a playback from way back · • tea and coffee-making facilities. • desk with lighting and plugs...

We are playing the same tune, only better

Now&annual report 2008

A playback from way back . . . Then

CITY LODGE HOTELS LIMITED

From small beginnings – Continuously improving and innovatingThe 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.

1 Financial highlights

3 Our key strategies and vision

4 Our brands

12 Our directorate

14 Our executive team

16 Chairman’s and chief executive’s review

22 Seven-year financial review

26 Responsible corporate citizenship and sustainability report

46 Administration

47 Annual financial statements

88 Value-added statement

89 Shareholders’ analysis

90 Notice of annual general meeting

93 Proxy form

ibc Members’ diary

contents

more of the same, even better

Then and NowFrom humble beginnings in 1985, the City Lodge Hotels group has grown into a dedicated and committed company offering quality on all levels.

Then – we offered accommodation suitable for the value conscious business traveller. Now – we are a multi-brand chain offering a variety of locations, features and budget choices.

Then – we pioneered quality selected services. Now – we value each and every client and have developed a loyal base of regulars.

Then – we created homely ambience. Now – we are in tune with the diverse needs of the wide range of business and leisure travellers making use of our facilities.

City Lodge Hotels LimitedAnnual Report 20081

financial highlightsfinancial highlights

82%average occupancy

27%increase in diluted headline earnings per share

39%return on average equity

27%increase in dividends per share

hosp

italit

yse

rvic

e

com

mitm

ent

trad

ition

tradi

tion

Breakfast like mom used to make it.

serv

ice

Always delivering on our promise

hosp

italit

y

You are most welcome

com

mitm

ent

People caring for people

City Lodge Hotels LimitedAnnual Report 2008 2

Stock exchangeperformance

Ordinary shareprice (cents)

01 0002 0003 0004 0005 0006 0007 0008 0009 000

Jun08

Jun07

Jun06

Jun05

Jun04

Jun03

Jun02

Jun01

Jun00

Jun99

Jun98

Jun97

Jun96

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Jun94

Jun93

financial highlightsfinancial highlights continued

For the year ended 30 June 2008 2008 % 2007

Revenue (R’m) 599,9 18 509,7EBITDA (R’m) 339,1 21 281,1Operating profit (R’m) 312,2 23 254,4Headline earnings (R’m) 225,5 27 177,7Diluted headline earnings per share (cents) 524,9 27 413,0Dividends declared per share (cents) 371,0 27 293,0Cash generated by operations (R’m) 364,1 22 299,4Net asset value per share (cents) 1 471 17 1 258


our key strategies

our vision

our key strategies

our vision

At the City Lodge Hotels group we continue to adopt the following key strategies to remain on top of our game:

• Continuing to obtain valuable feedback from our guests to ensure that we keep up with changing trends and meet their needs for quality and value-for-money accommodation and related services. Monitoring and researching the market on an ongoing basis will remain an important part of our business. From a product and features point of view, more of the same “but even better” is the way we like to look at it.

• Further developing our “people caring for people” focus which is at the core of everything we do. Through investing heavily in our own people via training, development and skills retention programmes, we will maintain and improve the service excellence standards that have been a hallmark of all our offerings over the past two decades. Our highly motivated, friendly and well-trained staff will continue to attract guests to our hotels.

• Growing the number of hotels and rooms offered by the group’s four brands through the extension of some existing hotels and the building of new hotels on ideally located sites.

• Nurturing, maintaining and growing top-of-mind awareness of the group’s brands to ensure that ours is the hotel group of choice for business and leisure travellers. This will be achieved through our television advertising campaigns, our state-of-the-art website, our strong relationships with the travel trade and alliances with other service providers in the travel industry.

• Achieving meaningful transformation in all aspects relating to BEE and ensuring compliance with the dti Codes of Good Practice and the tourism industry’s Scorecard and Charter.

People Caring for PeopleWe will be recognised as the preferred southern African 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 brandsour brands

6 hotels451 rooms

our current locationsCape Town

Johannesburg(Eastgate, Rosebank, Sandton)

Pretoria (Arcadia)

Port Elizabeth

More reasons to make yourself at home

The Courtyard Hotels offer the discerning guest an exclusive and gracious alternative to an The 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 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 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 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. kitchenette with refrigerator and microwave oven.

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

the finest 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 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.

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 office 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.


our brandsour brands continued

11 hotels1 801 rooms

our current locations future locationsBloemfontein

Cape Town (Pinelands, V&A Waterfront, GrandWest)

Durban (Central, Umhlanga Ridge)

Johannesburg (Bryanston, Johannesburg Airport, Sandton Katherine Street, Sandton Morningside)

Port Elizabeth

Johannesburg – Fourways

Pretoria – Hatfield

Pretoria – Lynnwood

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

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


Our rooms

• Spacious air-conditioned room with double 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

• 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.• Fax and photocopy services available.• Same-day laundry and dry-cleaning.• Sparkling swimming pool.• Free and convenient parking.• Wireless internet access.



our current locations future locationsBellville Port Elizabeth

George

Johannesburg (Johannesburg Airport, Midrand, Roodepoort, Sandton Grayston Drive)

Nelspruit

Polokwane

Pretoria (Menlo Park)

Stay smart

Very much like City Lodges, Town Lodges are also strategically located adjacent to motorways 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 The rooms are slightly smaller than City Lodge, but offer similar stylish decor and the

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

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

9 hotels1 041 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.

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.



16 hotels1 480 rooms

our current locations future locationsCape 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

Richards Bay

Rustenburg

Johannesburg – Southgate

Potchefstroom

Umhlanga Ridge

Why pay more?

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.


Our rooms

• 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

• 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 directorate

4. Ndumi Medupe (38)†

Chartered Accountant (SA).

Appointed to the board in 2006.

Auditor and financial consultant.

2. Frank Kilbourn (46)▫

BCom, LLM, BA (Hons), HDip Tax.


Director of companies.

our directorate

1. Hans Enderle (66)† Non-executive chairman and

founder.

52 years’ experience in the hotel 52 years’ experience in the hotel 52 years’ experience in the hotel 52 years’ experience in the hotel 52 years’ experience in the hotel 52 years’ experience in the hotel industry.industry.

3. Nigel Matthews (63)†

MA (Oxon), MBA.

Appointed to the board in 1989.Appointed to the board in 1989.Appointed to the board in 1989.Appointed to the board in 1989.Appointed to the board in 1989.

Director of companies.Director of companies.Director of companies.Director of companies.


9. Andrew Widegger (42)#▫*

Financial director.


15 years with the company.

7. Clifford Ross (51)#▫*

Chief executive.

33 years’ experience in the hotel industry.

5. Stuart Morris (62)▫



Director of companies.

6. Bulelani Ngcuka (54) BProc, LLB, MA (Webster

University – Geneva).

Appointed to the board Appointed to the board Appointed to the board 1 August 2008.1 August 2008.

Director of companies.Director of companies.Director of companies.Director of companies.

Member of the audit committeeMember of the audit committee

# Member of executive committee

† Member of remuneration and nomination committee

▫ Member of risk committeeØ Executive director

Independent non-executive director

8. Dr Keith Shongwe (44)BSc, MBChB.

Appointed to the board in 2002.Appointed to the board in 2002.Appointed to the board in 2002.

Business development executive.Business development executive.Business development executive.Business development executive.Business development executive.


our executive teamour executive team

4. Marcel Kobilski (44)#▫

Divisional director – human resources.


2. Tony Balabanoff (48)#Divisional director – operations.


1. Clifford Ross (51)#▫*

Chief executive.

21 years with the company.21 years with the company.21 years with the company.21 years with the company.

3. Gary Bisset (54)#▫

Divisional director – operations.

12 years with the company.12 years with the company.12 years with the company.12 years with the company.


9. Andrew Widegger (42)#▫Ø

Financial director.


7. Peter Schoeman (43)# Divisional director – sales and

marketing.


5. Naynesh Parbhoo (35)#Divisional director – accounting.


6. Heather Prinsloo (44)#Divisional director – transformation.

Joined 1 September 2008.Joined 1 September 2008.

8. Patrick Tate (52)#Divisional director – operations.

20 years with the company.20 years with the company.20 years with the company.

# Member of executive committee

▫ Member of risk committeeØ Executive director


chairman’s and chief executive’s review

Dear Shareholder

The theme of this year’s annual report – more of the same, only better – is not just a catchy buzz phrase, it is a philosophy that runs through the operational veins of the group and is a strategic imperative that we are passionate about sustaining.

The core values that were instilled as part of the group’s DNA in the 1980s – such as “TLC” (Tip-Top (Town), Loving (Lodge) and Clean (City)) – are still strongly adhered to as we continue to grow our footprint across South Africa.

More than 23 years after the opening of our first hotel, we are still striving to ensure that we always deliver quality accommodation and specially selected services to business and leisure travellers at value-for-money prices. Closely linked to this is our ongoing commitment to training our people, maintaining and upgrading our hotels and constantly introducing new features and innovations that meet our guests’ evolving needs.

Sticking to our knitting has served us well over the years and there is no reason why we should depart from this successful formula that has cemented the group’s place as one of the country’s premier hotel developers, owners and operators. Our four brands – Courtyard, City Lodge, Town Lodge and Road Lodge – may service different sectors of the accommodation market, but all 42 hotels and 4 773 rooms across these brands, share the same fundamental culture and ethos.

Realising that there is never room for complacency, our goal is to keep on delivering more of the same – to guests and shareholders – but always striving to do

better than we have done before. This applies to our hotels, our services, our training and development of our people, our corporate social responsibility projects, our innovations, our financial performance and our expansion plans.

Service excellence and endeavouring to always make our guests feel like they are “home-away-from-home” have been central elements of the group’s success to date and will remain at the forefront of all that we do in the future.

It was Charles Dickens’ character Oliver Twist who said: “Please, sir, may I have some more?” Mr Bumble did not want to give him any more. We would have made a plan!

More solid financial results

Strong demand across the four brands enabled the group to maintain average annual occupancy at 82% for the year ended 30 June 2008, matching the record achievement of the previous financial year and providing the base for solid rises in revenue, profit and dividends.

Revenue rose 18% to R599,9 million, aided by more rooms being sold and higher average room rates. The operating margin increased by two percentage points to 52% and operating profit increased by 23% to R312,2 million. As a result of higher average cash balances, higher interest rates and an increase in interest capitalised to property, plant and equipment, net interest received increased by R5,1 million.

Although occupancies continued to improve within the Courtyard brand, income from the joint venture was affected by a non-recurring write-off of R900 000.



Despite this, the share of profit from the joint venture rose by 12% to R8,5 million.

The group’s effective tax rate declined to 32,4% from 34,1% due to the reduction in the corporate tax rate to 28% and a decline in the STC rate to 10% for the interim dividend. There was also a R1,7 million credit to the opening deferred tax balance as a consequence of the change in the tax rate.

Net profit and fully diluted headline earnings per share both rose by 27% to R225,6 million and 524,9 cents respectively. Cash generated by operations increased by 22% to R364,1 million.

A final dividend of 194 cents was declared, equivalent to 70% of earnings for the second half, taking the distribution to shareholders for the full year to 371 cents, 27% higher than in the previous financial year.

Occupancy in the second half was marginally lower than in the first half due to the dilutionary impact of additional capacity in the form of the 118-room Road Lodge Centurion and the 90-room Road Lodge Richards Bay, combined with the further rooms being added between March and May at City Lodge Johannesburg Airport (59 rooms), City Lodge GrandWest (56 rooms) and Road Lodge Nelspruit (27 rooms).

More BEE

After an exhaustive process of examining all the options available, a highly innovative and far-reaching black economic empowerment transaction involving 15% of the group’s equity was concluded in July 2008.

Hans EnderleChairman



chairman’s and chief executive’s review continued

The parties involved in the BEE transaction are:

• 6% – the Injabulo Staff Trust (meaning “happy smiles”) – this will benefit eligible employees, including all current and future black and white employees who do not qualify to participate in the company’s executive share incentive scheme. Around 75% of City Lodge staff are from historically disadvantaged communities

• 3% – the University of Johannesburg’s School of Tourism and Hospitality – this institution has played a very important role in developing skills over many decades; a “trickle dividend” will be used annually to fund bursaries for historically disadvantaged black students. At least 85% of bursary recipients must be black, two thirds of whom must be female

• 6% – Vuwa (which means “wake up”) Investments – Vuwa is owned and controlled by historically disadvantaged individuals and includes African Footprint Investment Holdings, an investment holding company controlled by black women.

Following the enormous success of the ground-breaking City Lodge 10th Anniversary Employee Share Trust that was introduced in 1995 and which currently owns 1,7% of the group’s shares, it made sense to replicate and expand the model as part of our broad-based BEE initiative. Our staff are highly supportive and appreciative of this additional shareholding that provides them with lucrative dividends and share distributions.

By including the University of Johannesburg in our BEE transaction, we have taken a meaningful step towards furthering the education of students and alleviating skills shortages in our industry.

Contributing to the education of black students in the tourism and hospitality sector is an investment in the future of South Africa, while empowering and retaining our own black staff is also a key consideration for staff motivation and skills retention within our group.

Vuwa Investments, which is chaired by Bulelani Ngcuka, is an excellent BEE partner and we look forward to a strong and long-lasting symbiotic relationship into the future.

As a result of this 15% BEE transaction, black ownership of the group has effectively risen to 22,4% if mandated investments, as defined by the Department of Trade and Industry’s BEE codes, are excluded from the existing shareholding structure.

More “people caring for people”

People always have been and always will be the core of our group. As we continue to grow in hotels and rooms, we naturally also continue to grow as an important provider of employment in South Africa. At the end of June 2008, our staff complement stood at 1 142.

Training throughout our hotels continues to be a huge priority as does service excellence and staff motivation. Our “On Top Of My Game” service excellence programme and “The Gotcha Cup” – both of which were introduced in 2006 to create an enhanced awareness of service ahead of the Soccer World Cup in 2010 – are being keenly contested by our hotels and their staff who are also having some fun along the way as they strive to be the best they can be.


Significantly, our focus on training and staff development cannot be underestimated. A recent highlight in this regard was the appointment of Anton Rademeyer, a graduate of our very own City Lodge Academy, as manager of Road Lodge Carnival City.

While we were sad to bid farewell to Andrew Morris, our property development director, his company will be acting as project manager on our new developments, meaning that his expertise and knowledge of the group will be retained. Emile van der Merwe joined us in August 2008 as property manager.

Bulelani Ngcuka joined the board of directors with effect from 1 August 2008 and we look forward to a long and rewarding association with him and his company, Vuwa Investments.

As part of our ongoing commitment to transformation and broad-based empowerment, it was decided to create the new position of director responsible for transformation. Heather Prinsloo, who will serve on the executive committee, was appointed to this position with effect from 1 September.

More and even better hotels

On the expansion front, the group continues to find suitable sites and opportunities to grow in various parts of South Africa. Road Lodge Potchefstroom, our 43rd hotel, is scheduled to open in November 2008, increasing our presence in the North West province.

Construction on the 204-room Town Lodge Port Elizabeth has commenced with completion expected in early 2010.

Clifford RossChief executive



chairman’s and chief executive’s review continued

This will enable us to have all four of our brands represented in “the friendly city.” Construction on Road Lodges at Southgate (Johannesburg) and Gateway (Umhlanga) is likely to begin shortly.

In an exciting growth development for our presence in Gauteng, planning is at an advanced stage for three City Lodges: a 200-room hotel in Fourways (Johannesburg), a 200-room hotel in Lynnwood (Pretoria) and a 150-room hotel in Hatfield (Pretoria). In a departure from our normal practice, the two Pretoria hotels will be based on land and building leases. Construction on all three hotels is anticipated to begin by the end of calendar 2008.

Significantly, once all of these new hotels have been opened, our number of hotels will rise to 49 and our room portfolio will rise by 23% to 5 855 rooms across South Africa.

While there are still growth opportunities for our brands within South Africa, looking further afield into Africa has become a strategic objective that will receive ongoing attention during the current financial year. It is our firm belief that there is a good business case for introducing our successful business model to certain other countries.

Some research has been done into Nigeria and we continue to gather market information and operational details towards conducting a feasibility study into establishing a presence in Africa’s most populous nation. A significant amount of additional research and investigation still needs to be done before any foreign plans, transactions or agreements can be finalised.

In the meantime, we continue to be on the lookout for suitable sites within South Africa, which still has great potential in many areas. City Lodge is a proud South African company and our sights are firmly set on growing at home and abroad.

More focus on our guests

As our footprint gets bigger, our marketing and awareness-building focus grows and so does our emphasis on rewarding our loyal guests.

Throughout the high-profile sporting events of recent months – including cricket, golf, cycling and rugby – our innovative, fun and highly effective television advertisements have reinforced brand awareness and our “home-away-from-home” guest philosophy.

Our weekend specials – such as Team Scheme and Spouse-on-the-House as well as our internet based auction site, Bid2Stay, continue to contribute towards strengthening weekend occupancies as does our association with 1time airlines.

In line with the worldwide trend towards online reservations, our Lodger Club and Corporate Club programmes are growing in popularity, as increasing numbers of guests realise the benefits of booking via the internet and accumulating valuable points towards free accommodation. There are now more than 34 000 Lodger Club members and more than 300 Corporate Club members.


The importance of our website as a transaction, information and marketing tool cannot be overestimated as e-commerce increases in versatility and usability. A new payment gateway for internet bookings has been introduced and, after some minor modifications, is functioning extremely effectively.

Guest questionnaires and other feedback mechanisms continue to provide valuable insight into what guests want and expect from their hotel experience.

More of the same, only better

Heartfelt thanks must go to everyone who has contributed to the group’s success to date and to prospects for the future – this includes guests, staff, management, directors, shareholders and suppliers.

Positive trading conditions have continued into the early part of the new financial year, which will be boosted by full contributions from additional capacity – new hotels and extensions to existing hotels – added in the past financial year.

Excluding the accounting effects of the successfully concluded BEE transaction, satisfactory earnings growth is anticipated for the year ahead, while our newly announced expansion initiatives should underpin longer-term earnings prospects.

Hans Enderle Clifford RossChairman Chief executive


seven-year financial review


IFRS SA GAAP

R’m 2008 2007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 2002

Consolidated income statementsRevenue 599,9 509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9509,7 442,1 390,9 335,8 292,9 231,9

EBITDA 339,1 281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2281,1 237,0 206,3 173,9 151,7 112,2Depreciation and amortisation (26,9) (26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)(26,7) (25,5) (24,9) (23,2) (22,3) (21,7)

Operating profit 312,2 254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5254,4 211,5 181,4 150,7 129,4 90,5Net interest received/(paid) 13,2 8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)8,2 3,4 3,4 (0,6) (2,0) (8,6)Income from joint venture 8,5 7,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,97,6 5,4 3,1 3,0 3,5 0,9

Profit before taxation 333,9 270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8270,2 220,3 187,9 153,1 130,9 82,8Taxation (108,3) (92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)(92,3) (76,4) (65,3) (52,5) (44,1) (27,8)

Profit for the period 225,6 177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0

Determination of headline earningsProfit for the period 225,6 177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0177,9 143,9 122,6 100,6 86,8 55,0(Profit)/loss on sale of equipment (0,2) (0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —(0,3) 0,9 — — — —Taxation effect 0,1 0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —0,1 (0,2) — — — —

Headline earnings 225,5 177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0177,7 144,6 122,6 100,6 86,8 55,0

07 0807 0807 0807 080605040302 0605040302 0605040302 0605040302 0605040302 0605040302 0605040302 0605040302 0605040302

231,

923

1,9 29

2,9

292,

9

335,

833

5,8 390,

939

0,9

442,

144

2,1 50

9,7

509,

7 599,

959

9,9Revenue

(R’m)

07 0807 0807 0807 080605040302 0605040302 0605040302 0605040302 0605040302 0605040302 0605040302 0605040302 0605040302

55,0

55,0

86,8

86,8 10

0,6

100,

6 122,

612

2,6 144,

614

4,6 17

7,7

177,

7

225,

522

5,5Headline

earnings(R’m)


IFRS SA GAAP

R’m 2008 2007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 20022007 2006 2005 2004 2003 2002

Consolidated balance sheetsAssetsNon-current assets 695,1 564,5 501,9 477,6 481,2 426,9 395,6564,5 501,9 477,6 481,2 426,9 395,6564,5 501,9 477,6 481,2 426,9 395,6564,5 501,9 477,6 481,2 426,9 395,6564,5 501,9 477,6 481,2 426,9 395,6564,5 501,9 477,6 481,2 426,9 395,6564,5 501,9 477,6 481,2 426,9 395,6564,5 501,9 477,6 481,2 426,9 395,6564,5 501,9 477,6 481,2 426,9 395,6564,5 501,9 477,6 481,2 426,9 395,6564,5 501,9 477,6 481,2 426,9 395,6564,5 501,9 477,6 481,2 426,9 395,6

Property, plant and equipment 647,2 517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1517,7 456,1 432,6 439,8 385,8 351,1Intangible assets — — — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7— — — — 0,8 1,7Investments and loans 45,0 43,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,343,8 42,9 42,2 37,4 36,5 39,3Deferred taxation 2,9 3,0 2,9 2,8 4,0 3,8 3,53,0 2,9 2,8 4,0 3,8 3,53,0 2,9 2,8 4,0 3,8 3,53,0 2,9 2,8 4,0 3,8 3,53,0 2,9 2,8 4,0 3,8 3,53,0 2,9 2,8 4,0 3,8 3,53,0 2,9 2,8 4,0 3,8 3,53,0 2,9 2,8 4,0 3,8 3,53,0 2,9 2,8 4,0 3,8 3,53,0 2,9 2,8 4,0 3,8 3,53,0 2,9 2,8 4,0 3,8 3,53,0 2,9 2,8 4,0 3,8 3,5

Current assets 83,4 109,6 105,2 82,5 49,0 56,6 38,0109,6 105,2 82,5 49,0 56,6 38,0109,6 105,2 82,5 49,0 56,6 38,0109,6 105,2 82,5 49,0 56,6 38,0109,6 105,2 82,5 49,0 56,6 38,0109,6 105,2 82,5 49,0 56,6 38,0109,6 105,2 82,5 49,0 56,6 38,0109,6 105,2 82,5 49,0 56,6 38,0109,6 105,2 82,5 49,0 56,6 38,0109,6 105,2 82,5 49,0 56,6 38,0109,6 105,2 82,5 49,0 56,6 38,0109,6 105,2 82,5 49,0 56,6 38,0

Total assets 778,5 674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6

EquityTotal shareholders’ funds 626,5 534,4 466,5 415,7 390,8 342,1 303,8534,4 466,5 415,7 390,8 342,1 303,8534,4 466,5 415,7 390,8 342,1 303,8534,4 466,5 415,7 390,8 342,1 303,8534,4 466,5 415,7 390,8 342,1 303,8534,4 466,5 415,7 390,8 342,1 303,8534,4 466,5 415,7 390,8 342,1 303,8534,4 466,5 415,7 390,8 342,1 303,8534,4 466,5 415,7 390,8 342,1 303,8534,4 466,5 415,7 390,8 342,1 303,8534,4 466,5 415,7 390,8 342,1 303,8534,4 466,5 415,7 390,8 342,1 303,8

Share capital and premium 140,4 138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4138,0 136,4 134,8 133,7 131,8 131,4Reserves 486,1 396,4 330,1 280,9 257,1 210,3 172,4396,4 330,1 280,9 257,1 210,3 172,4396,4 330,1 280,9 257,1 210,3 172,4396,4 330,1 280,9 257,1 210,3 172,4396,4 330,1 280,9 257,1 210,3 172,4396,4 330,1 280,9 257,1 210,3 172,4396,4 330,1 280,9 257,1 210,3 172,4396,4 330,1 280,9 257,1 210,3 172,4396,4 330,1 280,9 257,1 210,3 172,4396,4 330,1 280,9 257,1 210,3 172,4396,4 330,1 280,9 257,1 210,3 172,4396,4 330,1 280,9 257,1 210,3 172,4

LiabilitiesNon-current liabilities 104,3 98,0 106,0 102,8 98,7 98,1 93,198,0 106,0 102,8 98,7 98,1 93,198,0 106,0 102,8 98,7 98,1 93,198,0 106,0 102,8 98,7 98,1 93,198,0 106,0 102,8 98,7 98,1 93,198,0 106,0 102,8 98,7 98,1 93,198,0 106,0 102,8 98,7 98,1 93,198,0 106,0 102,8 98,7 98,1 93,198,0 106,0 102,8 98,7 98,1 93,198,0 106,0 102,8 98,7 98,1 93,198,0 106,0 102,8 98,7 98,1 93,198,0 106,0 102,8 98,7 98,1 93,1

Interest-bearing borrowings 40,0 40,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,540,0 55,2 54,5 53,0 61,1 58,5Other non-current liabilities 6,7 5,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,35,9 5,4 6,8 4,6 4,1 3,3Deferred taxation 57,6 52,1 45,4 41,5 41,1 32,9 31,352,1 45,4 41,5 41,1 32,9 31,352,1 45,4 41,5 41,1 32,9 31,352,1 45,4 41,5 41,1 32,9 31,352,1 45,4 41,5 41,1 32,9 31,352,1 45,4 41,5 41,1 32,9 31,352,1 45,4 41,5 41,1 32,9 31,352,1 45,4 41,5 41,1 32,9 31,352,1 45,4 41,5 41,1 32,9 31,352,1 45,4 41,5 41,1 32,9 31,352,1 45,4 41,5 41,1 32,9 31,352,1 45,4 41,5 41,1 32,9 31,3

Current liabilities 47,7 41,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,741,7 34,6 41,6 40,7 43,3 36,7

Total equity and liabilities 778,5 674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6674,1 607,1 560,1 530,2 483,5 433,6

Earningsand

dividendsper share

(cents)

Netoperatingcash flowper share

(cents)

78,0 12

2,0

168,

0

203,

0

238,

0 293,

0

131,

8 205,

6

237,

1 287,

4

337,

9 413,

0

371,

052

4,9

524,

9

Diluted headline earnings per share

Dividends declared per share

07 080605040302 07 0807 0807 0807 080605040302 0605040302 0605040302 0605040302 0605040302 0605040302 0605040302 0605040302 0605040302

229,

422

9,4

260,

426

0,4

260,

4

300,

330

0,3

300,

3

354,

435

4,4

386,

438

6,4

386,

4

521,

652

1,6 62

2,2

622,

2



seven-year financial review continued

IFRS SA GAAP

2008 2007 2006 2005 2004 2003 2002

Ordinary share performanceShares in issue 000 42 602 42 482 42 368 42 214 42 125 41 962 41 910Weighted average shares in issue 000 42 519 42 416 42 300 42 186 42 033 41 939 40 752Weighted average convertible debentures in issue 000 — — — — — — 1 158Diluted headline earnings per share cents 524,9 413,0 337,9 287,4 237,1 205,6 131,8Dividends per share cents 371,0 293,0 238,0 203,0 168,0 122,0 78,0Dividend cover times 1,4 1,4 1,4 1,4 1,4 1,7 1,7Net asset value per share cents 1 471 1 258 1 101 985 928 815 725Net operating cash flow per share cents 622,2 521,6 386,4 354,4 300,3 260,4 229,4

Profitability and liquidityEBITDA margin % 56,5 55,1 53,6 52,8 51,8 51,8 48,4Operating margin % 52,0 49,9 47,8 46,4 44,9 44,2 39,0Effective tax rate % 32,4 34,1 34,7 34,8 34,3 33,7 33,6Return on ordinary shareholders’ funds % 38,9 35,5 32,8 30,2 27,4 26,9 22,0Interest-bearing debt to total shareholders’ funds % 6,4 7,5 11,8 13,1 15,6 19,6 19,3Net interest cover times n/a n/a n/a n/a 266,7 66,4 10,5Current ratio :1 1,8 2,6 3,0 2,0 1,2 1,3 1,0

Definitions

Headline earnings per shareProfit before exceptional items divided by the weighted average number of ordinary shares in issue.

Diluted headline earnings per shareHeadline earnings adjusted by the interest, after the tax- shielding effect on the convertible debentures, divided by the weighted average number of ordinary shares in issue including the convertible debentures and any outstanding share options in issue.

Dividend coverDiluted headline earnings per share divided by dividends declared per share.

Net asset value per shareTotal share and convertible debenture holders’ funds divided by the number of ordinary shares and convertible debentures in issue at the year-end.

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


IFRS SA GAAP

2008 2007 2006 2005 2004 2003 2002

Stock exchange performanceMarket price per ordinary share– Closing Rand 69,99 80,00 49,00 37,50 25,75 18,30 12,15– Highest Rand 89,86 82,50 58,50 39,80 28,50 18,65 13,00– Lowest Rand 65,00 46,27 36,00 24,50 17,60 11,20 8,10Market price per convertible debenture– Closing Rand n/a n/a n/a n/a n/a n/a n/a– Highest Rand n/a n/a n/a n/a n/a n/a 8,70– Lowest Rand n/a n/a n/a n/a n/a n/a 8,45Total market capitalisation R’m 2 981,7 3 398,6 2 076,0 1 583,0 1 084,7 767,9 509,2Fully diluted closing price earnings multiple times 13,3 19,4 14,5 13,0 10,8 8,8 9,1Volume traded– Ordinary shares 000 12 062 17 134 25 916 10 999 10 007 5 594 9 021– Convertible debentures 000 n/a n/a n/a n/a n/a n/a 101

OtherNumber of hotels 42 40 38 37 37 35 34Number of rooms 4 773 4 396 4 169 4 049 4 049 3 791 3 658Group average occupancy % 82 82 79 77 76 76 72

Definitions (continued)

EBITDAEarnings before interest, taxation, depreciation and amortisation.

EBITDA marginEBITDA expressed as a percentage of revenue.

Operating marginOperating profit expressed as a percentage of revenue.

Effective tax rateTaxation per the income statement expressed as a percentage of profit before taxation.

Return on ordinary shareholders’ fundsHeadline earnings attributable to ordinary shareholders expressed as a percentage of average ordinary shareholders’ funds.

Interest-bearing debt to total shareholders’ fundsInterest-bearing debt expressed as a percentage of total share and convertible debenture holders’ funds.

Net interest coverOperating profit divided by interest paid less interest received.

Current ratioCurrent assets divided by current liabilities.


responsible corporate citizenship and sustainability report

City Lodge Hotels Limited and its board of directors remain committed to the principles of good corporate governance contained in the Code of Corporate Practices and Conduct as set out in the second report of the King Commission on Corporate Governance (“King Report”), as well as the continuing obligations of the JSE Limited Listings Requirements (“Listings Requirements”) and Companies Act, 61 of 1973, as amended (“the Companies Act”), in the conduct of its business.

The board believes that the company has, throughout the period under review, complied with all material aspects of the King Report, save for the recommendation that the chairman of the board be an independent non-executive director. Hans Enderle, chairman of the board, founder of the company and majority shareholder, is not considered independent. The board is, however, of the opinion that, having regard to his considerable knowledge and experience in the hospitality industry together with his management expertise, this area of non-compliance with the King Report does not impair governance integrity.

The board

Introduction

In addition to the general powers of the directors as set out in the company’s articles of association, the board charter regulates how business is to be conducted by the board in accordance with the principles of good corporate governance.

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 who is supported by the executive committee.

Structure

City Lodge has a unitary board, comprising executive and non-executive directors, the majority of whom are independent. As at 30 June 2008, the board comprised six non-executive directors (five of whom are independent non-executives) and two executive directors. The board believes that this is in accordance with good corporate governance practices and 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.

Chairman of the board and chief executive

In compliance with the King Report and the Listings Requirements, the roles of chairman of the board and chief executive do not vest in the same person.

Selection and appointment of directors

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. All appointments are subject to shareholder confirmation at the annual general meeting.

The board continuously considers whether the directors possess the necessary skills, knowledge and experience to fulfil their obligations, particularly with regard to the operations and strategic direction of the company. It is satisfied that all the directors possess the requisite knowledge, skill and experience required to properly execute their duties and that all participate fully, frankly and constructively in board discussions and other activities, bringing balanced and independent judgement to bear on company business.

There were no new appointments to the board during the year under review. Mr Bulelani Ngcuka was appointed as a non-executive director with effect from 1 August 2008.



areas for improvement, measures are adopted to improve board performance, processes and procedures.

During the year under review, the directors all participated in the self-evaluation of the board. The results of the self-evaluation indicated that, in the board’s opinion, it was operating well and within its terms of reference.

The chairman of the board, having obtained input from the other board members, appraises the performance of the chief executive on an annual basis. The results of the appraisal are taken into consideration by the remuneration committee in its review of the remuneration of the chief executive.

The chairman of the remuneration committee informally appraises the performance of the chairman of the board.

Conflicts of interests and other directorships

Directors are required to disclose to the board, at least annually, 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.

Executive directors may accept appointments to outside boards. Such appointments must, however, first 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 regarding their outside appointments. The board is satisfied that the non-executive directors commit 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.

Rotation of directors

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. New appointees are required to retire at the first annual general meeting following their appointment and to make themselves available for re-election.

Brief curricula vitae of the directors retiring by rotation and offering themselves for re-election are set out on pages 12 and 13 of this annual report.

Period of office and terms of employment of directors

Executive directors are subject to the company’s standard terms and conditions of employment, save for the requirement that they serve notice periods of three months. Executive directors do not receive fees for serving on the board and board committees as they are paid employees of the company. Termination of an executive directors’ contract of employment automatically results in resignation from the board.

Non-executive directors are not subject to fixed terms of appointment and no service contracts have been concluded with the company.

Board and director evaluation

The board undertakes a formal evaluation of its performance, processes and procedures every second year in order to determine whether the board is effectively fulfilling its role. The evaluation takes the form of a questionnaire comprising a self-evaluation of the board as a whole. The responses which are treated confidentially are collated by the company secretary and the findings are reported to the chairman of the board for discussion with the board and, where applicable, with individual board members. Where the results indicate



responsible corporate citizenship and sustainability report continued

and strategy. Board members may request the inclusion of an item on the agenda and will liaise with the company secretary in this regard. Board packs comprising the agenda, minutes of previous board and board sub-committee meetings together with relevant supporting documentation are circulated to all directors in advance of each meeting in order to enable them to prepare thoroughly so that they can 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 committee meetings appears in the table below. Where a director has not been able to attend a board meeting, any comments which he or she has had arising out of the papers to be considered at that meeting have been relayed in advance to the chairman of the board.

Board meetings

In accordance with the board charter, the board is required to meet at least four times per financial year in order to monitor, review and implement inter alia, the group’s strategic objectives as well as matters of a financial, non-financial and operational nature. Special board meetings may be convened under exceptional circumstances to consider issues requiring urgent attention or decision. The board met six times during the year under review. This included one meeting to review the company’s strategic imperatives and to evaluate executive management’s progress in the achievement thereof.

Each board meeting follows a formal agenda prepared by the company secretary following consultation with the chairman, which, inter alia, covers operations, finance and administration, capital expenditure and acquisitions

BoardSpecial

boardAudit

committee

Remune-ration

committeeRisk

committeeBEE

committee

No of meetings 5 1 3 5 3 2H R Enderle 5 1 ~ 5 ~ 2F W J Kilbourn 5 1 2 ~ 3 ~I N Matthews 5 0 3 5 ~ 2N Medupe 5 1 ~ 5 ~ ~B T Ngcuka 0† 0† ~ ~ ~ ~S G Morris 5 1 3 ~ 3 2*C Ross 5 1 3* 5* 3 2K I M Shongwe 5 1 ~ ~ ~ 1◊

A C Widegger 5 1 3* ~ 3 2

*By invitation.

~Not a member.

◊ By virtue of a potential conflict of interest surrounding the adjudication and selection of a potential BEE partner for the company, recused himself from the proceedings of the committee for the duration of the period that he was conflicted.

†Appointed after the year ended 30 June 2008.

Board meeting dates: Special board meeting date:15 August 2007 12 February 2008 (Strategy review) 15 May 2008 4 December 20077 November 2007 13 February 2008


Board and management committees

The board has three standing committees, namely the audit committee, remuneration and nomination committee and risk committee, all of which operate within pre-approved terms of reference. 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. The board had also established a BEE committee to assist it in discharging its responsibility of meeting the ownership targets stipulated in the tourism industry’s BEE Charter and Scorecard.

All board committees are chaired by an independent non-executive director who reports, at each scheduled meeting of the board, on proceedings at committee meetings held prior to the board meeting. Copies of the minutes of meetings of the respective board 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.

Despite having delegated authority to the board committees to assist in the execution of its duties, power and authorities, the board remains accountable and responsible for the performance and affairs of the company. The committees may, in order to assist them in the discharge of their responsibilities, take independent professional advice.

Board committee meetings were well attended in the year under review.

Like the board, the respective board committees are subject to an evaluation as to their effectiveness every two years. This evaluation process took place during the year under review and the results indicate that the

Access to information

The directors have access to all relevant company information and to senior management so as to assist them in the discharge of their duties and responsibilities.

Professional advice

Directors are entitled to seek independent professional advice, at the expense of the company, relating to the affairs of the company and in the furtherance of their duties and responsibilities.

The composition of the board and details of the various board committees and management committees, as at 30 June 2008, is as follows:

UNITARY BOARD

Non-executive chairman

Five independent non- executive directors Two executive directors

Board sub-committees Management committees

Audit, chaired by Stuart Morris, independent non-executive

Exco, chaired by Clifford Ross, chief executive

Remuneration and nomination, chaired by Nigel Matthews, independent non-executive

MANDASCO, chaired by Clifford Ross, chief executive

Risk, chaired by Frank Kilbourn, independent

non-executive

BEE, chaired by Dr Keith Shongwe,

independent non-executive




The chief executive attends meetings by invitation, but is excused from discussions relating to his remuneration and benefits.

The committee is responsible for ensuring 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. The committee makes use of the services of specialist remuneration consultants to provide benchmarking data and advice to assist it in fulfilling its responsibilities in this regard.

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 a member of the board and its various 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.

During the year under review, shareholders voted in favour of the implementation of two share incentive plans, namely a share appreciation right scheme and a deferred bonus plan, which will replace the existing share option scheme and support the principle of the alignment of management and shareholder interests with

respective committees are operating effectively and in line with their respective terms of reference.

Audit committee

The three independent non-executive directors who constitute the committee are all financially literate.

The chief executive, financial director and representatives of the external and internal auditors attend meetings of the committee as invitees. Other board members also have a right of attendance.

The committee met three times during the year under review to assist the board with discharging its responsibility to safeguard the company’s assets, maintain adequate accounting records and develop and maintain effective systems of internal control in line with its formal terms of reference.

The committee annually reviews the audit programme, the independence and objectivity of the external auditors, as well as the nature and extent of non-audit services rendered by the external auditors. Having considered the nature and extent of non-audit services, particularly the proportion that the non-audit service fee represents in comparison to the annual audit fee, the committee is satisfied that independence of the external auditor has not been impaired and has recommended the reappointment of KPMG Inc. as the company’s external auditors for shareholder approval at the forthcoming annual general meeting.

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 met on five occasions during the year under review comprises three non-executive directors, two of whom are independent.


At an operational level, the risk management process is managed through the hotel risk register, a register comprising those risks in the group risk register which impact directly on the hotel properties forming part of the group. The hotel risk register is a standard item on the divisional directors – operations quarterly operational visits to the various properties. Any amendments to the existing risks or proposed new risks are tabled for discussion at the frequently held executive committee meetings, which are reported on at the meetings of the risk committee.

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. During the year under review, management recommended to the committee that the independent internal auditors perform a gap analysis at one of the company’s hotels in order to determine the current procedures being followed and how they differ from the documented procedures, whether there are any control deficiencies in the hotel operations and if so what improvements can be effected. The process had not been completed by the end of the year under review.

BEE committee

During the year under review, the five member committee, under the guidance of acting chairman, Nigel Matthews, who stood in for Dr Keith Shongwe, who due to a potential conflict of interest recused himself from proceedings, identified a strategic black partner and two broad-based consortia as well as a suitable structure for purposes of concluding a BEE transaction, which was subsequently approved by the board.

The participants in the BEE transaction, with a value of R490 million, namely Vuwa Investments (Proprietary) Limited, the Injabulo Staff Trust (formed for the economic empowerment of certain employees of the group) and the

performance conditions governing the vesting of the share appreciation rights.

Risk committee

The committee’s primary objective is to identify, develop, communicate and oversee the processes for managing risks across the group. As such, the risk management function is operational in nature. In order to assist the two independent non-executive directors, one of whom acts as chairman of the committee, in the discharge of the committee’s and ultimately the board’s duties relating to corporate accountability and associated risk in terms of management, assurance and reporting, four members of the executive committee serve on the committee.

The committee met three times during the period under review. Key items on the agenda of the respective meetings included:

• the annual review of the group risk register, which entails:

– reviewing and, where necessary, reranking, in terms of severity and probability, existing risks;

– the addition and ranking of new risks;

– where necessary, the deletion of certain risks; and

– the identification of opportunities where effective risk management can be turned into a competitive advantage;

• the chief executive’s report on the current status with regard to the top ten risks;

• business continuity and disaster recovery policies and procedures; and

• adequacy of insurance coverage.

Where circumstances necessitate, the risk register is updated more regularly than on an annual basis. In addition, the committee periodically undertakes an external review of the risk management methodology to ensure that it is in keeping with current best practice.




directors. The committee which meets at least every six to eight weeks, works to a formal agenda and met nine times during the year under review, including one meeting to review the company’s strategic direction.

Following the company’s financial year-end, the following changes to Exco took place:

• Andrew Morris resigned as divisional director – property and development after 12 years with the company. Notwithstanding Andrew’s resignation from the company, we will still enjoy the benefit of his extensive knowledge and expertise in the form of a consultative relationship.

• Heather Prinsloo was appointed as divisional director – transformation with effect from 1 September 2008. Heather comes to us with a unique array of skills and experience that will assist the company in achieving its transformation objectives in a manner that is both sustainable and that serves to enhance the group.

Management development and succession committee (“MANDASCO”)

MANDASCO comprises six members and assumes responsibility for ensuring that the company meets its objectives of attracting and retaining the appropriate level of talent and ensuring that the company maintains an adequate succession and talent development plan. At the same time the committee ensures that the company makes a meaningful contribution to transformation initiatives by achieving the targeted level of employment equity.

The committee met on four occasions during the year under review where:

• the minimum entry level criteria for selection to the respective succession pools were confirmed;

• the respective succession pools were populated by those individuals identified by the committee;

education entity to be established by the University of Johannesburg School for Tourism and Hospitality, would acquire 6%, 6% and 3% respectively of the ordinary share capital of the company following implementation of a scheme of arrangement which would require each City Lodge ordinary shareholder to dispose of 15 ordinary shares for every 100 ordinary shares held in the company.

The BEE transaction was approved by shareholders at a general meeting held on 26 June 2008 and scheme members voted in favour of the scheme of arrangement immediately thereafter. The scheme of arrangement was sanctioned by the High Court of South Africa (Witwatersrand Local Division) on 8 July 2008 resulting in the implementation thereof on 28 July 2008.

Following the successful implementation of the BEE transaction the board resolved that, the BEE committee having fulfilled its mandate, be disbanded.

The portfolio of the newly appointed divisional director – transformation will include all areas of transformation such as the group’s contribution to socio-economic development, enterprise development, preferential procurement, aspects of ownership and, in liaison with human resources, the areas of employment equity and skills development.

Executive committee (Exco)

Exco assists the chief executive in the discharge of the obligations delegated to him by the board, namely ensuring the effective control of the group’s operations, making recommendations to the board with regard to the group’s strategic imperatives and key policies and monitoring their implementation in accordance with the board’s directive, and delivering budgets and financial reports to the board.

Exco comprises nine directors, seven of whom are divisional directors and two of whom, including the chief executive who chairs the committee, are executive


The head of internal audit has unrestricted access to the chief executive, financial director and chairman of the audit committee and attends all audit committee meetings by invitation at which she presents reports which highlight audit area ratings per hotel and summarise internal audit activities. Where necessary, corrective action is taken to address control deficiencies and where opportunities present themselves to improve existing systems of control. No incidents of a material nature have been brought to the attention of the board during the year under review that indicate a material breakdown in internal controls.

The audit committee, having regard to representations made 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 board enjoys unlimited access to the advice and services of the company secretary who serves as a central source of guidance and advice to the board and who, in addition to the statutory duties, provides the board as a whole and the directors individually with detailed guidance as to how their responsibilities should be properly discharged.

The board is responsible for ensuring that the company secretary remains capable of fulfilling the function for which she has been appointed. Accordingly the appointment and removal of the company secretary is a matter for the board as a whole.

The board is satisfied that the company secretary is suitably qualified and experienced to discharge the responsibilities listed in section 268G of the Companies Act and the company secretary has signed the appropriate certificate as contained on page 48.

• the process for compiling, executing and monitoring individual development plans for succession pool members in order to enable them to reach their full potential and develop the necessary proficiencies required to suitably qualify for the position for which they are being developed;

• stretch assignment opportunities for succession pool members were identified; and

• individuals were identified for participation in the accelerated development and deployment programme (“ADDP”) and the progress of the existing ADDP candidates was monitored.

Internal audit function

KPMG Services (Pty) Limited carries out the company’s internal audit function which assists 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 is responsible to the audit committee and 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.

The audit committee 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.




to institutional investors, analysts and the media following the announcement of the company’s half-year and full-year results, the chairman of the board, chief executive and financial director attend regular meetings with institutional investors, analysts and existing or prospective shareholders, to communicate the company’s strategy and performance.

The company furthermore ensures that information is disseminated timeously via print and/or electronic news releases.

Shareholders are encouraged to attend the annual general meeting, which will afford them the opportunity to put questions to the board and chairmen of the respective board committees.

The City Lodge website, www.citylodge.co.za, is a further means of providing interested parties with financial, business and other company-related information.

Litigation and legal

The company is involved in 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

In its pursuit of excellence, the group is bound to its values and principles and believes that it must act, at all times, in a manner consistent with them. These values are enshrined in the company’s code of ethics which addresses its relationships with shareholders, guests, suppliers, employees and government.

Matters of an ethical nature are continuously monitored by Exco. The company has also established the Business Abuse Hotline, a 24-hour alert line outsourced to

Price-sensitive information and share dealings

Directors, the company secretary and certain senior employees who, by virtue of their employment, may have access to price-sensitive information may not deal, whether directly or indirectly, in City Lodge shares until such time as such information is made public.

In addition to the aforegoing, there are strict closed periods during which dealing in City Lodge shares is prohibited, namely:

• from 1 July up to the date of publication of the final results;

• from 1 January up to the date of publication of the interim results; 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 Stock Exchange News Service.

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.

The board is satisfied that all dealings have been reported in the appropriate manner during the period under review.

Stakeholder communication

The company continued its efforts to promote dialogue with its major institutional investors during the year under review. In addition to giving informal presentations


• 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. The decision was taken to install generators in all the group’s hotels at a total cost of R23 million. The installation program is progressing well and will be completed by the end of the 2009 financial year.

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 has therefore determined that the measurement of total energy consumption in a hotel should be expressed on a “per room occupied” 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.

Employer’s Mutual Protection Services (Pty) Limited, which affords employees the opportunity to anonymously report suspected cases of unethical or corrupt behaviour. All reports are investigated and, where appropriate, action is taken. No incident or act indicating a material breach in the required standard of ethical behaviour has been reported during the period under review.

The board is of the opinion that the continued adherence to the code will assist in preserving stakeholder confidence and support for the company.

Environmental sustainability

Introduction

The management of environmental issues 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.

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 environment. Therefore the following areas of its operations are highlighted as being deemed to have an impact:




Brand

kWh peroccupied room

(2007/2008)

kWh peroccupied room

(2006/2007)

Cost peroccupied room

(2007/2008)

Cost peroccupied room

(2006/2007)

Courtyard 348 332 R9,34 R7,58City Lodge 281 285 R6,41 R5,23Town Lodge 268 266 R6,49 R4,52Road Lodge 117 114 R3,76 R2,21

*The calculation of costs is dependent on utilities billing which can be erratic. This process does, however, allow for the investigation of variances to the trend.

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. 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 room occupied” 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(2007/2008)

kl peroccupied

room(2006/2007)

kl peroccupied

room(2005/2006)

Cost peroccupied

room(2007/2008)

Cost peroccupied

room(2006/2007)

Cost peroccupied

room(2005/2006)

Courtyard 0,62 0,68 0,69 R3,95 R5,70 R3,59City Lodge 0,53 0,48 0,38 R2,83 R3,15 R2,81Town Lodge 0,45 0,41 0,48 R6,68 R4,52 R3,75Road Lodge 0,43 0,48 0,41 R2,37 R3,13 R2,95

*The calculation of costs is dependent on utilities billing which can be erratic. This process does, however, allow for the investigation of variances to the trend.


• 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, and this ensures efficient usage of energy.

• The usage of energy-efficient globes continues to contribute to a reduction in energy consumption.

• 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 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.

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, aluminum 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 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.




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

In order to ensure that the group continues to focus on areas of social sustainability in line with its vision of having a positive impact and effect on the communities in which we operate, an external review of our CSI strategy has taken place. This has resulted in a redefinition of all relevant policies and reporting frameworks to ensure the provision of the greatest possible return on investment in this regard.

Corporate social investment (“CSI”)

The City Lodge – Ubuntu Ba Bantu – Social responsibility programme

Objectives

After the abovementioned review, the commonly shared objectives of City Lodge’s CSI programme may now be stated 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.

• To develop and empower disadvantaged communities in the social, economic and environmental spheres for the sustainability and long term growth of the company.

• The timing of garden watering is electronically controlled to ensure minimal evaporation.

• 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 to 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.


e-CSI

The group has continued with its very successful scheme of involving its guests in its decision-making with regards to the allocation of part of its CSI spend. This is accomplished by encouraging all those who book accommodation online, to choose to which of the following organisations they would like to allocate a sum of R5,00 per reservation they have made:

• Operation Hunger• The Society for Animals in Distress• The South African Golf Development Board

This opportunity continues to be well received and once again 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 an equally significant growth in the amounts handed over to the respective organisations on a bi-annual basis.

Cuppa-for-Cansa

The group’s involvement in this 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. This year the hotel contributing the largest amount to the effort was Road Lodge N1 City in Cape Town.

• 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 this year once again includes:

• donations in cash and kind to various institutions and organisations nation wide;

• the hosting of numerous hospitality studies students for their experiential training;

• lectures at hotel schools and schools; and

• participation in career days.

Involvement with and investment in social responsibility initiatives is divided between group-wide initiatives and local initiatives; the rationale being that the hotels are best able to ascertain what the needs of the communities are in which they operate. In addition, all employees in the group have the opportunity to participate by pledging an amount to be deducted from their salaries and paid over on their behalf to various charities.

Group wide CSI initiatives

The group continues to support the Community Chests of KwaZulu-Natal and the Western Cape as beneficiaries from a group-wide perspective, and this year also provided funds to the Giving Organisation in support of the efforts of our employees who contribute voluntarily to the same organisation.




Nkosi’s FoundationOliver’s HouseOperation HungerPurple Heart FoundationReach for a DreamRed Cross – DurbanRotarySA Golf DevelopmentSA Guide DogsSaint Martin Children’s HomeSANCA West RandSociety for Animals in DistressSOS Children’s VillageTAFTATents of SharonThe Haven Night ShelterThe Giving OrganisationThe NSRIThe Order of St JohnTumelo HouseUnited Cerebral Palsy Associations of SAWayside Shelters

Empowerment and transformation

Industry charter and scorecard

The alignment of the industry to the published Department of Trade and Industry codes is still underway and the re-aligned industry charter will be published shortly. Indications are that the industry charter will be quite closely aligned to the Department of Trade and Industry’s codes and therefore the group has aligned itself to the codes, in order to meet the targets as laid out in the codes. The group has concluded a self-assessment in this regard, as detailed herewith, and will shortly be working towards achieving a certificate from a verification agency in confirmation of this assessment.

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.

Local CSI initiatives

As is the norm, the various properties within the group have supported their local NGO’s, including the under-mentioned organisations, in many respects with donations of used linen and toweling, the organising of fund raising endeavours, staff volunteerism, cash donations and prizes for fund raising.

Alzheimers SAAutism SAAvril ElizabethBoy’s and Girl’s TownCANSACheshire HomesChristelike Maatskaplike RaadCHOCChubby ChumsCommunity ChestCommunity Chest – Western CapeCommunity Chest – KwaZulu-NatalCotlands Baby SanctuaryDiabetes SAEbenezer VillageEnoch’s WalkHeart FoundationHospice AssociationLionsLittle Wings of Heaven


DTi generic scorecardTotal 50,52

Element Category Indicator Weighted score

OWNERSHIP Voting rights Exercisable voting rights in the enterprise in the hands of black people 2,96

Code 100 Exercisable voting rights in the enterprise in the hands of black women 2,00

Statements Economic interest Economic interest of black people in the enterprise 3,96

100 Economic interest of black women in the enterprise 2,00

102 Economic interest of the following black natural people in the enterprise: 1,00

103 black designated groups; black participants in employee ownership schemes; black beneficiaries of public or general benefit schemes; or black participants in cooperatives

Realisation points Ownership fulfillment —

Current equity interest achieved accordingly: 2,38

10% of the target (Year 1)

20% of the target (Year 2)

40% of the target (Year 3-4)




Bonus points Involvement in the ownership of the enterprise of black new entrants 1,98

Involvement in the ownership of the enterprise of: 0,99

Black participants in employee ownership schemes;

Black participants of public or general benefit schemes; or

Black participants in cooperatives

MANAGEMENT Board participation Exercisable voting rights of board members who are black 1,67

CONTROL Black executive directors —

Code 200 Top management Black senior top management —

Statements Black other top management 1,11

200 Bonus points Black independent non-executive board members 1,00

EMPLOYMENT Black employees of the measured entity who are disabled employees as a 0,45

EQUITY percentage of all employees adjusted using the gender recognition factor

Code 300 Black employees of the measured entity who are in the measurement 0,40

Statements category of senior management as a percentage of all employees

300 in that measurement category adjusted using the gender

recognition factor

Black employees of the measured entity who are in the measurement 1,56

category of middle management as a percentage of all employees in that measurement category adjusted using the gender recognition factor




Element Category Indicator Weighted score

Black employees of the measured entity who are in the measurement 4,00

category of junior management as a percentage of all employees in that measurement category adjusted using the gender recognition factor

SKILLS Skills development Adjusted skills development spend on learning programmes for black 6,00

DEVELOPMENT spend on learning employees as a percentage of leviable amount

Code 400 programmes Adjusted skills development spend on learning programmes for black 0,50

Statements employees with disabilities as a percentage of leviable amount

400 In-service training Adjusted number of black employees participating in in-service training 3,46

programmes programmes as a percentage of total employees

PREFERENTIAL BEE procurement spend from all suppliers based on the BEE procurement 5,10

PROCUREMENT recognition levels as a percentage of total measured procurement spend

Code 500 BEE procurement spend from qualifying small enterprises or from —

Statements exempted small and micro enterprises based on the applicable BEE

500 procurement recognition levels as a percentage of total measured procurement spend

BEE procurement spend from any of the following suppliers as a

percentage of total measured procurement spend:

Suppliers that are more than 50% black owned regardless of their —

procurement recognition level

Suppliers that are more than 30% black women owned regardless of —

their BEE procurement recognition level

ENTERPRISE Average annual value of all qualifying contributions made by the 3,00

DEVELOPMENT measured entity measured from the commencement or the

Code 600 statement or the inception date to the date of measurement as

Statements a percentage of the target

600

SOCIO-ECONOMIC Average annual value of all qualifying contributions made by the 5,00

DEVELOPMENT measured entity measured from the commencement or the

Code 700 statement or the inception date to the date of measurement as

Statements a percentage of the target

700

The score of 50,52 indicates that the group is currently a level six contributor to broad-based black economic empowerment in terms of the codes.

The group’s firm intention is to become a level five contributor in the short to medium term. To this end a divisional director responsible for transformation has been appointed to direct and focus the group’s efforts in this regard.


These entrepreneurs provide and/or arrange tours, transfers and other travel and tourism related services to the group’s guests.

It is envisaged that further opportunities around enterprise development will be pursued in the near future involving certain participants in the group’s supply chain. An example of this type of initiative is an interest-free loan made to a 51% black woman owned start-up company that will provide cleaning services in the group’s Gauteng hotels.

Employment equity

The group has submitted its third employment equity plan for the period 2006 to 2009. 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, 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 employment equity plan (2006 – 2009) at the end of the second year.

Preferential procurement

In line with the spirit of broad-based black economic empowerment, the group recognises that the procurement of goods and services from black-owned and empowered enterprises is necessary in order to promote black economic empowerment and thereby grow the South African economy.

In pursuit of these objectives, City Lodge Hotels recognises the historical disparity of previously disadvantaged communities, in particular that of black women and the disabled, and will therefore make procurement readily available to black suppliers whilst ensuring that all suppliers are treated in a fair manner and within the framework of its procurement policy.

In order to assist black suppliers in participating meaningfully in the economy, the group will, on the basis of merit (quality, suitability and price), ensure that a percentage of its procurement needs are sourced from suppliers deemed to be BEE suppliers. The group has attained overall levels of 21,3% preferential procurement in the financial year under review.

Enterprise development

The group currently supports several new entrant black entrepreneurs in the tourism industry by providing space for the provision of travel desk services in some hotels.

Planned targets 2008 Achieved 2008

Occupational category White Designated* % White Designated* %

Legislators/senior officials and managers

114 115 50 136 103 43

Professionals 3 4 57 4 5 56Clerks 105 180 63 89 222 71Service and sales workers 3 130 98 — 132 100Craft and related trade workers 1 30 97 3 29 91Elementary occupations — 190 100 — 175 100

*Designated includes Africans, Coloureds, Indians and disabled.




Human capital

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 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 2007/8 Workplace Skills Plan as well as to confirm development and training needs as outlined in the 2008/9 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 assistance with the education of employee’s 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 executive share appreciation right 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 dependant on the annual share price performance. Each eligible employee received 214 shares in the company in November 2007. 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 employee 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.

The group currently recognises, and has a relationship agreement, with one trade union, SACCAWU which is representative of 26% 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.


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. 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 of generic health and safety units within various National Qualifications available to staff.

Compliance with health and safety policy and legislation is reviewed as 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 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 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.


administrationadministration

City Lodge Hotels Limited

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

E-mail: [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


for the year ended 30 June 2008

annual financial statements

annual financial statements

48 Directors’ responsibility statement

48 Certificate by the company secretary

49 Independent auditor’s report

50 Directors’ report

53 Accounting policies

58 Balance sheets

59 Income statements

60 Cash flow statements

60 Statements of recognised gains and losses

61 Reconciliation of movement in capital

and reserves

62 Notes to the financial statements


directors’ responsibility statementdirectors’ responsibility statement

certificate by the company secretarycertificate by the company secretary

The company’s directors are responsible for the preparation and fair presentation of the group annual financial statements and separate parent annual financial statements, comprising the balance sheets at 30 June 2008, and the income statements, the statements of recognised gains and losses 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, in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of South Africa.

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

The directors’ responsibility also includes maintaining adequate accounting records and an effective system of risk management as well as the preparation of the supplementary schedules included in these financial 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 financial statements and separate parent annual financial statements are fairly presented in accordance with the applicable financial reporting framework.

APPROVAl OF gROuP ANNuAl FINANCIAl StAteMeNtS AND SePARAte PAReNt ANNuAl FINANCIAl StAteMeNtS

The group annual financial statements and separate parent annual financial statements were approved by the board of directors on 26 September 2008 and signed on its behalf by:

C Ross A C Widegger

Chief executive Financial director

I, the undersigned, in my capacity as company secretary,

hereby confirm to the best of my knowledge and belief that

for the financial year ended 30 June 2008, 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


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

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

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 2008 and the income statements, the statements of recognised gains and losses 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 50 to 87.

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 2008, 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

26 September 2008

KPMG Crescent

85 Empire Road

Parktown

Johannesburg



directors’ reportdirectors’ report

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 R7,50 and R57,33 per share, none of which were issued to directors.

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 2007 1 156 620

Options granted 65 000

Options exercised (120 050)

Options cancelled (72 600)

total options at 30 June 2008 1 028 970

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. Details of options held by directors are included in note 14.

Share options are expensed in terms of IFRS 2. The current year’s expense was R2 714 264 (2007 – R2 040 793). Refer to note 21.

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 R333,9 million (2007 – R270,2 million) whilst consolidated headline earnings totalled R225,5 million (524,9 cents per share, diluted) compared with headline earnings of R177,7 million (413,0 cents per share, diluted) for the previous year.

The company’s interest in its subsidiaries’ profit after taxation amounted to R6,6 million (2007 – R5,6 million).

DIVIDeNDS

An interim dividend of 177,0 cents per share (2007 – 145,0 cents) was declared on 14 February 2008, payable to ordinary shareholders registered on 13 March 2008. A final dividend of 194,0 cents per share (2007 – 148,0 cents) was declared on 13 August 2008, payable to ordinary shareholders registered on 12 September 2008.

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 120 050 shares as reflected in note 8.


SuBSIDIARIeS AND JOINt VeNtuReS

Details relating to investments in subsidiaries and joint ventures are included in notes 2, 3 and 16.

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, C Ross (Chief executive), K I M Shongwe and A C Widegger (Financial director).

Mr B T Ngcuka was appointed as a non-executive director with effect from 1 August 2008.

In terms of the articles of association, Mr I N Matthews, Mr B T Ngcuka and Dr K I M Shongwe, 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.

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:

Distributiondate

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

The directors resolved at 30 June 1999 to write down the loan to R7,9 million, being the underlying value of the shares held by the trust as security against the loan as at that date. In applying IAS 39 – Financial Instruments: recognition and measurement, on initial recognition, the carrying value of the loan is R10,9 million (2007 – R9,4 million) based on amortised cost.



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 2008 2007 2008 2007

H R Enderle 34 930 34 930 5 289 975 5 289 975

F W J Kilbourn 20 000 20 000 — —

I N Matthews 489 489 — —

N Medupe — — — —

S G Morris — — — —

C Ross 27 423 27 423 — —

K I M Shongwe — — — —

A C Widegger 15 000 15 000 — —

total 97 842 97 842 5 289 975 5 289 975

Directors were interested in 442 040 (2007 – 442 040) options to acquire ordinary shares in the company at 30 June 2008 under the executive share incentive scheme. In terms of the scheme of arrangement in respect of the BEE transaction, mentioned below, 15% of all the directors’ shareholdings were acquired by the scheme participants on 28 July 2008. No material changes have taken place since that date. Details of options held by individual directors are included in note 14.

MAteRIAl POSt-BAlANCe Sheet eVeNtS

Following shareholder approval of the BEE transaction on 26 June 2008, the High Court sanctioned the scheme of arrangement on 8 July 2008 and the scheme was implemented on 28 July 2008.

The participants in the scheme are the Injabulo Staff Trust (6%), Vuwa Investments (Pty) Limited (6%) and an Education Trust to be established to benefit primarily black students of the University of Johannesburg’s School for Tourism and Hospitality (3%).

This represents 15% of the current issued share capital and translates into a 22,4% black ownership if mandated investments, as defined in the DTI’s Codes of Good Practice, are excluded from the company’s shareholder structure.

The shares were acquired at a price of R76,06 per share with a total value of approximately R490 million. Of this amount, the group has guaranteed the funding to the three participants to the extent of R440 million and Vuwa Investments has contributed equity of R50 million.

directors’ reportdirectors’ report continued


accounting policiesaccounting policies

RePORtINg eNtIty

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 2008 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 sigificant 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 21)

– measurement of impairment of trade receivables (note 24)

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 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.

transactions eliminated on consolidation

Intergroup transactions and balances, and any unrealised gains or losses arising from intergroup transactions, are eliminated in preparing the consolidated financial statements.


accounting policiesaccounting policies continued

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.

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

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

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

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

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 fifty 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 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 on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are currently as follows:

c Buildings 20 to 50 years

c 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.


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

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

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


accounting policiesaccounting policies continued

income statement as interest expense over the period of the borrowings.

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

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.

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.

longer probable that the related taxation benefit will be realised.

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.

trade and other receivables

Trade and other receivables are measured at amortised cost, 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


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 scheme allows certain employees to acquire shares of the company. The fair value of rights granted is 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 a binomial model, 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.

eARNINgS PeR ShARe

The group presents basic and diluted 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.

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. All borrowing costs 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.


at 30 June 2008

balance sheetsbalance sheets

group Company

Note2008R000

2007R000

2008R000

2007R000

ASSetS

Non-current assets 695 142 564 545 674 099 544 283

Property, plant and equipment 1 647 159 517 717 563 004 434 380

Interest in subsidiaries 2 66 053 66 053

Investments 3 34 148 34 496 34 148 34 496

Loan receivable 4 10 894 9 354 10 894 9 354

Deferred taxation 5 2 941 2 978

Current assets 83 391 109 571 80 325 100 600

Inventory 6 1 625 1 493 1 625 1 493

Trade receivables 25 472 23 855 25 472 23 855

Other receivables 7 5 437 4 831 3 988 6 134

Cash and cash equivalents 50 857 79 392 49 240 69 118

total assets 778 533 674 116 754 424 644 883

equIty

Capital and reserves 626 527 534 440 584 818 499 286

Share capital and premium 8 140 434 138 008 140 434 138 008

Retained earnings 480 399 392 910 438 690 357 756

Other reserves 9 5 694 3 522 5 694 3 522

lIABIlItIeS

Non-current liabilities 104 256 97 945 103 941 97 652

Interest-bearing borrowings 10 40 000 40 000 40 000 40 000

Other non-current liabilities 11 6 710 5 859 6 710 5 859

Deferred taxation 5 57 546 52 086 57 231 51 793

Current liabilities 47 750 41 731 65 665 47 945

Trade and other payables 12 45 763 30 746 63 797 37 383

Taxation payable 1 987 10 985 1 868 10 562

total equity and liabilities 778 533 674 116 754 424 644 883



income statementsincome statements

group Company

Note2008R000

2007R000

2008R000

2007R000

Revenue 599 902 509 711 599 902 509 711

Administration and marketing costs (46 002) (42 714) (40 760) (37 391)

Operating costs (214 801) (185 938) (237 370) (207 217)

339 099 281 059 321 772 265 103

Depreciation (26 934) (26 672) (26 630) (26 331)

Operating profit 13 312 165 254 387 295 142 238 772

Interest income 15.1 14 592 11 953 22 380 19 740

Interest expense 15.2 (1 338) (3 772) (1 338) (3 771)

Share of profit from joint venture 16 8 527 7 611 8 527 7 611

Profit before taxation 333 946 270 179 324 711 262 352

Taxation 17 (108 299) (92 260) (105 619) (89 990)

Profit for the period 225 647 177 919 219 092 172 362

Diluted earnings per share (cents)

– basic 525,2 413,5

earnings per share (cents)

– basic 530,7 419,5

Dividends declared per ordinary share (cents) 19 371,0 293,0

– interim paid 177,0 145,0

– final declared 194,0 148,0




cash flow statements

statements of regonised gains and losses

cash flow statements

statements of recognised gains and losses

group Company

Note2008R000

2007R000

2008R000

2007R000

Cash generated by operations 23.1 364 114 299 381 360 936 285 763Interest income 13 052 10 631 20 840 18 418Interest expense (1 338) (3 772) (1 338) (3 771)Taxation paid 23.2 (111 251) (85 016) (108 326) (82 585)Dividends paid 19 (138 158) (112 821) (138 158) (112 821)

Cash inflow from operating activities 126 419 108 403 133 954 105 004Cash utilised in investing activities (157 380) (89 006) (156 258) (84 072)

Investment to maintain operations 23.3 (22 021) (27 702) (22 021) (27 702)Investment to expand operations 23.4 (134 620) (60 651) (133 498) (55 717)Investments and loans 23.5 (1 192) (973) (1 192) (973)Proceeds on disposal of property, plant and equipment 23.3 453 320 453 320

Cash flows from financing activities 2 426 (13 847) 2 426 (13 847)

Repayment of long-term loan — (15 446) — (15 446)Proceeds on issue of share capital 12 11 12 11Proceeds on issue of share premium 2 414 1 588 2 414 1 588

Net (decrease)/increase in cash and cash equivalents (28 535) 5 550 (19 878) 7 085Cash and cash equivalents at beginning of period 79 392 73 842 69 118 62 033

Cash and cash equivalents at end of period 50 857 79 392 49 240 69 118

group Company

2008R000

2007R000

2008R000

2007R000

Actuarial loss and section 58 limit on defined-benefit plan (2 004) (1 150) (2 004) (1 150)Deferred taxation thereon 561 333 561 333Deferred taxation-rate change (12) — (12) —

Net loss recognised directly in equity (1 455) (817) (1 455) (817)Profit for the period 225 647 177 919 219 092 172 362

total recognised income and expense for the period 224 192 177 102 217 637 171 545



reconciliation of movement in capital reserves

reconciliation of movement in capital and reserves

R000 Note

Sharecapital

andpremium

Otherreserves

Retainedearnings Total

gROuP

Balance at 30 June 2006 136 409 2 298 327 812 466 519Issue of new ordinary shares 1 599 — — 1 599Profit for the period — — 177 919 177 919Recognised gains and losses — (817) — (817)Share compensation reserve — 2 041 — 2 041Dividends paid 19 — — (112 821) (112 821)

Balance at 30 June 2007 138 008 3 522 392 910 534 440

Issue of new ordinary shares 2 426 — — 2 426Profit for the period — — 225 647 225 647Recognised gains and losses — (1 455) — (1 455)Share compensation reserve — 3 627 — 3 627Dividends paid 19 — — (138 158) (138 158)

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

COMPANy

Balance at 30 June 2006 136 409 2 298 298 215 436 922Issue of new ordinary shares 1 599 — — 1 599Profit for the period — — 172 362 172 362Recognised gains and losses — (817) — (817)Share compensation reserve — 2 041 — 2 041Dividends paid 19 — — (112 821) (112 821)

Balance at 30 June 2007 138 008 3 522 357 756 499 286

Issue of new ordinary shares 2 426 — — 2 426Profit for the period — — 219 092 219 092Recognised gains and losses — (1 455) — (1 455)Share compensation reserve — 3 627 — 3 627Dividends paid 19 — — (138 158) (138 158)

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



notes to the financial statementsnotes to the financial statements

group Company

2008R000

2007R000

2008R000

2007R000

1. PROPeRty, PlANt AND equIPMeNtAt cost

Land 49 870 48 747 1 178 1 178

Buildings 614 982 490 461 568 318 443 796

– freehold 496 638 400 442 449 974 353 777

– leasehold 118 344 90 019 118 344 90 019

Buildings under construction 9 041 10 776 9 041 10 776

Furniture and equipment 210 268 182 581 209 363 181 676

884 161 732 565 787 900 637 426

Accumulated depreciation

Buildings 87 157 77 017 75 956 66 120

– freehold 61 327 54 120 50 126 43 223

– leasehold 25 830 22 897 25 830 22 897


237 002 214 848 224 896 203 046

Carrying value

Land 49 870 48 747 1 178 1 178

Buildings 527 825 413 444 492 362 377 676

– freehold 435 311 346 322 399 848 310 554

– leasehold 92 514 67 122 92 514 67 122

Buildings under construction 9 041 10 776 9 041 10 776


647 159 517 717 563 004 434 380


R000 Land Buildings

Furnitureand

equipment Total

1. PROPeRty, PlANt AND equIPMeNt (continued)Movements for the yearGroup – carrying valueOpening balance – 30 June 2006 43 813 374 069 38 204 456 086Additions* 4 934 61 618 21 801 88 353Disposals (50) (50)Depreciation (11 467) (15 205) (26 672)

Opening balance – 30 June 2007 48 747 424 220 44 750 517 717

Additions* 1 123 122 786 32 732 156 641Disposals (265) (265)Depreciation (10 140) (16 794) (26 934)

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

Company – carrying valueOpening balance – 30 June 2006 1 178 337 960 38 204 377 342Additions* 61 618 21 801 83 419Disposals (50) (50)Depreciation (11 126) (15 205) (26 331)

Opening balance – 30 June 2007 1 178 388 452 44 750 434 380

Additions* 122 787 32 732 155 519Disposals (265) (265)Depreciation (9 836) (16 794) (26 630)

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

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 650 000 (2007 – R827 000).



notes to the financial statementsnotes to the financial statements continued

Company

2008R000

2007R000

2. INteReSt IN SuBSIDIARIeS

Issuedshare

capitalR

%held

Shares at cost less impairment loss

Budget Hotels (Pty) Ltd 100 100 1 073 1 073

City Lodge (Airport Property) (Pty) Ltd 3 350 100 4 4

City Lodge (Randburg) (Pty) Ltd 100 100 176 176

Courtyard Management Company (Pty) Ltd 100 100 * *

Property Lodging Investments (Pty) Ltd 100 100 2 000 2 000

3 253 3 253

Non-current loan

Property Lodging Investments (Pty) Ltd 62 800 62 800

Interest in subsidiaries 66 053 66 053

The non-current loan is unsecured, bears interest at 12% per annum (2007 – 12%) and is repayable after 30 September 2009.

Amounts included in other receivables and payables

Amounts due by subsidiaries — 2 687

Amounts due to subsidiaries (18 299) (6 993)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) Ltd and Twenty Third Floor Investments Seventeen (Pty) Ltd.

*Less than R1 000.


group Company

2008R000

2007R000

2008R000

2007R000

3. INVeStMeNtS

Investment in joint venture

Cost of unlisted shares and equity loans 8 734 8 734 8 734 8 734

Acquisition costs capitalised 108 108 108 108

Increase 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 2 708 3 056 2 708 3 056

34 148 34 496 34 148 34 496

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 R117,6 million* (2007 – R109,6 million). The loans advanced are unsecured, have no fixed terms of repayment and bore interest at 13,0% per annum (2007 – 10,5%).

4. lOAN ReCeIVABle

City Lodge 10th Anniversary Employees’ Share Trust 10 894 9 354 10 894 9 354

The City Lodge 10th Anniversary Employees’ Share Trust loan is secured by the pledge of 720 013 (2007 – 857 401) shares having a market value of R50 393 710 (2007 – R68 592 080), 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 R10,894 million (2007 – R9,354 million). This increase was as a result of a notional credit to interest received in the current year of R1 540 000 (2007 – R1 322 000). 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

2008R000

2007R000

2008R000

2007R000

5. DeFeRReD tAxAtIONMovement of deferred taxation assets

Balance at beginning of year 2 978 2 899

Rate change (103) —

Current year temporary differences – income statement 66 79

Balance at end of year 2 941 2 978

Analysis of deferred taxation assets

Capital allowances 2 941 2 978

Movement of deferred taxation liabilities

Balance at beginning of year 52 086 45 431 51 793 45 170

Rate change – income statement (1 808) — (1 798) —

– balance sheet 12 — 12 —

Current year temporary differences – income statement 7 817 6 988 7 785 6 956

– balance sheet (561) (333) (561) (333)

Balance at end of year 57 546 52 086 57 231 51 793

Analysis of deferred taxation liabilities

Capital allowances 63 399 57 331 63 084 57 038

Defined benefit (892) (343) (892) (343)

Operating lease accrual (1 872) (1 699) (1 872) (1 699)

Prepayments 571 384 571 384

Provisions (3 660) (3 587) (3 660) (3 587)

57 546 52 086 57 231 51 793

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% (2007 – 29%).

6. INVeNtORy

Food, liquor and beverages 1 625 1 493 1 625 1 493

7. OtheR ReCeIVABleS

Loans due from related parties (refer to note 25) — 2 687

Prepayments 2 559 1 914 2 559 1 914

Other receivables 2 878 2 917 1 429 1 533

5 437 4 831 3 988 6 134


group Company

2008R000

2007R000

2008R000

2007R000

8. ShARe CAPItAl AND PReMIuMShare capitalAuthorised50 000 000 ordinary shares of 10 cents each 5 000 5 000 5 000 5 000

Issued42 602 003 (2007 – 42 481 953) ordinary shares of 10 cents each 4 260 4 248 4 260 4 248

Balance at beginning of year 42 481 953 (2007 – 42 368 053) ordinary shares of 10 cents each 4 248 4 237 4 248 4 237Options exercised during the period 120 050 (2007 – 113 900) of 10 cents each 12 11 12 11

Share premium 136 174 133 760 136 174 133 760

Balance at beginning of year 133 760 132 172 133 760 132 172Premium on issue of new ordinary shares 2 414 1 588 2 414 1 588

140 434 138 008 140 434 138 008

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

9. OtheR ReSeRVeSShare-based payment reserve 7 988 4 361 7 988 4 361

Balance at beginning of year 4 361 2 320 4 361 2 320Expense for the year 3 627 2 041 3 627 2 041

The share-based payment reserve relates to the accumulated cost for the future settlement of obligations arising from the share incentive scheme.Defined-benefit equity reserve (2 294) (839) (2 294) (839)

Balance at beginning of year (839) (22) (839) (22)Actuarial loss on defined-benefit plan (2 004) (1 150) (2 004) (1 150)Deferred tax thereon 561 333 561 333Deferred 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.

5 694 3 522 5 694 3 522




group Company

2008R000

2007R000

2008R000

2007R000

10. INteReSt-BeARINg BORROwINgSlong-term loans

Standard Bank 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 arrear.The loan capital is repayable by 31 December 2009 to the extent not already paid.

40 000 40 000 40 000 40 000

11. OtheR NON-CuRReNt lIABIlItIeS

Operating lease accrual 6 685 5 859 6 685 5 859

Defined-benefit obligation (refer to note 21) 25 — 25 —

6 710 5 859 6 710 5 859

12. tRADe AND OtheR PAyABleS

Trade payables 99 36 99 36

Loans due to related parties (refer to note 25) 18 299 6 993

Sundry accruals 40 025 25 562 39 930 25 475

Other trade payables 5 639 5 148 5 469 4 879

45 763 30 746 63 797 37 383


group Company

2008R000

2007R000

2008R000

2007R000

13. OPeRAtINg PROFItOperating profit is arrived at after charging

Auditors’ remuneration 1 668 1 295 1 609 1 241

Audit fees 837 730 778 676

Fees for other services 831 565 831 565

Defined-benefit plan expense (note 21) 2 318 3 358 2 318 3 358

Defined-contribution plan expense 3 309 2 177 3 309 2 177

Depreciation 26 934 26 672 26 630 26 331

– buildings 10 140 11 467 9 836 11 126

– furniture and equipment 16 794 15 205 16 794 15 205

Directors’ emoluments 7 932 8 627

Fees paid to non-executive directors (note 14) 1 183 1 545

Executive directors (note 14) 6 749 7 082

Impairment of trade receivables 175 (511) 175 (511)

Profit on disposal of property, plant and equipment (188) (270) (188) (270)

Operating lease rentals

– land 4 816 3 531 8 964 7 679

– hotel buildings 264 264 9 650 9 594

– office buildings 1 271 1 244 1 271 1 244

Pre-opening expenses 975 1 167 975 1 167

Salaries, wages and related benefits 108 609 95 548 106 497 93 655

Share-based payment expense (note 21) 3 627 2 041 3 627 2 041

– City Lodge 10th anniversary employees’ share trust 912 — 912 —

– City Lodge executive share option scheme 2 715 2 041 2 715 2 041

and after crediting

Rent received 993 1 230 993 1 230




R000Basicsalary

Per-formance

bonus

Fringebenefits

andallow-ances

Pensionfund

contri-butions

Totalannual

remune-ration

Gain onexerciseof shareoptions

Totalemolu-ments

14. DIReCtORS’ eMOluMeNtS

executive directors

2008

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

6 749 — 6 749

2007C Ross 1 768 1 747 255 283 4 053 726 4 779A C Widegger 1 320 1 306 192 211 3 029 — 3 029

7 082 726 7 808

Non-executive directorsFees R000

2008 2007

H R Enderle 446 431

F W J Kilbourn 159 241

I N Matthews 188 342

S G Morris 171 235

N Medupe 107 196

K I M Shongwe 112 100

1 183 1 545

No other payments were made to directors.

*The IFRS 2 costs for C Ross and A Widegger are R558 292 (2007: R358 265) and R349 880 (2007: R212 527) respectively. These costs are not included in the above emoluments.


Date ofgrant

Exerciseprice

(R)

Holdingat

30 June2007

Exer-cised

Holdingat

30 June2008 Lapse date

Numbervesting

at30 June

2008

14. DIReCtORS’ eMOluMeNtS (continued)

Directors’ share options

C Ross 02/08/1999 8,75 16 000 — 16 000 02/08/2009 16 00001/08/2000 7,30 26 000 — 26 000 01/08/2010 26 00001/08/2001 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 15 60013/08/2004 28,40 38 000 — 38 000 13/08/2014 15 20015/08/2005 37,47 36 000 — 36 000 15/08/2015 7 20009/11/2006 58,59 52 650 — 52 650 09/11/2016 —08/05/2007 80,31 28 000 — 28 000 08/05/2017 —

274 650 274 650 132 000

A C Widegger 04/01/1999 6,50 10 000 — 10 000 04/01/2009 10 00002/08/1999 8,75 5 000 — 5 000 02/08/2009 5 00003/01/2000 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 3 00013/08/2004 28,40 23 000 — 23 000 13/08/2014 9 20015/08/2005 37,47 21 000 — 21 000 15/08/2015 4 20009/11/2006 58,59 31 590 31 590 09/11/2016 —08/05/2007 80,31 16 800 16 800 08/05/2017 —

167 390 167 390 86 400




group Company

2008R000

2007R000

2008R000

2007R000

15. INteReSt15.1 Interest incomeBank interest 10 212 8 334 10 212 8 334Loans to Courtyard Joint Venture 2 840 2 294 2 840 2 294IAS 39 – effective interest 1 540 1 322 1 540 1 322Interest from subsidiaries 7 788 7 788Other — 3 — 2

14 592 11 953 22 380 19 740

15.2 Interest expenseLong-term borrowings 4 920 6 086 4 920 6 086Short-term borrowings 68 60 68 60(Reversal of prior accrued interest expense)/other — (1 547) — (1 548)

4 988 4 599 4 988 4 598Interest capitalised to property, plant and equipment (3 650) (827) (3 650) (827)

1 338 3 772 1 338 3 771

Interest is capitalised to property, plant and equipment at 10,89% (2007 – 7,31%) per annum.

16. 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 31 208 26 655 Operating costs (19 493) (16 401)

Operating profit 11 715 10 254 Depreciation (348) (349) Interest paid (2 840) (2 294)

Net profit 8 527 7 611 Distributed (8 527) (7 611)

Accumulated profit — —


Company

2008R000

2007R000

16. INteReSt IN JOINt VeNtuRe (continued)The group’s proportionate share of assets and liabilities of the joint venture is as follows:

Operating assets 35 078 35 502

Current assets 8 403 9 185

Total assets 43 481 44 687

Long-term liabilities 37 944 38 610

Current liabilities 1 653 1 541

Total liabilities 39 597 40 151

The group’s proportionate share of the cash flows of the joint venture is as follows:

Cash effects of operating activities 1 071 719

Cash utilised in investing activities (476) (396)

Cash effects of financing activities (666) (261)

Net cash (utilised)/generated (71) 62

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

2008R000

2007R000

2008R000

2007R000

17. tAxAtIONSouth African normal taxation

Current 86 865 71 248 84 244 68 931

Deferred – current 7 751 6 909 7 785 6 956

– rate change (1 705) — (1 798) —

Secondary tax on companies 15 388 14 103 15 388 14 103

108 299 92 260 105 619 89 990

Reconciliation of taxation rate % % % %

Standard rate 28,0 29,0 28,0 29,0

Adjusted for:

– disallowable expenses 0,3 (0,1) 0,4 (0,1)

– rate change (0,5) — (0,6) —

– secondary tax on companies 4,6 5,2 4,7 5,4

Effective rate of taxation 32,4 34,1 32,5 34,3

18. heADlINe eARNINgS PeR ShARe

Determination of headline earnings

Profit for the period 225 647 177 919

Profit on sale of property, plant and equipment (188) (270)

Taxation effect 53 78

Headline earnings 225 512 177 727

Number of shares for EPS calculations (000)

Undiluted weighted average 42 519 42 416

Share options 446 614

Diluted 42 965 43 030

Diluted headline earnings per share (cents) 524,9 413,0

Headline earnings per share (cents) 530,4 419,0


group Company

2008R000

2007R000

2008R000

2007R000

19. DIVIDeNDSNumber 37 of 148,0 cents (2007 – 121,0 cents) declared on 16 August 2007 and paid on 25 September 2007 62 884 51 277 62 884 51 277Number 38 of 177,0 cents (2007 – 145,0 cents) declared on 14 February 2008 and paid on 25 March 2008 75 274 61 544 75 274 61 544

138 158 112 821 138 158 112 821

On 13 August 2008, dividend number 39 of 194,0 cents per share in respect of the year ended 30 June 2008 was declared totalling R82 647 886 payable on 22 September 2008. The related STC payable at 10% amounts to R8 264 789. These financial statements do not reflect this dividend payable or the related STC.

20. COMMItMeNtS

Authorised

– contracted 45 000 92 000 45 000 92 000

– not contracted 352 000 205 000 352 000 205 000

397 000 297 000 397 000 297 000

Future capital expenditure will be financed out of funds generated from operations and external borrowings and approximately R252 million is expected to be spent during the year ending 30 June 2009.The company is party to various operating leases of periods between 20 and 99 years in respect of land on which group hotels have been constructed and 5 years in respect of office buildings.Schedule of minimum lease payments in respect of land and office building leases

– not later than 1 year 6 373 5 740 6 373 5 740

– between 1 and 5 years 23 529 24 009 23 529 24 009

– later than 5 years 345 016 351 547 345 016 351 547




group and Company

2008R000

2007R000

21. eMPlOyee BeNeFItS Retirement benefit informationThe group provides retirement benefits for 11% (2007 – 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 19% (2007 – 11%) 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. The current estimate in terms of IAS 19, as at 30 June 2008, as shown below, indicates that the fund has a deficit of R25 000 (2007 – R9,1 million surplus).

Current estimated employee benefit obligation:Present value of obligation (52 186) (37 714)Fair value of plan assets 52 161 46 898

(25) 9 184Reduction of surplus due to section 58 limit — (9 184)

Liability at year-end (refer to note 11) (25) —

Income statement effect:Current service cost (3 170) (3 142)Interest on obligation (3 323) (3 056)Expected return on plan assets 4 175 2 840

(2 318) (3 358)

Balance sheet effect:Opening net liability — —Expense (2 318) (3 358)Contributions paid 4 297 4 508Amount recognised in equity (1 954) (1 150)

Closing net liability 25 —

Movement in the liability for defined-benefit obligationsLiability for defined-benefit obligations at 1 July 37 714 30 190Service cost 3 170 3 142Interest cost 3 323 3 056Benefits paid (2 635) (1 632)Actuarial loss 10 614 2 958

Liability for defined-benefit obligations at 30 June52 186 37 714


group and Company

2008R000

2007R000

21. eMPlOyee BeNeFItS (continued) Retirement benefit information (continued)Movement in plan assetsFair value of plan assets at 1 July 46 898 31 554Expected return on plan assets 4 175 2 840Contributions 4 297 4 508Benefits paid (2 635) (1 632)Actuarial gain (574) 9 628

Fair value of plan assets at 30 June 52 161 46 898

Principal actuarial assumptions at the balance sheet date:Discount rate 10,9% 8,75%Expected return on plan assets 10,9% 8,75%Future salary increases 9,6% 6,25%Future pension increases 6,5% 4,05%

Historical information 2008 2007 2006 2005 2004

Present value of the defined-benefit obligation

(52 186) (37 714) (30 190) (24 630) (20 089)

Fair value of plan assets 52 161 46 898 31 554 22 892 16 031

(Deficit)/surplus in the plan (25) 9 184 1 364 (1 738) (4 058)

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

Share-based paymentsEquity-settled share option planCity lodge executive share option schemeThe 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 2 to 5 years. If the options remain unexercised after a period of 10 years from grant date, the options expire. Furthermore, options are forfeited if the employee leaves the group before the option vests. The share-based equity-settled option expense for the year ended 30 June in the income statement is R2 714 264 (2007 – R2 040 793).




group and Company

2008 2007

Numberof options

Weightedaverage

strikeNumber

of options

Weightedaverage

strike

21. eMPlOyee BeNeFItS (continued)

Share-based payments (continued)

Outstanding at beginning of period 1 156 620 37,60 985 600 25,90

Forfeited during period (72 600) 51,00 (10 800) 36,15

Granted during period 65 000 76,95 295 720 67,48

Exercised during period (120 050) 20,21 (113 900) 14,04

Expired during period — — — —

Outstanding at end of period 1 028 970 41,17 1 156 620 37,60

Exercisable at end of period 357 290 19,46 301 900 14,90

Weighted average remaining life 6,55 7,28

American binomial model inputs as follows:

Weighted average volatility 17,93% 21,01%

Weighted average risk-free rate 8,23% 7,87%

Weighted average dividend yield 3,59% 3,69%

Weighted average expected life (years) 10 10

Weighted average strike price (Rand) 76,95 67,48

Weighted average share price (Rand) 76,95 67,48

Weighted average option price (Rand) 22,93 20,51


21. eMPlOyee BeNeFItS (continued)Share-based payments (continued)10th anniversary employees’ share trustThe 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 at 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 1 year. The share-based equity-settled option expense for the 12 months ended 30 June in the income statement is R912 482 for 2008 and R1 065 909 for 2007.

2008 2007

Numberof shares

Numberof shares

Outstanding at beginning of period 857 401 946 135

Distributed during period 137 388 88 734

Outstanding at end of period 720 013 857 401

European binomial model inputs as follows:Per

shareTotal

portfolioPer

shareTotal

portfolio

2008 2007

Volatility 19% 19% 21% 21%

Risk-free rate 9,42% 9,42% 8,05% 8,05%

Dividend yield 3,33% 3,33% 4,60% 4,60%

Expected life (years) 1 1 1 1

Effective strike price (Rand) 95 68 592 080 54 46 360 615

Share price (rand) 80 57 476 348 49 41 641 183

Effective option price (Rand) 1,27 912 482 1,24 1 065 909

22. BORROwINg POweRSThe borrowings of the company are not limited by its articles of association.




group Company

2008R000

2007R000

2008R000

2007R000

23. NOteS tO the CASh FlOw StAteMeNtS23.1 Cash generated by operationsProfit before taxation 333 946 270 179 324 711 262 352

Adjusted for:– depreciation on property, plant and equipment 26 934 26 672 26 630 26 331– movement in operating lease accrual 826 499 826 499– interest income (13 052) (10 631) (20 840) (18 418)– interest expense 1 338 3 772 1 338 3 771– profit on disposal of property, plant and equipment (188) (270) (188) (270)– IAS 39 imputed interest — 293 — 293– movement in defined-benefit liability 25 — 25 —– defined-benefit debit to equity (2 004) (1 150) (2 004) (1 150)– share-based payment expense 3 627 2 041 3 627 2 041

Operating profit before working capital changes 351 452 291 405 334 125 275 449Increase in inventory (132) (122) (132) (122)(Increase)/decrease in trade and other receivables (2 223) 1 309 529 2 886Increase in trade and other payables 15 017 6 789 26 414 7 550

364 114 299 381 360 936 285 763

23.2 taxation paidBalance unpaid at beginning of year (10 985) (10 650) (10 562) (10 113)Taxation payable per income statements (102 253) (85 351) (99 632) (83 034)Balance unpaid at end of year 1 987 10 985 1 868 10 562

(111 251) (85 016) (108 326) (82 585)

23.3 Investment to maintain operationsAdditions to property, plant and equipment– land and buildings (11 486) (13 931) (11 486) (13 931)– furniture and equipment (10 535) (13 771) (10 535) (13 771)

(22 021) (27 702) (22 021) (27 702)

Less: Proceeds on disposal Furniture and equipment 453 320 453 320

(21 568) (27 382) (21 568) (27 382)

23.4 Investment to expand operationsAdditions to property, plant and equipment– land and buildings (112 423) (52 621) (111 301) (47 687)– furniture and equipment (22 197) (8 030) (22 197) (8 030)

(134 620) (60 651) (133 498) (55 717)


group Company

2008R000

2007R000

2008R000

2007R000

23. NOteS tO the CASh FlOw StAteMeNtS (continued)

23.5 Investments and loans

Decrease in investment in joint venture 348 349 348 349

Notional interest – 10th Anniversary Share Trust loan (1 540) (1 322) (1 540) (1 322)

(1 192) (973) (1 192) (973)

24. FINANCIAl INStRuMeNtS

24.1 Categories of financial instruments

Loans receivable 10 894 9 354 10 894 9 354

Trade receivables 25 472 23 855 25 472 23 855

Other receivables 5 437 4 831 3 988 6 134

Cash and cash equivalents 50 857 79 392 49 240 69 118

Interest-bearing borrowings 40 000 40 000 40 000 40 000

Trade and other payables 45 763 30 746 63 797 37 383

The fair value of the financial assets and liabilities is equal to its carrying amount.

24.2 Currency risk – The group is not exposed to currency risk.24.3 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.24.4 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 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.




24. FINANCIAl INStRuMeNtS (continued)24.4 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

2 years

Between2 and

5 years

groupAt 30 June 2008

Borrowings — 40 000 —Trade payables 45 763 — —

45 763 40 000 —

At 30 June 2007Borrowings — — 40 000Trade payables 30 746 — —

30 746 — 40 000

CompanyAt 30 June 2008

Borrowings — 40 000 —Trade payables 63 797 — —

63 797 40 000 —

At 30 June 2007Borrowings — — 40 000Trade payables 37 383 — —

37 383 — 40 000

24.5 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..24.6 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

2008R000

2007R000

2008R000

2007R000

24. FINANCIAl INStRuMeNtS (continued)

24.6 Credit risk (continued)The carrying amount of trade receivables represent the maximum credit exposure at reporting date which was:

Trade receivables

Not past due 14 589 13 902 14 589 13 902

0 – 30 days past due 9 163 8 480 9 163 8 480

31 – 120 days past due 1 720 1 473 1 720 1 473

Gross 2 402 1 980 2 402 1 980

Impairment (682) (507) (682) (507)

25 472 23 855 25 472 23 855

Trade receivables by type of customer

Travel agents 20 278 18 991 20 278 18 991

Large corporates and companies 5 194 4 864 5 194 4 864

25 472 23 855 25 472 23 855

Trade receivables by geographical region

South Africa 25 472 23 855 25 472 23 855

The movement in the impairment allowance in respect of trade receivables during the year was as follows:

Balance at beginning of year 507 1 018 507 1 018

Impairment loss/(gain) recognised 175 (511) 175 (511)

Balance at end of year 682 507 682 507

25. RelAteD PARtIeS25.1 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 14), there are no other related parties with whom material transactions have taken place.




Company

2008R000

2007R000

25. RelAteD PARtIeS (continued)25.2 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.25.3 Material related-party transactionsSubsidiary companiesManagement fees paid to related parties

Courtyard Management Company (Pty) Ltd 973 730

Operating lease rentals paid to related parties

Budget Hotels (Pty) Ltd 1 164 1 109


5 727 5 257

Interest received from related parties


Interest paid to related parties

Property Lodging Investments (Pty) Ltd 72 72

Joint ventures

Interest received from related parties

Gallic Courtyard (Arcadia) Share Block (Pty) Ltd 682 551

Gallic Courtyard (Bruma Lake) Share Block (Pty) Ltd 650 525

Gallic Courtyard (Rosebank) Share Block Ltd 507 409

Gallic Courtyard (Sandown) Share Block Ltd 325 263

Gallic Courtyard (Valkenberg) Share Block (Pty) Ltd 676 546

2 840 2 294


group Company

2008R000

2007R000

2008R000

2007R000

25. RelAteD PARtIeS (continued)25.4 Amounts due to:Subsidiary companiesBudget Hotels (Pty) Ltd 2 147 1 271City Lodge (Airport Property) (Pty) Ltd 4 4City Lodge (Randburg) (Pty) Ltd 1 192 1 192City Lodge Holdings (Share Block) (Pty) Ltd 4 527 4 526Courtyard Management Company (Pty) Ltd 9 920 —Property Lodging Investment (Pty) Ltd 509 —

18 299 6 993

25.5 Amounts due by:Subsidiary companiesCourtyard Management Company (Pty) Ltd — 1 094Property Lodging Investments (Pty) Ltd — 1 593

— 2 687

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

Joint venturesGallic Courtyard (Arcadia) Share Block (Pty) Ltd 5 243 5 243 5 243 5 243Gallic Courtyard (Bruma Lake) Share Block (Pty) Ltd 5 000 5 000 5 000 5 000Gallic Courtyard (Rosebank) Share Block Ltd 3 900 3 900 3 900 3 900Gallic Courtyard (Sandown) Share Block Ltd 2 500 2 500 2 500 2 500Gallic 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 13,0% per annum (2007 – 10,5%)

25.6 Key managementKey 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 7 496 7 455 6 129 6 131– Equity compensation benefits 1 553 677 732 677

9 049 8 132 6 861 6 808




26. ReleVANt StANDARDS AND INteRPRetAtIONS eFFeCtIVe FOR yeARS eNDINg AFteR 30 JuNe 2008

At the date of authorisation of these financial statements for the year ended 30 June 2008, 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 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 (AC 139) amendment

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


IFRS 3 (AC 140) Business Combinations Annual periods commencing on or after 1 July 2009*

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

IFRIC 12 Service Concession Arrangement Annual periods commencing on or after 1 January 2008*

IFRIC 13 Customer Loyalty Programmes Annual periods commencing on or after 1 July 2008*

IFRIC 14 IAS 19 – The Limit on a Defined-benefit Asset, Minimum Funding Requirements and their Interaction


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*

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


26. ReleVANt StANDARDS AND INteRPRetAtIONS eFFeCtIVe FOR yeARS eNDINg AFteR 30 JuNe 2008 (continued)

All of the above listed standards, except for IFRIC 12, IFRIC 15 and IFRIC 16, 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 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 pending 30 June 2010.IFRS 3 will be adopted by 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.IFRIC 13 will be adopted for the first time for the financial reporting period ending 30 June 2009. IFRIC 13 addresses accounting by entities that grant loyalty award credits to customers who buy goods or services.IFRIC 14 will be adopted for the first time for the financial reporting period ending 30 June 2009. IFRIC 14 provides guidance on how to assess the limit in IAS 19 on the amount of a pension fund surplus that can be recognised as an asset.

4TH PROOF



value added statementvalue-added statement

group

2008R000 %

2007R000 %R000 %R000 %

turnover 599 902 509 711Paid to suppliers for materials and services (142 662) (124 875)

Value added by operations 457 240 384 836

Interest income 14 592 11 953

Income from joint venture 8 527 7 611

Pre-opening expenses (975) (1 167)

total wealth created 479 384 100 403 233 100403 233 100403 233 100

Distributed as follows:

employeesSalaries, wages and all related benefits 108 609 23 95 548 2395 548 2395 548 23

governmentIncome taxation (current and deferred) 92 911 78 157Secondary tax on companies 15 388 14 103

Rates 8 557 7 062

116 856 24 99 322 2599 322 2599 322 25

Providers of capitalDividends to ordinary shareholders 138 158 112 821

Interest on borrowings 1 338 3 772

139 496 29 116 593 29116 593 29116 593 29

Reinvested to maintain/develop operations

Depreciation 26 934 26 672

Accumulated profit 87 489 65 098

114 423 24 91 770 2391 770 2391 770 23

total wealth distributed 479 384 100 403 233 100403 233 100403 233 100

total headcount (permanent and contract) 1 142 1 068

2008

2007

Reinvested to maintain/develop operations

Providers of capital

Government

Employees

23%23%

24%29%

24%

23%23%

25%29%

23%

4TH PROOF 4TH PROOF


as at 30 June 2008

shareholders’ analysisshareholders’ analysis

ShARehOlDeR SPReADNo of shareholders

in SANo of shareholders

other than in SA total shareholders

Shareholder typeNominalnumber

Per-centage

Nominalnumber

Per-centage

Nominalnumber

Per-centage

Public 10 293 73,53 209 12,13 10 502 85,66Directors 5 12,65 — — 5 12,65Other – Non-public 1 1,69 — — 1 1,69

Total 10 299 87,87 209 12,13 10 508 100,00

Beneficial shareholders with holdings exceeding 1%

Numberof shares

owned

% oftotal

issuedshares

Enderle SA (Pty) Limited* 5 289 975 12,42PIC Int Equity 1 656 254 3,89NedGrp Rainmaker Fund 1 110 000 2,61State Street Bank and Trust 1 001 834 2,35Investment Solutions – F and M Local 903 224 2,12Old Mutual High Yield Fund 826 406 1,94Oasis Property Equity Unit Trust Fund 798 200 1,87City Lodge 10th Anniversary Employees Share Trust* 720 013 1,69Old Mutual Life Assurance Co SA Ltd 697 966 1,64Mr H Roberts 680 000 1,60SA Stockbrokers Loan Account 570 000 1,34Fidelity Funds – EMEA 549 917 1,29SL Colla – Finsettle Ser 509 918 1,20Fortis Global Custody Services NL 480 420 1,13SIM Inflation Plus Fund 434 627 1,02

16 228 754 38,11

* 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.


notcie of annual general meetingnotice of annual general meeting

City Lodge Hotels Limited

Registration number: 1986/002864/06

Share code: CLH ISIN: ZAE 000117792

Notice is hereby given that the twenty-second 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, 6 November 2008 at 14:00 for the following business:

1. To receive and consider the financial statements for the year ended 30 June 2008.

2. To re-appoint KPMG Inc. as the independent auditors of the company for the ensuing year 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 12 and 13 of this report.

3.1 Mr I N Matthews

3.2 Mr B T Ngcuka

3.3 Dr K I M Shongwe

4. To approve the annual fees payable to the non-executive directors with effect from the year beginning 1 July 2008 as follows:

4.1 to the chairman of the board, R460 000;

4.2 for their services as directors, R90 000 each;

4.3 to the chairman of the audit committee, R79 350;

4.4 for their services as members of the audit committee, R38 000 each;

4.5 to the chairman of the remuneration committee, R68 800;

4.6 for their services as members of the remuneration committee, R33 000 each;

4.7 to the chairman of the risk committee, R54 200;

4.8 for their services as members of the risk committee, R26 000 each.

As special business, to consider and, if deemed fit, to pass, with our without modification, the following resolutions:

5. SPeCIAl ReSOlutION NuMBeR 1: 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;

– the company being authorised thereto by its articles of association;


– 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’s 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 – pages 12 to 15.

– Major beneficial shareholders – page 89.

– Directors’ interests in ordinary shares – page 52.

– Share capital of the company – page 67.

litigation statement

The directors, whose names appear on pages 12 and 13 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 12 and 13 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.

– 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;


notcie of annual general meetingnotice 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:

c holding shares in certificated form; or

c recorded on subregister in dematerialised electronic 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, 4 November 2008. 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

26 September 2008

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: 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.”


Registration number: 1986/002864/06 Share code: Clh SIN: ZAe 00011792

city lodge hotels limitedcity lodge hotels limited

Proxy formFor use at the twenty-second annual general meeting of members to be held on Thursday, 6 November 2008 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, 6 November 2008 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 and to authorise the directors to determine the auditors’ remuneration

3. Re-election of retiring directors

3.1 Mr I N Matthews

3.2 Mr B T Ngcuka

3.3 Dr K I M Shongwe

4. Approval of non-executive directors’ fees:

4.1 to the chairman of the board, R460 000;

4.2 for their services as directors, R90 000 each;

4.3 to the chairman of the audit committee, R79 350;

4.4 to the other members of the audit committee, R38 000 each;

4.5 to the chairman of the remuneration committee, R68 800;

4.6 to the other members of the remuneration committee, R33 000 each;

4.7 to the chairman of the risk committee, R54 200;

4.8 to the other members of the risk committee, R26 000.

5. Special Resolution – general authority to repurchase shares

6. Ordinary Resolution – signature of documents

Signature Date


NOteS

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, 4 November 2008.

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, 4 November 2008.

members’ diarymembers’ diary

BASTION GRAPHICS

FINANCIAl yeAR-eND 30 June

ANNuAl geNeRAl MeetINg October/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

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