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portfolio of progress

CITY LODGE HOTELS LIMITED


A N N U A L R E P O R T 2 0 0 9


contents

Our vision – “People caring for people”We are committed to remaining the preferred, southern African, value for money,

selected services hotel group.

Through dedicated leadership and teamwork we will demonstrate our consistent commitment to delivering caring service with style and grace.

We will constantly enhance our guest experience through our passionate people, ongoing innovation and leading-edge technology.

Our integrity, values and ongoing investment in our people and hotels will provide exceptional returns to stakeholders and ensure continued, sustainable growth.

Our vision

Profi le of progress

Financial achievements

Our brands

Our directorate

Our executive team

Chairman’s and chief executive’s review

Seven-year fi nancial review

Responsible corporate citizenship and sustainability report

Administration

Annual fi nancial statements

Shareholders’ analysis

Value-added statement

Members’ diary

Notice of annual general meeting

Proxy form

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A N N U A L R E P O R T 2 0 0 9


contents






Our vision



Our brands

Our directorate

Our executive team




Administration




Members’ diary


Proxy form


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116117118119123

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City Lodge at OR Tambo Airport

City Lodge Lynnwood

City Lodge Fourways

Some of our new developments

City Lodge Hotels Limited Annual Report 2009 1

city lodge group profile of progress

The City Lodge Hotels group has come a long way from its relatively humble

beginnings – a 123-room City Lodge in Randburg, opened on 1 August 1985.

Through the vision of founder, Swiss-born Hans Enderle, the City Lodge Hotels

group has grown from a single hotel in 1985 to a multi-brand chain offering a variety

of locations, features and budget choices to business and leisure travellers.

From the start, emphasis was placed on quality accommodation, homely ambience

and friendly service – still important attributes of the group in the 21st century and

core reasons guests choose our hotels.

After pioneering the quality selected services hotel concept in South Africa, the

group has grown substantially and diversified its product offering to meet different

travellers’ needs.

Commitment to service excellence from a highly motivated and dedicated staff is

a common thread throughout the group’s hotels which have developed a loyal base

of regular clients over the years and an ever-growing number of new guests.

The group now has four district brands, offering 4 989 rooms, at 44 locations

throughout South Africa.

progress of our quality and style

2 City Lodge Hotels Limited Annual Report 2009

highlights financial achievements

For the year ended 30 June 2009 2009 % 2008

Revenue (R’m) 665,0 11 599,9

Normalised EBITDA (R’m) 369,7 9 340,0*

Normalised operating profit (R’m) 334,8 7 313,1*

Normalised headline earnings (R’m) 236,0 4 226,4*

Diluted normalised headline earnings per share (cents) 549,1 4 527,0*

Dividends declared per share (cents) 361,0 (3) 371,0

Normalised cash generated by operations (R’m) 372,8 3 364,1

Normalised net asset value per share (cents) 1 627 17 1 473*

*Prior year restated to normalised earnings. Refer to note 20 for details of BEE transactions.

0908070605

10

5 11

5

25

4

31

3 33

5

Normalised operating profit(million)

0908070605

20

3

23

8

29

3

37

1

36

1

Dividends per share(cents)

0908070605

11

2

10

8

17

7

22

6 23

6

Normalised headline earnings(million)


Stock exchange performance – Ordinary share price (cents)

R334,8 mNormalised operating profi t

Normalised operating profi t for 2008/09 was R334,8 million, compared with R313,1 million in the previous year.

361,0 centsDividends per share

Dividends per share for 2008/09 was 361,0 cents, compared with 371,0 cents in the previous year.

R665,0 mRevenue

Group revenue for 2008/09 was R665,0 million, compared with R599,9 million in the previous year.

R236,0 mNormalised headline earnings

Normalised headline earnings for 2008/09 was R236,0 million, compared with R226,4 million in the previous year.

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our brands operational overview

6 hotels – 451 rooms 11 hotels – 1 802 roomsOUR ROOMS OUR ROOMS

Studio, one or two-bedroom luxury rooms.Well-appointed bathroom(s).Fully equipped kitchenette.Personal electronic safe in each room

(big enough for laptops). International direct-dial telephone.

Television with M-Net and selected DStv channels.Air-conditioned.

Spacious air-conditioned room with queen-sized bed or twin beds.Television with M-Net and selected DStv channels.Bathroom with bath and separate shower.Tea and coffee-making facilities. Rooms with sleeper-sofa available at selected hotels on request.

Rooms with two separate beds for twin accommodation.Electronic safe large enough to accommodate a laptop.Desk with lighting and plugs for easy connectivity.Dedicated line to internet.

OUR SERVICES OUR SERVICES

Woolworths personalised shopping service. Intimate lounge area. Courtesy bar (17:00 – 19:00). 24-hour enhanced security. Free, secure parking just metres from your door. An elegant boardroom for guest use. Personal use of guest offi ce and internet. Sparkling pool in landscaped garden setting. Full English and continental breakfast daily. In-room dining by arrangement with local restaurants. Same-day laundry and dry-cleaning service. 24-hour laundrette. Ice machine. Wireless internet access.

Internet area. Mini gym. Boardroom. Convenient locations, close to major routes. Full English and continental breakfast daily. 24-hour reception and check-in. Sundowner bar. 24-hour vending machines stocked with snacks and cold

beverage items. Same-day laundry and dry-cleaning. Sparkling swimming pool. Free and convenient parking. Wireless internet access. Coffee shop serving light meals.

OUR CURRENT LOCATIONS OUR CURRENT LOCATIONS

Cape Town Johannesburg (Eastgate, Rosebank, Sandton) Pretoria (Arcadia)Port Elizabeth

Bloemfontein Cape Town (Pinelands, V&A Waterfront, GrandWest)Durban (Central, Umhlanga Ridge) Johannesburg (Bryanston, Johannesburg – Airport Barbara Road, Sandton, Katherine Street, Sandton Morningside)Port Elizabeth

OUR FUTURE LOCATIONS

Johannesburg (Fourways, OR Tambo Airport)Pretoria (Hatfi eld, Lynnwood)


9 hotels – 1 041 rooms 18 hotels – 1 695 roomsOUR ROOMS OUR ROOMS

Fully carpeted, spacious air-conditioned room with double or twin beds.Television with M-Net and selected DStv channels.Interleading family rooms available.En-suite bathroom with maxi-shower. Tea and coffee-making facilities.

Desk with lighting and plugs for easy connectivity.

Fully carpeted and air-conditioned.Colour television with M-Net and radio channels.En-suite bathroom with shower, toilet and hand basin. Rooms with double or twin beds, with single sleeper chair available in selected rooms. Working desk.

OUR SERVICES OUR SERVICES

Convenient locations, close to major routes. Free, easy and secure parking. 24-hour reception and check-in. Full English and continental breakfast daily. Sundowner bar. 24-hour vending machine for snacks and beverages. Fax and photocopy services available. Same-day laundry and dry-cleaning. Wireless internet access.

A light breakfast is available daily. 24-hour vending machines stocked with snacks and

beverages. Free, ample and secure parking. 24-hour reception service. Coin and card call-boxes for trunk calls. Wireless internet access.

OUR CURRENT LOCATIONS OUR CURRENT LOCATIONS

Bellville GeorgeJohannesburg (Johannesburg Airport, Midrand, Roodepoort, Sandton Grayston Drive)NelspruitPolokwanePretoria (Menlo Park)

Cape Town (N1 City, Cape Town International Airport)Centurion Durban East London Johannesburg (Brakpan – Carnival City, Germiston Lake, Isando, Johannesburg Airport, Randburg, Rivonia) Kimberley Nelspruit Port Elizabeth Potchefstroom Richards Bay Rustenburg Umhlanga Ridge

OUR FUTURE LOCATIONS OUR FUTURE LOCATIONS

Port ElizabethUmhlanga Ridge

Bloemfontein AirportPort Elizabeth AirportSouthgate


more reasons to make yourself at homeThe Courtyard Hotels offer the discerning guest an exclusive and gracious alternative to an ordinary hotel.

Each Courtyard Hotel has its own distinct atmosphere, although they all share an air of elegance and

charm not readily found today. There are several accommodation options available, from the studio

through to one or two-bedroomed units, each of which offers a lounge area with a dining table,

a kitchenette with refrigerator and microwave oven.

We also provide a personal shopping service. Should you wish to have your kitchenette stocked with the

fi nest quality food and beverages prior to your arrival, contact us for an itemised shopping list and we will

gladly make these arrangements for you.

our brands the courtyard hotel chain

Courtyard – Port Elizabeth

“We were pleasantly surprised at the size of the room. It is fantastic.”

Courtyard, Sandton

– Guest Book

Courtyard – Eastgate


we’ll make you feel like you’re at home

our brands the city lodge hotel chain (continued)

City Lodge has become a household name in the southern African market, providing guests with

comfortable and tastefully decorated rooms which are the ideal place to make your own when you

come home at the end of your day – whether you have been working or playing.

Each room has an en-suite bathroom where you may choose to soak in a hot bath or take a shower

while deciding where to dine that evening.

City Lodge – Bryanston

“I was really impressed with the calibre of staff – their professionalism, friendliness, attentiveness and overall neat and tidy appearance!! I travel a lot and I seldom see this art of consistent experience.”

City Lodge, Umhlanga Ridge

– Guest Book

City Lodge – Umhlanga Ridge


stay smart

our brands the town lodge hotel chain (continued)

Very much like City Lodges, Town Lodges are also strategically located adjacent to motorways

and major routes.

The rooms are slightly smaller than City Lodge, but offer similar stylish decor and the

customary comfort. En-suite you will fi nd a maxi-shower with a glass door, a tiled built-in

seat, a wall-mounted and a hand-held showerhead.

Town Lodge – Roodepoort

“What a great stay, so convenient and with great service too. A perfect stop-over during a long journey. Thank you Town Lodge for making us feel so at home.”

Town Lodge, George

– Guest Book

Town Lodge – Polokwane


why pay more?

our brands the road lodge hotel chain (continued)

The best value in the City Lodge family of hotels is undoubtedly to be found at the Road Lodge.

These hotels offer unbelievable value-for-money; the same rate whether there are one, two or even

three people sharing the comfortably furnished and tastefully decorated room.

Road Lodge – Rustenburg

“Helped me and my mom with a quiet room – helped me to locate several sites on a map. Gave exceptional, friendly service – a great credit to your establishment”.

Road Lodge, Port Elizabeth

– Guest Book

Road Lodge – Kimberley


management our directorate

1.

2. 3. 4.

5.

8.

6.

9.

7.

1. Hans Enderle (67)† Non-executive chairman and founder 53 years experience in the hotel industry.

2. Frank Kilbourn (47) Director of companies BCom, LLM, BA (Hons), HDip Tax

Appointed to the board in 1996.

3. Nigel Matthews (64) † Director of companies MA (Oxon), MBA


4. Ndumi Medupe (39) Auditor and financial consultant Chartered Accountant (SA)


5. Stuart Morris (63) Director of companies Chartered Accountant (SA)


6. Bulelani Ngcuka (55)† Director of companies BProc, LLB, MA (Webster University – Geneva)


7. Clifford Ross (52)# Chief executive 34 years experience in the hotel industry.

8. Dr Keith Shongwe (45) Business development executive BSc, MBChB


9. Andrew Widegger (43)# Financial director Chartered Accountant (SA)

16 years with the company.

Member of audit committee # Member of executive committee

† Member of remuneration and nomination committee

Member of risk committee Executive director

Independent non-executive


1. Clifford Ross (52)# Chief executive 22 years with the company.

2. Andrew Widegger (43)# Financial director 16 years with the company.

3. Tony Balabanof (49)# Divisional director – operations 23 years with the company.

4. Gary Bisset (55)# Divisional director – operations 13 years with the company.

5. Alastair Dooley (30)# Divisional director – financial Joined 1 May 2009.

6. Marcel Kobilski (45)# Divisional director – human resources 13 years with the company.

7. Naynesh Parbhoo (36)# Divisional director – accounting 11 years with the company.

8. Ross Phinn (38)# Divisional director – operations 11 years with the company.

9. Heather Prinsloo (45)# Divisional director – transformation 1 year with the company.

10. Peter Schoeman (44)# Divisional director – sales and marketing 13 years with the company.

11. Patrick Tate (53)# Divisional director – operations 21 years with the company.

# Member of executive committee

Member of risk committee Executive director



management our executive team

1. 2.

3. 4. 5.

6.

9.

7.

10.

8.

11.

dear shareholder

Hans EnderleChairman

Clifford RossChief executive

Clifford Ross Hans Enderle

our chairman’s and chief executive’s review


In our 25th year of operations, it is perhaps

fi tting for us to step back and review our

“Portfolio of Progress” as our group and

the whole of South Africa looks forward

with eager anticipation to our country’s

momentous hosting of the 2010 FIFA

Soccer World Cup.

Progress effectively means a combination

of forward movement, improvement,

growth and development and evolution,

all of which are integral to our ongoing

success in an increasingly discerning

consumer-driven hospitality environment.


Progressing fi nancially

Against the backdrop of a weak economy, our

group did well to maintain average occupancies

at 77% in the year to 30 June 2009, compared

to the record occupancy rate of 82% achieved

in the previous fi nancial year.

In addition to the diffi cult trading conditions, the

second half of the year was adversely affected

by the number of public holidays in April,

exacerbated by the additional mid-week holiday

on 22 April for the general election.

Despite the lower occupancies, the number

of rooms sold increased marginally, due to

additional capacity being available relative to the

prior year. This, together with higher achieved

room rates, led to turnover increasing by 11%

to R665,0 million.

On a normalised basis (excluding the effects of

the BEE transaction), the EBITDA margin

decreased by 1,1 percentage points to 55,6%,

mainly due to the lower occupancies and

signifi cant increases in municipal services

expenses. Normalised EBITDA rose by 9%

to R369,7 million.

As a group, we are hugely excited about FIFA’s

four-yearly soccer extravaganza fi nally coming

to African soil, and our preparation has been

detailed and intensive. By the time the event

begins, we would have been running our “On

Top Of My Game” and “Gotcha Cup” service

excellence and staff motivation programmes for

no less than fi ve years, demonstrating our

commitment to this once-in-a-lifetime opportunity

to showcase City Lodge Hotels and South Africa

to the world. The “Gotcha Cup” will be presented

to the worthy winner at the end of June 2010.

Training of our hotel staff will continue right up

to the kick-off – including cultural diversifi cation

education and “do’s and don’ts” for dealing with

guests from a multitude of nations and traditions.

While we have contracted 80% of our rooms

inventory to MATCH for the World Cup, this has

been done so at rates which not only provide

us with a good return, but also maintain our

value-for-money reputation and South Africa’s

image as a value-for-money destination.

We are proud of the progress that has been

achieved – and continues to be achieved –

across all of our operations and activities.


our chairman’s and chief executive’s review (continued)

growth in business and leisure travel throughout

South Africa.

Having opened our 44th hotel – the 125-room

Road Lodge Umhlanga Ridge – during August

and September 2009, the next addition to our

rapidly growing family will be the 211-room

City Lodge Fourways, which will open its first

rooms in December and be fully operational in

the first quarter of 2010.

Our biggest hotel to date – the 303-room City

Lodge OR Tambo Airport – is making good

progress towards opening its first rooms in the

first quarter of 2010 and the remaining rooms in

time for the World Cup.

Excellent progress is also being made on our two

new Pretoria hotels – the 205-room City Lodge

Lynnwood and the 187-room City Lodge Hatfield.

The former is expected to be 75% operational by

the start of the World Cup and the latter will open

in the third quarter of 2010.

In Port Elizabeth, construction has begun on a

203-room Town Lodge, scheduled for completion in

the fourth quarter of 2010. This will result in all four

of the group’s brands being available to guests in

close proximity to each other along the city’s prime

As a result of the additional capacity and the

significantly higher capital expenditure,

depreciation increased by 29,4%. Interest income

was R3,1 million lower, whilst non-BEE interest

expense was R982 000 higher.

Despite lower occupancies, the group’s share of

profit from the Courtyard Joint Venture increased

by 5,0% to R9,0 million.

Profit before tax on a normalised basis increased

by 5,4% to R353,0 million whilst normalised

headline earnings increased by 4,2% to

R236,0 million and normalised headline earnings

per share, on a fully diluted basis, also rose 4,2%

to 549,1 cents.

Given the extensive development programme, the

board resolved to drop the payout ratio for the

final dividend from 70% to 60% of normalised net

profit, resulting in a full year dividend per share of

361,0 cents (2008 – 371,0 cents).

Property progress

Without doubt we are currently in the most

exciting growth phase of our near quarter century

history. The new hotels we are developing will

position us ideally to take advantage of future


Staffing up to handle our progress

Taking a pro-active approach, we have made

several central office appointments to manage the

group through this strong growth and development

phase. Additional capacity brings with it the need

for a larger management team and the inclusion

of some specific and focused responsibilities

requiring the skills of dedicated specialists.

The following appointments reflect this reality:

Ross Phinn, divisional director – operations

(there are now four divisional operations

directors overseeing the group’s existing and

upcoming hotels):

Alastair Dooley, divisional director – financial;

Henri Joubert, international business

development manager;

Maxine Muir, manager, orientation and

management development;

Kobus van Zyl, development manager;

Emile van der Merwe, property investment

manager; and

Cathy Bayne, design manager.

beach front. Construction will begin soon on a

90-room Road Lodge at Port Elizabeth Airport and a

66-room Road Lodge at Bloemfontein Airport, both

of which are scheduled to open in the second

quarter of 2010.

In Johannesburg, construction will soon begin on

the 118-room Road Lodge Southgate and adding

70 rooms to Town Lodge Grayston Drive, both of

which should be completed by mid-June 2010.

At Umhlanga Ridge, a site has been secured for

the development of a 187-room Town Lodge.

This surge in our property progress will result in our

group offering 53 hotels and 6,629 rooms across

its four brands, an increase of 36%.

Long term debt facilities of R400 million have been

secured to facilitate the funding of these

developments. As at 30 June 2009, R100 million

of this funding had been drawn.

Ensuring that our property portfolio keeps on

growing, further sites have been secured in carefully

chosen locations to take advantage of future

development opportunities.



People progress

People have always been and will always

continue to be at the heart of everything we do.

The appointment of Maxine Muir, previously

general manager of Courtyard Eastgate, to the

newly created position of manager, orientation

and management development, is in line with

our group’s constant commitment to building a

strong group of managers and management

potential to take us forward. Her “executive

coach” role is seen as particularly important at

a time when our group is in a major growth

phase and there is a shortage of external skills

to tap into in the broader South African market.

On the training front, our group has achieved

the internationally recognised Investors in People

accreditation which is essentially a business

improvement tool, designed to advance an

organisation’s performance through its people.

Ongoing training throughout our hotels focuses

on delivering excellent service, improving skills,

developing people and enabling our group to

comply with a range of statutory requirements.

Progressing our BBBEE status

As a group, we are committed to the spirit and

the practical implementation of South Africa’s

broad-based Black Economic Empowerment

legislation and associated requirements.

The Black Economic Empowerment transaction

which saw the Injabulo Staff Trust acquire a

6% shareholding, Vuwa Investments (Pty) Ltd – 6%

and the University of Johannesburg School of

Tourism and Hospitality Education Trust – 3%,

was effected in July 2008, has been fully implemented

and is working well for all parties.

In the first year since this transaction was

completed, we have achieved Level 6

certification in the Department of Trade and

Industry’s codes and will continue to make

progress in compliance and scorecard ratings.

With the government now having finalised its

policy regarding procurement by its departments

and agencies, our continually improving BBBEE

status should place us in a favourable position to

receive guests from this important sector of the

economy.


Once staff members have been selected for

these pools, personal development plans are

drawn up to assist with their progress.

Technological progress

Technology has become an increasingly

important enabling tool in our industry, but it

requires modification and upgrades from time

to time to ensure that we remain in line with

the latest functionality and advancements.

Our central server environment is being

upgraded with live rollout scheduled for

November 2009 and we are also upgrading to

the latest Microsoft Windows operating system.

A VM Ware (virtual memory) platform is also

being introduced.

By adopting the eRes system as our new

internet booking engine, we have cleared the

way for direct links with outsourced booking

engines, increasing the online bookability of our

rooms. An electronic invoicing system is also in

the pipeline.

Wireless internet accessibility has been

extended to run throughout all our Courtyard,

City Lodge and Town Lodge hotels and all Road

Currently, we have 16 learnerships in place –

nine in front-of-house and seven in

housekeeping – and we have 45 staff

members undergoing cross-training to

broaden their skills.

The City Lodge Academy continues to make a

valuable contribution with 18 would-be managers

enrolled in the programme – seven in first year,

eight in second year, and three in their final year.

Our Accelerated Development and Deployment

Programme is gaining traction with three staff

members currently on the programme. This

one-year programme is specifically designed for

people with particular service oriented skills – not

necessarily hospitality skills – aimed at fast-

tracking them into senior management. One

individual has already successfully come through

this programme and been appointed as a

Road Lodge manager.

With succession planning being an important

consideration in our people-focused industry, our

Management Development and Succession

Committee continues to make good progress

with identifying staff to go into “succession pools”

for promotion into more responsible positions.



continued status as one of Johannesburg’s most

popular hotels.

Progressing internationally

Our recently appointed International Business

Development Manager, Henri Joubert, has made

good progress in identifying possible international

locations for our brands. This includes gathering

information and conducting intensive research into

various countries and locations.

Following a detailed feasibility study on Nigeria, it

has been decided to place this expansion project

on the “back burner” with a view to revisiting it

at a later stage. Global economic uncertainty,

scarcity of capital and the perceived risks of

doing business in that country have informed

the board’s decision.

India continues to be seen as an attractive expansion

destination and further research is underway into this

vast and intriguing country.

It is likely, however, that our first foray outside of

South Africa will be into a neighbouring country in

southern Africa. Ongoing research is being carried

out on expansion opportunities in Namibia, Botswana,

Zambia, Zimbabwe, Mozambique and Mauritius.

Lodges will be fully “wifi” enabled by the end of

June 2010.

Progressing our features and facilities

Keeping our hotels fresh, homely and relevant to

our guests’ needs has always been a hallmark of

our hospitality offerings. Through our guest

questionnaires and our own domestic and

international research, we are constantly staying

in touch with travellers’ needs.

Our flagship City Lodge brand has undergone a

major makeover that has focused on upgrading

and modernising the product it offers to guests.

This process has involved introducing coffee

shops to all City Lodges operating from 10:00 to

22:00, providing wireless internet access

throughout the hotels (not only in certain areas),

enhancing the boardrooms and further improving

the sleep experience.

For example, after a comprehensive

refurbishment, City Lodge Katherine Street,

one of our stalwart hotels in the Sandton area,

was re-introduced to corporates and the travel

industry at a function in July – and its new look

was extremely well-received, auguring well for its


Genuine and heartfelt thanks must go to everyone

– guests, staff, management, directors and

suppliers – who has contributed to our group’s

progress to date, enabling us to look towards our

silver anniversary on 1 August 2010 with a sense of

confidence, excitement and celebration.

Hans Enderle

Chairman

Clifford Ross

Chief executive

Future progress

Our group is well positioned and prepared for the

2010 FIFA Soccer World Cup. It is important to

note, however, that only half of the event will fall

into the 2010 financial year.

While there are some signs of improving demand,

trading conditions are expected to remain soft in

the near term. Occupancies are not expected to

normalise until the 2011 financial year, which will

also benefit from half of the World Cup, an

anticipated recovery in local and global

economies and contributions from the new

hotels being added to our existing portfolio.


IFRS SA GAAP

R’m 2009 2008 2007 2006 2005 2004 2003

Consolidated normalised income statementsRevenue 665,0 599,9 509,7 442,1 390,9 335,8 292,9

EBITDA* 369,7 340,0 281,1 237,0 206,3 173,9 151,7Depreciation and amortisation (34,9) (26,9) (26,7) (25,5) (24,9) (23,2) (22,3)

Operating profit 334,8 313,1 254,4 211,5 181,4 150,7 129,4Net interest income/(expense) 9,2 13,2 8,2 3,4 3,4 (0,6) (2,0)Income from joint venture 9,0 8,5 7,6 5,4 3,1 3,0 3,5

Profit before taxation 353,0 334,8 270,2 220,3 187,9 153,1 130,9Taxation (116,8) (108,3) (92,3) (76,4) (65,3) (52,5) (44,1)

Profit for the period 236,2 226,5 177,9 143,9 122,6 100,6 86,8

Determination of headline earningsProfit for the period 236,2 226,5 177,9 143,9 122,6 100,6 86,8(Profit)/loss on sale of equipment (0,3) (0,2) (0,3) 0,9 — — —Taxation effect 0,1 0,1 0,1 (0,2) — — —

Headline earnings 236,0 226,4 177,7 144,6 122,6 100,6 86,8

*Prior year restated to normalised results. Refer to note 20 for details of BEE transactions.

seven-year financial review

07 0806050403

292,

9

335,

8

390,

9

442,

1

509,

7 599,

9

665,

0

Revenue(R’m)

07 0806050403

86,8

100,

6

122,

6

144,

6 177,

7 226,

4

236,

0

Normalised headline earnings(R’m)

09 09


IFRS SA GAAP

R’m 2009 2008 2007 2006 2005 2004 2003

Consolidated normalised balance sheetsAssetsNon-current assets 815,2 695,1 564,5 501,9 477,6 481,2 426,9

Property, plant and equipment 765,9 647,2 517,7 456,1 432,6 439,8 385,8Intangible assets — — — — — — 0,8Investments and loans 46,3 45,0 43,8 42,9 42,2 37,4 36,5Deferred taxation 3,0 2,9 3,0 2,9 2,8 4,0 3,8

Current assets 155,4 83,4 109,6 105,2 82,5 49,0 56,6

Total assets 970,6 778,5 674,1 607,1 560,1 530,2 483,5

EquityTotal shareholders’ funds 695,6 627,4 534,4 466,5 415,7 390,8 342,1

Share capital and premium 143,1 140,4 138,0 136,4 134,8 133,7 131,8Reserves* 552,5 487,0 396,4 330,1 280,9 257,1 210,3

LiabilitiesNon-current liabilities 176,5 104,3 98,0 106,0 102,8 98,7 98,1

Interest-bearing borrowings 100,0 40,0 40,0 55,2 54,5 53,0 61,1Other non-current liabilities 15,6 6,7 5,9 5,4 6,8 4,6 4,1Deferred taxation 60,9 57,6 52,1 45,4 41,5 41,1 32,9

Current liabilities 98,5 47,7 41,7 34,6 41,6 40,7 43,3

Total equity and liabilities 970,6 778,5 674,1 607,1 560,1 530,2 483,5


07 0806050403

Earnings and dividends per share(cents)

07 0806050403

260,

4

300,

3

354,

4

386,

4 521,

6 622,

2

649,

2

Net operating cash flow per share(cents)

09 09

Normalised diluted headline earnings per share

Dividends declared per share

205,

6

237,

1

287,

4

337,

9 413,

0 527,

0

549,

1

122,

0

168,

0

203,

0

238,

0

293,

0 371,

0

361,

0


seven-year financial review (continued)

IFRS SA GAAP

2009 2008 2007 2006 2005 2004 2003

Ordinary share performanceShares in issue 000 42 744 42 602 42 482 42 368 42 214 42 125 41 962Normalised weighted average shares in issue 000 42 647 42 519 42 416 42 300 42 186 42 033 41 939Normalised diluted headline earnings per share cents 549,1 527,0* 413,0 337,9 287,4 237,1 205,6Dividends per share cents 361,0 371,0 293,0 238,0 203,0 168,0 122,0Normalised dividend cover times 1,5 1,4* 1,4 1,4 1,4 1,4 1,7Normalised net asset value per share cents 1 627 1 473* 1 258 1 101 985 928 815Normalised net operating cash flow per share cents 649,2 622,2 521,6 386,4 354,4 300,3 260,4

Profitability and liquidityEBITDA margin % 55,6 56,7* 55,1 53,6 52,8 51,8 51,8Operating margin % 50,3 52,2* 49,9 47,8 46,4 44,9 44,2Effective tax rate % 33,0 32,3* 34,1 34,7 34,8 34,3 33,7Return on ordinary shareholders’ funds % 34,7 38,9 35,5 32,8 30,2 27,4 26,9Interest-bearing debt to total shareholders’ funds % 19,2 6,4 7,5 11,8 13,1 15,6 19,6Net interest cover times n/a n/a n/a n/a n/a 266,7 66,4Current ratio :1 1,5 1,8 2,6 3,0 2,0 1,2 1,3


DEFINITIONS

Normalised headline earnings per share

Normalised profit before exceptional items divided by the weighted average number of ordinary shares in issue.

Normalised diluted headline earnings per share

Normalised headline earnings divided by the sum of the weighted average number of ordinary shares in issue and any outstanding share options in issue.

Dividend cover

Normalised diluted headline earnings per share divided by dividends declared per share.

Normalised net asset value per share

Total normalised shareholders’ funds divided by the number of ordinary shares in issue at the year-end.

Normalised net operating cash flow per share

Net cash inflow from operating activities, before dividends, divided by the weighted average number of ordinary shares in issue.


IFRS SA GAAP

2009 2008 2007 2006 2005 2004 2003

Stock exchange performanceMarket price per ordinary share – Closing Rand 69,00 69,99 80,00 49,00 37,50 25,75 18,30– Highest Rand 79,00 89,86 82,50 58,50 39,80 28,50 18,65– Lowest Rand 57,00 65,00 46,27 36,00 24,50 17,60 11,20Total market capitalisation R’m 2 949,3 2 981,7 3 398,6 2 076,0 1 583,0 1 084,7 767,9Normalised fully diluted closing price earnings multiple times 12,6 13,3* 19,4 14,5 13,0 10,8 8,8Volume traded– Ordinary shares 000 13 991 12 062 17 134 25 916 10 999 10 007 5 594

OtherNumber of hotels 43 42 40 38 37 37 35Number of rooms 4 864 4 773 4 396 4 169 4 049 4 049 3 791Group average occupancy % 77 82 82 79 77 76 76


DEFINITIONS (continued)

EBITDA

Normalised earnings before interest, taxation, depreciation and amortisation.

EBITDA margin

Normalised EBITDA expressed as a percentage of revenue.

Operating margin

Normalised operating profit expressed as a percentage of revenue.

Effective tax rate

Taxation per the income statement expressed as a percentage of profit before taxation.

Return on ordinary shareholders’ funds

Normalised headline earnings attributable to ordinary shareholders expressed as a percentage of average ordinary shareholders’ funds.

Interest-bearing debt to total shareholders’ funds

Interest-bearing debt expressed as a percentage of total shareholders’ funds.

Net interest cover

Operating profit divided by interest paid less interest received.

Current ratio

Current assets divided by current liabilities.


responsible corporate citizenship and sustainability report

Regulatory compliance

City Lodge Hotels Limited is incorporated in accordance

with the provisions of the Companies Act, 61 of 1973,

as amended (“the Companies Act”), and is listed on the

JSE. It subscribes to the principles incorporated in the

Code of Corporate Practices and Conduct as set out in

the second report of the King Commission on Corporate

Governance (“King Report”), the continuing obligations

of the JSE Limited Listings Requirements (“Listings

Requirements”) and the Companies Act, in the conduct

of its business.

The board is of the opinion that, for the financial year

under review, the company has complied substantially

with the King Report except for the recommendation

that the chairman of the board should be an

independent non-executive director. Although

Hans Enderle, being the founder of the company and

largest, single shareholder is not considered

independent, his considerable knowledge and

experience in the hotel industry together with his

management expertise and continued valuable

contribution to the board, makes him the ideal candidate

for chairman. The board is accordingly of the opinion

that this area of non-compliance with the King Report

does not impair governance integrity.

The board

Accountability and delegation of authority

While the board assumes ultimate responsibility for the

development and implementation of the company’s

strategy, operating and financial performance and

other matters reserved to itself, it has delegated

responsibility for the management of the day-to-day

affairs of the company to the chief executive and

executive committee (“exco”). Specific responsibilities

have been delegated to the board’s sub-committees.

However, delegating authority to board sub-

committees and/or the exco does not in any way

mitigate or dissipate the discharge by the board of

its duties and responsibilities.

Structure, composition and rotation

The company has a unitary board. As at 30 June 2009

the board comprised seven non-executive directors (of

whom six are independent non-executives) all of whom

have the necessary skill and experience to bring

judgement to bear independent of management and

two full-time salaried executive directors. The board is

of the opinion that the current mix of executive and

non-executive knowledge, skill and experience ensures

that no one individual or block of individuals has

unfettered powers of decision-making or can dominate

the board’s decision-making.


Audit committee

Ndumi Medupe, a qualified chartered accountant, was

appointed to the committee as it was felt that her

knowledge and expertise in the field of finance would

serve to enhance the membership of the committee.

Remuneration and nomination committee

Bulelani Ngcuka was appointed to the committee

following Ndumi Medupe’s redeployment to the audit

committee.

Risk committee

Keith Shongwe was appointed to the committee with

effect from 1 August 2009.

The company’s articles of association require at least

one-third of the directors to retire by rotation at every

annual general meeting. The directors so retiring may, if

eligible, offer themselves for re-election. In addition, the

articles of association require new appointees to retire

at the first annual general meeting following their

appointment and to make themselves available for

re-election.

Brief biographical details of the directors retiring by

rotation and offering themselves for re-election are set

out on pages 22 and 23 of this annual report.

Procedures for appointments to the board are formal

and transparent and a matter for the board as a whole,

assisted where appropriate by the Remuneration and

Nomination Committee. Prior to any appointment,

potential board appointees are subject to a fit and

proper test, as required by the Listings Requirements.

Appointments, however, remain subject to shareholder

approval at the annual general meeting. New

appointees receive an induction pack from the

company secretary containing pertinent company

information and board documentation, are advised of

their fiduciary duties and responsibilities and visit the

company’s operations so as to gain a better

understanding of the company’s operations.

The board and its various sub-committees

continuously assess the composition of the board

and its sub-committees to ensure they possess the

appropriate balance of skills, knowledge and

experience to meet the company’s strategic objectives.

The year under review saw a number of changes

being effected to the board and its respective

sub-committees, commencing with the shareholder’s

endorsement of the appointment of Mr Bulelani

Ngcuka to the board at the company’s annual

general meeting on 6 November 2008. Details

regarding changes to the composition of the

various sub-committees are as follows:


responsible corporate citizenship and sustainability report (continued)

Chairman of the board and chief executive

The running of the board and the executive responsibility

for the running of the company’s business are two

distinct tasks. Accordingly the roles of chairman of the

board and chief executive do not vest in the same

person. The chairman of the board assumes

responsibility for the working of the board, while the

chief executive is responsible for providing leadership

to exco, running the business and implementing the

policies and strategies adopted by the board.

Period of office and terms of employment of

directors

Executive directors are full-time salaried employees

of the company and are engaged on the company’s

standard terms and conditions of employment, subject

to short-term notice periods. Executive directors do not

receive fees by virtue of their membership of the board

and board sub-committees and termination of an

executive directors’ contract of employment will result

in resignation from the board.

Non-executive directors are not subject to a fixed term

of appointment and no service contracts have been

concluded with City Lodge.

In accordance with the board charter, the retirement age

for an executive director and non-executive director is

65 years and 70 years, respectively, subject to review

at the discretion of the board.

Board effectiveness and evaluation

A formal evaluation of the board’s performance and

its processes and procedures is undertaken every

second year.

The evaluation takes the form of a questionnaire

comprising a self-evaluation of the board as a whole,

probing composition, duties, responsibilities, process

and effectiveness. Responses are treated confidentially

and the results are collated by the company secretary

and reported to the chairman of the board and

respective board sub-committees, who in turn report

on the results at subsequent board and board sub-

committee meetings.

The current evaluation of the board and its sub-

committees commenced during August 2009 and

the findings will be reported on at a future meeting

of the board.

The performance of the chief executive is evaluated

annually by the chairman of the board, who consults the

non-executive directors prior to conducting the review.

The chairman of the Remuneration and Nomination

Committee reviews the performance and leadership

of the chairman of the board in an informal manner.

Conflicts of interests and other directorships

A process is in place to record and update directors’

interests in other boards and contracts on an annual

basis. Directors are also required to disclose to the


necessary, special board meetings may be convened to

consider issues requiring urgent attention or decision,

alternatively decisions are taken by directors between

scheduled meetings by written resolution as provided for

in the company’s articles of association.

The board met four times during the year under review.

To ensure that the board functions effectively, the board

works to a formal agenda prepared by the company

secretary following consultation with the chairman of the

board. Any board member may request the inclusion of

an item to the agenda and will liaise with the company

secretary in this regard. Board papers comprising the

agenda and the relevant supporting documentation are

circulated to the directors in advance of each meeting in

order that they can adequately prepare and participate

fully, frankly and constructively in board discussions and

bring the benefit of their particular knowledge, skills and

abilities to the board table.

Individual director attendance at board and board

sub-committee meetings, the annual strategy session

and the annual general meeting appears in the table

below.

Where a director is unable to attend a board meeting

he or she tenders his or her apologies to the chairman

of the board and the company secretary and any

comments which he or she has arising out of the papers

to be considered at that meeting are relayed in advance

to the chairman of the board.

board any interests (including potential interests),

whether direct or indirect, in material contracts or

proposed contracts involving the company and any of its

subsidiary companies, as well as any other directorships,

as and when they arise.

Directors are required to recuse themselves from

discussion or decisions on those matters where they

have conflicts or potential conflicts of interest.

Executive directors may accept appointments to outside

boards. External board appointments must however be

discussed with the chairman of the board and will be

considered to the extent that such appointment is not in

conflict with the business of the company and will not

detrimentally affect their executive responsibilities.

Non-executive directors are required to consult the

chairman of the board with regards their outside

appointments. The board is satisfied that, for the period

under review, the non-executive directors devoted

sufficient time to their responsibilities to the company

and that none of the directors have a material interest in

any contract entered into by the company.

Board meetings

The board charter requires the board to convene at least

quarterly each financial year in order to monitor, review

and implement, inter alia, matters of a strategic,

financial, non-financial and operational nature. When



Summary of attendance:

Board and board sub-committee meetings and strategy session

1 July 2008 – 30 June 2009

BoardStrategy session

Annual general

meetingAudit

committeeRemuneration

committeeRisk

committee

No. of meetings 4 1 1 3 3 3H R Enderle 4 1 1 ~ 3 ~F W J Kilbourn 3 1 1 2 ~ 3I N Matthews 4 1 1 3 3 ~N Medupe 4 1 1 1 2 ~BT Ngcuka 4 1 1 ~ 1 ~S G Morris 4 1 1 3 ~ 3C Ross 4 1 1 3* 3* 3K I M Shongwe 2 1 1 ~ ~ †A C Widegger 4 1 1 3* ~ 3

~ not a member* by invitation appointed during the year under review resigned from committee during year under review

† appointed after the year ended 30 June 2009

Board meeting dates

13 August 2008

6 November 2008

11 February 2009

13 May 2009

Strategy session date

12 May 2009

Annual general meeting date

6 November 2008


Details of the composition of the board and its various

sub-committees as at 30 June 2009, is as follows:

UNITARY BOARD

Non-executive chairman

6 Independent non-executive directors

2 Executivedirectors

Board Committees Management Committees

Audit, chaired by Stuart Morris, independent

non-executive

EXCO

Remuneration and Nomination, chaired by

Nigel Matthews, independent non-executive

MANDASCO

Risk, chaired by Frank Kilbourn, independent

non-executive

Board and management committees

The board has three standing sub-committees, namely

the Audit committee, remuneration and Nomination

committee and Risk committee, all of which operate

within pre-approved terms of reference, that assist it in

the execution of its duties, power and authorities. The

terms of reference are subject to periodic review in order

to ensure that they are aligned with best practice and

legislative and regulatory requirements.

Strategy review

While the board assumes ultimate responsibility for

determining the company’s strategic direction, the

implementation and achievement thereof vests with

exco. Accordingly the board and exco meets annually to

review the company’s strategic imperatives and evaluate

executive management’s progress in the achievement

thereof.

In addition to the annual review, the board is appraised

of the progress made with regards the achievement of

the strategic imperatives at the quarterly board

meetings.

Access to information

The directors have access, at reasonable times,

to all relevant company information and to senior

management to assist them in the discharge of their

duties and responsibilities.

Professional advice

Directors are entitled to seek independent professional

advice relating to the affairs of the company and in the

furtherance of their duties and responsibilities, at the

company’s expense.



Each board sub-committee is chaired by an independent

non-executive director who reports to the board at each

scheduled meeting of the board, on proceedings at

meetings held prior to the board meeting. Copies of

the minutes of meetings of the respective board

sub-committees, with the exception of the Remuneration

and Nomination Committee, are circulated with the

agenda and supporting documentation for each meeting

of the board.

The respective committee chairmen attend the annual

general meeting in order to address any questions

raised by shareholders falling within their respective

mandates.

Board sub-committee meetings were well attended

during the year under review.

The board sub-committees, like the board, are subject

to evaluation as to their effectiveness every two years

and they may, where necessary in order to carry out

their functions, take independent outside professional

advice.

The board has determined that the respective board

sub-committees have, for the year under review, fulfilled

their responsibilities in compliance with their respective

terms of reference and mandates.

Audit committee

The four member committee, which comprises only

independent non-executive directors, all of whom are

financially literate, convened three times during the year

under review to discharge its responsibilities as set out

in the committee’s terms of reference.

The chief executive, financial director, external audit

engagement partner and head of internal audit attend

meetings by invitation, but do not enjoy voting rights.

During the year under review the audit committee

discharged its functions as follows:

examined and reviewed the annual financial

statements and interim reports and recommended

that they be adopted by the board;

reviewed and approved the scope of the annual audit

and audit fees;

approved the internal audit plan and fee;

reviewed reports from the internal auditors;

considered material financial and operating issues

relating to the group subsidiary companies and

approved the subsidiary companies financial

statements;

pre-approved non-audit and ad hoc services to be

rendered by KPMG for the year ahead; and

reviewed and verified the independence of the external

auditor and recommended the re-appointment of

KPMG as external auditor, subject to shareholder

approval at the forthcoming annual general meeting.


The primary function of the committee is to ensure that

the company’s executive and divisional directors are

remunerated for their individual contributions to the

overall performance of the company on a basis that is

reasonable, competitive and fair. In order to effectively

fulfil this function, the committee makes use of the

services of specialist remuneration consultants to

provide benchmarking data and advice.

Executive and divisional directors’ remuneration

packages comprise:

base salary;

benefits which include retirement funding, medical

cover and car allowance;

short-term incentives which are calculated with

reference to performance related formulae; and

long-term incentives through participation in the

company’s Share Appreciation Right Scheme and

Deferred Bonus Plan.

The committee, on the advice of executive management,

makes recommendations to the board in respect of the

fees to be paid to the non-executive directors for their

services as members of the board and its various

sub-committees. These fees are independent of the

company’s financial performance and once adopted, but

prior to implementation and payment, are submitted to

the shareholders for approval at the company’s annual

general meeting.

The company, and more specifically the audit

committee, is aware of the new Listings Requirement to

appoint a finance director to the board by 30 June

2009. The committee is pleased to report that this

requirement has already been met and is further satisfied

that the financial director has the necessary expertise

and experience to manage the company’s finance

function.

On the recommendation of the committee, the board

annually considers and assesses the going concern

assertion in the interpretation of financial statements

at year end. At the interim reporting period, a similar

process is followed to enable the board to consider

whether or not there is sufficient reason for this

conclusion to be affirmed.

The committee meets, at least once annually, with both

the external and internal auditors, and without

management present, in order to discuss any issues

relevant to the audit.

Remuneration and nomination committee

The committee which comprises three non-executive

directors, two of whom are independent, met three

times during the period under review.

The chief executive attends meetings by invitation,

but does not participate in discussions relating to

his remuneration and benefits.



The year under review saw the first awards being made

under the new Share Appreciation Right Scheme 2007

(“SAR Scheme”) and Deferred Bonus Plan 2007 (“DBP”).

Both the SAR Scheme and the DBP support the

principle of aligning management and shareholder

interests with performance conditions.

Risk committee

The committee’s primary function is the identification

of risk, to measure its potential impact and initiate,

implement and manage mitigating strategies to reduce

the company’s exposure to an acceptable level. Risk

management is therefore essentially an operational

function. As a result, the seven member committee

comprises a majority Exco members. The remaining

members of the committee are independent non-

executive directors, one of whom acts as chairman.

The committee met three times during the year under

review to:

conduct the annual review of the group risk register,

and where necessary, re-rank, in terms of severity and

probability, existing risks; add and rank new risks;

where necessary, delete certain risks; and identify

opportunities where effective risk management can be

turned into a competitive advantage;

consider the chief executive’s report on the current

status with regard to key risks;

consider whether any issues have come to light which

impact the risk profile of the company and require

amendment to, or inclusion in, the Risk Register;

consider health and safety requirements, particularly

food hygiene;

ensure that adequate disaster recovery processes are

in place; and

ensure that all insurable risks have been adequately

covered.

At an operational level the risk management process

is managed through the hotel risk register, which

comprises those risks in the group risk register that have

a direct impact on the hotel properties forming part of

the group. The hotel risk register is a standing agenda

item on the divisional directors’: operations, quarterly

operational visits.

The head of internal audit meets with the chief executive

and financial director on an annual basis in order to

determine whether internal audit will be able to provide

further assurance on the company’s risk management

controls. It was agreed, during the year under review,

that the internal auditors review the company’s

compliance with the third report of the King Commission

on Corporate Governance, once it is published, in order

to ascertain whether there are any areas of compliance

that require improvement. As at the date of this report,

the review has not commenced.


on the City Lodge audit for a number of years. His

knowledge and expertise in the field of accounting

and finance is a welcome addition to Exco.

The period also saw an expansion to the portfolio of

Andrew Widegger, the financial director, with the

company’s property and development and international

expansion portfolios being entrusted to him.

In anticipation of the completion of the 10 announced

new hotels, Ross Phinn was appointed to Exco as the

fourth divisional director: operations. Ross has been with

the company for 11 years and has held various

managerial positions, with the most recent being that

of general manager of City Lodge Johannesburg –

Airport Barbara Road.

Exco now comprises 11 members.

Management development and succession

committee (“MANDASCO”)

The committee comprises eight members, Heather

Prinsloo and Ross Phinn having been appointed to the

committee during and post the year under review,

respectively.

The purpose of the committee is to meet the company’s

objectives of attracting and retaining the appropriate

level of talent, thereby ensuring that the company

maintains an adequate succession and talent

development plan. In addition, it supports the identified

talent in order that they may reach their potential and

Executive committee (Exco)

Exco meets every six to eight weeks and convened six

times during the year under review to assist the chief

executive in the discharge of the obligations delegated

to him by the board. These include ensuring the effective

control of the company’s operations, making

recommendations to the board with regard to the

company’s strategic imperatives and key policies,

implementing the policies and strategies adopted by

the board and delivering budgets and financial reports

to the board for consideration.

The year under review saw the following appointments

take place:

Heather Prinsloo – divisional director:

transformation

Heather is responsible for ensuring that the company,

following the implementation of the BEE transaction,

achieves its transformation objectives, including the

achievement of charter targets for procurement from

black empowered entities, investment in socially

responsible projects and assisting in the development

of black owned enterprises in a manner that is both

sustainable and that benefits the business of the

company; and

Alastair Dooley – divisional director: financial

Alastair is a qualified chartered accountant.

He comes to the group from KPMG, having served



develop the necessary proficiencies required to succeed

in an ever-changing and challenging environment, whilst

at the same time, ensuring that the company makes a

meaningful contribution to transformation initiatives by

achieving the targeted level of employment equity.

Three meetings were held during the year under review:

to ensure that the company maintains an adequate

succession and talent development plan by –

identifying suitable candidates to populate the

respective succession pools; and

compiling, executing and monitoring individual

development plans for succession pool members,

to enable them to reach their full potential and

develop the requisite skills and expertise

necessary to suitably qualify them for the position

for which they are being developed;

to monitor the company’s transformation initiatives

with regards reaching the targeted level of

employment equity by identifying individuals for

participation in the accelerated development and

deployment programme and monitoring the progress

of existing candidates.

Internal audit function

The internal audit function, as carried out by KPMG

Services (Pty) Limited, is an independent, objective,

assurance and consulting activity, designed to add value

and improve the company’s operations. Internal audit

operates within pre-approved terms of reference to

assist the company in meeting its objectives by bringing

a systematic, disciplined approach to evaluate and

improve the effectiveness of internal financial controls

and governance processes.

The internal audit function provides:

assurance that the management processes are

adequate to identify and monitor significant risks;

confirmation of the effective and efficient operation

of the established internal controls;

assurance that management’s actions are such that

they maintain or enhance the capability of the entity

as a going concern; and

objective confirmation that the board receives the

right quality of assurance and information from

management and that this information is reliable.

Internal audit reports to the audit committee, which in

turn approves the duties, areas and scope of audits and

costs for the year, taking account of changing business

needs and monitors performance against the plan.

While the head of internal audit is administratively

accountable to the financial director, she has

unrestricted access to the chief executive and chairman

of the audit committee. The internal auditors attend all

audit committee meetings, by invitation, at which they

present reports highlighting audit area ratings per

hotel and summarise internal audit activities.

Where necessary, follow-up audits and/or corrective


Directors have unlimited access to the services of the

company secretary.

Price-sensitive information and share dealings

In terms of company policy, no director, the company

secretary and certain senior employees who, by virtue of

their employment, may have access to price sensitive

information may deal, whether directly or indirectly, in

City Lodge shares on the basis of unpublished price-

sensitive information.

Dealing in City Lodge shares is furthermore prohibited

during closed periods, namely:

from the end of the interim and annual reporting

periods until the day following the announcement of

the company’s results for the relevant period; and

any period when the company is trading under a

cautionary announcement or is negotiating a major

transaction and an announcement relating thereto

is imminent.

Directors and the company secretary are required to

obtain prior written approval from the chairman of

the board, or in his own case, any other designated

director, before dealing in City Lodge shares. Details

of dealings are advised to the JSE, via the

company’s sponsor, for publication on the Securities

Exchange News Service.

action is taken to address control deficiencies and where

opportunities present themselves, to improve existing

systems of control. The audit committee is pleased to

report that, during the year under review, no incidents

indicating a material breakdown in internal controls was

reported.

The audit committee, having regard to representations

by the internal and external auditors, remains confident

that despite the two audit functions being carried out by

the same audit firm, there is adequate segregation

between the two functions to ensure that their

independence is not compromised.

Company Secretary

The company secretary provides the board, as a whole,

and directors, individually, with guidance on the

discharge of their responsibilities. She serves as the

central source of information and advice to the board

and within the company on matters relating to good

governance.

It is the company secretary’s responsibility to ensure that

the proceedings and affairs of the board, the board

sub-committees, the company itself and, where

appropriate, shareholders are properly administered in

accordance with relevant legislation. She also assumes

responsibility for compliance with the Listings

Requirements and administers the statutory

requirements of the company and its subsidiaries

as well as the various share schemes.



All dealings in securities by directors and senior

employees are effected through the office of the

company secretary who maintains a record of requests

for dealing and clearances and a report of directors’

dealings is tabled at each meeting of the board.

Stakeholder communication

The company is committed to providing all stakeholders

with regular, timeous, honest and relevant information on

both financial and non-financial matters.

The chairman of the board, chief executive and financial

director regularly engage with institutional investors,

analysts and the media, with due regard for statutory,

regulatory and other directives and guidelines prohibiting

the dissemination of unpublished price-sensitive

information by the company and its directors.

Shareholders are encouraged to attend the annual

general meeting at which they are afforded the

opportunity to put questions to the board and chairmen

of the respective board sub-committees.

The company makes use of the City Lodge website,

www.citylodge.co.za, Securities Exchange News Service

and the print and radio media as a means of providing

interested parties with financial (including interim and

annual reports), business and other company related

information.

Litigation and legal

The company is subject to various legal proceedings,

actions and claims in the normal course of business,

which, being subject to risks and uncertainty, cannot be

reliably predicted. Notwithstanding the aforegoing, the

board does not believe that there is any legal action,

pending, threatened or ongoing, that will have a material

effect on the operations of the company.

Ethics and code of conduct

The company, in its pursuit of excellence, is bound to

the values and principles enshrined in the company’s

code of ethics which addresses its relationships with

shareholders, guests, suppliers, employees and

government.

Exco continuously monitors all matters of an ethical

nature. The company has also established the Business

Abuse Hotline, a 24-hour alert line outsourced to

Employer’s Mutual Protection Services (Pty) Limited

which affords employees the opportunity to report

perceived cases of unethical or corrupt behaviour,

anonymously. All reports are investigated and, where

appropriate, action is taken.

The company is pleased to report that no incident or act

indicating a material breach in the required standard of

ethical behaviour has been reported during the period

under review.


environment. Therefore the following areas of its

operations are highlighted as being deemed to have an

impact:

Energy consumption (electrical).

Water consumption (cleaning, laundry and guest

usage).

Waste water (sewage, laundry and kitchen).

Air quality and pollution (laundry, kitchen emissions

and non-smoking areas).

Recyclable waste (paper, glass, aluminium cans and

steel cans).

Energy consumption

In its operations, the group uses only electrical energy

as supplied by Eskom or the relevant municipalities.

Energy efficient generators have been installed in all of

our hotels. The generators will provide only essential

services to minimise load and therefore diesel usage and

emissions. The majority of this consumption is divided

between hot water boilers, air-conditioning, lighting and

on-site laundry equipment.

As the majority of hotels do not have large public areas

this consumption is in turn dictated by the levels of room

occupancy enjoyed by the hotels. The group is in the

process of installing additional energy efficient lighting

and further exploring innovative ways of reducing our

energy consumption. Plans are afoot to drive an

awareness programme for both guests and employees

Environmental sustainability

Introduction

Corporate environmental responsibility is regarded as a

key performance area for all our hotel management and

as such their compliance with group policies in this

regard is taken into account when assessing their overall

performance. The group is guided in this regard by

Responsible Tourism guidelines, developed prior to the

World Summit on Sustainable Development in 2003, that

are in accordance with the World Tourism Organisation’s

code of ethics, broad ISO 14001 best practice and the

International Hoteliers Environmental Initiative.

The group continues to explore innovative ways to

reduce its carbon footprint. Increased consumer

awareness of global environmental issues has further

strengthened our commitment to apply more effective

energy and water management procedures and policies.

With our mission to educate and motivate environmental

lifestyles choices through our guests and staff, the

world’s largest and most experienced conservation

organisation, World Wide Fund for Nature (“WWF”) has

come on board to provide guidance and expertise.

Environmental impacts

While the nature and location of the group’s operations

are considered to be of low impact, the group

acknowledges that even at this level it, like any other

facility or household, does have an impact on the



with regards to their responsibility towards conserving energy. The group has determined that the measurement of total

energy consumption in a hotel should be expressed on a “per occupied room” basis, and by brand thus allowing for

comparative reporting with a view to maintaining or even reducing levels of consumption year-on-year, where possible.

Brand

kWh peroccupied room

(2008/2009)

kWh peroccupied room

(2007/2008)

Cost peroccupied room

(2008/2009)


(2007/2008)

Courtyard 355 348 R17,82 R9,34City Lodge 370 281 R12,10 R6,41Town Lodge 261 268 R15,68 R6,49Road Lodge 202 117 R9,30 R3,76

Water consumption

All water for supplying guest rooms and for use in the laundries and kitchens is drawn from municipal supply. In isolated

instances, borehole water is used to supplement municipal supply for garden watering purposes. In its endeavour to

reduce water consumption, the group has embarked on an awareness programme together with the World Wide Fund

for Nature. The majority of the group’s water is consumed in the hot water boilers and in the on-site laundries.

As with energy, this consumption is dictated by the levels of occupancy enjoyed by the hotels, and the group has

therefore determined that the measurement of total water consumption in a hotel should also be expressed on a “per

occupied room” basis and by brand, thus allowing for comparative reporting with a view to maintaining or even reducing

levels of consumption year-on-year, where possible.

Brand

kl peroccupied room

(2008/2009)

kl peroccupied room

(2007/2008)


(2008/2009)


(2007/2008)

Courtyard 0,72 0,62 R7,96 R3,95City Lodge 0,44 0,53 R3,99 R2,83Town Lodge 0,76 0,45 R5,76 R6,68Road Lodge 0,68 0,43 R4,06 R2,37


may contribute to a decrease in consumption. The most

effective measures in use at present are as follows:

hot water boilers are set to heat water at night, in

off-peak periods. This hot water is then stored for use

the following day and distributed via heat pumps to

the rooms;

air-conditioners are set to switch off automatically at

four preset times every day. This curbs wasted energy

consumption when air-conditioners are inadvertently

left on by guests;

on-site laundry equipment usage is carefully monitored

and a programme of regular maintenance ensures that

equipment is operating optimally. Machines are

pre-set to operate on specific cycles, ensuring

efficient usage of energy;

the usage of energy-efficient globes continues to

contribute to a reduction in energy consumption; and

all hotels and staff continue to participate in a

programme called “Switch off Something” which

involves being aware of energy usage and taking

active steps to reduce it, such as switching off lights

and electrical equipment in vacated rooms,

storerooms and staff areas.

Water consumption

As with energy consumption, new technologies are

continually being assessed in order to ascertain how

the plumbing in new-builds should be set up and

Waste water

The addition of chemicals and kitchen greases to waste

water, as well as the discharge of swimming pool water,

constitute the main concerns in this regard.

Air quality and pollution

The group hardly has an impact in this regard and the

output of airborne emissions that the group is directly

responsible for, is limited to those created by laundry

and kitchen extraction. In addition, however, the group

considers and acts upon issues surrounding air quality

within its hotels, anti smoking legislation and ozone

harmful substances.

Recycling

Once again, although it does not engage in activities

which produce large amounts of recyclable waste

material, the group does leverage opportunities

which exist to recycle paper, glass, aluminium and

steel cans.

Mitigating strategies and actions

Energy consumption

The mitigating strategies put in place to alleviate

excessive consumption do not necessarily alter from

year to year, with successful programmes being followed

continuously. The group does, however, engage in an

ongoing review of technologies and methodologies that



what equipment should be put in place. New

legislation aimed at governing water usage is also in

the offing and the group is providing input into the

measures under consideration. Mitigating strategies

put in place to alleviate excessive consumption are

as follows:

guests are informed that water is a precious

resource and should be used sparingly.

Additionally, guests are given the option of retaining

towels by placing them on the towel rails, which

contributes to a reduction in the number of items

to be laundered and, consequently, the water

consumed;

rooms are fitted with dual-flush toilets to allow

guests the opportunity to use less water and hand

basins, showers and taps are fitted with diffusers

that restrict flow without detriment to pressure;

the use of laundry equipment is carefully monitored

and staff members are provided with

comprehensive training to ensure the correct

loading of machines and load planning;

the timing of garden watering is electronically

controlled to ensure minimal evaporation; and

all hotels and staff continue to participate in a

programme called “Close a Tap” which involves

being aware of water consumption and taking

active steps to reduce it, such as not running taps

while cleaning and attending to maintenance

issues.

Waste water

Mitigating strategies put in place to minimise the addition of

harmful effluent into the environment by way of municipal

sewerage systems include:

exclusive use of bio-degradable and eco-friendly chemicals

in all cleaning and laundry operations;

all guest supplies in the form of soaps, shampoos and foam

bath liquids are bio-degradable;

all hotels are fitted with grease traps to ensure that kitchen

and food greases are removed from waste water before it

enters municipal systems; and

salt chlorinators are used to maintain pool hygiene and

minimise the use of chemicals.

Air quality and pollution

Mitigating strategies put in place to minimise the effect the

group may have in this regard include:

the effective filtration of kitchen and laundry extraction with

regular monitoring and maintenance of the extraction and

filtration systems;

ensuring that cleaning materials and air fresheners are not

dispensed by aerosol;

compliance with legislation – where the group has ensured

that all public areas in its hotels are smoke-free areas, with at

least 30% of rooms in all hotels being smoke-free and certain

accommodation floors also declared completely smoke-free;

and

the use of ozone-friendly refrigerants in all cooling equipment.


To develop and empower disadvantaged communities

in the social, economic and environmental spheres for

the sustainability and long-term growth of the company.

To build and improve relationships with the company’s

existing and potential stakeholders, through forming

mutually beneficial partnerships.

To create and enhance City Lodge’s reputation as a

caring corporate citizen.

To attract quality socially responsible staff to the

company, as well as retain and enhance the loyalty and

pride in the company of existing staff.

To increase customer goodwill and loyalty through the

strategic positioning of City Lodge as a leading

contributor in the development of disadvantaged people

in the hospitality industry.

Assistance provided includes:

Donations in cash and kind to various institutions and

organisations nationwide.

Experiential training opportunities are provided to

educational and community development institutions

that offer hospitality courses.

Lectures at institutions of higher learning and at high

schools.

Participation in career days.

Ubuntu Ba Bantu Social Responsibility Programme

In order to maximise our impact on the communities in

which we operate, we have divided our Ubuntu Ba

Bantu Programme into three initiatives, namely a

Recycling

The group continues in its partnership with a number of

organisations/companies which are engaged in this respect,

including SAPPI, Mondi, Enviroglass and Collect-a-Can, in

order to ensure the efficient and beneficial recycling of

materials.

Social sustainability

Introduction

City Lodge Hotels Limited recognises the historical disparity

of previously disadvantaged communities. The group has

therefore developed a Corporate Social Investment (“CSI”)

policy which is aligned to the company’s strategy and which

contributes to the company’s overall mission and vision.

The group’s CSI Programme is deliberate, focused,

coherent and progressive, with the intent purpose of

impacting the lives of communities in which we reside.

Corporate Social Investment

The City Lodge – Ubuntu Ba Bantu Social Responsibility

Programme

Objectives

The objectives of the City Lodge CSI Programme is as

follows:

To make a positive, sustainable impact on the

communities in which City Lodge operates through

investing in improving the quality of life of disadvantaged

communities.



e-CSI

Our guests continue to actively participate in this very

successful scheme, where guests are involved in the

decision making with regards to the allocation of part of the

group’s CSI spend. Guests, who book on-line, are

encouraged to nominate one of three organisations they

would like us to allocate the sum of R5,00 per reservation

they have made. There has been a significant increase in

the number of on-line bookers who have indicated a charity

of choice when making a reservation, resulting in a

significant growth in the amounts handed over to the

following organisations, who received biannual funding

from this programme:

Operation Hunger

The Society for Animals in Distress

The South African Golf Development Board

We have recognised that in order to maximise the impact of

e-CSI initiatives, they have to be aligned to the City Lodge

Hotels strategic objectives, as well as to the codes of good

practice. As a result we had to bid farewell to The Society

for Animals in Distress and consider a strategic green

partnership.

With our mission to educate and motivate our

guests and employees with environmental

lifestyle choices, we have partnered with World

Wide Fund for Nature (WWF). WWF’s mission

is to stop the degradation of the planet’s

natural environment and to build a future in

Flagship Project, Group Wide CSI Initiatives and an

individual Hotels’ SED (socio-economic development)

Programme.

Flagship Project

The group extended a call for proposals inviting

organisations to apply for funding for projects or

programmes providing skills training and development

in the hospitality sector. All respondents were

evaluated against the SA Social Investment Exchange

(SASIX) criteria. The funding was awarded to Jobstart

Training Centre, a programme of Catholic Welfare

Development, based in Cape Town. The funding

provided will enable Jobstart to empower

20 unemployed, historically disadvantaged people

and train them in marketable skills in the hospitality

Industry. The group has pledged to provide experiential

training opportunities to the trainees and further assist

Jobstart in an advisory capacity.

Group wide CSI Initiatives

Having a national footprint the group continues to

encourage staff and guests alike to meaningfully and

voluntarily embrace the valuable contribution they can

make toward social sustainability. We do this by

creating an opportunity for our guests to participate in

our e-CSI programme and Cuppa-for-Cansa project.

Our Staff are encouraged to voluntarily participate in

Payroll Giving.


donations of linen and furnishings, staff volunteerism,

cash donations, prizes for fund raising, as well as the

organising of fundraising events:

Alexandra Society for the Care & Welfare of

the Aged

Avril Elizabeth Home

Banakekeleni Hospice

Boys & Girls Town

CANSA

C.H.A.N.C.E. (Children’s Home & Nurturing Centre)

Christelik-Maatskaplike Raad, Rustenburg

Chubby Chums for the Children’s Home

Cotlands

Ebenezer Village, Atlantis, Cape Town

Enochs Walk

EP Children’s Home

Institute for the Blind

Lions

Matla a bana

Muriel Brand School

Nkosi Foundation

Nomads Bowls Southern Africa

Oliver’s House

Rotary

Shanti Nilays Hospice-in-the-West

Shekinah Care Centre

St Johns Ambulance Foundation

which humans live in harmony with nature. WWF

becomes one of our new e-CSI beneficiaries.

Cuppa-for-Cansa

The group’s involvement in the project continues and sees

the Road Lodge brand hotels pitted against one another

annually to see which hotel can produce the largest

contribution for Cuppa-for-Cansa. Proceeds are drawn

from hot beverage sales in the public areas. Once again,

our Road Lodge N1 City has contributed the largest

amount to the project.

Payroll Giving

In line with our philosophy of being “People Caring for

People” we have facilitated a process with The Giving

Organisation, whereby our employees request a payroll

deduction every month to be paid over on their behalf to a

basket of organisations.

Hotel SED (Socio-economic Development)

The various hotels in the group, each support a local

NGO. The hotels support the NGOs listed below through



Empowerment and Transformation

Transformation is one of the group’s strategic imperatives.

The group’s approach to empowerment and transformation

is broad based and holistic and aims to create a culture of

shared vision as well as growth and development of the

group. A divisional director responsible for transformation

has been appointed to direct and focus the group’s

transformation strategy.

The group’s empowerment journey began with the

conclusion of the BEE Ownership deals and the verification

of their B-BBEE status against the dti Codes of Good

Practice. A consolidated verification certificate was issued

by EmpowerLogic, recognising City Lodge Hotels Limited

as a Level 6 contributor to B-BBEE.

Being a value adding vendor, City Lodge receives a BEE

Procurement Recognition level of 75%. It is the group’s

firm intention to become a level 5 contributor in the

short-term and a level 4 in the medium-term.

The Tourism Sector Codes were gazetted in May 2009.

The Tourism Sector Codes follow the same principles and

methodologies of calculating B-BBEE compliance as the

dti Codes of Good Practice. The group’s future scorecards

will be measured against these codes.

Preferential Procurement

City Lodge Hotels recognises preferential procurement as

an effective instrument to promote transformation. While

ensuring that all suppliers are treated fairly and within the

St Vincent’s School for the Deaf

Tents of Sharon

The Action for Blind and Disabled Children

The Haven Care Centre

The South African Red Cross Society

Tumelo Home

United Cerebral Palsy Association of South Africa

Vusababantu-Tsoabatho Aids Project

Wayside Shelters

Woodside Special Care Centre, Cape Town


framework of its procurement policy, the group will

continue to make procurement readily available to

black suppliers. We continue to engage with our

non-compliant suppliers, encouraging them to transform

with the group. The group meets the definition of a

Level 5 contributor towards broad based black

economic empowerment in terms of the preferential

procurement of the company.

Enterprise Development

Enterprise Development is well integrated into our

transformation strategy. The group’s preferential

procurement framework and policy also acts as a

catalyst in identifying enterprise development initiatives.

The group currently supports several new black

entrepreneurs through our Enterprise Development

Support Programme. The group continues to provide

concierge desks to black owned tour operators in some

of our hotels in Cape Town and Durban. Enterprise

Development support has been provided to Afriboom

(Pty) Limited, a specialised cleaning company, in the

form of an interest free loan. Afriboom (Pty) Limited has

been successful in tendering for the cleaning contract

for our Gauteng Hotels. The support provided to

Afriboom has enabled them to employ 663 active staff

and further grow the enterprise by securing further

cleaning contracts.

Further opportunities, involving participants in the

group’s supply chain and through collaboration with

Tourism Industry Stakeholders, have been identified

and these will be pursued.

Employment equity

The group will submit its fourth employment equity plan

for the period 2009 to 2014 in October 2009. The

planned achievements in this fourth plan are intended

to mirror the targets that are reflected on the BBBEE

Scorecard for the same period. The employment equity

consultative committee meets at least bi-annually to

assess progress towards the achievement of

quantitative goals, as well as to consider the qualitative

elements which may influence the aforesaid

achievements.

The committee is representative of all individuals in

the company, and is currently chaired by the human

resources director and enjoys the participation of

the representative trade union.



The table hereunder indicates the achievements of the group against its planned goals in terms of its third employment

equity plan (2006 – 2009) at the end of the third year.

Planned Goals 2009 Achieved 2009

Occupational Category White Designated* % White Designated* %

Legislators / Senior Officials and Managers 111 118 52 127 118 48

Professionals 3 4 57 6 5 45

Clerks 95 190 50 90 230 72

Service and Sales Workers 3 135 100 1 135 100

Craft and related trade Workers 1 33 97 3 28 89Elementary Occupations 0 205 100 0 155 100

*Designated includes Africans, Coloureds, Indians and disabled

Legislation now requires that the following table be displayed in respect of the company’s employee profile

(as at 30 June 2009).

Male Female Foreign nationals

Occupational level African Coloured Indian African Coloured Indian White

Whitemale Male Female Total

Top management 1 1 8 10Senior management 3 1 1 20 30 55Middle management 4 1 1 7 2 1 13 24 53Junior management 23 9 48 14 4 18 21 137Discretionary decision making 81 23 3 144 45 10 68 20 1 1 396Defined decision making 72 11 125 36 3 247Total permanent 183 45 5 325 98 15 119 106 1 1 898Non permanent 4 1 11 2 4 1 23

Grand total 187 46 5 336 100 15 123 107 1 1 921


qualifications framework upon which the group

places emphasis in terms of the achievement

of national qualifications.

The committee has had the opportunity of endorsing

the report on the achievements against the 2008/09

Workplace Skills Plan as well as to confirm

development and training needs as outlined in the

2009/10 Workplace Skills Plan. All grants available

to the company have now been paid out by THETA

for the previous period.

While the City Lodge Academy continues to form

the basis of the group’s efforts to develop a pool

of previously disadvantaged management level

employees the group has additionally developed

an Accelerated Development and Deployment

Programme in order to attract and retain suitable

external and internal candidates who are to be fast

tracked to senior management positions within

the group.

Remuneration, Benefits and Incentives

The group’s remuneration policy allows for the

attraction and retention of talent, and the market

is surveyed on a regular basis to ensure that this

remains the case. In addition to market-related

salaries, employees at all levels throughout the

group enjoy benefits such as retirement funding,

medical aid, annual bonuses and a loan scheme for

Human Capital

In a scarce skills environment, the group is

consistently growing its ability to attract and retain

talent. In this regard, the group is currently working

towards achieving group wide recognition against

the Investors in People standard, with all its hotels

having achieved the standard thus far and central

office currently undergoing assessment.

Achievement of the standard would demonstrate the

group’s ongoing commitment towards growing and

empowering its people. Clearly defined career

pathing and succession planning, along with market

related remuneration

and excellent working

conditions and benefits,

all contribute towards

making the group an

employer of choice in

the industry.

Training and development

The skills development committee continues to meet

several times annually in order to determine skills

development needs in the group. The committee

has been given the capacity to deal with skills

development issues and committee members are

therefore knowledgeable both with regards to

legislation surrounding skills development and the

administrative requirements of the national



The group currently recognises, and has a

relationship agreement, with one trade union,

SACCAWU, which is representative of less than

25% of its employees.

The group continues to use its programme

“High Performance People” as the model for its

ER, and courses are held periodically for supervisors

and management. This programme is also made

available to shop stewards to ensure complete

understanding of the company’s policies and

procedures. These procedures have also recently

been revised to reflect current best practice and a

fresh round of training for management, supervisors

and shop stewards has been completed.

Health and Safety

Although the group’s properties do not represent

dangerous working environments, all necessary

precautions and measures are taken to ensure the

safety of its employees and guests. All properties

adhere to strict guidelines in terms of monitoring and

implementing Health and Safety requirements.

Health and safety training, in respect of fire

prevention/fighting as well as basic first aid, is

mandatory for all staff, and competency gained in

this regard is recognised as prior learning in respect

assistance with the education of employees’

dependants. Long-service awards are also

presented at 5, 10 and 20-year anniversaries.

Top, senior and middle management employees are

entitled to participate in a performance and appraisal

linked bonus scheme “PAL” which measures both

quantitative and qualitative achievements in terms of

key performance areas. Top and senior management

are furthermore entitled to participate in the Share

Appreciation Rights Scheme.

All other levels of staff are participants in the 10th

Anniversary employee share trust scheme; also

know as Sizovuna or “Share Shares”. Participation in

this scheme allows for an annual dividend payout to

each participant as well as a distribution of shares,

which is dependent on the annual share price

performance. In addition to this scheme the newly

established “Injabulo” employee share ownership

scheme will, in time, allow further benefits to flow

to employees in this manner.

Employee and Industrial Relations (“ER”

and “IR”)

The group approaches ER and IR issues with an

inclusive view, preferring to invite participation on all

substantive issues that may have an effect on the

employment relationship or on employees’

conditions of work.


highlighting the behaviour/practices which expose

them, and their communities, to the danger of

contracting HIV/AIDS.

This commitment to HIV/AIDS awareness includes:

the display of the City Lodge Policy on HIV/AIDS

and the availability of the Code of Good Practice

in each workplace in the company;

availability and display of HIV/AIDS related material

published by the Department of Health and

non-governmental organisations;

copies of the abovementioned literature

distributed on a regular basis;

training and refresher courses on the subject; and

the facilitation of easy and confidential access to

counselling for all employees.

In conjunction with the employment equity

committee and the representative trade union, the

group has ascertained the interventions required to

ensure that the number of employees infected with

HIV/AIDS is kept to a minimum and that efforts are

made to assist those who are infected to enjoy

quality of life, thereby allowing for their continued

contribution.

of generic health and safety units within various

National Qualifications available to staff.

Compliance with health and safety policy and

legislation is reviewed as a part of the internal audit

procedure. In addition, the group maintains its

commitment to ensuring that levels of hygiene,

compliant with HACCP (Hazard Analysis of Critical

Control Points) legislation, are maintained at all the

group’s properties.

The group also ensures that all contractors engaged

in the delivery of services to the group are equally

compliant in terms of their adherence to health and

safety requirements.

HIV/AIDS

The group’s policy on HIV/AIDS states that the

group endeavours to create an environment in the

workplace which is non-discriminatory towards, and

supportive of, employees living with HIV/AIDS.

The group has also recognised its social

responsibility towards assisting in the eradication of

the HIV/AIDS pandemic by informing all its

employees of the dangers of HIV/AIDS and


administration and contact details


Incorporated in the Republic of South Africa

Registration number 1986/002864/06

ISIN: ZAE 00011 7792

Share code: CLH

COMPANY SECRETARY

M C van Heerden

REGISTERED OFFICE

The Lodge

Bryanston Gate Office Park

Corner Homestead Avenue and Main Road

Bryanston

PO Box 97

Cramerview, 2060

Telephone: +2711 557 2600

Facsimile: +2711 557 2670

Email: [email protected]

Websites: www.citylodge.co.za

www.bid2stay.co.za

TRANSFER SECRETARIES

Computershare Investor Services 2004 (Pty) Limited

70 Marshall Street

Johannesburg, 2001

PO Box 61051

Marshalltown, 2107

AUDITORS

KPMG Inc.

BANKERS

The Standard Bank of South Africa Limited

ATTORNEYS

Edward Nathan Sonnenbergs

SPONSOR

J P Morgan Equities Limited


annual financial statements

Directors’ responsibility statement

Certificate by the company secretary

Independent auditor’s report

Directors’ report

Accounting policies

Balance sheets

Income statements

Cash flow statements

Statements of recognised income and expenses

Reconciliation of movement in capital and reserves

Notes to the financial statements

66

66

67

68

72

78

79

80

81

82

83


The company’s directors are responsible for the preparation and fair presentation of the group annual fi nancial statements and separate parent annual fi nancial statements, comprising the balance sheets at 30 June 2009, and the income statements, the statements of recognised income and expenses and cash fl ow statements for the year then ended, signifi cant accounting policies and the notes to the fi nancial statements, and other explanatory notes, and the directors’ report, in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of South Africa.

The directors’ responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of these fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

The directors’ responsibility also includes maintaining adequate accounting records and an effective system of risk management as well as the preparation of the supplementary schedules included in these fi nancial statements.

The directors have made an assessment of the group’s and company’s ability to continue as a going concern and there is no reason to believe the businesses will not be going concerns in the year ahead.

The auditor is responsible for reporting on whether the group annual fi nancial statements and separate parent annual fi nancial statements are fairly presented in accordance with the applicable fi nancial reporting framework.

APPROVAL OF GROUP ANNUAL FINANCIAL STATEMENTS AND SEPARATE PARENT ANNUAL FINANCIAL STATEMENTS

The group annual fi nancial statements and separate parent annual fi nancial statements were approved by the board of directors on 30 September 2009 and signed on its behalf by:

C Ross A C Widegger

Chief executive Financial director

directors’ responsibility statement

I, the undersigned, in my capacity as company secretary, hereby confi rm to the best of my knowledge and belief that for the fi nancial year ended 30 June 2009, the company has lodged with the Registrar of Companies all returns required of a public company in terms of the Companies Act of South Africa and that all such returns are true, correct and up to date.

M C van Heerden

Company secretary

certificate by the company secretary


REPORT ON THE FINANCIAL STATEMENTS

We have audited the group annual financial statements and the annual financial statements of City Lodge Hotels Limited, which comprise the balance sheets at 30 June 2009 and the income statements, the statements of recognised income and expenses and cash flow statements for the year then ended, significant accounting policies and the notes to the financial statements, and other explanatory notes, and the directors’ report as set out on pages 68 to 115.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of South Africa. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

AUDITOR’S RESPONSIBILITY

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

OPINION

In our opinion, these financial statements present fairly, in all material respects, the consolidated and separate financial position of City Lodge Hotels Limited at 30 June 2009, and its consolidated and separate financial performance and consolidated and separate cash flows for the period then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa.

KPMG Inc.

Registered Auditor

Per G Parker

Chartered Accountant (SA) Registered Auditor Director

30 September 2009

KPMG Crescent

85 Empire Road

Parktown

Johannesburg

independent auditor’s report to the members of city lodge hotels limited


NATURE OF BUSINESS

The group owns and operates high quality, affordable hotels targeted at the business community and leisure traveller.

FINANCIAL RESULTS

Group profit before taxation for the year amounted to R249,9 million (2008 – R333,9 million) whilst consolidated headline earnings totalled R131,8 million (360,2 cents per share, diluted) compared with headline earnings of R225,5 million (524,9 cents per share, diluted) for the previous year.

On a normalised basis, the consolidated headline earnings totalled R236,0 million (549,1 cents per share, diluted) compared with normalised headline earnings of R226,4 million (527,0 cents per share, diluted) for the previous year.

The company’s interest in its subsidiaries’ profit after taxation amounted to R7,3 million (2008 – R6,6 million).

DIVIDENDS

An interim dividend of 203,0 cents per share (2008 – 177,0 cents) was declared on 12 February 2009, payable to ordinary shareholders registered on 13 March 2009. A final dividend of 158,0 cents per share (2008 – 194,0 cents) was declared on 13 August 2009, payable to ordinary shareholders registered on 11 September 2009.

SHARE CAPITAL

There was no change in the authorised share capital of the company during the year under review.

The issued share capital increased by 142 050 shares as reflected in note 8.

The shares issued during the year were to participants in the executive employee share incentive scheme, in terms of share options exercised, at prices of between R6,50 and R57,33 per share.

ACCOUNTING FOR THE BEE TRANSACTION

The scheme of arrangement in respect of the BEE transaction was implemented on 28 July 2008. In terms of the scheme, the Injabulo Staff Trust (Staff Trust) acquired 6% of the then issued

share capital, Vuwa Investments (Pty) Limited (Vuwa) 6% and the University of Johannesburg School of Tourism and Hospitality Education Trust (Education Trust) 3%.

The total scheme consideration of R490,7 million was funded by the issuing of preference shares, which have been guaranteed by City Lodge, in the amount of R440,7 million and an equity contribution of R50 million by Vuwa.

At the time of implementation, an interest rate swap agreement was entered into whereby the rate was fixed for the period of the outstanding debt.

As a result of the residual risk in the transaction being borne by City Lodge, the three Special Purpose Vehicles (SPVs) are deemed to be controlled by City Lodge and they are therefore incorporated for accounting purposes.

The accounting effects of the transactions are as follows:

The terms of the funding are deemed to constitute an option and in the case of Vuwa and the Education Trust there is an upfront, once off IFRS 2 expense of R25,84 million which is reflected in note 20 as part of the BEE transaction charges and in the balance sheet under other reserves.

On incorporation, the preference share funding is reflected in the balance sheet as part of non-current liabilities as BEE preference shares whilst the preference dividends paid/accrued are included with the interest expense under BEE preference dividend.

Utilising the proceeds from the payment of the City Lodge final dividend in September 2008 and interim dividend in March 2009, the SPVs declared a preference dividend of R31,9 million of which R13,6 million in respect of the A preference shares was paid and R18,3 million in respect of the B preference shares was accrued and added to the balance sheet as part of the BEE preference share liability. In addition, A preference shares to the value of R12,4 million were redeemed.

An amount of R27,8 million was accrued in respect of the preference dividends payable as at 30 June 2009. Of this R3,9 million is in respect of the A’s which is payable in October 2009 and is included in current liabilities. The balance of R23,9 million is in respect of the B’s and has

directors’ report for the year ended 30 June 2009


been included in non-current liabilities as it is payable beyond one year’s time.

In terms of the interest rate swap, the interest rate was fixed at a rate slightly below the average rate payable in respect of the preference shares during the period. The result was a net settlement of R33 000 due to the SPVs as at 30 June 2009 in respect of the period under review. This is credited to the BEE preference dividend expenses.

In terms of IAS 39, the interest rate swap is required to be carried at fair value and marked up or down to market value through the Income Statement at each period end. The market value as at 30 June 2009 was determined and resulted in a loss of R26,5 million. This is reflected as part of the BEE transaction charges in note 20 and as a liability in the balance sheet under non-current liabilities.

In terms of IAS 39, the shareholder’s loan by Vuwa to the SPV is required to be recognised at its fair value (present value) at the time it was advanced because it is interest free. The written down amount is reflected under non-current liabilities as BEE shareholder’s loan, whilst the balance, after providing for deferred tax at 28% is included in other reserves. At each period end a notional interest charge, net of deferred tax, will be expensed through the income statement and the value of the loan in the balance sheet increased by the corresponding amount. The net notional interest charge for the current period is R1 280 000 and is reflected in note 20.

The investment in 6 390 365 City Lodge ordinary shares by the SPVs is reflected as a deduction from capital and reserves. In addition, they are deducted from the weighted average number of shares in issue when calculating earnings per share.

The dividends received by the SPVs on the City Lodge shares held by them are deducted from the dividends paid by City Lodge on incorporation.

The majority of the sundry expenses reflected in Note 20 as part of the BEE transaction charges relate to the stamp duties, legal fees, bank and other charges incurred as part of negotiating and arranging the transaction.

THE CITY LODGE SHARE APPRECIATION RIGHT SCHEME

At a meeting of the shareholders on 7 November 2007, a new share scheme was created for directors and certain employees of the company. This scheme replaces the City Lodge Executive Employee Share Incentive Scheme.

In terms of the scheme, employees will receive annual grants of SARs, which are conditional rights to receive shares equal to the value of the difference between the exercise price and the grant price. Vesting of the SARs is subject to performance conditions. The duration and specific nature of the performance conditions and performance period will be stated in the letter of grant and will be determined by the RemCom on an annual basis in respect of each new grant of SARs. The performance conditions that will be imposed will be no less stretching than the requirement that headline earnings per share (HEPS) should increase by 2% (two percent) per annum above inflation over a 3 (three) year performance period. Retesting of the performance conditions will be allowed in year four and five. After vesting, the SARs will become exercisable. Upon exercise by a participant, the relevant Employer company will settle the value of the difference between the exercise price and the grant price by delivering shares, alternatively, as a fall-back provision only, by settling the value in cash. SARs not exercised within the SAR period will lapse.

Movement in rights granted in the company in terms of the share appreciation rights scheme during the year are summarised below:

Total rights at 30 June 2008 —

Rights granted 627 225

Rights exercised —

Rights forfeited (16 250)

Total rights at 30 June 2009 610 975

The share-based equity settled option expense for the year ended 30 June 2009 is R3 376 867 (2008 – nil). Refer note 23.

THE CITY LODGE DEFERRED BONUS PLAN

Employees will be permitted to use a portion of the after-tax component of their annual bonus to acquire bonus shares. A simultaneous conditional matching award of shares will be


directors’ report for the year ended 30 June 2009 (continued)

made to the participant on the condition that the participant remains in the employ of an employer company and retains the bonus shares over the DBP period. The participant remains the owner of the bonus shares for the duration of the DBP period and will enjoy all shareholder rights in respect of the bonus shares. Bonus shares can be withdrawn from escrow at any stage, but the matching award is forfeited to the extent of the bonus shares withdrawn from escrow during the DBP period.

Movement in shares granted in the company in terms of the deferred bonus plan during the year are summarised below:

Total shares at 30 June 2008 —

Shares purchased 9 000

Shares sold —

Total shares at 30 June 2009 9 000

The share-based equity settled option expense for the year ended 30 June 2009 is R161 740 (2008 – nil). Refer to note 23.

THE CITY LODGE EXECUTIVE EMPLOYEE SHARE INCENTIVE SCHEME

Movements in options granted over shares in the company in terms of the executive employee share incentive scheme during the year are summarised as follows:

Total options at 30 June 2008 1 028 970

Options granted —

Options exercised (142 050)

Options cancelled (11 200)

Total options at 30 June 2009 875 720

Options are granted at the weighted average price of trades on the JSE during the ten trading days preceding the option date. The options are exercisable to the extent of 20% on the expiry of two years from the date of grant, a further 20% on the expiry of years three and four and the remaining 40% on the expiry of year five. In terms of the deed governing the scheme, a maximum of 7% of the issued ordinary shares may be utilised for purposes of the scheme. This option scheme has been

replaced by the City Lodge Share Appreciation Rights Scheme, but will remain in place for options granted under this scheme, until such time as these options are exercised or lapse. Details of options held by directors are included in note 16.

Share options are expensed in terms of IFRS 2. The current year’s expense was R2 302 748 (2008 – R2 714 264). Refer to note 23.

THE CITY LODGE 10TH ANNIVERSARY EMPLOYEES’ SHARE SCHEME

At a general meeting of shareholders on 18 December 1995, a share scheme was created for all employees other than those employees who participate in the City Lodge executive employee share incentive scheme. The company issued 1 000 000 new ordinary shares to the trust which were funded by means of an interest-free loan from the company for an amount of R34 million.

The following distributions were made in terms of the scheme:

Distribution date

Shares per eligible

employeeTotal shares distributed

December 1995 30 15 420

November 2005 55 38 445

November 2006 138 88 734

November 2007 214 137 388

279 987

In applying IAS 39 – Financial Instruments: recognition and measurement, on initial recognition, the carrying value of the loan is R12,7 million (2008 – R10,9 million) based on amortised cost.

SUBSIDIARIES AND JOINT VENTURES

Details relating to investments in subsidiaries and joint ventures are included in notes 2, 3 and 18.


DIRECTORATE AND SECRETARY

The directors in office during the year under review were: H R Enderle (Chairman), F W J Kilbourn, I N Matthews, N Medupe, S G Morris, B T Ngcuka, C Ross (Chief executive), K I M Shongwe and A C Widegger (Financial director).

In terms of the articles of association, Mr F W J Kilbourn, Mrs N Medupe and Mr S G Morris, retire at the forthcoming annual general meeting but are eligible and available for re-election.

SEGMENTAL INFORMATION

The group has one business segment situated in South Africa which is subject to the same risk profile and as such the group has identified one segment whose results are the same as presented in the balance sheet, income statement, cash flow statement and related notes.

DIRECTORS’ INTEREST

The directors’ individual interests in the issued ordinary share capital of the company at 30 June were as follows:

Beneficial

Direct Indirect

Director 2009 2008 2009 2008

H R Enderle 29 691 34 930 4 496 479 5 289 975

F W J Kilbourn 17 000 20 000 — —

I N Matthews 416 489 — —

N Medupe — — — —

S G Morris — — — —

B T Ngcuka — — 444 521* —

C Ross 14 440 27 423 — —

K I M Shongwe — — — —

A C Widegger 31 750 15 000 — —

Total 93 297 97 842 4 941 000 5 289 975

Directors were interested in 385 040 (2008 – 442 040) options to acquire ordinary shares in the company at 30 June 2009 under the executive share incentive scheme. No changes have taken place since that date as this scheme has been replaced by the share appreciation rights scheme and the deferred bonus plan. Details of options held by individual directors are included in note 16.

*Mr Ngcuka’s indirect shareholding reflects his proportionate share of the 2 556 185 shares owned by Vuwa Investments (Pty) Limited.

GOING CONCERN

The directors consider that the company has adequate resources to continue operating for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing the company’s financial statements. The directors have satisfied themselves that the company is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements.

MATERIAL POST-BALANCE SHEET EVENTS

There are no material post-balance sheet events.


REPORTING ENTITIES

City Lodge Hotels Limited (the “company”) is a company domiciled in South Africa. The consolidated financial statements of the company as at and for the year ended 30 June 2009 comprise the company and its subsidiaries (together referred to as the “group”) and the group’s interest in jointly controlled entities. The group operates in the hotel industry.

BASIS OF PREPARATION

Functional and presentation currency

The annual financial statements are presented in Rand, which is the company’s functional currency, rounded to the nearest thousand.

BASIS OF MEASUREMENT

The annual financial statements are prepared on the historical-cost basis and the accounting policies set out below have been applied consistently by all group entities to all periods presented in these financial statements.

The preparation of financial statements in conformity with International Financial Reporting Standards (IFRS) requires management to make judgements, estimates and assumptions that may affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period, or in the period of the revision and future periods if the revision affects both current and future periods.

In particular, information about significant areas of estimation, uncertainty and critical judgements, in applying accounting

policies that have the most significant effect on the amounts recognised in the financial statements is in relation to the following:

depreciation period for buildings (accounting policy note)

measurement of share-based payments (note 23)

measurement of impairment of trade receivables (note 26)

STATEMENT OF COMPLIANCE

The annual financial statements and group annual financial statements have been prepared in accordance with IFRS and its interpretations adopted by the International Accounting Standards Board and in accordance with the Companies Act of South Africa.

SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF CONSOLIDATION

The group annual financial statements include the financial statements of the company and its subsidiaries. The results of subsidiaries are included from/to their effective dates of acquisition/disposal.

Investments in subsidiaries and joint ventures are carried at cost less impairment in the company financial statements.

Subsidiaries

Subsidiaries are entities controlled by the company. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account.

Joint ventures

Joint ventures are those entities over which the group exercises joint control in terms of a contractual agreement. Investments in joint ventures are accounted for using the equity method. The group’s share of post-acquisition earnings of joint ventures is included in earnings attributable to ordinary shareholders from/to their effective dates of acquisition/disposal.

accounting policies


Special purpose vehicles

The group has established a number of special purpose vehicles (SPVs) for the purposes of the BEE transaction. The group does not have any direct or indirect shareholdings in these entities. The group has guaranteed the funding of the SPVs and accounts for these SPVs as being agents acting on behalf of their principal, the Company, resulting in the incorporation of the SPVs into the company and group financial statements.

Transactions eliminated on consolidation

Intragroup transactions and balances, and any unrealised income or expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.

PROPERTY, PLANT AND EQUIPMENT

Owned assets

Items of property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Costs include expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour and any other costs directly attributable to bringing the asset to a working condition for its intended use. Where significant components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Freehold land is stated at cost and is not depreciated. Freehold and leasehold buildings are stated at cost and depreciated over periods of up to 50 years as deemed appropriate to reduce carrying values to estimated residual values over their useful lives.

The group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when the cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced item is derecognised. All other costs are recognised in the income statement as an expense as incurred.

Borrowing costs incurred on funds raised to erect hotel buildings (qualifying assets) are capitalised up to the date that

the activities necessary to prepare the hotel for its intended use are substantially complete.

Depreciation is charged to the income statement to write-off the cost of the asset to its estimated residual value on a straight-line basis over the estimated useful life of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are currently as follows:

Buildings 20 to 50 years

Furniture and equipment 3 to 5 years

The residual values, depreciation methods, and useful lives are reassessed annually.

Gains and losses arising on the disposal of property, plant and equipment in the normal course of the business are included in the income statement.

LEASES

Operating leases

Leases, where the lessor retains the risk and rewards of ownership of the underlying asset, are classified as operating leases.

Operating lease payments are expensed in the income statement on a straight-line basis over the period of the leases. Other contingent operating lease payments are charged against profit as they are incurred.

INTANGIBLE ASSETS

Internally developed trademarks are not recognised. Expenditure to enhance and maintain such trademarks is charged in full against profit.

IMPAIRMENT

Financial assets

A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset that can be measured reliably.

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


accounting policies (continued)

An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

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

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

Non-financial assets

The carrying amounts of the group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss

is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

PRE-OPENING EXPENSES

Pre-opening expenses of new hotels are charged directly against profit as incurred.

INVENTORY

Inventory is stated at the lower of cost and net realisable value, on a first-in first-out basis, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated selling expenses.

TAXATION

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity.

Current taxation comprises taxation payable calculated on the basis of the expected taxable income for the year, using the taxation rates enacted or substantively enacted at the balance sheet date, and any adjustment of taxation payable for previous years.

Deferred taxation is provided using the balance sheet liability method, based on temporary differences. Temporary differences are differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax base. The amount of deferred taxation provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using taxation rates enacted or substantively enacted at the balance sheet date. Deferred taxation is charged to the income statement except to the extent that it relates to a transaction that is recognised directly in equity, or a business combination that is an acquisition. The effect on deferred taxation of any changes in taxation rates is recognised in the income statement, except to the extent that it relates to items previously charged or credited directly to equity.


Deferred taxation is not recognised for the following temporary differences:

The initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they will not reverse in the foreseeable future.

A deferred taxation asset is recognised to the extent that it is probable that future taxable profits will be available against which the associated unused taxation losses and deductible temporary differences can be utilised. Deferred taxation assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related taxation benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Secondary taxation on companies is recognised in the year dividends are declared.

FINANCIAL INSTRUMENTS

Measurement

Financial instruments are initially measured at fair value plus, for financial instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition, these instruments are measured as set out below:

FINANCIAL ASSETS

Investments

Investments that meet the criteria for classification as loans are carried at amortised cost using the effective interest method, less impairment losses.

Financial assets designated as financial assets at fair value through profit or loss are carried at fair value with any gains or losses being recognised in profit or loss. Fair value, for this purpose, is market value if listed. Attributable transaction costs are recognised in profit or loss when incurred.

Trade and other receivables

Trade and other receivables are measured at amortised cost, using the effective interest rate method, less impairment losses.

Cash and cash equivalents

Cash and cash equivalents are measured at fair value.

Derecognition

Financial assets are derecognised if the group’s contractual rights to the cash flows from the financial assets expire or if the group transfers the financial asset to another party without retaining control of substantially all risks and rewards of the asset. Financial liabilities are derecognised if the group’s obligations expire or are discharged or cancelled.

FINANCIAL LIABILITIES

Borrowings are stated at amortised cost using the effective interest method.

Any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement as interest expense over the period of the borrowings.

Derivatives are recognised initially at fair value, and any directly attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value with changes therein recognised in profit or loss.

The company uses an interest rate swap to hedge its exposure on certain borrowings to fluctuations in interest rates. The fair value is determined using appropriate coupon curve valuation techniques based on prevailing rates at year-end.

Trade and other payables are measured at amortised cost, using the effective interest method.


accounting policies (continued)

OFFSET

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when the company has a legally enforceable right to set off the recognised amounts, and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

SHARE CAPITAL AND EQUITY

Ordinary shares are classified as equity. Incremental external costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

PREFERENCE SHARES

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

PROVISIONS

Provisions are recognised when the group or company has a present legal or constructive obligation as a result of past events, for which it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the liability.

REVENUE

Revenue comprises revenue received from hotel accommodation, food and beverage sales, but excludes value-added tax.

Revenue is measured at the fair value of the consideration received or receivable, net of returns and allowances and trade discounts. Revenue is recognised when the significant risks and rewards of ownership have been transferred, recovery of the consideration is probable, the associated costs can be estimated reliably and there is no continuing management involvement.

For the customer loyalty programme, the fair value of the consideration received or receivable in respect of the initial sale is allocated between the award credits (“Lodger-points”) and the other components of the sale. The group supplies all of the awards, being accommodation itself. The amount allocated to the Lodger-points is estimated by reference to the fair value of the accommodation for which they could be redeemed, since the fair value of the Lodger-points themselves is not directly observable. The fair value of the accommodation is estimated taking into account the expected redemption rate and the timing of such expected redemptions. Such amount is deferred and revenue is recognised only when the Lodger-points are redeemed and the group has fulfilled its obligations to supply the accommodation. The amount of revenue recognised in those circumstances is based on the number of Lodger-points that have been redeemed in exchange for accommodation, relative to the total number of Lodger-points that is expected to be redeemed.

RENTAL INCOME

Rental income from property leased out under operating leases is recognised on a straight-line basis over the term of the lease. The property leased is owner-occupied property.

FINANCIAL INCOME AND EXPENSE

Financial income comprises interest income on funds invested. Interest income is recognised as it accrues, using the effective interest method.

Financial expenses comprise interest expense on borrowings, dividends on preference shares classified as liabilities and unwinding of discounts on provisions. All borrowing costs, not directly attributable to the acquisition, construction or production of qualifying assets, are recognised in profit or loss using the effective interest method.

EMPLOYEE BENEFITS

Short-term employee benefits

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


The accrual for employee entitlements to salaries, bonuses and annual leave represent the amounts which the group has a present obligation to pay as a result of employees’ services provided to the balance sheet date. The accruals have been calculated at undiscounted amounts based on current wage and salary rates.

Retirement benefits

Defined-contribution plans

Contributions to defined-contribution pension plans are recognised as an expense in the income statement as incurred.

Defined-benefit plans

The group’s net obligation in respect of the defined-benefit pension plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on AAA credit-rated bonds that have maturity dates approximating to the terms of the group’s obligations and are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed by a qualified actuary using the projected unit credit method.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement.

All actuarial gains and losses are recognised directly in equity.

Where the calculation results in a benefit to the group, the recognised asset is limited to the net total of any unrecognised actuarial losses and past-service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

Share-based payment transactions

The share incentive schemes allow certain employees to acquire shares of the company. The fair value of rights granted are recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the rights. The fair value of the rights granted is measured using the stated models, taking into account the terms and conditions upon which the rights were granted. The amount recognised as an expense is adjusted to reflect the actual number of share rights that vest, except where forfeiture is due only to share prices not achieving the threshold for vesting.

Share-based payment arrangements in which the group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the group.

EARNINGS PER SHARE

The group presents basic, diluted and normalised earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing profit for the period by the weighted average number of ordinary shares outstanding during the period.

Diluted EPS is determined by dividing profit for the period by the weighted average number of ordinary shares outstanding plus all potential dilutive ordinary shares, which comprise share options granted to employees.

Normalised EPS is calculated by dividing profit for the period, excluding the effects of the BEE transactions, by the weighted average number of ordinary shares outstanding, excluding shares held by the BEE SPVs, during the period.

Normalised diluted EPS is determined by dividing profit for the period, excluding the effects of the BEE transactions, by the weighted average number of ordinary shares outstanding, excluding shares held by the BEE SPVs, plus all potential dilutive ordinary shares, which comprise share options granted to employees.


balance sheets at 30 June 2009

Group Company

Note2009R000

2008R000

2009R000

2008R000

ASSETSNon-current assets 815 238 695 142 774 378 674 099

Property, plant and equipment 1 765 897 647 159 661 982 563 004Interest in subsidiaries 2 66 053 66 053Investments 3 33 654 34 148 33 654 34 148Loan receivable 4 12 689 10 894 12 689 10 894Deferred taxation 5 2 998 2 941

Current assets 155 539 83 391 164 045 80 325

Inventory 6 1 773 1 625 1 773 1 625Trade receivables 32 654 25 472 32 654 25 472Other receivables 7 103 754 5 437 112 930 3 988Cash and cash equivalents 17 358 50 857 16 688 49 240

Total assets 970 777 778 533 938 423 754 424

EQUITY Capital and reserves 186 518 626 527 137 538 584 818

Share capital and premium 8 143 147 140 434 143 147 140 434BEE investment in City Lodge (486 051) (486 051)Retained earnings 459 833 480 399 410 853 438 690Other reserves 9 69 589 5 694 69 589 5 694

LIABILITIESNon-current liabilities 681 095 104 256 680 746 103 941

Interest-bearing borrowings 10 100 000 40 000 100 000 40 000BEE preference shares 11 428 300 428 300BEE shareholder’s loan 12 14 360 14 360BEE B preference share dividend accrual 11 23 906 23 906Fair value of BEE interest rate swap 26 26 480 26 480Other non-current liabilities 13 15 621 6 710 15 621 6 710Deferred taxation 5 72 428 57 546 72 079 57 231

Current liabilities 103 164 47 750 120 139 65 665

Interest-bearing borrowings 10 40 000 40 000Trade and other payables 14 53 339 45 763 70 603 63 797Taxation payable 9 825 1 987 9 536 1 868

Total equity and liabilities 970 777 778 533 938 423 754 424


income statements for the year ended 30 June 2009

Group Company

Note2009R000

2008R000

2009R000

2008R000

Revenue 665 029 599 902 665 029 599 902Administration and marketing costs (46 977) (46 002) (41 572) (40 760)BEE transaction charges 15 (56 962) (56 962)Operating costs excluding depreciation (251 320) (214 801) (274 875) (237 370)

309 770 339 099 291 620 321 772Depreciation (34 858) (26 934) (34 594) (26 630)

Operating profit 15 274 912 312 165 257 026 295 142Interest income 17.1 11 486 14 592 19 274 22 380Interest expense 17.2 (45 465) (1 338) (45 465) (1 338)Share of profit from joint venture 18 8 952 8 527 8 952 8 527

Profit before taxation 249 885 333 946 239 787 324 711Taxation 19 (117 919) (108 299) (115 092) (105 619)

Profit for the period 131 966 225 647 124 695 219 092

Earnings per share (cents) – basic 20 364,0 530,7Diluted earnings per share (cents) – basic 20 360,6 525,2Dividends declared per ordinary share (cents) 21 361,0 371,0

– interim paid 203,0 177,0 – final declared 158,0 194,0


cash flow statements for the year ended 30 June 2009

Group Company

Note2009R000

2008R000

2009R000

2008R000

Cash generated by operations 25.1 368 231 364 114 338 686 360 936Interest income 9 691 13 052 17 479 20 840Interest expense (15 208) (1 338) (15 208) (1 338)Taxation paid 25.2 (103 274) (111 251) (100 594) (108 326)Dividends paid 21 (143 884) (138 158) (143 884) (138 158)

Cash inflow from operating activities 115 556 126 419 96 479 133 954Cash utilised in investing activities (243 985) (157 380) (223 961) (156 258)

Investment to maintain operations 25.3 (80 867) (22 021) (80 867) (22 021)Investment to expand operations 25.4 (73 181) (134 620) (53 157) (133 498)Expenditure refundable on operating leases (91 098) (91 098)Investments and loans 25.5 494 (1 192) 494 (1 192)Proceeds on disposal of property, plant and equipment 25.3 667 453 667 453

Cash flows from financing activities 94 930 2 426 94 930 2 426

Proceeds on issue of share capital 14 12 14 12Proceeds on issue of share premium 2 699 2 414 2 699 2 414Increase in long term borrowings 100 000 100 000Issue of BEE preference shares 440 700 440 700Redemption of BEE preference shares (12 400) (12 400)Proceeds of BEE shareholder’s loan 50 000 50 000

BEE shareholder’s loan 12 582 12 582Equity component of BEE shareholder’s loan 37 418 37 418

Distribution by BEE SPV (32) (32)BEE investment in City Lodge (486 051) (486 051)

Net (decrease) in cash and cash equivalents (33 499) (28 535) (32 552) (19 878)Cash and cash equivalents at beginning of period 50 857 79 392 49 240 69 118

Cash and cash equivalents at end of period 17 358 50 857 16 688 49 240


statements of recognised income and expenses for the year ended 30 June 2009

Group Company

2009R000

2008R000

2009R000

2008R000

Actuarial loss and section 58 limit on defined-benefit plan (8 781) (2 004) (8 781) (2 004)

Deferred taxation thereon 2 459 561 2 459 561

Deferred taxation-rate change — (12) — (12)

Net loss recognised directly in equity (6 322) (1 455) (6 322) (1 455)

Profit for the period 131 966 225 647 124 695 219 092

Total recognised income and expense for the period 125 644 224 192 118 373 217 637


reconciliation of movement in capital and reserves for the year ended 30 June 2009

R000 Note

Sharecapital

andpremium

Treasuryshares

Otherreserves

Retainedearnings Total

GROUP

Balance at 30 June 2007 138 008 — 3 522 392 910 534 440Issue of new ordinary shares 2 426 — — — 2 426Profit for the period — — — 225 647 225 647Recognised income and expenses — — (1 455) — (1 455)Share compensation reserve — — 3 627 — 3 627Dividends paid 21 — — — (138 158) (138 158)

Balance at 30 June 2008 140 434 — 5 694 480 399 626 527

Issue of new ordinary shares 2 713 — — — 2 713Profit for the period — — — 131 966 131 966Recognised income and expenses transferred — — 2 294 (2 294) —Recognised income and expenses — — — (6 322) (6 322)Share compensation reserve — — 8 820 — 8 820BEE share-based payment reserve — — 25 840 — 25 840BEE investment in City Lodge — (486 051) — — (486 051)Equity component of BEE shareholder’s loan 9 — — 26 941 — 26 941Dividends paid 21 — — — (143 884) (143 884)Distribution by BEE SPV — — — (32) (32)

Balance at 30 June 2009 143 147 (486 051) 69 589 459 833 186 518

COMPANYBalance at 30 June 2007 138 008 — 3 522 357 756 499 286Issue of new ordinary shares 2 426 — — — 2 426Profit for the period — — — 219 092 219 092Recognised income and expenses — — (1 455) — (1 455)Share compensation reserve — — 3 627 — 3 627Dividends paid 21 — — — (138 158) (138 158)

Balance at 30 June 2008 140 434 — 5 694 438 690 584 818

Issue of new ordinary shares 2 713 — — — 2 713Profit for the period — — — 124 695 124 695Recognised income and expenses transferred — — 2 294 (2 294) —Recognised income and expenses — — — (6 322) (6 322)Share compensation reserve — — 8 820 — 8 820BEE share-based payment reserve — — 25 840 — 25 840Equity component of BEE shareholder’s loan 9 — — 26 941 — 26 941BEE investment in City Lodge — (486 051) — — (486 051)Dividends paid 21 — — — (143 884) (143 884)Distribution by BEE SPV — — — (32) (32)

Balance at 30 June 2009 143 147 (486 051) 69 589 410 853 137 538


notes to the financial statements for the year ended 30 June 2009

Group Company

2009R000

2008R000

2009R000

2008R000

1. PROPERTY, PLANT AND EQUIPMENTAt costLand 69 894 49 870 1 178 1 178Buildings 678 795 614 982 632 130 568 318

– freehold 560 451 496 638 513 786 449 974– leasehold 118 344 118 344 118 344 118 344

Buildings under construction 36 912 9 041 36 912 9 041Furniture and equipment 243 859 210 268 242 954 209 363

1 029 460 884 161 913 174 787 900

Accumulated depreciationBuildings 100 396 87 157 88 930 75 956


Furniture and equipment 163 167 149 845 162 262 148 940

263 563 237 002 251 192 224 896

Carrying valueLand 69 894 49 870 1 178 1 178Buildings 578 399 527 825 543 200 492 362


Buildings under construction 36 912 9 041 36 912 9 041Furniture and equipment 80 692 60 423 80 692 60 423

765 897 647 159 661 982 563 004


notes to the financial statements for the year ended 30 June 2009 (continued)

R000 Land Buildings

Furnitureand

equipment Total

1. PROPERTY, PLANT AND EQUIPMENT (continued)Movements for the yearGroup – carrying valueOpening balance – 30 June 2007 48 747 424 220 44 750 517 717Additions* 1 123 122 786 32 732 156 641Disposals (265) (265)Depreciation (10 140) (16 794) (26 934)

Opening balance – 30 June 2008 49 870 536 866 60 423 647 159

Additions* 20 024 91 684 42 340 154 048Disposals (452) (452)Depreciation (13 239) (21 619) (34 858)

Closing balance – 30 June 2009 69 894 615 311 80 692 765 897

Company – carrying valueOpening balance – 30 June 2007 1 178 388 452 44 750 434 380Additions* 122 787 32 732 155 519Disposals (265) (265)Depreciation (9 836) (16 794) (26 630)

Opening balance – 30 June 2008 1 178 501 403 60 423 563 004

Additions* 91 684 42 340 134 024Disposals (452) (452)Depreciation (12 975) (21 619) (34 594)

Closing balance – 30 June 2009 1 178 580 112 80 692 661 982

At 30 June 2009 properties with a carrying amount of R93,0 million are subject to a registered bond to secure bank loans (see note 10).A register of the land and buildings is available for inspection at the registered office of the company, a copy of which will be supplied to members of the public on request.

*Included in additions is interest capitalised of R3 287 000 (2008 – R3 650 000).


Company

2009R000

2008R000

2. INTEREST IN SUBSIDIARIES

Issuedshare

capitalR

%held

Shares at cost less impairment lossBudget Hotels (Pty) Limited 100 100 1 073 1 073City Lodge (Airport Property) (Pty) Limited 3 350 100 4 4City Lodge (Randburg) (Pty) Limited 100 100 176 176Courtyard Management Company (Pty) Limited 100 100 * *Newshelf 892 (Pty) Limited# 100Newshelf 935 (Pty) Limited# 100Property Lodging Investments (Pty) Limited 100 100 2 000 2 000Vuwa Hotels (Pty) Limited# 100

3 253 3 253Current loanProperty Lodging Investments (Pty) Limited 62 800 62 800

Interest in subsidiaries 66 053 66 053

The current loan is unsecured, bears interest at 12% per annum (2008 – 12%) and is repayable on demand.Amounts included in other receivables and payablesAmounts due by subsidiaries 14 756 —Amounts due to subsidiaries (17 564) (18 299)These amounts are unsecured, interest-free and repayable on demand.The company also has an indirect, 100% shareholding in City Lodge Holdings (Share Block) (Pty) Limited and Twenty Third Floor Investments Seventeen (Pty) Limited.

*Less than R1 000.#City Lodge has guaranteed the funding of these BEE entities, resulting in their incorporation.



Group Company

2009R000

2008R000

2009R000

2008R000

3. INVESTMENTSInvestment in joint venture (see note 18)Cost of unlisted shares and equity loans 8 734 8 734 8 734 8 734Acquisition costs capitalised 108 108 108 108Increase in investment since acquisition– land and buildings 5 998 5 998 5 998 5 998– loans receivable 16 600 16 600 16 600 16 600– property, plant and equipment less depreciation 2 214 2 708 2 214 2 708

33 654 34 148 33 654 34 148

The investment in joint venture represents the acquisition of the shares and right of use of the assets of the Courtyard group of hotels with effect from 1 April 1995. The directors’ valuation of the investment is R124,4 million* (2008 – R117,6 million). The loans advanced are unsecured, have no fixed terms of repayment and bear interest at 14,25% per annum (2008 – 13,0%).

4. LOAN RECEIVABLECity Lodge 10th anniversary employees’ share trust 12 689 10 894 12 689 10 894

The City Lodge 10th anniversary employees’ share trust loan is secured by the pledge of 720 491 (2008 – 720 013) shares having a market value of R49 713 879 (2008 – R50 393 710), is interest-free and is repayable upon demand by the company at any time after the expiry of 20 years from the date of adoption of the scheme or in the event of the share price falling below R34,00 per share.The loan amount is measured at amortised cost of R12,689 million (2008 – R10,894 million). This increase was as a result of a notional credit to interest received in the current year of R1 795 000 (2008 – R1 540 000). The future value and nominal recoverable amount of the loan is R34,0 million.

* The directors’ valuation has been calculated by estimating the average earnings for the current and forthcoming year and applying an applicable price-earnings ratio.


Group Company

2009R000

2008R000

2009R000

2008R000

5. DEFERRED TAXATIONMovement of deferred taxation assetsBalance at beginning of year 2 941 2 978Rate change — (103)Current year temporary differences – income statement 57 66

Balance at end of year 2 998 2 941

Analysis of deferred taxation assetsCapital allowances 2 998 2 941

Movement of deferred taxation liabilitiesBalance at beginning of year 57 546 52 086 57 231 51 793Rate change – income statement — (1 808) — (1 798) – balance sheet — 12 — 12Current year temporary differences – income statement 6 864 7 817 6 830 7 785 – balance sheet 8 018 (561) 8 018 (561)

Balance at end of year 72 428 57 546 72 079 57 231

Analysis of deferred taxation liabilitiesCapital allowances 70 817 63 399 70 468 63 084Defined benefit (3 351) (892) (3 351) (892)Income received in advance (2 062) (2 062)BEE preference share dividend STC 1 603 1 603BEE shareholder’s loan 9 980 9 980Operating lease accrual (2 027) (1 872) (2 027) (1 872)Prepayments 521 571 521 571Provisions (3 053) (3 660) (3 053) (3 660)

72 428 57 546 72 079 57 231

The expected manner of recovery of the deferred tax asset and settlement of the liability will be through use.The tax rate used to calculate the deferred tax balance is 28% (2008 – 28%).

6. INVENTORYFood, liquor and beverages 1 773 1 625 1 773 1 625



Group Company

2009R000

2008R000

2009R000

2008R000

7. OTHER RECEIVABLESLoans due from related parties (refer to note 27) 14 756 —Expenditure refundable on operating leases 91 098 — 91 098 —Prepayments 2 182 2 559 2 182 2 559Sundry receivables 10 474 2 878 4 894 1 429

103 754 5 437 112 930 3 988

Expenditure refundable on operating leases relates to the portion of expenditure on leased buildings required to be funded by City Lodge during construction and to be refunded by the landlord on completion.

8. SHARE CAPITAL AND PREMIUMShare capitalAuthorised50 000 000 ordinary shares of 10 cents each 5 000 5 000 5 000 5 000

Issued42 744 053 (2008 – 42 602 003) ordinary shares of 10 cents each 4 274 4 260 4 274 4 260

Balance at beginning of year 42 602 003 (2008 – 42 481 953) ordinary shares of 10 cents each 4 260 4 248 4 260 4 248Options exercised during the period 142 050 (2008 – 120 050) of 10 cents each 14 12 14 12

Share premium 138 873 136 174 138 873 136 174

Balance at beginning of year 136 174 133 760 136 174 133 760Premium on issue of new ordinary shares 2 699 2 414 2 699 2 414

143 147 140 434 143 147 140 434

The unissued shares are under the control of the directors until the forthcoming annual general meeting.


Group Company

2009R000

2008R000

2009R000

2008R000

9. OTHER RESERVESShare-based payment reserve 42 648 7 988 42 648 7 988

Balance at beginning of year 7 988 4 361 7 988 4 361Expense for the year – share incentive scheme 8 820 3 627 8 820 3 627Expense for the year BEE share-based payment expense 25 840 — 25 840 —

The share-based payment reserve relates to the accumulated cost for the future settlement of obligations arising from the share incentive scheme.The BEE share-based payment expense relates to the once-off IFRS 2 charge in respect of the BEE transaction concluded during the year (refer note 15).Defined-benefit equity reserve — (2 294) — (2 294)

Balance at beginning of year (2 294) (839) (2 294) (839)Recognised income and expenses transferred to retained earnings 2 294 — 2 294 —Actuarial loss on defined-benefit plan — (2 004) — (2 004)Deferred tax thereon — 561 — 561Deferred tax rate-change — (12) — (12)

The defined-benefit equity reserve relates to all actuarial gains and losses and the section 58 limit, net of deferred taxation, recognised directly in equity.

Equity component of BEE shareholder’s loan 26 941 26 941

Balance at beginning of year — —Loan raised 37 418 37 418

Deferred tax thereon (10 477) (10 477)

The shareholder’s loan relates to the equity contribution received from Vuwa Investments (Pty) Limited in respect of the BEE transaction concluded during the year.

69 589 5 694 69 589 5 694



Group Company

2009R000

2008R000

2009R000

2008R000

10. INTEREST-BEARING BORROWINGSSecured bank loan 100 000 — 100 000 —The loan is secured over land and buildings with a carrying amount of R93,0 million and bears interest at the three-month JIBAR rate plus 2,75 percentage points. Interest repayments are made every six months in arrears.The loan capital is repayable in equal six-monthly instalments commencing 30 December 2011.The loan is the portion of the R400 million approved facility which was utilised during the current year to fund the group’s current expansion.The required bank covenants have been met.Unsecured bank loan 40 000 40 000 40 000 40 000The loan is unsecured and bears interest at the six-month JIBAR rate plus 1,45 percentage points. Interest repayments are made every six months in arrears.

The loan capital is repayable by 31 December 2009.

140 000 40 000 140 000 40 000Less amounts to be repaid within one year’s time (40 000) — (40 000) —

Non-current liabilities 100 000 40 000 100 000 40 000

11. BEE PREFERENCE SHARESProceeds from the issue of redeemable preference shares 440 700 440 700Redeemed during the year (12 400) (12 400)

428 300 428 300

A and B cumulative redeemable preference shares were issued in connection with the BEE transaction by the three Special Purpose Vehicles (SPVs) to fund a portion of the purchase price of investments in City Lodge Hotels Limited. These have been guaranteed by City Lodge resulting in the deemed control of the SPVs and their incorporation for accounting purposes. The preference dividend is determined using 70% and 71% of the prime lending rate for the A and B preference shares respectively. Preference dividends are declared once City Lodge dividends have been received by the SPVs.At the time of implementation, an interest rate swap agreement was entered into whereby the rate was fixed for the period of the outstanding debt (refer note 26). An amount of R27,8 million was accrued in respect of preference dividends payable as at 30 June 2009. Of this R3,9 million in respect of A preference shares is included under trade and other payables (refer note 14) due in October 2009 and R23,9 million in respect of B preference shares payable beyond one year’s time.


Group Company

2009R000

2008R000

2009R000

2008R000

11. BEE PREFERENCE SHARES (continued)Voluntary redemption of A and B preference shares may be made, with full redemption of the preference shares required by 28 July 2015 and 28 July 2013 respectively. The minimum scheduled redemptions in respect of A and B preference shares are as follows:– not later than one year — —– between one and five years 321 210 321 210– later than 5 years 107 090 107 090

12. BEE SHAREHOLDER’S LOANVuwa Investments (Pty) LimitedLoan granted 50 000 50 000Equity component of BEE shareholder’s loan (37 418) (37 418)Notional interest expense 1 778 1 778The BEE shareholder’s loan represents the equity contribution by Vuwa Investments (Pty) Limited to the Vuwa SPV as part funding to purchase shares in City Lodge Hotels Limited. The loan is measured at amortised cost of R14,360 million (2008 – nil). The notional debit to interest expense at a rate of 14,35% per annum was R1 778 000 (2008 – nil). The future value of the loan is R50 million.The loan is unsecured, bears notional interest at 14,35%, and is repayable on demand after 31 December 2017.

14 360 14 360

13. OTHER NON-CURRENT LIABILITIESOperating lease accrual 7 238 6 685 7 238 6 685Defined-benefit obligation (refer to note 23) 8 383 25 8 383 25

15 621 6 710 15 621 6 710

14. TRADE AND OTHER PAYABLESTrade payables 650 99 650 99Loans due to related parties (refer to note 27) 17 564 18 299Sundry accruals 39 604 40 025 39 502 39 930Other trade payables 8 511 5 639 8 313 5 469Preference dividend payable 3 858 3 858Interest swap accrual on preference dividend payable 716 716

53 339 45 763 70 603 63 797



Group Company

2009R000

2008R000

2009R000

2008R000

15. OPERATING PROFITOperating profit is arrived at after charging/(crediting)Auditors’ remuneration 1 524 1 668 1 448 1 609

Audit fees 1 072 837 996 778Fees for other services 452 831 452 831

BEE transaction charges 56 962 56 962

– IFRS 2 share-based payment charge (note 9 and 23) 25 840 25 840– Loss on fair value of interest rate swap 26 480 26 480– Sundry expenses 4 642 4 642

Defined-benefit plan expense (note 23) 4 019 2 318 4 019 2 318Defined-contribution plan expense 4 036 3 309 4 036 3 309Depreciation 34 858 26 934 34 594 26 630

– buildings 13 239 10 140 12 975 9 836– furniture and equipment 21 619 16 794 21 619 16 794

Directors’ emoluments 6 105 7 932

Fees paid to non-executive directors (note 16) 1 380 1 183Executive directors (note 16) 4 725 6 749

Impairment of trade receivables (227) 175 (227) 175Operating lease rentals– land 4 378 4 816 9 399 8 964– hotel buildings 263 264 9 732 9 650– office buildings 1 791 1 271 1 791 1 271Pre-opening expenses 309 975 309 975Profit on disposal of property, plant and equipment (215) (188) (215) (188)Salaries, wages and related benefits 119 465 108 609 117 097 106 497

– employed 105 176 96 890 102 808 94 778– sub-contracted 14 289 11 719 14 289 11 719

Rent received (859) (993) (859) (993)

Share-based payment expense (note 23) 8 820 3 627 8 820 3 627

– City Lodge 10th anniversary employees’ share trust 2 978 912 2 978 912– City Lodge deferred bonus plan 162 162– City Lodge executive share option scheme 2 303 2 715 2 303 2 715– City Lodge share appreciation right scheme 3 377 3 377


R000Basicsalary

Per-formance

bonus

Fringebenefits

andallow-ances

Pensionfund

contri-butions

Totalannual

remune-ration

Gain onexerciseof shareoptions

Totalemolu-ments

16. DIRECTORS’ EMOLUMENTS

Executive directors2009C Ross* 2 139 — 261 303 2 703 2 589 5 292A C Widegger* 1 596 — 200 226 2 022 898 2 920

3 735 — 461 529 4 725 3 487 8 212

2008C Ross 1 925 1 370 258 308 3 861 — 3 861A C Widegger 1 438 1 024 196 230 2 888 — 2 888

3 363 2 394 454 538 6 749 — 6 749

* The IFRS 2 costs for C Ross and A Widegger are R565 068 (2008 – R558 292) and R356 043 (2008 – R349 880) respectively. These costs are not included in the above emoluments.

Non-executive directorsFees R000

2009 2008

H R Enderle 493 446F W J Kilbourn 182 159I N Matthews 197 188S G Morris 195 171N Medupe 125 107B T Ngcuka 98K I M Shongwe 90 112

1 380 1 183

No other payments were made to directors.



Date ofgrant

Grantprice

(R)

Holdingat

30 June2009

Lapsedate

Numbervesting at

30 June2009

16. DIRECTORS’ EMOLUMENTS (continued) Share appreciation rightsC Ross 01/09/2008 76,71 89 035 01/09/2015 —A C Widegger 01/09/2008 76,71 53 225 01/09/2015 —

142 260 —

Date ofoffer

Numberof bonus

shares

Share priceacquisition

priceMatching

sharesVesting

date

Deferred bonus planC Ross 01/09/2008 5 000 75,00 5 000 01/9/2011A C Widegger 01/09/2008 4 000 75,50 4 000 01/9/2011

9 000 9 000

For further information regarding the share appreciation rights and deferred bonus plan, refer to pages 69 and 70.


Date ofgrant

Exerciseprice

(R)

Holdingat

30 June2008

Exer-cised

Holdingat

30 June2009 Lapse date

Numbervesting

at30 June

2009

16. DIRECTORS’ EMOLUMENTS (continued)

Directors’ share optionsC Ross 02/08/1999 8,75 16 000 16 000 — 02/08/2009 —

01/08/2000 7,30 26 000 26 000 — 01/08/2010 —01/08/2001 8,41 26 000 — 26 000 01/08/2011 26 00001/08/2002 11,75 26 000 — 26 000 01/08/2012 26 00001/08/2003 18,50 26 000 — 26 000 01/08/2013 26 00013/08/2004 28,40 38 000 — 38 000 13/08/2014 22 80015/08/2005 37,47 36 000 — 36 000 15/08/2015 14 40009/11/2006 58,59 52 650 — 52 650 09/11/2016 10 53008/05/2007 80,31 28 000 — 28 000 08/05/2017 —

274 650 42 000 232 650 125 730

A C Widegger 04/01/1999 6,50 10 000 10 000 — 04/01/2009 —02/08/1999 8,75 5 000 5 000 — 02/08/2009 —03/01/2000 9,30 10 000 — 10 000 03/01/2010 10 00001/08/2000 7,30 5 000 — 5 000 02/08/2010 5 00003/01/2001 7,75 10 000 — 10 000 03/01/2011 10 00001/08/2001 8,41 5 000 — 5 000 01/08/2011 5 00001/01/2002 8,60 10 000 — 10 000 01/01/2012 10 00001/08/2002 11,75 5 000 — 5 000 01/08/2012 5 00001/01/2003 16,80 10 000 — 10 000 01/01/2013 10 00001/08/2003 18,50 5 000 — 5 000 01/08/2013 5 00013/08/2004 28,40 23 000 — 23 000 13/08/2014 13 80015/08/2005 37,47 21 000 — 21 000 15/08/2015 8 40009/11/2006 58,59 31 590 — 31 590 09/11/2016 6 31808/05/2007 80,31 16 800 — 16 800 08/05/2017 —

167 390 15 000 152 390 88 518



Group Company

2009R000

2008R000

2009R000

2008R000

17. INTEREST17.1 Interest incomeBank interest 6 574 10 212 6 574 10 212Loans to Courtyard Joint Venture 3 113 2 840 3 113 2 840IAS 39 – effective interest 1 795 1 540 1 795 1 540Interest from subsidiaries 7 788 7 788Other 4 — 4 —

11 486 14 592 19 274 22 380

17.2 Interest expenseLong-term borrowings 5 362 4 920 5 362 4 920Short-term borrowings 245 68 245 68IAS 39 – effective interest 1 778 1 778Preference dividend 41 367 41 367

48 752 4 988 48 752 4 988Interest capitalised to property, plant and equipment (3 287) (3 650) (3 287) (3 650)

45 465 1 338 45 465 1 338

Interest is capitalised to property, plant and equipment at 12,33% (2008 – 10,89%) per annum.

18. INTEREST IN JOINT VENTUREThe group has a 50% interest in the Courtyard Share Block Companies as detailed below. The hotel operations are conducted in a rental pool. The group’s participation in the rental pools at the Courtyards Bruma Lake, Valkenberg and Arcadia is 50%. The participation in the rental pools at the Courtyards Rosebank and Sandton is 32,42% and 26,03% respectively.Management fees are paid by the respective rental pools to Courtyard Management Company (Pty) Ltd, which is a wholly owned subsidiary.The group’s proportionate share of the assets and liabilities and the results of the operations have been equity-accounted.The group’s proportionate share of the results of the operations of the joint venture is as follows: Revenue 32 153 31 208 Operating costs (19 595) (19 493)

Operating profit 12 558 11 715 Depreciation (493) (348) Interest paid (3 113) (2 840)

Net profit 8 952 8 527 Distributed (8 952) (8 527)

Accumulated profit — —


Company

2009R000

2008R000

18. INTEREST IN JOINT VENTURE (continued)The group’s proportionate share of assets and liabilities of the joint venture is as follows: Operating assets 36 264 35 078 Current assets 9 157 8 403

Total assets 45 421 43 481

Long-term liabilities 37 153 37 944 Current liabilities 3 866 1 653

Total liabilities 41 019 39 597

The group’s proportionate share of the cash flows of the joint venture is as follows: Cash effects of operating activities 2 800 1 071 Cash utilised in investing activities (2 011) (476) Cash effects of financing activities (792) (666)

Net cash (utilised)/generated (3) (71)

Equity earnings from the joint ventures are distributed.

The group’s shareholding in the joint venture companies is as follows:

Issuedshare

capitalR % held

Gallic Courtyard (Arcadia) Share Block (Pty) Ltd 1 518 50Gallic Courtyard (Bruma Lake) Share Block (Pty) Ltd 2 584 50Gallic Courtyard (Rosebank) Share Block Ltd 2 456 50Gallic Courtyard (Sandown) Share Block Ltd 1 584 50Gallic Courtyard (Valkenberg) Share Block (Pty) Ltd 2 690 50



Group Company

2009R000

2008R000

2009R000

2008R000

19. TAXATIONSouth African normal taxationCurrent 94 187 86 865 91 337 84 244 Deferred – current 6 807 7 751 6 830 7 785 – rate change — (1 705) — (1 798)Secondary tax on companies 16 925 15 388 16 925 15 388

117 919 108 299 115 092 105 619

Reconciliation of taxation rate % % % %Standard rate 28,0 28,0 28,0 28,0Adjusted for:– BEE transactions 8,8 9,1– disallowable expenses 3,6 0,3 3,8 0,4– rate change — (0,5) — (0,6)– secondary tax on companies 6,8 4,6 7,1 4,7

Effective rate of taxation 47,2 32,4 48,0 32,5


Group

2009R000

2008R000

20. HEADLINE EARNINGS PER SHAREDetermination of headline earnings and normalised headline earningsProfit for the period 131 966 225 647Profit on sale of property, plant and equipment (215) (188)Taxation effect 60 53

Headline earnings 131 811 225 512

BEE transaction charges 56 962

– IFRS 2 share-based payment charge 25 840– Loss on fair value of interest rate swap 26 480– Sundry expenses 4 642

Notional interest charge on BEE shareholder loan net of deferred tax 1 280Preference dividends paid/payable by the BEE entities 41 367STC on accrued preference share dividends 1 603IFRS 2 share-based payment charge for the 10th anniversary employee share trust 2 978 912

Normalised headline earnings 236 001 226 424

Number of shares for EPS calculations (000)Undiluted weighted average 36 257 42 519Share options 335 446

Diluted 36 592 42 965

Number of shares for normalised EPS calculations (000)Undiluted weighted average 36 257 42 519BEE shares treated as treasury shares 6 390 —

Undiluted normalised weighted average 42 647 42 519Share options 335 446

Diluted normalised weighted average 42 982 42 965

Headline earnings per share (cents) 363,5 530,4Diluted headline earnings per share (cents) 360,2 524,9Normalised headline earnings per share (cents) 553,4 532,5Diluted normalised headline earnings per share (cents) 549,1 527,0



Group Company

2009R000

2008R000

2009R000

2008R000

21. DIVIDENDSNumber 39 of 194,0 cents (2008 – 148,0 cents) declared on 13 August 2008 and paid on 22 September 2008 82 674 62 884 82 674 62 884Number 40 of 203,0 cents (2008 – 177,0 cents) declared on 12 February 2009 and paid on 23 March 2009 86 580 75 274 86 580 75 274Dividends attributable to treasury shares (25 370) (25 370)

143 884 138 158 143 884 138 158

On 13 August 2009, dividend number 41 of 158,0 cents per share in respect of the year ended 30 June 2009 was declared totalling R67 535 604 payable on 21 September 2009. The related STC payable at 10% amounts to R6 753 560. These financial statements do not reflect this dividend payable or the related STC.

22. COMMITMENTSAuthorised– contracted 150 000 45 000 150 000 45 000– not contracted 767 000 352 000 767 000 352 000

917 000 397 000 917 000 397 000

Future capital expenditure will be financed out of funds generated from operations and external borrowings and approximately R460 million is expected to be spent during the year ending 30 June 2010.The company is party to various operating leases of periods between 20 and 99 years in respect of land and hotel buildings and 5 years, in respect of office buildings.Schedule of minimum lease payments in respect of land, hotel building and office building leases– not later than 1 year 9 102 6 373 9 102 6 373– between 1 and 5 years 81 444 23 529 81 444 23 529– later than 5 years 518 103 345 016 518 103 345 016

Total financial institution-backed guarantees provided to third parties on behalf of the Company amounted to R465,6 million. The directors do not believe any exposure to loss is likely.The issued guarantees have the following expiry dates:

– not later than 1 year 23 780 16 780 23 780 16 780– between 1 and 5 years 321 210 — 321 210 —– later than 5 years 108 230 1 140 108 230 1 140


Group and Company

2009R000

2008R000

23. EMPLOYEE BENEFITS Retirement benefit informationThe group provides retirement benefits for 10% (2008 – 11%) of the group’s permanent employees through a defined-benefit pension scheme that is subject to the Pension Funds Act, 1956, as amended. This fund was closed to new membership on 28 February 2004 and a new defined-contribution fund was established. Company contributions to this new fund are fixed at a rate of 10,5% of pensionable salaries and 28% (2008 – 19%) of the group’s permanent employees are members. Employees who are not members of the above funds are members of the appropriate industry fund.A statutory actuarial valuation of the defined-benefit fund is undertaken every three years. At 31 July 2004, the effective date of the most recent statutory actuarial valuation, the retirement benefit fund was found to have a deficit of R4,7 million. The next statutory actuarial valuation being 1 August 2007 has been delayed, with the required extensions obtained.The current estimate in terms of IAS 19, as at 30 June 2009, as shown below, indicates that the fund has a deficit of R8 383 000 (2008 – R25 000 deficit).

Current estimated employee benefit obligation:Present value of obligation (57 241) (52 186)Fair value of plan assets 48 858 52 161

Liability at year-end (refer to note 13) (8 383) (25)

Income statement effect:Current service cost (4 037) (3 170)Interest on obligation (5 812) (3 323)Expected return on plan assets 5 830 4 175

(4 019) (2 318)

Balance sheet effect:Opening net liability (25) —Expense (4 019) (2 318)Contributions paid 4 442 4 297Amount recognised in equity (8 781) (2 004)

Closing net liability (8 383) (25)

Movement in the liability for defined-benefit obligationsLiability for defined-benefit obligations at 1 July 52 186 37 714Service cost 4 037 3 170Interest cost 5 812 3 323Benefits paid (1 705) (2 635)Actuarial (gain)/loss (3 089) 10 614

Liability for defined-benefit obligations at 30 June 57 241 52 186



Group and Company

2009R000

2008R000

23. EMPLOYEE BENEFITS (continued) Retirement benefit information (continued)

Movement in plan assetsFair value of plan assets at 1 July 52 161 46 898Expected return on plan assets 5 830 4 175Contributions 4 442 4 297Benefits paid (1 705) (2 635)Actuarial gain (11 870) (574)

Fair value of plan assets at 30 June 48 858 52 161

Principal actuarial assumptions at the balance sheet date:Discount rate 9,3% 10,9%Expected return on plan assets 9,3% 10,9%Future salary increases 7,5% 9,6%Future pension increases 4,9% 6,5%

Historical information R000 2009 2008 2007 2006 2005

Present value of the defined-benefit obligation (57 241) (52 186) (37 714) (30 190) (24 630)

Fair value of plan assets 48 858 52 161 46 898 31 554 22 892

(Deficit)/surplus in the plan (8 383) (25) 9 184 1 364 (1 738)

Medical aidCertain of the group’s employees belong to the Discovery Health Medical Scheme.There are no obligations for post-retirement medical aid contributions.


23. EMPLOYEE BENEFITS (continued) Share-based paymentsEquity-settled share appreciation right schemeThe group plan provides for a grant price equal to the 10-day volume weighted average market price of the group’s shares on grant date. The vesting period is generally three to five years. The vesting of the share appreciation right (SAR) is subject to the achievement of specified performance conditions. The performance conditions are that the normalised headline earnings per share (HEPS) should increase by 2% points per annum above inflation (CPIX) over a three-year performance period. If the SARs remain unexercised after a period of seven years from grant, they expire. Furthermore, unexercised SARs are forfeited if the employee leaves the group before they expire. Fair value is measured using an American binomial valuation model. The share-based equity settled expense for the year ended 30 June 2009 in the income statement is R3 376 867 (2008 – Rnil).

2009 2008

Numberof SARs

Weightedaverage

strikeNumberof SARs

Weightedaverage

strike

Outstanding at beginning of period — — — —Granted during period 627 225 76,71 — —Forfeited during period (16 250) 76,71 — —Exercised during period — — — —Expired during period — — — —

Outstanding at end of period 610 975 76,71 — —

Exercisable at end of period — — — —

2009 2008

Average remaining life (years) 6,18 —

American binomial model inputs as follows:Volatility 23% —Risk free rate 9% —Dividend yield 4,91% —Expected life (years) 7 —Strike price (Rand) 76,71 —Average share price (Rand) 76,71 —Option price (Rand) 20,04 —



23. EMPLOYEE BENEFITS (continued)Share-based payments (continued)Equity-settled deferred bonus planCertain employees will be permitted to use a portion of the after-tax component of their annual bonus to acquire bonus shares at market value. A matching award will be made to the participants on the condition that they remain in the employment of the company for the deferred bonus plan period. The deferred bonus plan provides for a grant price equal to zero. The vesting and expiry period is generally three years. Furthermore, matching awards are forfeited if the employee leaves the group before they vest. Fair value is measured using a European binomial valuation model. The share-based equity settled expense for the year ended 30 June 2009 in the income statement is R161 740 (2008 – Rnil).

2009 2008

Numberof options

Weightedaverage

strikeNumber

of options

Weightedaverage

strike

Outstanding at beginning of period — — — —Granted during period 9 000 0 — —Forfeited during period — — — —Exercised during period — — — —Expired during period — — — —

Outstanding at end of period 9 000 0 — —

Exercisable at end of period — — — —

2009 2008

Average remaining life (years) 6,18 —

European binomial model inputs as follows:Volatility 24% —Risk free rate 9,21% —Dividend yield 4,91% —Expected life (years) 3 —Strike price (Rand) 0,00 —Average share price (Rand) 75,50 —Option price (Rand) 65,16 —


23. EMPLOYEE BENEFITS (continued)Share-based payments (continued)Equity-settled share option planThe group plan provides for a grant price equal to the average quoted market price of the group’s shares on grant date. The vesting period is generally two to five years. If the options remain unexercised after a period of 10 years from grant, the options expire. Furthermore, options are forfeited if the exployee leaves the group before the options vest. The share-based equity settled option expense for the year ended 30 June 2009 in the income statement is R2 302 748 (2008 – R2 714 264). No further grants will be made under this scheme.

2009 2008

Numberof options

Weightedaverage

strikeNumber

of options

Weightedaverage

strike

Outstanding at beginning of period 1 028 970 41,17 1 156 620 37,60Granted during period — — 65 000 76,95Forfeited during period (11 200) 53,34 (72 600) 51,00Exercised during period (142 050) 19,10 (120 050) 20,21Expired during period — — — —

Outstanding at end of period 875 720 44,59 1 028 970 41 17

Exercisable at end of period 410 984 30,29 357 290 19,46

2009 2008

Average remaining life (years) 5,95 6,55

American binomial model inputs as follows:Weighted average volatility — 17,93%Weighted average risk free rate — 8,23%Weighted average dividend yield — 3,59%Weighted average expected life (years) — 10Weighted average strike price (Rand) — 76,95Weighted average share price (Rand) — 76,95Weighted average option price (Rand) — 22,93



23. EMPLOYEE BENEFITS (continued)Share-based payments (continued)Equity-settled 10th anniversary share planThe Group plan provides for an annual share distribution equal to half of the financial year’s capital growth, if any, of the portfolio of City Lodge shares held by the trust. The distributions to eligible employees (employees in the service of the group for a least one year) are equity settled three months after year-end, provided that the portfolio’s market value at year-end, exceeds the market value at the previous year-end. Entitlements are forfeited if the employee leaves the group’s service before a distribution takes place. The vesting period is one year. Expected volatility was determined by calculating the historical volatility of the group’s share price over the previous two years. Fair value is measured using an European binomial valuation model. The share-based equity settled expense for the year ended 30 June 2009 in the income statement is R2 978 675 (2008 – R912 482).

2009Number

of shares

2008Number

of shares

Outstanding at beginning of period 720 013 857 401Distributed during period — (137 388)

Outstanding at end of period 720 013 720 013

2009 2008

Pershare

Totalportfolio

Pershare

Totalportfolio

European binomial model inputs as follows:Volatility 23% 23% 19% 19%Risk free rate 11,99% 11,99% 9,42% 9,42%Dividend yield 4,64% 4,64% 3,33% 3,33%Expected life (years) 1 1 1 1Effective strike price (Rand) 69,99 50 393 710 95 68 592 080Share price (Rand) 69,99 50 393 710 80 57 476 348Effective option price (Rand) 4,14 2 978 675 1,27 912 482

Equity-settled Vuwa black economic empowerment schemeOn 8 July 2008 the City Lodge group effected a black economic empowerment scheme with Vuwa Hotels (Pty) Ltd. In terms of the scheme, 6% (2 556 185) of the issued share capital of City Lodge was acquired by Vuwa Hotels in terms of a scheme of arrangement. Standard Bank of South Africa subscribed for R80 million amortising, seven-year A preference shares bearing interest at 70% of the prime interest rate and R66,1 million cumulative zero coupon five-year B preference shares bearing interest at 71% of the prime interest rate. Ordinary dividends received by Vuwa Hotels must be used to service and repay the preference shares and City Lodge guarantees the preference shares. There is a lock-in period to 31 December 2017. Vuwa Hotels may not dispose of City Lodge shares, between 1 July 2015 and 31 December 2017 unless it is to black persons. Fair value is measured using a cash flow and a binomial valuation model. The share-based equity settled option expense for the year ended 30 June 2009 in the income statement is R10 351 488 (2008 – Rnil).


23. EMPLOYEE BENEFITS (continued)Share-based payments (continued)Equity-settled University of Johannesburg School of Tourism and Hospitality, black economic empowerment schemeOn 8 July 2008 the City Lodge group effected a black economic empowerment scheme with Newshelf 935 (Pty) Ltd. In terms of the scheme, 3% (1 278 060) of the issued share capital of City Lodge was acquired by Newshelf 935 in terms of a scheme of arrangement. Standard Bank of South Africa subscribed for R35 million amortising, seven-year A preference shares bearing interest at 70% of the prime interest rate and R63,3 million zero coupon five-year B preference shares bearing interest at 71% of the prime interest rate. Ordinary dividends received by Newshelf 935 must be used to service and repay the preference shares and City Lodge guarantees the preference shares. Newshelf 935 (Pty) Ltd may not sell any of the City Lodge shares until the funding is repaid. Fair value is measured using a cash flow and a binomial valuation model. The share-based equity settled option expense for the year ended 30 June 2009 in the income statement is R15 488 768 (2008 – Rnil).The following inputs were used in determining the share-based payment expense for the Vuwa and University of Johannesburg schemes:

2009Per

share

2008Per

share

Binomial model inputs as follows:Volatility 20% —Risk free rate 10,36% —Dividend yield 5,57% —Expected life (years) 9,48 —Effective strike price (Rand) 111,17 —Share price (Rand) 76,06 —Effective option price (Rand) 12,12 —Equity contribution (Rand) — —Net fair value of option (Rand) 12,12 —Cash flow model inputs as follows:Ordinary dividend number 37 (Rand) 1,48 —Ordinary dividend number 38 (Rand) 1,77 —Dividend growth rate 12% —Expected life (years) 9,48 —Effective 7-year fixed rate (70% of prime) 10,48%Effective 5-year fixed rate (71% of prime) 10,58% —Effective 5 x 9-year fixed rate (71% of prime) 10,40% —Effective 7 x 9-year fixed rate (70% of prime) 10,27% —

Equity-settled Injabulo staff trust, black economic empowerment schemeOn 8 July 2008 the City Lodge group effected a black economic empowerment scheme with Newshelf 892 (Pty) Limited. In terms of the scheme, 6% of the issued share capital of City Lodge was acquired by Newshelf 892 in terms of a scheme of arrangement. Standard Bank of South Africa subscribed for R80 million amortising, seven-year A preference shares bearing interest at 70% of the prime interest rate and R116,3 million cumulative zero coupon five-year B preference shares bearing interest at 71% of the prime interest rate. Ordinary dividends received by Newshelf 892 must be used to service and repay the preference shares and City Lodge guarantees the preference shares. No share-based equity settled option expense for the year ended 30 June 2009 exists as no grants to employees have been made.



Group Company

2009R000

2008R000

2009R000

2008R000

24. BORROWING POWERSThe borrowings of the company are not limited by its articles of association.

25. NOTES TO THE CASH FLOW STATEMENTS25.1 Cash generated by operationsProfit before taxation 249 885 333 946 239 787 324 711

Adjusted for:– depreciation on property, plant and equipment 34 858 26 934 34 594 26 630– movement in operating lease accrual 553 826 553 826– interest income (11 486) (13 052) (19 274) (20 840)– interest expense 45 465 1 338 45 465 1 338– profit on disposal of property, plant and equipment (215) (188) (215) (188)– IFRS 2 share-based payment charge 25 840 25 840– loss on fair value of interest rate swap 26 480 26 480– movement in defined-benefit liability 8 358 25 8 358 25– defined-benefit debit to equity (8 781) (2 004) (8 781) (2 004)– share-based payment expense 8 820 3 627 8 820 3 627

Operating profit before working capital changes 379 777 351 452 361 627 334 125Increase in inventory (148) (132) (148) (132)(Increase)/decrease in trade and other receivables (14 401) (2 223) (25 026) 529Increase/(decrease) in trade and other payables 3 003 15 017 2 233 26 414

368 231 364 114 338 686 360 936

25.2 Taxation paidBalance unpaid at beginning of year (1 987) (10 985) (1 868) (10 562)Taxation payable per income statements (111 112) (102 253) (108 262) (99 632)Balance unpaid at end of year 9 825 1 987 9 536 1 868

(103 274) (111 251) (100 594) (108 326)

25.3 Investment to maintain operationsAdditions to property, plant and equipment– land and buildings (41 367) (11 486) (41 367) (11 486)– furniture and equipment (39 500) (10 535) (39 500) (10 535)

(80 867) (22 021) (80 867) (22 021)Less: Proceeds on disposal Furniture and equipment 667 453 667 453

(80 200) (21 568) (80 200) (21 568)


Group Company

2009R000

2008R000

2009R000

2008R000

25. NOTES TO THE CASH FLOW STATEMENTS (continued)25.4 Investment to expand operationsAdditions to property, plant and equipment– land and buildings (70 341) (112 423) (50 317) (111 301)– furniture and equipment (2 840) (22 197) (2 840) (22 197)

(73 181) (134 620) (53 157) (133 498)

25.5 Investments and loansDecrease in investment in joint venture 494 348 494 348Notional interest – 10th Anniversary Share Trust loan — (1 540) — (1 540)

494 (1 192) 494 (1 192)

26. FINANCIAL INSTRUMENTS26.1 Classes of financial instrumentsLoans receivable 12 689 10 894 12 689 10 894Trade receivables 32 654 25 472 32 654 25 472Other receivables 103 754 5 437 98 174 3 988Cash and cash equivalents 17 358 50 857 16 688 49 240Interest-bearing borrowings 100 000 40 000 100 000 40 000BEE preference shares 428 300 428 300BEE shareholder’s loan 14 360 14 360BEE B preference share dividend accrual 23 906 23 906BEE interest rate swap 26 480 26 480Current portion of interest-bearing borrowings 40 000 40 000Trade and other payables 53 339 45 763 70 603 63 797

The fair value of the financial assets and liabilities is equal to its carrying amount.26.2 Currency risk – The group is not exposed to currency risk.26.3 Interest rate risk – The group generally adopts a policy of ensuring that its exposure to changes in interest rates is limited by either fixing the rate or by linking the rate to the average medium term, risk-free rate over the period of the respective loan.With the issuance of the redeemable preference shares (refer note 11) the group decided to enter into an interest-rate swap agreement to fix the interest rate for the period of the preference shares at between 9,95% and 10,01%.26.4 Liquidity risk – is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to managing liquidity by managing its working capital, capital expenditure and cash flows, is to ensure as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.



26. FINANCIAL INSTRUMENTS (continued)26.4 Liquidity risk (continued)The table below analyses the financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Less than1 year

Between1 and

5 yearsMore than

5 years

GroupAt 30 June 2009Borrowings 40 000 100 000 —BEE preference shares — 321 210 107 090BEE shareholder’s loan — — 14 360BEE B preference share dividend accrual — 23 906 —BEE interest rate swap — 26 480 —Trade payables 53 339 — —

93 339 471 596 121 450

At 30 June 2008Borrowings — 40 000 —Trade payables 45 763 — —

45 763 40 000 —

CompanyAt 30 June 2009Borrowings 40 000 100 000 —BEE preference shares — 321 210 107 090BEE shareholder’s loan — — 14 360BEE B preference share dividend accrual — 23 906 —BEE interest rate swap — 26 480 —Trade payables 70 603 — —

110 603 471 596 121 450

At 30 June 2008Borrowings — 40 000 —Trade payables 63 797 — —

63 797 40 000 —

26.5 Capital management – The group’s objective when managing capital is to safeguard the group’s ability to continue as a going concern and to provide acceptable returns for shareholders.26.6 Credit risk – Credit risk is the risk of financial loss to the group if a counterparty to a financial asset fails to meet its contractual obligations. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all travel agents or customers requiring credit. Reputable financial institutions are used for investing and cash-handling purposes. At the reporting date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset.


Group Company

2009R000

2008R000

2009R000

2008R000

26. FINANCIAL INSTRUMENTS (continued)26.6 Credit risk (continued)Current loan – Property Lodging Investments (Pty) Ltd 62 800 62 800Loan receivable 12 689 10 894 12 689 10 894Other receivables 103 754 5 437 112 930 3 988The carrying amount of trade receivables represent the maximum credit exposure at reporting date which was:Trade receivablesNot past due 21 257 14 589 21 257 14 5890 – 30 days past due 10 104 9 163 10 104 9 16331 – 120 days past due 1 293 1 720 1 293 1 720

Gross 1 748 2 402 1 748 2 402Impairment (455) (682) (455) (682)

32 654 25 472 32 654 25 472

Trade receivables by type of customerTravel agents 28 616 20 278 28 616 20 278Large corporates and companies 4 038 5 194 4 038 5 194

32 654 25 472 32 654 25 472

Trade receivables by geographical regionSouth Africa 32 654 25 472 32 654 25 472

The movement in the impairment allowance in respect of trade receivables during the year was as follows:Balance at beginning of year 682 507 682 507Impairment (gain)/loss recognised (227) 175 (227) 175

Balance at end of year 455 682 455 682

27. RELATED PARTIES27.1 Identity of related parties with whom material transactions have occurredThe company is the holding company of Budget Hotels (Pty) Ltd, City Lodge (Airport Property) (Pty) Ltd, City Lodge (Randburg) (Pty) Ltd, Courtyard Management Company (Pty) Ltd and Property Lodging Investments (Pty) Ltd. The company is a partner in five joint ventures, ie Gallic Courtyard (Arcadia) Share Block (Pty) Ltd, Gallic Courtyard (Bruma Lake) Share Block (Pty) Ltd, Gallic Courtyard (Rosebank) Share Block Ltd, Gallic Courtyard (Sandown) Share Block Ltd and Gallic Courtyard (Valkenberg) Share Block (Pty) Ltd.Courtyard Management Company (Pty) Ltd is the management company of the five joint ventures.Budget Hotels (Pty) Ltd and Property Lodging Investments (Pty) Ltd lease land to City Lodge Hotels Ltd.Interest-bearing loans exist between City Lodge Hotels Ltd, Property Lodging Investments (Pty) Ltd and the five joint ventures.All of the above entities are related parties to the company. Other than the directors’ remuneration (note 16), there are no other related parties with whom material transactions have taken place.



Company

2009R000

2008R000

27. RELATED PARTIES (continued)27.2 Types of related-party transactionsManagement fees and operating lease rental payments have been made and interest has been received from certain related parties. These transactions with related parties occurred under terms that are no less favourable than those arranged with third parties.27.3 Material related-party transactionsSubsidiary companiesManagement fees paid to related partiesCourtyard Management Company (Pty) Ltd 1 129 973

Operating lease rentals paid to related partiesBudget Hotels (Pty) Ltd 1 247 1 164Property Lodging Investments (Pty) Ltd 5 021 4 563

6 268 5 727

Interest received from related partiesProperty Lodging Investments (Pty) Ltd 7 860 7 860

Interest paid to related partiesProperty Lodging Investments (Pty) Ltd 72 72

Joint venturesInterest received from related partiesGallic Courtyard (Arcadia) Share Block (Pty) Ltd 747 682Gallic Courtyard (Bruma Lake) Share Block (Pty) Ltd 713 650Gallic Courtyard (Rosebank) Share Block Ltd 556 507Gallic Courtyard (Sandown) Share Block Ltd 356 325Gallic Courtyard (Valkenberg) Share Block (Pty) Ltd 741 676

3 113 2 840


Group Company

2009R000

2008R000

2009R000

2008R000

27. RELATED PARTIES (continued)

27.4 Amounts due to:

Subsidiary companies

Budget Hotels (Pty) Ltd 3 095 2 147

City Lodge (Airport Property) (Pty) Ltd 4 4

City Lodge (Randburg) (Pty) Ltd 1 192 1 192

City Lodge Holdings (Share Block) (Pty) Ltd 4 529 4 527

Courtyard Management Company (Pty) Ltd 8 744 9 920

Property Lodging Investment (Pty) Ltd — 509

17 564 18 299

25.5 Amounts due by:

Subsidiary companies

Property Lodging Investments (Pty) Ltd 14 756 —

14 756 —

The amounts due to and by subsidiary companies are unsecured, interest-free and repayable on demand.

Joint ventures

Gallic Courtyard (Arcadia) Share Block (Pty) Ltd 5 243 5 243 5 243 5 243

Gallic Courtyard (Bruma Lake) Share Block (Pty) Ltd 5 000 5 000 5 000 5 000

Gallic Courtyard (Rosebank) Share Block Ltd 3 900 3 900 3 900 3 900

Gallic Courtyard (Sandown) Share Block Ltd 2 500 2 500 2 500 2 500

Gallic Courtyard (Valkenberg) Share Block (Pty) Ltd 5 198 5 198 5 198 5 198

21 841 21 841 21 841 21 841

The amounts due by joint ventures are unsecured, have no fixed terms of repayment and bore interest at 14,25% per annum (2008 – 13,0%).

27.6 Key management

Key management, other than directors, is defined as first-line management of the company and its principal operations. First-line management largely constitutes operational executive management.

Key management compensation is as follows:

– Short-term employee benefits, including salaries and bonuses 8 330 7 496 6 935 6 129

– Equity compensation benefits 2 836 1 553 2 836 732

11 166 9 049 9 771 6 861



28. RELEVANT STANDARDS AND INTERPRETATIONS EFFECTIVE FOR YEARS ENDING AFTER 30 JUNE 2009

At the date of authorisation of these financial statements for the year ended 30 June 2009, the following standards and interpretations were in issue but not yet effective for the company:

Standard/interpretation Effective date

IAS 1 Presentation of financial statements (revised) Annual periods commencing on or after 1 January 2009*

IAS 19 The Limit on a defined Benefit Asset, Minimum Funding Requirements and their interaction in the South African Pension Fund Environment

Annual periods commencing on or after 1 April 2009

IAS 23 Borrowing costs Annual periods commencing on or after 1 January 2009*

IAS 27 amendment

Consolidated and separate financial statements

Annual periods commencing on or after 1 July 2009*

IAS 32 and IAS 1 amendment

IAS 32 – Financial Instruments: Presentation and IAS 1 – Presentation of Financial Statements: Puttable Financial Instruments and Obligations Arising on Liquidation

Annual periods commencing on or after 1 January 2009*

IAS 39 amendment

Eligible Hedged Items Annual periods commencing on or after 1 July 2009*

IFRS 1 and IAS 27 amendment

Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate


IFRS 2 amendment

IFRS 2 – Share-based Payment: Vesting Conditions and Cancellations


IFRS 3 Business Combinations Annual periods commencing on or after 1 July 2009*

IFRS 5amendment

Improvement to IFRSs 2008 – IFRS 5 Non-currrent Assets Held for Sale and Discontinued Operations

Annual periods commencing on or after 1 July 2009

IFRS 7 amendment

Improving disclosures about financial instruments Annual periods commencing on or after 1 January 2009

Various Improvement to IFRSs 2009 Annual periods commencing on or after 1 January 2009

IFRS 8 Operating Segments Annual periods commencing on or after 1 January 2009*

IFRIC 15 Agreements for the Construction of Real Estate Annual periods commencing on or after 1 January 2009*

IFRIC 16 Hedges of a Net Investment in a Foreign Operation Annual periods commencing on or after 1 October 2008*

IFRIC 17 Distributions of Non-cash Assets to Owners Annual periods commencing on or after 1 July 2009

All standards will be adopted at their effective date (except for the effect on those standards that are not applicable to the company).


28. RELEVANT STANDARDS AND INTERPRETATIONS EFFECTIVE FOR YEARS ENDING AFTER 30 JUNE 2009 (continued)

All of the above listed standards, except for IFRIC 15, IFRIC 16 and IFRIC 17 are applicable to the business of the company and will therefore have an impact on future financial statements.IAS 1 will be adopted for the first time for the financial reporting period ending 30 June 2010.IAS 19 will be adopted by the company for the financial reporting period ending 30 June 2010.IAS 23 will be adopted by the company, but is not expected to have any significant implications as the company already capitalises borrowing costs.IAS 27 will be adopted by the company for the financial reporting period ending 30 June 2010.IAS 32 and IAS 1 will be adopted by the company for the financial reporting period ending 30 June 2010.IAS 39 will be adopted by the company for the financial reporting period ending 30 June 2010.IFRS 1 and IAS 27 amendment, will be adopted by the company for the financial reporting period ending 30 June 2010.IFRS 2 amendment will be adopted by the company for the financial reporting period ending 30 June 2010.IFRS 3 will be adopted by the company for the financial reporting period ending 30 June 2010.IFRS 5 amendment will be adopted by the company for the financial reporting period ending 30 June 2010.IFRS 7 amendment will be adopted by the company for the company for the financial reporting period ending 30 June 2010.IFRS 8 will be adopted for the first time for the financial reporting period ending 30 June 2010. In terms of this IFRS, segment reporting will be based on the information that management uses internally for evaluating segment performance and when deciding how to allocate resources to operating segments.


shareholders’ analysis as at 30 June 2009

SHAREHOLDER SPREAD

No of shareholders in SA

No of shareholders other than in SA Total shareholders

Shareholder typeNominalnumber

Per-centage

Nominalnumber

Per-centage

Nominalnumber

Per-centage

Public 11 850 61,50 239 11,13 12 089 72,63Directors 5 10,74 — — 5 10,74Other – Non-public 4 16,63 — — 4 16,63

Total 11 859 88,87 239 11,13 12 098 100,00

Beneficial shareholders with holdings exceeding 1%

Numberof shares

owned

% oftotal

issuedshares

Enderle SA (Pty) Limited* 4 496 479 10,52Vuwa Hotels (Pty) Limited* 2 556 185 5,98Newshelf 892 (Pty) Limited* 2 556 120 5,98GEPF Equity 1 407 816 3,29Newshelf 935 (Pty) Limited* 1 278 060 2,99Old Mutual Life Assurance Co SA Ltd 893 188 2,09Investment Solutions – F and M Local 767 740 1,80State Street Bank and Trust 732 377 1,71City Lodge 10th Anniversary Employees Share Trust* 720 491 1,69Middle East and Africa – Fidelity 701 293 1,64Oasis Property Equity Fund 693 077 1,62RMB Securities (Pty) Limited 682 112 1,60Community Growth Fund 599 972 1,40Mr H Roberts 578 000 1,35Nedgroup Rainmaker Fund 437 401 1,02

19 100 311 44,68

* Non-public, which in terms of the JSE Listings Requirements includes, inter alia, the directors of the company, the trustees of any employees’ share scheme and any person or entity that is interested in 10% or more of a particular class of securities.


value-added statement for the year ended 30 June 2009

Group

2009R000 %

2008R000 %

Turnover 665 029 599 902Paid to suppliers for materials and services (226 645) (142 662)

Value added by operations 438 384 457 240Interest income 11 486 14 592Income from joint venture 8 952 8 527Pre-opening expenses (309) (975)

Total wealth created 458 513 100 479 384 100

Distributed as follows:Employees (permanent and contracted)Salaries, wages and all related benefits 119 465 26 108 609 23

GovernmentIncome taxation (current and deferred) 100 994 92 911Secondary tax on companies 16 925 15 388Rates 8 840 8 557

126 759 28 116 856 24

Providers of capitalDividends to ordinary shareholders 143 884 138 158Interest on borrowings 45 465 1 338

189 349 41 139 496 29

Reinvested to maintain/develop operationsDepreciation 34 858 26 934Accumulated (loss)/profit (11 918) 87 489

22 940 5 114 423 24

Total wealth distributed 458 513 100 479 384 100

Total headcount (permanent and contract) 1 239 1 142

Reinvested to maintain/develop operations

Providers of capital

Government

Employees

23%

24%29%

24%

2008

26%

28%

41%

5%

2009


members’ diary

FINANCIAL YEAR-END 30 June

ANNUAL GENERAL MEETING November

REPORTS

Announcement of results for the half-year February

Announcement of annual results August

Annual financial statements September/October

DIVIDENDS

Declaration Interim February

Final August

Payment Interim March/April

Final September/October


City Lodge Hotels Limited

Registration number: 1986/002864/06

Share Code: CLH ISIN: ZAE 000117792

Notice is hereby given that the twenty-third annual general

meeting of members of City Lodge Hotels Limited will be held

at The Lodge, Bryanston Gate Office Park, Corner Homestead

Avenue and Main Road, Bryanston on Thursday, 5 November

2009 at 14:00 for the following business:

1. To receive and consider the financial statements for the year

ended 30 June 2009.

2. To re-appoint KPMG Inc. as the independent auditors of the

company for the ensuing year with G Parker as the

engagement partner and to authorise the directors to

determine the auditors’ remuneration.

3. To elect directors who retire by rotation in accordance with

the provisions of the articles of association. The following

directors, being eligible, offer themselves for re-election and

their profiles appear on pages 22 and 23 of this report.

3.1 F W J Kilbourn

3.2 N Medupe

3.3 S G Morris

4. To approve the annual fees payable to the non-executive

directors with effect from the year beginning 1 July 2009

as follows:

4.1 to the chairman of the board, R501 500;

4.2 for their services as directors, R98 100 each;

4.3 to the chairman of the audit committee, R86 500;

4.4 for their services as members of the audit committee,

R41 450 each;

4.5 to the chairman of the remuneration committee,

R75 000;

4.6 for their services as members of the remuneration

committee, R36 000 each;

4.7 to the chairman of the risk committee, R59 100;

4.8 for their services as members of the risk committee,

R28 350 each.

As special business, to consider and, if deemed fit, to pass,

with our without modification, the following resolutions:

5. SPECIAL RESOLUTION: GENERAL AUTHORITY TO

REPURCHASE SHARES

“RESOLVED THAT the directors be and are hereby

authorised to approve and implement the acquisition by the

company (or a subsidiary of the company), of shares issued

by the company by way of a general authority, which shall

only be valid until the company’s next annual general

meeting, unless it is then renewed, provided that it shall not

extend beyond 15 (fifteen) months from the date of the

passing of the special resolution, whichever period is the

shorter, in terms of the Companies Act, and the Listings

Requirements of the JSE Limited (“the JSE”) which provide,

inter alia, that the company may only make a general

repurchase of its shares subject to:

the repurchase being implemented through the order

book operated by the JSE trading system, without prior

understanding or arrangement between the company and

the counterparty;

notice of annual general meeting


notice of annual general meeting (continued)

the company being authorised thereto by its articles of

association;

repurchases not being made at a price greater than 10%

(ten percent) above the weighted average of the market

value of the shares for the 5 (five) business days

immediately preceding the date on which the transaction

was effected;

an announcement being published as soon as the

company has repurchased ordinary shares constituting,

on a cumulative basis, 3% (three percent) of the initial

number of ordinary shares, and for each 3% (three

percent) in aggregate of the initial number of ordinary

shares repurchased thereafter, containing full details of

such repurchases;

repurchases not exceeding 20% (twenty percent) in

aggregate of the company’s issued ordinary share capital

in any one financial year;

the company’s sponsor confirming the adequacy of the

company’s working capital for purposes of undertaking

the repurchase of shares in writing to the JSE upon

entering the market to proceed with the repurchase;

the company remaining in compliance with paragraphs

3.37 to 3.41 of the JSE Listings Requirements concerning

shareholder spread after such repurchase;

the company and/or its subsidiaries not repurchasing

securities during a prohibited period as defined in

paragraph 3.67 of the JSE Listings Requirements; and

the company only appointing one agent to effect any

repurchases on its behalf.”

The directors, having considered the effects of the

repurchase of the maximum number of ordinary shares in

terms of the aforegoing general authority, are of the opinion

that for a period of 12 (twelve) months after the date of the

notice of the annual general meeting:

the company and its subsidiaries will be able, in the

ordinary course of business, to pay its debts;

the consolidated assets of the company and its

subsidiaries, fairly valued in accordance with generally

accepted accounting practice, will exceed the

consolidated liabilities of the company; and

the company and its subsidiaries’ ordinary share capital,

reserves and working capital will be adequate for ordinary

business purposes.

The following additional information, some of which may

appear elsewhere in the annual report of which this notice

forms part, is provided in terms of section 11.26 of the JSE

Listings Requirements for purposes of this general authority:

directors and management – page 22 to 25.

major beneficial shareholders – page 116.

directors’ interests in ordinary shares – page 71.

share capital of the company – page 88.

Litigation statement

The directors, whose names appear on pages 22 and 23 of

the annual report of which this notice forms part, are not

aware of any legal or arbitration proceedings, including

proceedings that are pending or threatened, that may have

or have had in the recent past, being at least the previous

12 (twelve) months, a material effect on the group’s financial

position.


Directors’ responsibility statement

The directors, whose names appear on pages 22 and 23 of

the annual report, collectively and individually accept full

responsibility for the accuracy of the information pertaining to

this special resolution and certify that, to the best of their

knowledge and belief, there are no facts that have been

omitted which would make any statement false or

misleading, and that all reasonable enquiries to ascertain

such facts have been made and that the special resolution

contains all information.

Material changes

Other than the facts and developments reported on in the

annual report, there have been no material changes in the

affairs or financial position of the company and its

subsidiaries since the date of signature of the audit report

and up to the date of this notice.

The directors have no specific intention, at present, for the

company to repurchase any of its shares but consider that

such a general authority should be put in place should an

opportunity present itself to do so during the year, which is in

the best interests of the company and its shareholders.

The reason for and effect of the special resolution is to grant

the directors of the company a general authority in terms of

the Companies Act and the JSE Listings Requirements for

the repurchase by the company (or by a subsidiary of the

company) of the company’s shares.

6. ORDINARY RESOLUTION NUMBER 1: CONTROL OVER

THE UNISSUED SHARES

“RESOLVED THAT the unissued ordinary shares in the

authorised share capital of the company be and are hereby

placed under the control of the directors of the company

who are authorised to allot and issue the ordinary shares at

their discretion until the next annual general meeting of the

company, subject to the provisions of the Companies Act

and the Listings Requirements and for the purpose of

placing the directors in a position to declare a scrip dividend

distribution with an alternative to receive cash, should they

so resolve. This shall further be subject to the aggregate

number of ordinary shares able to be allotted and issued in

terms of this resolution being limited to five percent (5%) of

the number of ordinary shares in issue at 30 June 2009.”

7. ORDINARY RESOLUTION NUMBER 2: SIGNATURE OF

DOCUMENTS

“RESOLVED THAT any one director or the company

secretary of the company be and is hereby authorised to do

all such things and sign all such documents and take all

such action as they consider necessary to implement the

resolutions set out in this notice convening this annual

general meeting at which this ordinary resolution will be

considered.”


notice of annual general meeting (continued)

VOTING AND PROXIES

A member entitled to attend and vote at the annual general

meeting is entitled to appoint a proxy to attend, speak and vote

in his stead. A proxy need not be a member of the company.

The form of proxy is only to be completed by those members

who are:

holding shares in certificated form; or

recorded on sub-register in dematerialised form in ‘own

name’.

All other beneficial owners who have dematerialised their shares

through a CSDP or broker and wish to attend the annual

general meeting, must instruct their CSDP or broker to provide

them with a Letter of Representation, or they must provide the

CSDP or broker with their voting instructions in terms of the

relevant custody agreement entered into between them and the

CSDP or broker. Proxy forms should be forwarded to reach the

company’s transfer secretaries by not later than 14:00 on

Tuesday, 3 November 2009. The completion of a proxy form will

not preclude a member from attending the meeting.

By order of the board

M C van Heerden

Company secretary

Bryanston

30 September 2009


proxy form city lodge hotels limited Registration number: 1986/002864/06 Share code: CLH SIN: ZAE 00011792

For use at the twenty-third annual general meeting of members to be held on Thursday, 5 November 2009 at The Lodge, Bryanston Gate Office Park, corner Homestead Avenue and Main Road, Bryanston, at 14:00.

I/we, the undersigned

of

being the registered holder/s of ordinary shares

hereby appoint

or failing him,

or failing them, the chairman of the meeting as my/our proxy to act for me/us and vote for me/us on my/our behalf as indicated below at the annual general meeting of the company to be held on Thursday, 5 November 2009 at 14:00 and at any adjournment thereof.

In favour of Against Abstain

1. Adoption of the annual financial statements

2. To re-appoint KPMG Inc. as the independent auditors of the company for the ensuing year with G Parker as the engagement partner and to authorise the directors to determine the auditors’ remuneration

3. Re-election of retiring directors

3.1 Mr F W J Kilbourn

3.2 Mrs N Medupe

3.3 Mr S G Morris

4. Approval of non-executive directors’ fees:

4.1 to the chairman of the board, R501 500;

4.2 for their services as directors, R98 100 each;

4.3 to the chairman of the audit committee, R86 500;

4.4 to the other members of the audit committee, R41 450 each;

4.5 to the chairman of the remuneration committee, R75 000;

4.6 to the other members of the remuneration committee, R36 000 each;

4.7 to the chairman of the risk committee, R59 100;

4.8 to the other members of the risk committee, R28 350.

5. Special Resolution – general authority to repurchase shares

6. Ordinary Resolution 1 – control over the unissued shares

7. Ordinary Resolution 2 – signature of documents

Signature Date


1. Each member is entitled to appoint one or more proxies (who

need not be a member(s) of the company) to attend, speak

and vote (either on a poll or by show of hands) in place of

that member at the annual general meeting.

2. A member may insert the name of a proxy or the names of

two alternative proxies of the member’s choice in the space

provided, with or without deleting the words “the chairman of

the meeting”. All deletions must be individually initialled by

the member, failing which they will not have been validly

effected. The person whose name appears first on the form

of proxy and who is present at the annual general meeting

shall be entitled to act as proxy to the exclusion of the

persons whose names follow.

3. Voting instructions for each of the resolutions must be

completed by filling in the number of votes (one per ordinary

share) under the “In favour of”, “Against” or “Abstain”

headings on the Proxy Form. If no instructions are filled in on

the Proxy Form, the chairman of the annual general meeting,

if the chairman is the authorised proxy, or any other proxy

shall be authorised to vote in favour of, against or abstain

from voting as he/she deems fit.

4. A member or his/her proxy is entitled but not obliged to vote

in respect of all the ordinary shares held by the member. The

total number of votes for or against the resolutions and in

respect of which any abstention is recorded may not exceed

the total number of shares held by the member.

5. If this form has been signed by a person in a representative

capacity, the document authorising that person to sign must

be attached, unless previously recorded by the company’s

transfer secretaries or waived by the chairman of the annual

general meeting.

6. The chairman of the annual general meeting may reject or

accept any form of proxy that is completed and/or received

other than in accordance with these instructions and notes.

7. Any alterations or corrections to this form of proxy have to be

initialled by the signatory(ies).

8. The completion and lodging of this form of proxy will not

preclude the relevant member from attending the annual

general meeting and speaking and voting in person to the

exclusion of any proxy appointed by the member.

9. Forms of proxy have to be lodged with or posted to the

company, c/o Computershare Investor Services 2004

(Pty) Limited, 70 Marshall Street, Johannesburg, 2001

(PO Box 61051, Marshalltown, 2107), to be received by not

later than 14:00 on Tuesday, 3 November 2009.

10. This proxy form is to be completed only by those members

who either still hold shares in a certificated form, or whose

shares are recorded in their own name in electronic form in

the subregister.

11. Shareowners whose dematerialised shares are held in the

name of a nominee and wish to attend the annual general

meeting must contact their Central Securities Depository

Participant (CSDP) or broker who will furnish them with the

necessary letter of authority to attend the annual general

meeting. Alternatively they have to instruct their CSDP or

broker as to how they wish to vote. This has to be done in

terms of the agreement between the shareowner and the

CSDP or the broker.

12. Shareowners who wish to attend and vote at the meeting

must ensure that their letters of authority from their CSDP or

broker reach the transfer secretaries by not later than 14:00

on Tuesday, 3 November 2009.

notes to the proxy form

BASTION GRAPHICS




A N N U A L R E P O R T 2 0 0 9


contents






Our vision



Our brands

Our directorate

Our executive team




Administration




Members’ diary


Proxy form


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