 million and R13,2 million,respectively. If the acquisition had occurred on 1 July 2010, Group revenue would have been R17,5 millionmore, and operating profit for the period would have increased by R0,1 million. These amounts have been calculated based on consistent application of the Group’s accounting policies.

The fair value of assets and liabilities have been determined by management and the value of intangible assetshave been determined by qualified valuators and management.



FS76 <


37. BUSINESS COMBINATIONS continued

The fair value of these assets and liabilities and intangibles assets are set out below.

Net cash flow from acquisitions

The goodwill is attributable to the workforce acquired and significant synergies expected to arise after theGroup’s acquisition of the acquired subsidiaries and businesses.

The final assets and liabilities arising from the acquisition are as follows:

DPI FikeMining Supplies Electroline

Proprietary ProprietaryLimited Limited Total

Fair Carrying Fair Carrying Fair Carryingvalue amount value amount value amountR’000 R’000 R’000 R’000 R’000 R’000

Property, plant and equipment 57 57 61 61 118 118Trademarks (included in

intangible assets – refer note 13) – – 1 300 – 1 300 –

Customer relationships (included in intangible assets – refer note 13) 600 – 204 – 804 –

Inventories 1 234 1 234 4 881 4 881 6 115 6 115Trade and other receivables 1 559 1 559 6 714 6 714 8 273 8 273Cash and cash equivalents 370 370 – – 370 370Borrowings – – (10 198) (10 198) (10 198) (10 198)Trade and other payables (1 086) (1 086) (1 800) (1 800) (2 886) (2 886)Taxation receivable/payable 150 150 – – 150 150Deferred tax (240) (71) (61) 360 (301) 289Provisions (48) (49) (408) (408) (456) (457)Bank overdraft – – (304) (304) (304) (304)

Total net asset value 2 596 2 164 389 (694) 2 985 1 470Goodwill 405 – – – 405 –

Purchase consideration 3 001 – 389 – 3 390 –Fair value of previous interest (1 802) – (122) – (1 924) –Non-controlling interest – – (143) – (143) –(Cash)/overdraft (370) – 304 – (66) –

Net cash flow from acquisitions 829 – 428 – 1 257 –



> FS77



Derecognition of Africa Swiss Trading – Joint Venture Group

On 30 June 2011 the Group derecognised its joint venture interest in AST as a result of the purchase of anadditional 49% equity interest from the co-venturer for a cash consideration of R24,2 million and obtained control of AST at reporting date, holding 100% of the entire AST group.

Subsequent to year-end (8 July 2011) the Group sold 49% of its wholly-owned investment in AST to an outsideparty for a cash consideration of R24,5 million.

A joint venture agreement was entered into at the same time.

As a result of the acquisition and subsequent disposal, the Group has accounted for AST as a ‘subsidiaryacquired with a view to disposal’ and consequently has recognised a non-current asset and disposal group held-for-sale for R42,5 million.

A net loss on disposal of the previously held interest (AST – joint venture), calculated in terms of IFRS 3 –Business Combinations, for R15,8 million has been recognised in profit and loss. This has been calculated taking into account the total aggregated ‘cost’ of R34,1 million (includes net assets disposed and the effect ofrecycling of foreign currency translation reserves) and the calculated fair value of the previously held interest of R18,3 million.

Due to certain post-disposal adjustments, the Group has recognised fair value adjustments, mainly a contingentliability, for guarantees assumed for certain tax and warranty exposures which have been taken into account inthe determination of the fair value of the previously held interest.

The net cash outflow in the current year from the disposal was R3,2 million comprising net overdrafts derecognised.

The 49% acquisition price of R24,2 million has been settled post-reporting date and is included as an acquisition vendor payable in borrowings in the Statement of Financial Position. The loss on derecognition isestimated to have no tax effects.

acquisition of Africa Swiss Trading as a disposal group – subsidiary held for sale

As explained above, the Group increased its shareholding in AST by acquiring the remaining 49% shareholdingfrom the co-venturer for a cash consideration of R24,2 million on 30 June 2011. AST was previously proportionately consolidated and transfer of control has resulted in the acquisition of a wholly-owned subsidiaryat reporting date.

Subsequent to year-end, the Group sold 49% of its interest in AST to a new co-venturer for R24,5 million andtherefore the consolidated identifiable assets and liabilities (including goodwill) in AST has been presented as awholly-owned subsidiary acquired with a view to disposal.

The investment in AST as a single asset, valued at fair value less costs to sell, amounts to R42,5 million andhas been presented as an asset held for sale in the Statement of Financial Position.

As allowed by IFRS 5, a full fair value exercise has not been performed at the reporting date.

Derecognition of Saffer Angola – subsidiary

In prior periods, part of the operations of Saffer Angola was transferred to the AST joint venture (including certain assets and liabilities) and the remaining business was abandoned. As a result of the impending liquidation of Saffer Angola in the current year, the remaining foreign currency translation reserve amounting toR2,4 million has been recycled to profit and loss (loss on derecognition).



FS78 <



Loss of control – AST – 2010

Africa Swiss Trading Proprietary Limited (AST) is a company of which Franke Holdings AG owned 49% and the

Dawn Group 51%.

Dawn Group bore the majority of risks and therefore consolidated AST as a subsidiary.

On 31 December 2009, the shareholders of AST recapitalised the business through a R22 million cash

injection, which resulted in the normalisation of imbalanced funding and re-alignment with the original joint

venture agreement. As a result the risks relating to the entity are jointly shared and AST was subsequently

accounted for as a joint venture from 31 December 2009. This event resulted in a gain of R13,6 million

recorded in profit and loss.

The carrying value of the total net liabilities derecognised amounted to R3,0 million and the fair value of joint

venture assets re-assumed approximates their carrying values. Fair value equates to the net asset value for the

joint venture.

Cash, Assets at

loans fair value

and through

receiv- profit or

ables loss Total

R’000 R’000 R’000

38. FINANCIAL ASSETSBY CATEGORY

The accounting policies for financial instruments have been

applied to the line items below:

Group – 2011

Trade and other receivables – current ** 756 899 – 756 899

Cash and cash equivalents 150 903 – 150 903

Derivative financial instruments * – 165 165

Total 907 802 165 907 967

Group – 2010

Trade and other receivables – non-current 36 826 – 36 826

Trade and other receivables – current ** 709 621 – 709 621

Cash and cash equivalents 198 980 – 198 980

Total 945 427 – 945 427

* Foreign Exchange Contracts (FECs).

** Excluding pre-payments.



> FS79


Liabilities at Other

fair value financial

through liabilities Derivatives

profit and at amor- used for

loss tised cost hedging Total

R’000 R’000 R’000 R’000

39. FINANCIAL LIABILITIESBY CATEGORY

The accounting policies for financial instruments

have been applied to the line items below:

Group – 2011

Borrowings – 331 633 – 331 633

Trade and other payables ** – 627 227 – 627 227

Bank overdrafts and call loans – 185 429 – 185 429

Derivative financial instruments * 464 – 6 990 7 454

Total 464 1 144 289 6 990 1 151 743

Group – 2010

Borrowings – 325 219 – 325 219

Trade and other payables ** – 537 851 – 537 851

Bank overdrafts and call loans – 159 078 – 159 078

Derivative financial instruments * 67 – 6 526 6 593

Total 67 1 022 148 6 526 1 028 741

* Foreign Exchange Contracts (FECs) and interest rate swaps.

** Excluding post-retirement medical aid, deferred profit, rebates and leave pay, lease smoothing and accrued expenses.

40. RISK MANAGEMENT

Financial risk management

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and cash flow interest rate risk as well as price risk), credit risk and liquidity risk. The Group’soverall risk management programme focuses on the unpredictability of financial markets and seeks to minimisepotential adverse effects on the Group’s financial performance. The Group uses derivative financial instrumentsto hedge certain risk exposures. The Board provides principles for overall risk management, as well as policiescontaining specific areas such as foreign exchange risk.

Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilitiesand net investments in foreign operations. Exposures consist primarily of exposures with respect to the USDollar and British Pound as well as exposure to foreign exchange due to operations in African countries including Botswana, Angola, Mozambique, Namibia, Nigeria, Tanzania, Zambia, Mauritius and Zimbabwe (US$).

To manage the Group’s foreign exchange risk arising from future commercial transactions and recognisedassets and liabilities, entities in the Group use forward foreign exchange contracts. Foreign exchange risk ariseswhen future commercial transactions and recognised assets or liabilities are denominated in a currency that isnot the entity’s functional currency.



FS80 <


40. RISK MANAGEMENT continued

Forward foreign exchange contracts are entered into to manage exposure to fluctuations in foreign currencyexchange rates on specific transactions. In general, the Group’s policy is to enter into forward foreign exchangecontracts for up to 75% of net foreign currency exposures over the following twelve months.

The Group has certain investments in foreign operations which result in exposure to foreign currency translation risk. It is the Group’s policy to source borrowings denominated in the respective currencies in anattempt to reduce the exposure of the net assets of such foreign operations. These borrowings are sourced inthe respective countries and are in the name of the respective legal entities.

The Group’s significant exposure to foreign currency risk was as follows:

R’000

Functional currency British Tanzanian Botswana Other

Rand exposed to: US Dollar Euro Pound Shilling Pula currencies Total

30 June 2011

Trade and other receivables 12 965 1 844 6 901 9 021 4 343 4 606 39 680

Trade and other payables (58 824) (5 010) (34) (423) (153) (6 109) (70 553)

Foreign overdrafts and

bank borrowings (3 532) – – (7 619) (1 519) 859 (11 811)

Cash and cash equivalents 5 984 588 9 142 3 981 (2 371) 8 333

Foreign exchange contracts –

net sell/(buy) (265) (25) (9) – – – (299)

Total (43 672) (2 603) 6 867 1 121 6 652 (3 015) (34 650)

R’000

Functional currency British Tanzanian Botswana Angolan Other

Rand exposed to: US Dollar Euro Pound Shilling Pula Kwanza currencies Total

30 June 2010

Trade and other

receivables 20 776 1 180 7 497 10 645 5 614 2 028 11 540 59 280

Trade and other

payables (39 918) (3 929) (61) (623) (2 931) (424) (4 233) (52 119)

Foreign overdrafts and

bank borrowings (3 602) – – (5 551) (1 621) (101) (4 655) (15 530)

Cash and cash

equivalents 35 4 1 114 8 542 1 949 3 016 13 661

Total (22 709) (2 745) 7 437 4 585 9 604 3 452 5 668 5 292



> FS81



Sensitivity analysis

A 10% weakening of the Rand against the above currencies as at 30 June would have increased/(decreased) equity and

post-tax profit by:

R’000

Functional currency British Tanzanian Botswana Angolan Other

Rand exposed to: US Dollar Euro Pound Shilling Pula Kwanza currencies Total

Impact on equity

and post-tax

profit for the year

ended 30 June 2011 (3 144) (187) 494 81 479 – (217) (2 494)

Impact on equity

and post-tax

profit for the year

ended 30 June 2010 (1 635) (198) 535 330 691 249 408 380

This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2010.

A 10 percent strengthening of the Rand against the above currencies as at 30 June would have had the equalbut opposite effect on the above currencies to the amounts shown above, on the basis that all variables remain constant.

The foreign exchange contracts in the tables above are shown at the year-end values for similar contractsmaturing at the same date.

An analysis of the Group’s foreign exchange contracts can be found in note 24.

Cash flow and fair value 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’s borrowings are denominated mainly in Rand.

The Group is exposed to interest rate risk as it borrows and places funds at both fixed and floating interest

rates. The risk is managed by maintaining an appropriate mix between fixed and floating rate borrowings and

placings within market expectations.

The Group also enters into floating-to-fixed interest rate swaps to manage the fair value interest rate risk arising

where it has borrowed at fixed rates.

Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates.

Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals (primarily

quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated by reference

to the agreed notional amounts.

The effective interest rates on bank overdrafts are disclosed in note 18. Interest rates on other borrowings are

disclosed in note 23.



FS82 <



The table below analyses the Group’s sensitivity to interest rate movements:

Group

2011 2010

R’000 R’000

At 30 June

Total borrowings 517 048 484 297

Less: Fixed rate borrowings (16 961) (11 494)

Less: Non-interest-bearing borrowings and acquisition vendors (25 328) (20 830)

Less: Cash and cash equivalents (150 903) (198 980)

Net variable rate debt 323 856 252 993

Interest rate swaps 6 990 6 526

Net variable rate exposure 330 846 259 519

Interest rate change (2%) 6 617 5 190

Potential impact on earnings (after tax) 4 764 3 737

For further details on borrowing exposures and related maturity dates refer to note 23.

Price risk

The Group is not exposed to equity securities price risk as the Group does not have investments classified on

the consolidated Statement of Financial Position either as available-for-sale or at fair value through profit and

loss.

Credit risk management

Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks andfinancial institutions and outstanding receivables. The granting of credit is controlled by a formal applicationprocess. If wholesale 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 financialposition, past experience and other factors. Individual risk limits are set based on internal or external ratings inaccordance with limits set by the Board. Ongoing credit evaluations are performed on the financial position ofcustomers, taking into account its financial position, past experience and other factors.

It is the Group’s policy to limit derivative counterparties and cash transactions to high credit-quality financialinstitutions.

Potential concentrations of credit risk consist mainly within trade receivables.

Trade receivables are presented net of the provision for doubtful debt.

Trade and other receivables are covered by credit insurance according to Group policy and special risk exposures.



> FS83



Credit quality of trade receivables can be analysed as follows:

Group

2011 2010R’000 R’000

Group 1 36 954 36 723Group 2 568 769 520 249Group 3 29 354 53 986 Group 4 24 647 –

Total 659 724 610 958

Group 1 – new customers (less than six months).

Group 2 – existing customers (more than six months) with no defaults (no bad

debt write-offs/hand-overs) in the past.

Group 3 – existing customers (more than six months) with some defaults in the past.

Group 4 – customers with defaults, no trading and hand over. This category of trade

receivables relates mainly to contractors and sub-contractors exposed to

government and parastatal bodies. Appropriate security policies are in place

to limit risks in this category.

The following balances were held with major banks of high quality located in South Africa 150 903 198 980

Management does not expect any losses from non-performance by these counterparties.

Liquidity risk management

Prudent liquidity management implies maintaining sufficient cash and availability of funding through an adequateamount of committed credit facilities.

The Group manages liquidity risk through the compilation and monitoring of cash flow forecasts, as well asensuring that adequate borrowing facilities are maintained. Borrowing powers are disclosed under note 23.Repayments of long-term borrowings are structured so as to match the expected cash flows from the operations to which they relate.

The Group utilises the credit facilities of various banking institutions and has been able to operate within thesefacilities. This trend is expected to continue into the foreseeable future to fund growth in the Group (also refernote 23). Also refer to the covenant section of Borrowings – note 23 on page FS61.



FS84 <



The table below analyses the Group’s financial liabilities that will be expected to be settled on a net basis intorelevant maturity groupings based on the remaining period at the reporting date to the contractual maturitydate. The amounts disclosed in the table are the contractual undiscounted cash flows.

Gross Less BetweenCarrying contractual than two and Overamount cash flows one year five years five years

R’000 R’000 R’000 R’000 R’000

At 30 June 2011

Overdraft 185 429 185 429 185 429 – –Borrowings 331 633 394 129 344 328 48 813 988Trade and other payables* 656 307 656 307 656 307 – –Interest rate swap 6 990 6 990 – 6 990 –

Total 1 180 359 1 242 855 1 186 064 55 803 988

At 30 June 2010

Overdraft 159 078 159 078 159 078 – –Borrowings 325 219 404 935 81 206 308 762 14 967Trade and other payables* 537 918 537 918 537 918 – –Interest rate swap 6 526 6 526 – 6 526 –

Total 1 028 741 1 108 457 778 202 315 288 14 967

* Excludes post-retirement medical aid, deferred profit and accrued expenses.

An analysis of derivative financial instruments which will be settled on a gross basis follows in note 24.

Fair value estimation

The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates to terminate the contracts at the Statement of Financial Position date.

The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows.

The nominal value less impairment provision of trade receivables and payables are assumed to approximatetheir fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the futurecontractual cash flows at the current market interest rate that is available to the Group for similar financialinstruments.

Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid toshareholders, return capital to shareholders and issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio iscalculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current andnon-current borrowings as shown in the consolidated Statement of Financial Position), less cash and cashequivalents. Total capital is calculated as ‘equity’ shown in the consolidated Statement of Financial Position.



> FS85




Group Company

2011 2010 2011 2010R’000 R’000 R’000 R’000


It is DAWN’s intention to maintain the gearing ratio below 50%.

The gearing ratio at 30 June was as follows:

Total borrowings 517 048 484 297 – –Less: Cash and cash equivalents (150 903) (198 980) – –Less: Non-interest-bearing debt (10 356) (20 830) – –Less: Directors and family member loans – (5 198) – –

Net debt 355 789 259 289 – –Total equity 1 174 930 1 215 960 481 362 481 362

Total capital 1 530 733 1 475 249 481 362 481 362

Gearing ratio (%) 30 21

Group

2011 2010R’000 R’000

41. RELATED PARTIESThe Group entered into transactions and has balances with related parties as listed below. These include associates, joint ventures, entities under common control and directors. Transactions that are eliminated are not included. Transactions with related parties are effected on a commercial basis and related party debts are repayable on a commercial basis.

A listing of the Group’s principal subsidiaries, joint ventures and associates is set out on pages FS92 to FS94 of the annual financial statements. Fortransactions with directors refer to note 42 (Directors’ remuneration). Results of joint ventures are disclosed on page FS94.

The following transactions were carried out with related parties:

Sales of goods and services

Subsidiary held for sale as at 30 June 2011/joint venture as at 30 June 2010AST Group 15 578 10 307

Joint ventureDPI Aqualia Proprietary Limited 51 –

15 629 10 307

AssociatesFibrex S.A.R.L. 3 130 433Sangio Pipe Proprietary Limited 1 179 –Saffer-Union (West Africa) Limited 59 535

4 368 968

Total sales of goods and services 19 997 11 275

FS86 <


Group

2011 2010R’000 R’000

41. RELATED PARTIES continued

Purchases of goods

AssociatesSangio Pipe Proprietary Limited 62 161 56 629Heunis Steel Proprietary Limited 2 574 10

Total purchases of goods 64 735 56 639

Commission paid

Braveheart Financial Services Proprietary Limited 1 170 1 080

Total commission paid 1 170 1 080

Commission received

Saffer International commission received from AST 1 046 833

Total commission received 1 046 833

Interest received

AssociatesHeunis Steel Proprietary Limited 2 276 2 493Sangio Pipe Proprietary Limited 903 425

3 179 2 918

OtherDAWN Share Trust 198 132

198 132

Total interest received 3 377 3 050

Year-end balances arising from sales/purchases of goods/services

Trade and other receivables

Subsidiary held for sale as at 30 June 2011/joint venture as at 30 June 2010AST Group 26 091 11 092

Joint ventureDPI Group 122 718

26 213 11 810

AssociatesFibrex S.A.R.L. 1 310 213Saffer Union (West Africa) Limited – 1 497Sangio Pipe Proprietary Limited 194 –Heunis Steel Proprietary Limited 46 7

1 550 1 717

OtherBraveheart Financial Services Proprietary Limited 4 155 –

4 155 –

Total trade and other receivables 31 918 13 527



> FS87


Group

2011 2010R’000 R’000


Loans to other related parties and non-controlling shareholders

AssociatesSangio Pipe Proprietary Limited 7 445 7 250 Saffer Union (West Africa) Limited – 4 071Heunis Steel Proprietary Limited 369 409Fibrex S.A.R.L. 343 677Electroline Proprietary Limited – 8 425

Subsidiary held for sale as at 30 June 2011/joint venture as at 30 June 2010Africa Swiss Trading Proprietary Limited # 3 755 18 163

Joint venturesDPI Aqualia Proprietary Limited # 845 773

OtherDAWN Share Trust – unrestricted share scheme funding * 2 919 2 723 Braveheart Financial Services Proprietary Limited 349 –

Total loans to other related parties and non-controlling shareholders 16 025 42 491

# Refer to Trade and Other Receivables – note 17.* Refer Directors’ Emoluments – note 42.

Trade and other payables

Subsidiary held for saleAST Group 83 –

83 –

AssociatesSangio Pipe Proprietary Limited 25 924 10 919Fibrex S.A.R.L. 806 1 129Apex Valves (South Africa) Proprietary Limited 2 990 –

29 720 12 048

Total trade and other payables 29 803 12 048

Loans from other related parties, associate and non-controllingshareholdersDPI Aqualia Proprietary Limited 835 –Franke Holding AG 24 250 * 13 515DPI Group non-controlling shareholders – 2 674Wholesale Housing Supplies (East London) non-controlling shareholders – 1 560AST Group non-controlling shareholders – 166

Total loans from other related parties and non-controlling shareholders 25 085 17 915

* Amount due for acquisition from AST joint venture partner.

Loans from other related parties and non-controlling shareholders are unsecured and have no specific terms of repayment.

Year-end balances arising from financing subsidiaries

Loans receivableLoans receivable by Distribution and Warehousing

Network Limited from:Wholesale Housing Supplies Proprietary Limited 431 045 444 698



FS88 <


Group

2011 2010R’000 R’000


Loans from related parties

Loans from directors and key management of the Group (and their families):

Beginning of the year 5 189 6 339Loans advanced from directors during the year 5 923 18 505Loan repayments to directors (7 009) (20 247)Interest paid 373 592

End of the year 4 476 5 189

Loans from directors and family members are unsecured and have no specific terms of repayment, bearinginterest at 7% (2010: 8%). The loans are payable on demand. As a result, the loans are recorded at their nominal value (refer note 23).

42. DIRECTORS’ EMOLUMENTSDirectors’ emoluments for the year ended 30 June 2011 are outlined as follows:

Committees

Remune- Ethics

Board Audit ration and and

member and Nomi- Transfor-

fees Advisory Risk nation mation Total

R’000 R’000 R’000 R’000 R’000 R’000

2011

OS Arbee 23 – 42 # 36 – 101

LM Alberts 182 # 85 61 61 # – 389

RL Hiemstra 91 – – – – 91

VJ Mokoena *3 *5 70 – – – 24 # 94

SD Mthembi-Mahanyele 90 – – – – 90

June 2011 456 85 103 97 24 765

2010

OS Arbee 83 – 39 33 – 155

LM Alberts 165 # 77 55 55 # – 352

AS Boynton-Lee *1 42 – – – – 42

RL Hiemstra 83 – – – – 83

AN Kendal *2 42 – – – – 42

VJ Mokoena 83 – – – 30 113

June 2010 498 77 94 88 30 787

# Chairman.



*3 Resigned 14 January 2011.

*4 Appointed 1 May 2010.





> FS89


42. DIRECTORS’ EMOLUMENTS continued

Retire- Unre-

ment and stricted

medical Direc- share

contri- tors’ Share options scheme

Salary Bonus bution fees Total SAR 1* LTIP2 DBP3 funding

R’000 R’000 R’000 R’000 R’000 ’000 ’000 ’000 R’000

Executive

directors

2011

JA Beukes 1 806 150 342 – 2 298 160 286 18 –

JAI Ferreira 1 241 360 176 – 1 777 160 1 074 22 1 793

RD Roos 1 130 82 171 – 1 383 160 959 3 1 126

DA Tod 3 090 1 122 577 – 4 789 294 2 044 178 –

June 2011 7 267 1 714 1 266 – 10 247 774 4 363 221 2 919

2010

JA Beukes 1 796 – 336 – 2 132 238 177 18 –

JAI Ferreira 1 075 – 159 – 1 234 238 164 22 1 678

GL Geldenhuis 420 – 79 – 499 – – – –

RD Roos 890 – 139 – 1 029 238 139 3 1 046

DA Tod 2 798 – 526 – 3 324 376 300 178 –

June 2010 6 979 – 1 239 – 8 218 1 090 780 221 2 724

Prescribed

officers

2011

CJ Bishop 1 795 – 218 – 2 013 160 1 360 – –

GD Kotzee 1 636 136 297 – 2 069 188 632 – –

R Straussner 1 582 800 135 – 2 517 113 128 – –

PJ van Niekerk 1 267 420 181 – 1 868 89 470 – –

RP Haynes 765 – 155 – 920 22 – – –

M Coetzee 1 354 – 200 – 1 554 71 50 – –

June 2011 8 399 1 356 1 186 – 10 941 643 2 640 – –

2010

CJ Bishop # 594 – 73 – 667 – – – –

GD Kotzee 1 459 – 288 – 1 747 238 102 – –

R Straussner 1 428 – 122 – 1 550 119 51 – –

PJ van Niekerk 1 149 – 172 – 1 321 47 38 – –

M Coetzee 1 260 200 191 – 1 651 – 25 – –

June 2010 5 890 200 846 – 6 936 404 216 – –

# Started on 1 March 2010.

* Reduction in share incentives as vesting conditions not met.1 Share Appreciation Rights.2 Long-Term Incentive Plans.3 Deferred Bonus Plans.



FS90 <


42. DIRECTORS’ EMOLUMENTS continued

A prescribed officer, in terms of the Companies Act no 71 of 2008, as amended, means the holder of an office,within a company. DAWN has identified its prescribed officers as the members of the Executive Committee andcluster heads.

All executive directors are eligible for an annual performance-related bonus payment linked to appropriateGroup and business sector targets. The structure of the individual annual bonus plans and awards are decidedby the Group Remuneration Committee.

The directors were issued shares under a deferred delivery scheme, for future delivery and payment in prioryears. Formal contracts have been concluded with the participants in terms of the rules of the DAWN ShareTrust.

43. EVENTS AFTER THE REPORTING PERIOD

Subsequent to the end of the reporting period, the Group has entered into negotiations with its lenders to

restructure the term debt on terms more appropriate to the economic cycle in which the Group currently

operates. Furthermore, on 8 July 2011 DAWN disposed of its 49% stake in AST to Kwikot Proprietary Limited,

for a purchase consideration of R24,5 million (subject to certain guarantees and warranties) which was settled

in cash. Management is not aware of any other material events that occurred subsequent to the end of the

reporting period. There has been no material change in the Group’s contingent liabilities since the year-end.



> FS91


Interest in subsidiaries, associate companies and joint venturesfor the year ended 30 June

Percentage Issuedinterest share Class

capital ofActivities 2011 2010 (Rands) share Country

1. Subsidiaries in which Distribution and Warehousing

Network Limited has a direct interest:

Almar Aluminium Proprietary Limited D 100 100 1 461 696 Ord RSAAlmar Marketing Proprietary Limited D 100 100 100 Ord RSAAvrutec Proprietary Limited D 100 100 1 Ord RSACity Wires Proprietary Limited D 100 100 100 Ord RSACobra Watertech Proprietary Limited C 99 95 1 000 Ord RSACourier Internet Exchange Proprietary Limited D 100 100 100 Ord RSADAWN Consolidated Holdings Proprietary Limited H 100 100 120 Ord RSADAWN Management Services Proprietary Limited D 100 100 100 Ord RSADelivery Deluxe Proprietary Limited D 100 100 100 000 Ord RSAElectroline Proprietary Limited B 90 – 100 Ord RSAGeyser Technology Proprietary Limited D 100 100 100 Ord RSAInex Trading Proprietary Limited D 100 100 68 000 Ord RSAMonocraft Proprietary Limited D 100 100 400 Ord RSARoyal Express Services Proprietary Limited D 100 100 2 Ord RSASkillco Proprietary Limited D 100 100 100 Ord RSAStylus Industries Proprietary Limited D 100 100 300 000 Ord RSAVaal Mac Holdings Proprietary Limited D 100 100 10 000 Ord RSAWholesale Housing Supplies Proprietary Limited B 100 100 1 000 Ord RSA

2. Subsidiaries, associates and joint ventures in which

Distribution and Warehousing Network Limited has

an indirect interest:

SubsidiariesAlmar Extrusions Proprietary Limited D 100 100 1 000 Ord A RSABathing Paradise Proprietary Limited D 100 100 100 Ord RSACaslead Properties Proprietary Limited D 94 94 100 Ord RSACity Non-Ferrous Metals Proprietary Limited D 100 100 2 000 Ord RSACobra Brands Proprietary Limited D 100 100 37 609 Ord A RSA

– 100 37 609 Ord B RSA– 100 24 782 Ord C RSA

DAWN Consolidated Properties Proprietary Limited H 100 100 100 Ord RSADAWN Cargo Proprietary Limited D 100 100 100 Ord RSADAWN Logistics Proprietary Limited D 100 100 1 000 Ord RSADAWN Human Resource Solutions Proprietary Limited A 52 51 1 000 Ord RSADAWN 101 Investments Proprietary Limited D 100 100 170 000 Ord RSADAWN Kitchen Fittings Proprietary Limited (formerly

Amalgamated Fasteners and Fittings Proprietary Limited) B 95 100 100 Ord RSADPI Fike Mining Supplies Proprietary Limited D 100 – 1 000 Ord RSADPI Holdings Proprietary Limited H 100 100 1 000 Ord A RSA

100 100 1 000 Ord B RSADPI International Limited H 100 100 16 Ord MauritiusDPI Kwanzi Proprietary Limited D 100 100 100 Ord RSADPI Motown Proprietary Limited D 100 100 1 000 Ord RSADPI Phumela Trading Proprietary Limited D 100 100 100 Ord RSADPI Plastics Proprietary Limited C 100 100 2 000 Ord RSAFranmore Investments Proprietary Limited A 100 – 100 Ord NamibiaIncledon Proprietary Limited D 100 100 46 Ord RSAIncledon DPI Proprietary Limited B 100 100 1 000 Ord RSAIncledon DPI Proprietary Limited A 75 75 100 Ord Botswana

FS92 <


Interest in subsidiaries, associate companies and joint venturesfor the year ended 30 June

Percentage Issuedinterest share Class

capital ofActivities 2011 2010 (Rands) share Country

2. Subsidiaries, associates and joint ventures in which

Distribution and Warehousing Network Limited has

an indirect interest: continued

Insyst Cape Town Proprietary Limited D 100 100 100 Ord RSAInsyst Durban Proprietary Limited D 100 100 100 Ord RSAInsyst Johannesburg Proprietary Limited D 100 100 100 Ord RSAIsca (Proprietary Limited C 100 100 100 Ord RSALa-Co Africa Marketing Proprietary Limited B 51 51 1 000 Ord RSALexshell 63 General Trading Proprietary Limited D 100 100 100 Ord RSALibra Bathroomware SA Proprietary Limited C 100 100 600 Ord RSANamibia Plastic Converters Proprietary Limited C 100 100 201 Ord NamibiaPipex Plastics Botswana Proprietary Limited C 100 100 742 391 Ord BotswanaRomson Properties Proprietary Limited D 100 100 100 Ord RSASaffer Angola S.A.R.L. D 50 50 115 278 Ord AngolaSaffer International Proprietary Limited D 100 100 1 000 Ord RSASpringset (Natal) Proprietary Limited D 100 100 20 000 Ord RSASpringset Alloys Proprietary Limited D 100 100 100 Ord RSAStability Hardware Wholesale Proprietary Limited D 100 100 10 200 Ord RSAVaal Sanitaryware Proprietary Limited C 100 100 100 Ord RSAVeloset Proprietary Limited D 100 100 100 Ord RSAWholesale Housing Supplies (East London) Proprietary Limited D 100 76 100 Ord RSA

Joint venturesAfrica Swiss Trading Proprietary Limited H 51 51 500 Ord RSAShares held by African Swiss Trading Proprietary Limited in:

Africa Swiss Trading Limitada B 100 100 9 000 Ord AngolaAfrica Swiss Trading Limitada B 90 90 11 906 Ord MozambiqueAfrica Swiss Trading Limited (Zambia) B 100 100 8 440 Ord ZambiaAfrica Swiss Trading Limited (Mauritius) B 90 90 2 850 Ord MauritiusASTIZ (Private) Limited (Zimbabwe) B 55 55 1 530 Ord Zimbabwe

Aqualia DPI Proprietary Limited C 50 50 251 366 Ord MauritiusDPI Fike Mining Supplies Proprietary Limited B – 56 1 000 Ord RSADPI Ichweba Proprietary Limited B 33 50 100 Ord RSADPI Simba Limited C 50 50 5 600 000 Ord Tanzania

AssociatesElectroline Proprietary Limited B – 49 – Ord RSAHeunis Steel Proprietary Limited B 49 49 100 Ord RSASaffer Union (West Africa) Limited B 50 50 946 522 Ord NigeriaSangio Pipe Proprietary Limited C 49 49 100 Ord RSAApex Valves South Africa Proprietary Limited C 49 – 100 Ord RSAFibrex – Fabrica deArt.De.F.b. Sinteticas, S.A.R.L. H 33 33 174 Ord Angola

Activities

A – Other; B – Wholesale trading; C – Manufacturing; D – Dormant; H – Investment holding company; Z – Distribution

Percentage interest reflects voting power.

* The DAWN Group has effective control of the board of directors of Saffer Angola S.A.R.L. by means of an additional deciding vote.

> FS93


Interest in joint venturesas at 30 June

Group

2011 2010R’000 R’000

Aggregate financial information

STATEMENT OF FINANCIAL POSITION

Group’s proportionate share of assets and liabilities:

AssetsNon-current assets 6 385 17 385Current assets 36 655 64 836

43 040 82 221

Equity and liabilitiesShareholders’ interest 12 231 5 747Non-current liabilities 2 241 16 288Current liabilities 28 568 60 186

43 040 82 221

INCOME STATEMENT

Group’s proportionate share of income and expenditure:

Revenue 112 612 144 688

Profit before income tax (10 175) 16 306Income tax (2 104) (2 250)

(Loss)/profit for the year (12 279) 14 056

FS94 <


SI02 <


Listed below is an analysis of holdings extracted from the register of ordinary shareholders at 30 June 2011.

Number of % Number of %Portfolio size shareholders of total shares held of total

1 – 1 000 585 31,85 245 830 0,101 001 – 10 000 796 43,33 2 849 721 1,19

10 001 – 100 000 310 16,88 10 192 398 4,24100 001 – 1 000 000 108 5,88 36 464 428 15,18

1 000 001 and over 38 2,06 190 490 527 79,29

Total 1 837 100,00 240 242 904 100,00

DISTRIBUTION OF SHAREHOLDERSBanks 22 1,20 4 928 018 2,05Close corporations 26 1,42 449 340 0,19Endowment funds 13 0,71 614 229 0,26Individuals 1 395 75,94 17 830 613 7,42Insurance companies 20 1,09 7 431 317 3,09Investment companies 11 0,60 733 025 0,31Medical schemes 8 0,44 732 359 0,30Mutual funds 77 4,19 51 550 126 21,46Nominees and trusts 141 7,68 19 491 535 8,11Other corporations 17 0,93 16 148 794 6,72Private companies 32 1,74 92 229 119 38,39Public companies 2 0,11 867 800 0,36Retirement funds 73 3,95 27 236 629 11,34

Total 1 837 100,00 240 242 904 100,00

SHAREHOLDERS’ SPREAD ANALYSISNon-public shareholders 9 0,49 111 359 169 46,36

Directors and associates 7 0,38 16 614 220 6,92Holding 10% or more 2 0,11 94 744 949 39,44

Public shareholders 1 828 99,51 128 883 735 53,64

Total 1 837 100,00 240 242 904 100,00

Disclosures in accordance with section 56(7)(b) of the Companies Act and paragraph 8.63 of the JSE LimitedListings Requirements:

BENEFICIAL SHAREHOLDERS WITH A HOLDING GREATER THAN 3% OF ISSUED SHARES

Number of %shares held of total

Dream World Investments 239 Proprietary Limited 65 614 483 27,31Coronation Fund Managers 29 130 466 12,13Cityhold Staff Trading Account 15 091 308 6,28Boles, CA 13 250 000 5,52Government Employees Pension Fund 10 820 415 4,50Monyetla Marketing Proprietary Limited 10 416 666 4,34Old Mutual 9 181 069 3,82Wholesale Housing Supplies Proprietary Limited 8 718 012 3,22

Total 162 222 419 67,52

Analysis of shareholdersas at 30 June 2011

Shareholders’ diary

JSE Limited performancefor the year ended 30 June

2011 2010

Market price per shareClosing at year-end (cents) 639 770Highest (cents) 998 890Lowest (cents) 510 575

Market capitalisation (R’000) 1 535 152 1 849 870 Number of transactions recorded 3 306 6 410 Value of shares traded (R’000) 214 376 491 713 Volume of shares traded (’000) 28 538 65 028 Volume traded to number in issue (%) 11,87 27,07

Financial year-end 30 June

2011

Six-month interim report 10 March 2011

Profit statement for the year 16 September 2011

Annual report 4 November 2011

Record date to be recorded in the register to be eligible to receive the notice of annual general meeting 11 November

Mailing of annual report and no change statement released on SENS 18 November

Last day to trade in order to be eligible to vote at the annual general meeting 2 December

Record date to be recorded in the register to be eligible to speak and vote at the annual general meeting 9 December

Lodging of proxy forms with transfer secretaries by 12:00 on 13 December

Annual general meeting at 12:00 on 15 December

> SI03


Notice of annual general meeting

DISTRIBUTION AND WAREHOUSING NETWORK LIMITED

Registration number 1984/008265/06Incorporated in the Republic of South AfricaShare code: DAW • ISIN: ZAE000018834(“DAWN” or “the Company”)

This document is important and requires your immediateattention. If you are in any doubt as to what action youshould take in respect of the resolutions contained in thisnotice, please consult your Central Securities DepositoryParticipant (“CSDP”), broker, banker, attorney, accountant or other professional adviser immediately.If you have sold or otherwise transferred all your ordinaryshares in the Company, please send this documenttogether with the accompanying form of proxy at onceto the relevant transferee or to the stockbroker, bank orother person through whom the sale or transfer waseffected, for transmission to the relevant transferee.

Until the Companies Act, No 71 of 2008, as amended

(“the Act”), came into effect on 1 May 2011, the

Memorandum of Incorporation (“MOI”) of the Company

comprised its Memorandum of Association and its

Articles of Association. On the date that the Act came

into effect, the Memorandum of Association and Articles

of Association of the Company automatically converted

into the Company’s MOI. Accordingly, for consistency of

reference in this notice of annual general meeting, the

term “MOI” or “Memorandum of Incorporation” is used

throughout to refer to the Company’s Memorandum of

Incorporation (which previously comprised the

Company’s Memorandum of Association and its Articles

of Association, as aforesaid).

All references in this notice of annual general meeting

(including all of the ordinary and special resolutions

contained herein) to the Company’s MOI refer to

provisions of that portion of the Company’s MOI that

was previously called the Company’s Articles of

Association.

Section 63(1) of the Act – Identification of meetingparticipants

Kindly note that meeting participants (including proxies)

are required to provide reasonably satisfactory

identification before being entitled to attend or participate

in a shareholders’ meeting. Forms of identification

include valid identity documents, driver’s licenses and

passports.

Notice of meeting

NOTICE IS HEREBY GIVEN THAT the 2011 annual general meeting of shareholders of Distribution andWarehousing Network Limited (“DAWN” or “theCompany”) will be held at 12:00 on Thursday, 15December 2011, at DAWN Showroom, 18 EalingCrescent, Cnr Main Road and Bryanston Drive,Bryanston for the following purposes to consider and, ifdeemed fit, to pass with or without modifications, the following resolutions:

Special resolution number 1Issue a general authority to the Company to repurchase its own shares

“RESOLVED THAT the Company, or a subsidiary, be andhereby is authorised, by way of general authority as contemplated in section 48 of the Companies Act no 71of 2008, as amended, (“Act”) to acquire from time totime any of the issued ordinary shares of the Company,upon such terms and conditions and in such amountsas the directors of the Company may from time to timedetermine, but subject to the Memorandum ofIncorporation of the Company, the provisions of the Actand the Listings Requirements of the JSE Limited(“JSE”).

It is recorded that the Listings Requirements of the JSErequire, inter alia, that the Company or a subsidiary maymake a general acquisition of shares issued by theCompany only if:

• the repurchase of the ordinary shares is effectedthrough the order book operated by the JSE tradingsystem and done without any prior understanding orarrangement between the Company and the coun-terparty;

• at any point in time the Company may only appointone agent to effect any repurchases on its behalf;

• this general authority shall only be valid until the nextannual general meeting of the Company, providedthat it shall not extend beyond 15 (fifteen) monthsfrom the date of passing of the general authority torepurchase shares;

• the maximum price at which the shares may beacquired will be 10% (ten percent) above the weighted average market value at which such ordinary shares are traded on the JSE, for such

SI04 <


Notice of annual general meeting continued

ordinary shares for the 5 (five) business days immediately preceding the date on which the trans-action is effected;

• any such acquisition shall not, in any one financialyear, exceed 10% (ten percent) of the Company’sissued ordinary shares or 240 million (two hundredand forty million) shares as at the passing of the general authority;

• the Company or its subsidiaries may not repurchaseordinary shares during a prohibited period as definedin paragraph 3.67 of the JSE Listings Requirements;

• the repurchase may only be effected, if the shareholder spread requirements as set out in paragraphs 3.37 to 3.41 of the JSE ListingsRequirements are still met after such repurchase;

• should derivatives be used, such authority is limitedto paragraphs 5.72(c) and (d) and 5.84(a) of the JSEListings Requirements;

• a statement will be issued by the directors, that afterconsidering the maximum effect of such repurchase,for a period of at least 12 (twelve) months after thedate of the notice of the annual general meeting:

– the Company and the DAWN Group will be ableto repay its debts in the ordinary course of business;

– the assets of the Company and the DAWNGroup fairly valued according to InternationalFinancial Reporting Standards and on a basisconsistent with the last financial year of theCompany ended 30 June 2011, exceed its liabilities;

– the Company and the DAWN Group have adequate share capital and reserves;

– the Company and the DAWN Group have sufficient working capital for their requirements;

• the directors undertake not to effect a repurchaseunless they are satisfied that the working capitalrequirements of the Company are adequate for itsrequirements; and

• when the Company has cumulatively repurchased3% (three percent) of the initial number of the relevant class of securities, and for each 3% (threepercent) in aggregate of the initial number of thatclass acquired thereafter, an announcement must be

made. Such announcement must be made as soonas possible and in any event by not later than 08:30on the second business day following the day onwhich the relevant threshold is reached or exceeded.

The directors of the Company do not have any specific

intentions for utilising this general authority at the date of

this annual general meeting.”

Reason for and effect of the special resolution

The reason for and effect of this special resolution is to

obtain an authority for, and to authorise the Company

and its subsidiaries, by way of a general authority to

acquire the Company’s issued ordinary shares. It is the

intention of the directors of the Company to use such

authority should prevailing circumstances, such as

market conditions, in their opinion warrant it.

In order for this special resolution number 1 to be

adopted, the support of at least 75% (seventy-five per

cent) of the total number of votes, which the

shareholders present or represented by proxy at this

meeting are entitled to cast, is required.

Additional disclosure requirements required in terms of

paragraph 11.26 of the JSE Listings Requirements.

Material changes

No material changes have occurred since the end of thelast financial period, being 30 June 2011, and the dateof this notice of annual general meeting.

Directors’ responsibility statement

The directors of Distribution and Warehousing Network

Limited as set out on pages CG04 to CG06 of the

Corporate Governance section:

• have considered all the statements of fact and opinion in the annual report to which this notice isattached;

• accept, individually and collectively, full responsibilityfor such statements; and

• declare that, to the best of their knowledge andbelief, such statements are correct and no materialfacts have been omitted, the omission of whichwould make any such statements false or misleadingand that they have made all reasonable enquiries toascertain such facts and that this notice contains allinformation required by law and the JSE ListingsRequirements.

> SI05



Litigation statement

Distribution and Warehousing Network Limited nor itssubsidiaries is party to any legal or arbitration proceedings (including such proceedings which arepending or (threatened) which may have or have had inthe previous 12 (twelve) months a material effect on theGroup’s financial position.

Other disclosure in terms of paragraph 11.26 of the

JSE Listings Requirements

The JSE Listings Requirements require the following disclosures, which are contained in the annual report.

Disclosure references in the annual report

Requirements Reference

Directors Pages CG04 to CG06Major shareholders Page SI02Directors’ interests in securities Page FS07Share capital of the Company Pages FS55 and FS56,

Note 19

The Company may not enter the market to proceed withthe repurchase until DAWN’s sponsor, Deloitte & ToucheSponsor Services (Proprietary) Limited, has confirmedthe adequacy of DAWN’s working capital for the purposes of undertaking a repurchase of shares, in writing to the JSE.

Special resolution number 2Approval of non-executive directors’ fees

“RESOLVED THAT the remuneration payable to the non-executive directors of the Company for the 2012financial year be as follows:

R’000

Chairman 200 000Non-executive directors 100 000Chairman of Audit Committee and

Chairman of Risk Committee 100 000Chairman of Remuneration Committee

and Chairman of Nomination Committee 65 000Chairman of Ethics and Transformation

Committee 40 000Committee members – Audit; Risk 60 000

– Remuneration;Nomination 40 000


Special resolution number 2 is required in terms of section 66 of the Companies Act to authorise theCompany to pay remuneration to non-executive directors of the Company in respect of their services asdirectors.

Furthermore, in terms of the JSE Listings Requirementsand King III, remuneration payable to non-executivedirectors should be approved by shareholders inadvance or within the previous two years.

In order for this special resolution number 2 to be adopted, the support of at least 75% (seventy-five percent) of the total number of votes, which the shareholders present or represented by proxy at thismeeting are entitled to cast, is required.

Special resolution number 3Approval of directors’ emoluments

“RESOLVED that the directors’ emoluments for the year

ended 30 June 2011, which are set out in note 42 on

page FS90, be approved.”

Reason for and effect of this special resolution

The reason for special resolution number 3 is to approve

the remuneration paid to the directors of the Company

for their services as directors as required by section

66(9) of the Act.

In order for this special resolution number 3 to be

adopted, the support of at least 75% (seventy-five per

cent) of the total number of votes, which the

shareholders present or represented by proxy at this

meeting are entitled to cast, is required.

Special resolution number 4Authority to provide financial assistance to anycompany or corporation which is related or inter-related to the Company

“RESOLVED that, in accordance with section 45 of the

Act, the provision of any financial assistance by the

Company to any company or corporation which is

related or inter-related to the Company (as defined in the

Act), on the terms and conditions which the directors of

DAWN may determine, be and is hereby approved.”

SI06 <




In terms of the Act, the Board may authorise theCompany to provide any financial assistance to relatedor inter-related companies which are Group companies,including subsidiary companies of the Company, where itbelieves it would be beneficial to the Company to do soin future, subject to certain requirements set out in theAct, including the Company meeting solvency and liquidity tests.

This general authority is necessary for the Company tocontinue making loans to subsidiaries as well as grantingletters of support and guarantees in appropriate circumstances. A general authorisation from shareholders avoids the need to refer each instance to shareholders for approval with the resulting time delaysand expense. If approved, this general authority willexpire at the end of two years. It is, however, the intention to renew the authority annually at the annualgeneral meeting.

Notifications

Shareholders are hereby notified in terms of section45(5) of the Companies Act that the Board has passedthe same resolution to take effect on the passing of this special resolution by shareholders.

Shareholders are also advised that the Board is satisfiedthat after providing the financial assistance, theCompany will satisfy the solvency and liquidity tests andthat the terms under which the financial assistance isproposed to be given are fair and reasonable to theCompany.

In terms of the Act, 75% of the votes cast by shareholders present or represented by proxy at themeeting must be cast in favour of this resolution for it tobe adopted.

Ordinary resolution number 1Adopt the annual financial statements for the yearended 30 June 2011

“To receive, consider and adopt the annual financialstatements for the year ended 30 June 2011 togetherwith the reports of the auditors and directors.”

In terms of section 62(3)(c) of the Act, the percentage ofvoting rights that will be required for this ordinary resolution to be adopted is an amount greater than 50%of the voting rights exercised on the resolution.

Ordinary resolution number 2Ratification of appointment of directors

Messrs VJ Mokoena and M Akoojee have been appointed by the Board of directors of the Company tothe Board and are nominated for election by shareholders as directors of the Company.

Accordingly, shareholders are requested to consider and, if deemed fit, to ratify the appointment of Messrs VJ Mokoena and M Akoojee as directors of theCompany by way of passing the separate ordinary resolutions set out below.

Ordinary resolution number 2.1

“To ratify the appointment of VJ Mokoena as an independent non-executive director of the Company.”

VJ Mokoena (51)

BA (UJ); Post-Graduate Diploma in Management (Wits);

Executive Development Programme (New York)

Other directorships: Non-executive director of EqstraHoldings Limited; trustee of Imperial and UkhambaCommunity Development Trust; Founder and Chairmanof Ninathi Investment Holdings (Pty) Limited

Re-appointed to the DAWN Board: 22 June 2011

Veli Mokoena was appointed to the Imperial board on 17 March 2004 and with the unbundling of Eqstra fromthe Imperial Group in April 2008, resigned the Imperialboard and joined the Eqstra board. Veli was the chiefexecutive officer of Ukhamba Holdings, the Group’s BEEpartner, and served on the DAWN Board from December2004 until February 2011. He resigned in February 2011and formed Ninathi Investment Holdings (Pty) Limited.Veli was re-appointed to the DAWN Board in June 2011.


“To ratify the appointment of M Akoojee as a non-executive director of the Company.”

M Akoojee (32)BAcc (hons) Acc; CA(SA); CFA

Appointed to the DAWN Board: 23 June 2011

Mohammed is a member of the Imperial HoldingsExecutive Committee where he is responsible forinvestor relations and is also involved in the strategicdevelopment of the Imperial Group. He joined the

> SI07



Imperial Group in 2009. He previously worked atNedbank Securities as an investment analyst and atInvestec in the corporate finance division.

In terms of section 62(3)(c) of the Act, the percentage ofvoting rights that will be required for these ordinary resolutions to be adopted is an amount greater than50% of the voting rights exercised on the resolution.

Ordinary resolution number 3Re-appointment of directors

“Messrs RL Hiemstra and JA Beukes retire by rotationand, being eligible, offer themselves for re-election asdirectors of the Company.

Accordingly, shareholders are requested to consider and,if deemed fit, to re-elect Messrs RL Hiemstra and JA Beukes as directors of the Company by way of passing the separate ordinary resolutions set out below.


“To confirm the re-appointment of Mr RL Hiemstra as anindependent non-executive director of the Company.”

RL Hiemstra (55)

CA(SA)

Other directorships: Executive Director of ImperialHoldings Limited and various operating companies in theImperial Group as well as Kagiso Media Limited anddirector of Ukhamba Holdings Proprietary Limited

Appointed to the DAWN Board: 30 June 1998

Tak Hiemstra is the Executive Director: StrategicPlanning of Imperial Holdings Limited. He was formerlythe Chief Executive Officer of Imperial Bank. He has twenty years’ experience in corporate finance affairs andcontributes to the Board of DAWN through corporatestrategic planning. Tak was appointed as Chairman ofDAWN on 1 July 2011.


“To confirm the re-appointment of Mr JA Beukes as anexecutive director of the Company.”

JA Beukes (43)

BCom (Hons) Acc

Appointed to the DAWN Board: 20 August 1998

After completing his articles, Jan joined the Group asfinancial manager in 1994 and was appointed Group

financial director in 1998. In 2006 he assumed the position as the Chief Executive of the Trading divisionand was appointed Chief Operating Officer ofDistribution and Warehousing Network Limited in 2008.He was appointed as Group Risk and Internal AuditOfficer in 2010.


Ordinary resolution number 4Re-appointment of auditors and appointment ofdesignated audit partner for the year ending 30 June 2012

“To confirm the reappointment of PricewaterhouseCoopersInc., Registered Auditors, upon the recommendation ofthe current Audit Committee, as independent auditors ofthe Company and to appoint I Buys as the designatedauditor for the following year.”

In terms of section 62(3)(c) of the Act, the percentage of

voting rights that will be required for these ordinary

resolutions to be adopted is an amount greater than

50% of the voting rights exercised on the resolution.

Ordinary resolution number 5Appointment of Audit Committee members for theyear ending 30 June 2012

“To elect, each by way of a separate vote, the following

non-executive directors as members of the DAWN Audit

Committee until the conclusion of the next annual

general meeting of the Company in 2012:


“To elect as member of the Audit Committee

Mr OS Arbee until the conclusion of the next annual

general meeting of the Company in 2012.”

OS Arbee (51)

BCom (Hons) Acc

Non-executive director

Appointed to the DAWN Board: 15 December 2004

Other directorships: Director of Ukhamba Holdings

Proprietary Limited, Imperial Bank Limited and Imperial

Holdings Limited

SI08 <



Osman Arbee was a senior partner at Deloitte & Touche.He is the Chief Executive Officer of the Car Rental division and Chairman of the Automotive Retail, Partsand Tourism Divisions of Imperial Holdings Limited. Hejoined Imperial on 1 September 2004.


“To elect as member of the Audit Committee Mr LM Alberts until the conclusion of the next annualgeneral meeting of the Company in 2012.”

LM Alberts (70)

BSc Eng; MBL

Independent non-executive director

Date appointed to the DAWN Board: 30 August 2001

Other membership: Member of the Engineering Council

of South Africa (ECSA)

Lou Alberts is an electrical engineer with more than forty

years’ experience in technical management as well as in

the business field, where he has held various executive

directorships. He was actively involved in the unbundling

of the Boumat group in 1999, where he was the Chief

Executive Officer, and has also served on the board and

council of SEIFSA. He currently consults to the building

industry, both locally and internationally. Lou was the

Chairman of the DAWN Group until 30 June 2011, upon

which date he resigned as Chairman, but agreed to

continue as an independent non-executive director.


“To elect as member of the Audit Committee

Mr RL Hiemstra until the conclusion of the next annual

general meeting of the Company in 2012.”

RL Hiemstra (55)

CA(SA)

Non-executive director

Date appointed to the DAWN Board: 30 June 1998

Other directorships: Executive director of Imperial

Holdings Limited and various operating companies in the

Imperial Group as well as Kagiso Media Limited and

director of Ukhamba Holdings Proprietary Limited.

Tak Hiemstra is the Executive Director: Strategic

Planning of Imperial Holdings Limited. He was formerly

the Chief Executive Officer of Imperial Bank. He has

twenty years’ experience in corporate finance affairs and

contributes to the Board of DAWN through corporate

strategic planning. Tak was appointed Chairman of

DAWN with effect from 1 July 2011.


Ordinary resolution number 6Endorsement of remuneration policy and itsimplementation

“To endorse, through a non-binding advisory vote toascertain the shareholder’s view, the Company’s remuneration policy and its implementation. A summaryof DAWN’s remuneration policy is set out in theRemuneration Report contained in the CorporateGovernance section on pages CG27 to CG30.”

Ordinary resolution number 7Approval and ratification of the proposed amendments to the provisions of the DAWNShare Appreciation Right Scheme, the DAWNLong-Term Incentive Plan and the DAWN DeferredBonus Plan in compliance with Schedule 14 ofthe JSE Listings Requirements

“RESOLVED THAT as an ordinary resolution in terms ofthe Listings Requirements of the JSE Limited, the DAWNShare Appreciation Right Scheme, the DAWN Long-Term Incentive Plan and the DAWN DeferredBonus Plan (collectively referred to as “the Plans”), asamended, and as approved by the JSE, in order toensure compliance with Schedule 14 of the JSE ListingsRequirements, be adopted by the Company.”

The principal amendments are set out in Annexure A tothis notice of annual general meeting of which this resolution forms a part and are set out on page SI13 ofthe annual report to which the notice is attached.

Reason for and effect of this ordinary resolution

In accordance with Schedule 14 of the ListingsRequirements of the JSE Limited, the amendments tothe terms of the Plans are required to be approved bythe passing of an ordinary resolution, requiring 75%majority of votes cast in favour of such resolution byequity securities holders present or represented by proxyat the annual general meeting to approve such resolution, in the determination of which, all votes

> SI09



attaching to equity securities owned or controlled bypersons who are existing participants of the Plans shallbe excluded. In compliance with Schedule 14.6 and14.7 of the Listings Requirements, a summary of theprincipal terms of the Plans, together with the notice ofthe annual general meeting and the amended andrestated terms (both in marked-up format showing theexact changes to the current terms and in clean format)will be available for inspection by shareholders duringnormal business hours at the registered office of theCompany for a period of not less than 14 (fourteen days)prior to this meeting.

Ordinary resolution number 8Granting the directors the authority to implementthe special and ordinary resolutions

“RESOLVED THAT, any director of the Company be and

is hereby authorised to do all such things, sign all such

documents and take all such actions as may be

necessary for or incidental to the implementation of the

above special and ordinary resolutions.”

In terms of section 62(3)(c) of the Act, the percentage of

voting rights that will be required for this ordinary

resolution to be adopted is an amount greater than 50%

of the voting rights exercised on the resolution.

To transact such other business as may berequired at an annual general meeting.

Record dates The posting record date, being the date that

shareholders must be recorded in the register to be

eligible to receive this notice of annual general meeting,

is Friday, 11 November 2011.

The last day to trade in order to be eligible to vote at the

annual general meeting is Friday, 2 December 2011.

The voting record date, being the date that shareholders

must be recorded in the register to be eligible to speak

and vote at the annual general meeting is Friday,

9 December 2011.

Voting and proxiesVoting

The shareholders of the Company will be entitled to

attend the general meeting and to vote on the

resolutions set out above. On a show of hands, every

DAWN shareholder who is present in person, by proxy

or represented at the general meeting shall have one

vote (irrespective of the number of shares held in the

Company), and on a poll, which any shareholder can

request, every DAWN shareholder shall have for each

share held by him/her that proportion of the total votes in

the Company which the aggregate amount of the

nominal value of that share held by him bears to the

aggregate of the nominal value of all the shares issued

by the Company.

In terms of the JSE Listings Requirements any shares

currently held by the DAWN Share Incentive Trust will not

be taken into account in determining the results of voting

on special resolution number 1.

Proxies

A DAWN shareholder entitled to attend and vote at the

annual general meeting may appoint one or more

persons as its proxy to attend, speak and vote in its

stead. A proxy need not be a shareholder of the

Company.

A form of proxy is attached for the convenience of

certificated shareholders and “own name” dematerialised

shareholders of the Company who are unable to attend

the annual general meeting, but who wish to be

represented thereat. In order to be valid, duly completed

forms of proxy must be received by the Company's

Transfer Secretaries, Computershare Investor Services

Proprietary Limited, Ground Floor, 70 Marshall Street,

Johannesburg, 2001 (PO Box 61051, Marshalltown,

2107), not later than 12:00 on Tuesday, 13 December

2011.

Section 63(1) of the Act requires that meeting

participants provide satisfactory identification.

Shareholders’ rights regarding proxies in terms of section

58 of the Act are as follows:

(1) At any time, a shareholder of a company may

appoint any individual, including an individual who is

not a shareholder of that company, as a proxy to –

(a) participate in, and speak and vote at, a

shareholders’ meeting on behalf of the

shareholder; or

(b) give or withhold written consent on behalf of theshareholder to a decision contemplated in section 60.

SI10 <



(2) A proxy appointment –

(a) must be in writing, dated and signed by theshareholder; and

(b) remains valid for –

(i) one year after the date on which it wassigned; or

(ii) any longer or shorter period expressly set outin the appointment, unless it is revoked in amanner contemplated in sub-section (4) (c),or expires earlier as contemplated in subsection (8) (d).

(3) Except to the extent that the Memorandum ofIncorporation of a company provides otherwise –

(a) a shareholder of that company may appoint twoor more persons concurrently as proxies, andmay appoint more than one proxy to exercisevoting rights attached to different securities heldby the shareholder;

(b) a proxy may delegate the proxy’s authority to acton behalf of the shareholder to another person,subject to any restriction set out in the instrument appointing the proxy; and

(c) a copy of the instrument appointing a proxy mustbe delivered to the company, or to any other person on behalf of the company, before theproxy exercises any rights of the shareholder at ashareholders meeting.

(4) Irrespective of the form of instrument used toappoint a proxy –

(a) the appointment is suspended at any time and tothe extent that the shareholder chooses to actdirectly and in person in the exercise of anyrights as a shareholder;

(b) the appointment is revocable unless the proxyappointment expressly states otherwise; and

(c) if the appointment is revocable, a shareholdermay revoke the proxy appointment by –

(i) cancelling it in writing, or making a laterinconsistent appointment of a proxy; and

(ii) delivering a copy of the revocation instrumentto the proxy, and to the company.

(5) The revocation of a proxy appointment constitutes acomplete and final cancellation of the proxy’s authority to act on behalf of the shareholder as of thelater of –

(a) the date stated in the revocation instrument, ifany; or

(b) the date on which the revocation instrument wasdelivered as required in sub-section (4)(c)(ii).

(7) A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to the extent that the instrument appointing the proxy otherwise provides.

Any shareholder of the Company who completes andlodges a form of proxy will nevertheless be entitled toattend and vote in person at the general meeting shouldhe/she decide to do so.

Dematerialised shareholders of the Company, other than“own name” dematerialised shareholders of theCompany, who have not been contacted by their CSDPor broker with regard to how they wish to cast theirvotes, should contact their CSDP or broker and instructtheir CSDP or broker as to how they wish to cast theirvotes at the Company’s annual general meeting in orderfor their CSDP or broker to vote in accordance with suchinstructions. This must be done in terms of the agreement entered into between such dematerialisedshareholders of the Company and the relevant CSDP orbroker. If your CSDP or broker does not obtain instructions from you, they will be obliged to act in termsof your mandate furnished to them.

Electronic participationShould any shareholder wish to participate in the annual

general meeting by way of electronic participation, that

shareholder should make application in writing (including

details as to how the shareholder or its representative

can be contacted) to so participate to the transfer

secretaries at the address below, to be received by the

transfer secretaries at least five business days prior to

the annual general meeting in order for the transfer

secretaries to arrange for the shareholder (and its

representative) to provide reasonably satisfactory

identification to the transfer secretaries for the purposes

of section 63(1) of the Companies Act, 2008 and for the

transfer secretaries to provide the shareholder (or its

representative) with details as to how to access any

electronic participation to be provided. The Company

reserves the right to elect not to provide for electronic

participation at the annual general meeting in the event

that it determines that it is not practical to do so. The

costs of accessing any means of electronic participation

> SI11



provided by the Company will be borne by the

shareholder so accessing the electronic participation.

Shareholders are advised that participation in the annual

general meeting by way of electronic participation will

not entitle a shareholder to vote. Should a shareholder

wish to vote at the annual general meeting, he/she may

do so by attending and voting at the annual general

meeting either in person or by proxy.

By order of the Board

JA BeukesCompany Secretary

Johannesburg

4 November 2011


Registration number 1984/008265/06

Incorporated in the Republic of South Africa

Share code: DAW • ISIN: ZAE000018834

(“DAWN” or “the Company”)

Registered Office: Cnr Barlow Road and Cavaleros

Drive, Jupiter Ext 3, Germiston, 1401

Postal Address: PostNet suite number 100,

Private Bag X1037, Germiston, 1400

Transfer Secretaries: Computershare Investor

Services Proprietary Limited, 70 Marshall Street,

Marshalltown, 2001

PO Box 61051, Marshalltown, 2107

Sponsor: Deloitte & Touche Sponsor Services

Proprietary Limited, Building 6, Deloitte Place, The

Woodlands, 20 Woodlands Drive, Woodmead, 2196

Private Bag X6, Gallo Manor, 2052


SI12 <

Annexure A

SUMMARY OF THE PROPOSED AMENDMENTS AND REVISED TERMS OFTHE DAWN SHARE APPRECIATION RIGHT SCHEME, THE DAWN LONG-TERM INCENTIVE PLAN AND THE DAWN DEFERRED BONUS PLAN(collectively referred to as “the Plans”)

Amendments to the Plans

On 15 October 2008, the JSE Limited replaced Schedule 14 of the Listings Requirements in its entirety with a newSchedule 14 which requires all existing schemes to be rendered conformant with the revised Schedule 14. The amendments to the Plans are primarily designed to render the Plans conformant with the revised Schedule 14 and toupdate it in conformance with best practice.

The amendments to the Plans will not affect the rights of any participants that are holders of shares in terms of thePlans and/or to whom options were granted prior to implementation of the amendments to the Plans.

The principal amendments are summarised as follows:

• The maximum number of shares that may be issued under the Plans is set at 36 540 000 amounting to approximately 20% of all issued share capital. This limit is permitted to be increased proportionately to reflectchanges in capital structure, as specified in the Rules (refer to Rule 5.1.4 of the Plans). In addition, it is clarified thatshares purchased in the market in settlement of the Plans and awards that are forfeited are excluded from this limit.(The limits listed above have not been amended from the limits approved at the general meeting held on 6December 2006).

• The limit of a fixed number of shares, namely 4 600 000, that can be allocated to any participant under any of thePlans has been added. (The limits listed above have not been amended from the limits approved at the generalmeeting held on 6 December 2006).

• The Plans have been amended to confirm the requirement that employees’ standardised annual salary and gradeform the primary basis upon which awards under the Plans are made.

• The discretion afforded to the Remuneration Committee in the case of termination of employment of a participanthas been limited within a specific framework.

• The right of the directors to change the performance conditions of an award has been removed, in compliance withthe general requirement that no discretion may be afforded to the Board in respect of matters affecting the participants of the Plans save as may be motivated for change of control and termination of employment.

The full documents of the Plans and certain points of clarity and administrative changes to the Plans as required by theJSE Listings Requirements and King III are proposed and will be available for inspection at the Company’s registeredoffices at Cnr Barlow Road and Cavaleros Drive, Jupiter Ext 3, Germiston from Thursday, 1 December 2011 up toThursday, 15 December 2011, being the date of the annual general meeting. These documents are:

• the initial Share Appreciation Right deed;• the amended Share Appreciation Right deed;• the initial Long-Term Incentive Plan deed;• the amended Long-Term Incentive Plan deed;• the initial Deferred Bonus Plan deed; and• the amended Deferred Bonus Plan deed.

There are no outstanding awards under the DAWN Share Incentive Scheme as set out in the DAWN Share Trust andthis Scheme is winding down as participants exercise their outstanding awards, all of which have vested and will besettled by the purchase of shares in the market. No changes are thus being made to the Trust Deed that constitutesthe DAWN Share Incentive Scheme.


> SI13


Corporate information

DISTRIBUTION AND WAREHOUSING NETWORK LIMITED Incorporated in the Republic of South AfricaRegistration Number: 1984/008265/06Listed on the JSE Limited JSE share code: DAWISIN: ZAE000018834

COMPANY SECRETARYJA Beukes Cnr Barlow Road and Cavaleros DriveJupiter Ext 3 Germiston, 1401 Postal addressPostNet Suite number 100Private Bag X1037Germiston, 1400 Tel: +27 11 323 0450Fax: +27 11 323 0466e-mail: [email protected] site: www.dawnltd.co.za

REGISTERED OFFICE Cnr Barlow Road and Cavaleros DriveJupiter Ext 3 Germiston, 1401 Postal addressPostNet Suite number 100Private Bag X1037Germiston, 1400

DIRECTORS

RL Hiemstra79 Boeing Road East Bedfordview, 2007Johannesburg

DA TodCnr Barlow Road and Cavaleros DriveJupiter Ext 3 Germiston, 1401

M Akoojee79 Boeing Road East Bedfordview, 2007Johannesburg

LM AlbertsCnr Barlow Road and Cavaleros DriveJupiter Ext 3 Germiston, 1401

OS Arbee140 Boeing Road East Elma ParkEdenvale, 1610Johannesburg

JA BeukesCnr Barlow Road and Cavaleros DriveJupiter Ext 3 Germiston, 1401

JAI FerreiraCnr Barlow Road and Cavaleros DriveJupiter Ext 3 Germiston, 1401

VJ Mokoena32 Electron RoadIsando, 1609

RD RoosCnr Barlow Road and Cavaleros DriveJupiter Ext 3 Germiston, 1401

INTERNET Web site: www.dawnltd.co.zae-mail: [email protected]

AUDITORS PricewaterhouseCoopers Inc.2 Eglin RoadSunninghill, 2157Johannesburg

TRANSFER SECRETARIESComputershare Investor Services Proprietary Limited 70 Marshall StreetMarshalltown, 2001PO Box 61051Marshalltown, 2107Tel: +27 11 370 5000Fax: +27 11 370 5271

SPONSORDeloitte & Touche Sponsor Services Proprietary Limited Building 6, Deloitte Place The Woodlands 20 Woodlands Drive Woodmead, 2196Private Bag X6Gallo Manor, 2052Tel: +27 11 806 5000Fax: +27 11 806 5666

SI14 <

Distribution and Warehousing Network LimitedRegistration number 1984/008265/06 • Incorporated in the Republic of South Africa

JSE code: DAW • ISIN: ZAE000018834(“DAWN” or “the Company”)

FORM OF PROXY – ANNUAL GENERAL MEETING

FOR COMPLETION BY CERTIFICATED SHAREHOLDERS OR OWN NAME DEMATERIALISED SHAREHOLDERS ONLYIf you wish to appoint a proxy to act on your behalf at the annual general meeting of DAWN shareholders to be held on Thursday, 15 December 2011 at 12:00 at DAWNShowroom, 18 Ealing Crescent, Cnr Main Road and Bryanston Drive and at any adjournment or postponement thereof, please complete and return this form of proxy (alsosee the notes overleaf).

If dematerialised shareholders of the Company, other than “own name” dematerialised shareholders of the Company have not been contacted by their CSDP or broker with regard to how they wish to cast their votes, they should contact their CSDP or broker and instruct their CSDP or broker as to how they wish to cast their votesat the Company’s annual general meeting in order for their CSDP or broker to vote in accordance with such instructions. Dematerialised shareholders of the Company whoare not “own name” dematerialised shareholders of the Company and who wish to attend the Company’s annual general meeting must obtain their necessary Letter ofRepresentation from their CSDP or broker, as the case may be, and submit same to the transfer secretaries to be received by no later than 12:00 on Thursday, 13 December 2011. This must be done in terms of the agreement entered into between the dematerialised shareholder of the Company and their CSDP or broker. If theCSDP or broker, as the case may be, does not obtain instructions from such dematerialised shareholders of the Company, it will be obliged to act in terms of the mandate furnished to it, or if the mandate is silent in this regard, to abstain from voting.

Please indicate whether you elect to receive documents electronically at the e-mail address inserted below by ticking the appropriate box

YES NO

Full name: I/We (BLOCK LETTERS)

of (address)

Telephone: (Work) (area code: ) Telephone: (Home) (area code: )

Fax: (area code: ) Cell number:

E-mail:

being the holder(s) of DAWN ordinary shares, hereby appoint:

1 or failing him/her,

2 or failing him/her,

3. the Chairperson of the general meeting,

as my/our proxy to vote for me/us on my/our behalf at the annual general meeting of DAWN shareholders, which will be held for the purpose of considering, and if deemed fit, passing, with or without modification, the special and ordinary resolutions to be proposed thereat and at any adjournment thereof and to vote for and/or against such resolutions and/or abstain from voting in respect of the DAWN shares registered in my/our name/s as follows:

Please indicate with an “X” the instructions to your proxy in the spaces provided below. In the absence of such indication the proxy will be entitled to exercisehis/her discretion in voting.

Number of votes (one per share)

RESOLUTION For Against Abstain

Special resolution number 1Issue a general authority to the Company to repurchase its own shares

Special resolution number 2Approval of non-executive directors’ fees

Special resolution number 3Approval of directors’ emoluments

Special resolution number 4Authority to provide financial assistance to any company or corporation which is related or inter-related to the Company

Ordinary resolution number 1Adopt the annual financial statements for the year ended 30 June 2011

Ordinary resolution number 2Ratification of appointment of directors

Ordinary resolution number 2.1Mr VJ Mokoena

Ordinary resolution number 2.2Mr M Akoojee

Ordinary resolution number 3Re-appointment of directors

Ordinary resolution number 3.1RL Hiemstra

Ordinary resolution number 3.2JA Beukes

Number of votes (one per share)

RESOLUTION For Against Abstain

Ordinary resolution number 4To confirm the reappointment of PricewaterhouseCoopers Inc as auditors and Mr I Buys as the designated auditor

Ordinary resolution number 5Appointment of Audit Committee members for the year ending 30 June 2012

Ordinary resolution number 5.1OS Arbee

Ordinary resolution number 5.2LM Alberts

Ordinary resolution number 5.3RL Hiemstra

Ordinary resolution number 6To endorse the Company’s remuneration policy and its implementation

Ordinary resolution number 7Approval and ratification of the amendments to the provisions of the DAWN Share Appreciation Right Scheme, the DAWN Long-Term Incentive Plan and the DAWN Deferred Bonus Plan

Ordinary resolution number 8Authorising the directors to implement the special and ordinary resolutions

Signed at on 2011

Signature

Assisted by (if applicable)

Name Capacity Signature

(Please print in BLOCK LETTERS)

Notes:

1. Only shareholders who are registered in the register of the Company undertheir “own name” may complete a form of proxy or attend the general meeting. This includes shareholders who have not dematerialised theirshares or who have “own name” dematerialised shares. A proxy need not be a shareholder of the Company.

2. Dematerialised shareholders who have not elected “own name” registrationin the register of the Company through a CSDP and who wish to attend theannual general meeting, must instruct their CSDP or broker to provide themwith the necessary Letter of Representation to attend.

3. Dematerialised shareholders who have not elected “own name” registrationin the register of the Company through a CSDP and who are unable toattend, but wish to vote at the annual general meeting, must timeously provide their CSDP or broker with their voting instructions in terms of thecustody agreement entered into between that shareholder and the CSDP or broker.

4. A DAWN shareholder may insert the name of a proxy or the names of twoalternative proxies of his/her choice in the spaces provided with or withoutdeleting “the chairperson of the general meeting”, but any such deletionmust be initialled by the DAWN shareholder. The person whose nameappears first on the form of proxy and who is present at the annual generalmeeting will be entitled to act as proxy to the exclusion of those whosenames follow.

5. On a show of hands, every shareholder of the Company present in personor represented by proxy shall have one vote only. On a poll a shareholderwho is present in person or represented by a proxy shall be entitled to thatproportion of the total votes in the Company which the aggregate amount ofthe nominal value of the shares held by him/her bears to the aggregateamount of the nominal value of all the shares issued by the Company.

6. Please insert the number of shares in the relevant spaces according to how you wish your votes to be cast. If you wish to cast yourvotes in respect of a lesser number of DAWN shares exercisable by you,insert the number of DAWN shares held in respect of which you wish tovote. Failure to comply with the above will be deemed to authorise andcompel the chairperson, if the chairperson is an authorised proxy, to vote infavour of the resolutions, or to authorise any other proxy to vote for oragainst the resolutions or abstain from voting as he/she deems fit, in respectof all the DAWN shareholder’s votes exercisable thereat. A DAWN shareholder or its/his/her proxy is not obliged to use all the votes exercisableby the DAWN shareholder or its/his/her proxy, but the total of the votes castand in respect whereof abstention is recorded may not exceed the total ofthe votes exercisable by the DAWN shareholder or its/his/her proxy.

7. This form of proxy must be received by the transfer secretaries,Computershare Investor Services Proprietary Limited, Ground Floor, 70Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107),by no later than 12:00 on Tuesday, 13 December 2011.

8. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed, should such shareholder wish to do so.

9. Any alteration or correction made to this form of proxy must be initialled bythe signatory(ies).

10. Documentary evidence establishing the authority of a person signing thisform of proxy in a representative capacity must be attached to this form ofproxy unless previously recorded by the transfer secretaries or waived by thechairperson of the general meeting.

11. The completion and lodging of this form of proxy will not preclude the relevant DAWN shareholder from attending the annual general meeting andspeaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such DAWN shareholder wish to do so.

12. The chairperson of the annual general meeting may accept or reject anyform of proxy which is completed and/or received other than in accordancewith these notes and instructions, provided that the chairperson is satisfiedas to the manner in which the DAWN shareholder wishes to vote.

13. This form of proxy shall not be valid after the expiration of six months fromthe date when it was signed.

14. Where there are joint shareholders of shares any one of such persons mayvote at the annual general meeting in respect of such joint shares as ifhe/she were solely entitled thereto; but if more than one of such joint holdersare present or represented at the general meeting, that one of the said persons whose name stands first in the register of shareholders in respect ofsuch shares or his/her proxy, as the case may be, shall alone be entitled tovote in respect thereof.

15. DAWN shareholders who hold shares in DAWN through a nominee shouldadvise their nominee or, if applicable, their CSDP or broker timeously of theirintention to attend and vote at the annual general meeting or to be represented by proxy thereat in order for their nominee or, if applicable, theirCSDP or broker to provide them with the necessary Letter of Representationto do so or should provide their nominee or, if applicable, their CSDP or broker timeously with their voting instruction should they not wish to attendthe annual general meeting in person, in order for their nominee to vote inaccordance with their instruction at the annual general meeting.

PLEASE READ THE NOTES BELOW


Documents

ANNUAL REPORT 2011 - ShareData · DAWN HR. • The DAWN Academy is launched. 2009 • Acquisition of a 49% interest in Apex Valves. Electroline becomes a wholly-owned subsidiary