Mise en page 1 - corporate.clubmedcorporate.clubmed/wp-content/uploads/2009/11/DOCUMENT-DE-REF… · Club Med average price - 2006 127.1 99.9 112.0 Change 9.8% 12.9% 11.8% (1) Bar

2006 Annual Report // 65

Financial Report

66 // MANAGEMENT REPORT

74 // RISK FACTORS

78 // 2007 FINANCIAL CALENDAR

79 // CHAIRMAN’S REPORT ON THE PRACTICES AND PROCEDURES OF THE BOARD OF DIRECTORSAND INTERNAL CONTROL PROCEDURES

90 // AUDITORS’ REPORT ON INTERNAL CONTROL

66

The consolidated financial statements for fiscal 2006 represent

the Group’s first financial statements prepared in accordance

with IFRS. Comparative financial information for 2005 has been

prepared on the same basis.

The IFRS transition options selected by the Group are present-

ed in Note 2 to the consolidated financial statements. The

Group elected to adopt IAS 32 and IAS 39 as from 1 November

2005. Pro forma financial information for fiscal 2005 is provided

to facilitate year-on-year comparisons.

FINANCIAL HIGHLIGHTS(in € millions)

2005 pro forma 2006(includingIAS 32/39)

Consolidated revenueReported 1,590 1,679Like-for-like 1,601 1,679

EBITDAR - Leisure (1) 222 232Operating income - Leisure 25 24Operating income -Management of assets 89 40Other operating income & expense (33) (29)

Operating income 81 35

Net income attributable to shareholders 3 5

Net borrowings (323) (294)

(1) EBITDAR - Leisure: Earnings before interest, taxes, depreciation,amortization and rents.

Consolidated revenue amounted to €1,679 million, an

increase of 5.6% on a reported basis. This was the first year of

growth after four straight years of decline.

Like-for-like revenue was up 4.9%, reflecting 7.7% growth in

the first half and 2.3% in the second.

Operating income - Leisure was stable at €24 million, reflect-

ing the impact of asset refinancing transactions currently in

progress under the Group’s property management strategy.

Although these transactions have an accretive impact on net

income, their effect on operating income is dilutive because

the rents paid to the buyers of the Villages exceed the depre-

ciation charges recorded when Club Méditerranée was the

owner.

EBITDAR - Leisure rose to €232 million in fiscal 2006 from

€222 million the previous year.

EBITDAR represents the best indicator of operating per-

formance, because it excludes the impact of depreciation,

amortization, rents and changes in provisions.

Operating income - Management of assets, corresponding

to the revenues and expenses generated by the management

of property assets, amounted to €40 million versus €89 million

in fiscal 2005, when an unusually high volume of asset refi-

nancing transactions was carried out.

Other operating income and expense, corresponding to

restructuring, litigation and credit card costs, represented a net

expense of €29 million, more or less unchanged from fiscal 2005.

The Group’s bottom line was positive for the second year

running, with net income rising to €5 million from €3 million.

CONSOLIDATED FINANCIAL RESULTS

BUSINESS REVIEW

CustomersIn fiscal 2006, the Group welcomed over 1.6 million customers.

The 3.1% decline compared with fiscal 2005 was largely due

to the 3.4% reduction in capacity over the year, including 6%

in the summer season with the closure of five entry-level

Villages in Europe and the temporary closure of certain Villages

for renovation, notably Cancún and La Caravelle. The number

of Jet tours and Club Med Gym customers was up slightly

compared with fiscal 2005.

Number of customers in France(in thousands)

Change vs.2004 2005 2006 2004

Individual customers 443 451 443 -

Business customers 66 58 66 -

Groups 72 73 59 - 18.0%

Total 581 582 568 - 2.4%

In fiscal 2006, Club Med France customers represented 43%

of total customers. The number of individual and business

customers remained stable over the last three years, while

groups declined. The decline mainly concerned vacations

organized by certain companies’ works councils, generally at

hut and 2-Trident Villages.

Management Report

+ 4.9%+ 5.6%

Management Report


Hotel days - VillagesHOTEL DAYS BY ISSUING ZONE

(in thousands of hotel days sold)

2005 2006 Change

Europe 6,846 6,511 - 4.9%Americas 1,475 1,290 - 12.6%Asia 627 759 + 21.0%

Total 8,948 8,560 - 4.3%

HOTEL DAYS BY RECEIVING ZONE

(in thousands of hotel days sold)

2005 2006 Change

Europe 6,272 5,885 - 6.2%Americas 1,901 1,733 - 8.8%Asia 775 942 + 21.6%

Total 8,948 8,560 - 4.3%

Capacity and occupancy rates

2005 2006 Change

Occupancy Occupancy Occupancy Capacity rate Capacity rate rate

Europe 8,494 73.8% 8,142 72.3% - 1.5 ptsAmericas 2,855 66.6% 2,621 66.1% - 0.5 ptsAsia 1,639 47.3% 1,787 52.7% + 5.4 pts

Total 12,988 68.9% 12,550 68.2% - 0.7 pts

Occupancy rate by category

Thousands of hotel daysby destination Occupancy rate

2005 2006 2005 2006

Huts and2 Tridents 747 418 71.9% 71.1%3 Tridents 5,882 5,435 71.2% 70.7%4 Tridents 2,206 2,626 64.2% 65.0%Other 113 81

Total 8,947 8,560 68.9% 68.2%

A total of 8.56 million hotel days were sold during the

year, representing a 4.3% decline. Hotel days at 3 and

4-Trident Villages were stable, with the 7.6% fall at

3-Trident Villages offset by 19% growth at 4-Trident units.

Although the occupancy rate was down 0.7 points

overall, it improved in the 4-Trident category.

The overall occupancy rate reflects major changes in the

Village base, particularly the shift upmarket. These

changes also affected the breakdown between Villages

open throughout the year (year-round capacity) and those

open during part of the year only (seasonal capacity).

Year-round capacity is generally more profitable, but it

tends to bring down the Group’s average occupancy rate.

In the five years since 2001, year-round capacity has risen

from 64% of the total to 74%, and it is expected to reach

80% in 2008.

Average prices (like-for-like)

(€/hotel day)

Winter Summer Full year

Club Med average price - 2005 115.8 88.5 100.2

Price effect 2.5 1.6 2.1Implementation of the strategy(1) 6.9 8.6 7.8Other effects(2) 1.9 1.2 1.9

Club Med average price - 2006 127.1 99.9 112.0

Change 9.8% 12.9% 11.8%

(1) Bar & Snacking Included, resegmentation, Comfort à la carte.(2) Changes in mix (issuer zones, Villages).

It is important to note that the increase in average price was

not due to higher catalog rates, but rather to the implemen-

tation of the Group’s upmarket strategy, with the introduction

of Bar & Snacking Included, Village resegmentation and the

rollout of Comfort à la carte boosting the average price per

hotel day by €7.80.

Rates were increased in line with or by slightly less than

inflation, adding €2.10 to the average price per hotel day.

RevPAB (Revenue per available bed)(€/hotel day)

Year ended 31 October

Change Change 2004 2005 2006 2006 vs. 2005 vs.

2005 2004

Europe 73.8 77.7 84.6 + 9% + 15%Americas 69.6 73.5 80.7 + 10% + 16%Asia 72.9 61.0 69.7 + 14% - 4%

Total Villages 72.7 74.7 81.7 + 9% + 12%

RevPAB: Total Village revenue excluding tax and transportation/Available beds.

RevPAB (revenue per available bed) is an important business

indicator, reflecting the effect of changes both in price mix

and in occupancy rates. For this reason, it is a key measure

of how well customers are embracing the Group’s strategy.

In fiscal 2006, RevPAB increased by €7 per hotel day (9%),

reflecting advances across all zones.

68

STATEMENT OF INCOME

1. Revenue

1.1 FISCAL 2006 VS. FISCAL 2005

(in € millions)

At constant exchange rates, fiscal 2006 revenue rose 4.9%,

including €115 million from an improved price mix. The differ-

ence compared with the 5.6% growth on a reported basis was

due to the €11 million currency effect, primarily related to the

US dollar, Brazilian real and Mexican peso.

1.2 LIKE-FOR-LIKE REVENUE BY REGION AND BUSINESS (ISSUING ZONES)

(in € millions)

2005 2006 2006vs. 2005

Europe 936 982 + 4.9%Asia 116 145 + 24.9%Americas 206 196 - 5.2%

Villages 1,258 1,323 + 5.1%

Jet tours 289 300 + 3.8%Other businesses 54 56 + 5.2%

Total 1,601 1,679 + 4.9%

2. Income by region and business(in € millions)

EBITDAR Operating income- Leisure

2005 2006 2005 2006

Europe 151 164 18.0 21.4Asia 27 21 5.3 (1.6)Americas 22 23 (2.2) (1.6)

Sub-total Villages 200 208 21.1 18.2

Jet tours 9 9 4.3 3.1Other businesses 13 15 (0.7) 2.4

Total 222 232 24.8 23.7

%of like-for-like revenue 13.8% 13.8%

2.1 VILLAGE EBITDAR

(in € millions)

2005 2006

Revenue (1) 1,288 1,346Margin on variable costs 791 823as a % of revenue (2) 60.2% 60.4%

Fixed selling costs (162) (171)Fixed operating costs (395) (405)Other (34) (39)

EBITDAR - Leisure* 200 208

EBITDAR - Leisure (fiscal 2005) 200

Currency effect 9Volume effect (34)Change in price mix 76Impact of operating loss (19)

Change in margin on variable costs 32

Currency effect (6)Fixed selling costs (7)Fixed operating costs (7)Other (4)


(1) Revenue plus insurance settlements.(2) Adjusted to exclude insurance settlements.

*EBITDAR - Leisure: Earnings before interest, taxes, depreciation andamortization and rents.

The favorable change in price mix contributed to a €32 million

increase in margin on variable costs.

Fixed selling costs rose €7 million, primarily reflecting higher

marketing and advertising costs in the Europe-Africa region.

Fixed operating costs increased by €7 million (1.8%). Adjusted

for changes in capacity, fixed costs per hotel day were 5.9%

higher, or just 2.6% higher based on a comparable number

of Villages.

1,590

+ 11+ 115

- 37

1,679

Fiscal 2006Price mix

Fiscal 2005

Winter Summer Full year

Reported revenue + 10.5% + 1.2% + 5.6%

Like-for-like revenue + 7.7% + 2.3% + 4.9%

Currency effectVolume effect

Management Report


The increase was primarily due to:

• The rapid shift in the Village base, with the closure of entry-

level Villages.

• Service enhancements to support the upmarket strategy.

• Exceptional increases in energy and insurance costs, as well

as certain other costs.

2.2 VILLAGE EBITDAR BY REGION

2.2.1 EBITDAR - Leisure: Europe

(in € millions)

2005 2006

Revenue (1) 946 986Margin on variable costs 543 568as a % of revenue (2) 57.1% 57.5%


EBITDAR - Leisure 151 164


Currency effect 0Volume effect (39)Change in price mix 69Impact of operating loss (6)


Currency effect 1Fixed selling costs (7)Fixed operating costs (4)Other (1)



EBITDAR in the Europe region rose €13 million and EBITDAR

margin was 0.6 points higher. Growth was led by the upmarket

strategy and a favorable change in price mix.

2.2.2 EBITDAR - Leisure: Asia

(in € millions)

2005 2006

Revenue (1) 142 146Margin on variable costs 94 89as a % of revenue (2) 61.1% 60.6%




Currency effect 0Volume effect 18Change in price mix 0Impact of operating loss (24)

Change in margin on variable costs (6)

Currency effect 0Fixed selling costs 0Fixed operating costs (1)Other 1



In fiscal 2006, EBITDAR in the Asia region continued to be

adversely affected by the previous year’s natural disasters; for

example, the Kani Village did not fully open until the begin-

ning of the summer. This loss of income, more than twelve

months after the tsunami, was not covered by insurance.

Summer EBITDAR in Asia was stable compared with summer

2005, when it included insurance settlements, and has

returned to summer 2004 levels.

2.2.3 EBITDAR - Leisure: Americas

(in € millions)

2005 2006

Revenue (1) 200 213Margin on variable costs 152 166as a % of revenue(2) 75.6% 76.0%




Currency effect 9Volume effect (13)Change in price mix 7Impact of operating loss 11


Currency effect (7)Fixed selling costs 0Fixed operating costs (2)Other (4)



EBITDAR in the Americas region rose slightly, despite the

closure of the Cancún Village for reconstruction following

hurricane Wilma, and the closure of La Caravelle during the

summer for renovation.

70

2.3 OTHER BUSINESSES

2.3.1 Operating income - Leisure:

Jet tours and other businesses

(in € millions)

2005 2006

Operating income - Leisure

Jet tours 4.3 3.1Club Med Gym 2.5 4.4Club Med World (3.2) (2.0)

Total 3.6 5.5

2.3.2 Jet tours income

(in € millions)

2005 2006

Revenue 295 303

Semi-net margin* 38.7 36.9as a % of revenue 13% 12%

Other costs (34.4) (33.8)

Operating income - Jet tours 4.3 3.1

(*) Semi-net margin = gross margin (revenue less purchases) afteragency commissions.

• Jet tours ended fiscal 2006 with operating income of

€3.1 million, down €1.2 million from the previous year. Winter

season operating income declined €3 million, due to a fall-

off in business in Egypt and an unfavorable currency effect.

The company’s summer season operating income improved,

however, to €4.5 million from €3 million in summer 2005.

• Club Med Gym’s operating income climbed to €4.4 million

in fiscal 2006 from €2.5 million the previous year, reflecting

the success of marketing efforts to support the upmarket

strategy.

2.4 REVENUE TO EBITDAR CONVERSION RATE

(in € millions)

2005 2006

Club Med EBITDARExcluding operating loss 162 187

Business interruption insurance settlements 38 21

Club Med EBITDAR 200 208Other (Jet tours, Club Med Gym, etc.) 22 24

Consolidated EBITDAR 222 232

• Like-for-like consolidated revenue grew €78 million over the

fiscal year, including a €46 million increase in Village revenue

excluding transportation.

• Club Med EBITDAR before insurance settlements was

€25 million higher, or €22 million excluding transportation.

• With EBITDAR up €22 million on revenue up €46 million, the

conversion rate was 48%.

3. Income statement

(in € millions)

2005 2005 2006Pro forma

Reported incl. IAS incl. IAS32/39 32/39

Revenue 1,590 1,590 1,679

Operating income - Leisure 25 25 24Operating income - Management of assets 89 89 40Other operating income & expense (33) (33) (29)

Operating income 81 81 35Finance costs and other financial income & expense (38) (45) (32)Share of income of associates 3 3 3Income tax expense (36) (35) (1)Minority interests (1) (1) 0

Net income 9 3 5

Consolidated operating income, comprising operating income

from leisure businesses and the management of assets and

other operating income & expense, amounted to €35 million

in fiscal 2006. Operating income from the management of

assets amounted to €40 million, which was lower than in

fiscal 2005 when an unusually high volume of asset refinanc-

ing transactions was carried out.

3.1 FINANCE COSTS AND OTHER FINANCIAL INCOME & EXPENSE

(in € millions)

2005 2005 2006Pro forma

excl. IAS incl. IAS incl. IAS32/39 32/39 32/39

OCEANE convertible/exchangeable bonds (16) (22) (21)Finance costs (17) (18) (12)Other (1) (2) (4)

Finance costs and other financial income & expense before exchange gains and losses (34) (41) (37)Realized and unrealized exchange gains and losses (4) (4) 5

Finance cost, net (38) (45) (32)

Average debt (625) (594) (481)

Reported cost of debt (1) 5.72% 7.12% 7.02%Effective cost of debt (2) 5.72% 5.72% 5.76%

(1) Reported cost of debt is calculated based on finance costs and otherfinancial income & expense adjusted for the effect of applyingIAS 32 and IAS 39.

(2) The effective cost is based on interest payments, as reported inthe cash flow statement.

Finance costs and other financial income & expense

including the effect of applying IAS 32 and IAS 39 (financial

instruments) amounted to €32 million in fiscal 2006 compared

with €45 million the previous year.

+ €25 m

INVESTMENTS AND DISPOSALS

(in € millions)

2005 2006

Total Club Med investments (114) (151)Net of government grants and tax relief

Disposals and asset refinancing transactions 245 143

Investments net of disposals 131 (8)

In fiscal 2006, the Group invested €151 million, net of govern-

ment grants of €7 million. A further €30 million was invested

by third parties, such as Gecina, owner of the La Plagne

Village. The total included €20 million at La Caravelle, €15 mil-

lion at Cancún, €15 million at Les Boucaniers, €10 million at

Kani, €3 million at Cervinia and €3 million at Trancoso, as well

as €14 million for the buyout of minority interests in the

Cancún/Ixtapa/Sandpiper Villages and €6 million on informa-

tion systems.

In fiscal 2007, the main investments will concern the La Pointe

aux Canonniers, Ixtapa and Kos Villages.

The Village upgrade program will be completed by the end

of fiscal 2008.

Disposals in fiscal 2006 concerned:

• Villages that did not fit in with the upmarket strategy - such

as Crested Butte, Flaine, Valbella and Cadaques - which

were sold as going concerns.

• Sale and operating leaseback transactions involving the

Chamonix, Avoriaz and Les Deux Alpes Villages, under the

Group’s asset refinancing strategy.

PROPERTY PORTFOLIO (NET BOOK VALUE)

(in € millions)

December 2006assumptions

Assets available for sale 92Assets refinancable over the short and medium-term 310*Other assets(including assets refinancable over the longer term) 549Total property, plant and equipment 951

* Including around €100 million in secured debt.

Property, plant and equipment are divided into three categories:

1. Assets that do not fit in with the upmarket strategy, repre-

senting a carrying amount of €92 million at 31 October 2006.

2. Assets that can be refinanced in the near term, with a

carrying amount of €310 million at 31 October 2006.

The improvement can be explained as follows:

- Finance costs declined in tandem with the reduction in

average debt. However, application of IAS 32 and IAS 39

to the OCEANE convertible/exchangeable bonds had a

significant impact. At 5.76%, the effective cost of debt was

stable year-on-year.

- Realized and unrealized exchange gains and losses repre-

sented a net gain of €5 million. This was mainly attributa-

ble to the US dollar, for which the hedging rate was more

favorable than the average exchange rate for the year and

whose year-end rate was more favorable than the rate at

1 November 2005.

Income tax expense declined in 2006 compared with 2005

when deferred tax assets were set off against tax on the

exceptionally high disposal gains realized during the year.

Net income for fiscal 2006 came in at €5 million, up from

€3 million the previous year.

BALANCE SHEET

(in € millions)

Assets 1 Nov. 2005 31 Oct. 2006incl. IAS incl. IAS

32/39 32/39

Non-current assets:- Property, plant and equipment 986 951- Intangible assets 182 182- Non-current financial assets 66 80

Total non-current assets 1,234 1,213Government grants (22) (28)

Total assets 1,212 1,185

Equity and liabilities 1 Nov. 2005 31 Oct. 2006incl. IAS incl. IAS

32/39 32/39

Equity 523 514

Provisions 64 69

Deferred taxes, net 60 51

Working capital 242 257

Net debt 323 294

Total equity and liabilities 1,212 1,185

Gearing 61.8% 57.2%

- Equity contracted slightly to €514 million at 31 October

2006, including negative translation adjustments of around

€15 million.

- Net debt continued to decline, to €294 million, leading to

an improvement in gearing to 57%.

- Working capital, which represents a net source of funds at

Club Méditerranée, amounted to €257 million or 15% of

revenue, roughly unchanged from 31 October 2005.

- Non-current assets amounted to €1,213 million at 31 October

2006, an amount close to the year-earlier figure.

Management Report


Investments were almost entirely self-financed by the increase

in net cash from operations and the proceeds from asset

disposals, generating free cash flow of €39 million and a

€29 million reduction in net debt.

SIGNIFICANT EVENTS OF THE YEAR

A FASTER SHIFT IN THE VILLAGE BASE

Club Med is vigorously pursuing its upmarket strategy. More

than 50 Villages have been renovated over the past five years

and around 15 more will be upgraded in the two years to

come. This systematic move up the quality scale will be com-

pleted at the end of 2008, when all of the Villages will be rated

either 3 or 4-Tridents.

In fiscal 2006, the Group decided to close five entry-level

Villages and prepared to upgrade seven Villages to 4-Trident

status.

Nearly €200 million has been committed to renovating exist-

ing Villages and opening new ones, including La Caravelle

(€20 million), Cancún Yucatán (€15 million), Villars (€10 million),

La Plagne (€14 million) and Opio (27 million) that were tem-

porarily closed during fiscal 2006.

In fiscal 2006, €158 million was invested directly by Club

Méditerranée and more than €30 million indirectly by

the Group’s real estate partners. In 2007, investments will

total around €100 million by Club Méditerranée and some

€100 million by partners.

Major product innovationsIn 2006, Bar & Snacking Included was rolled out to all the sea

and sun Villages, giving Club Med a significant competitive

advantage.

Comfort à la carte has delivered the expected response to

customers looking for quality and who want to choose their

room comfort.

And lastly, the creation of Club Med Baby Welcome and Club

Med Passworld has effectively met the needs of families.

Major shift in the customer base andrecord satisfaction ratingsThe percentage of Club Med’s core target customers in

France (the Top 12*) rose significantly in fiscal 2006, to 69%

of all French customers from 35% in fiscal 2003.

*Top 12: the 12% of the population with the highest average dispos-able incomes.

3. Other assets with a carrying amount of €549 million at

31 October 2006, corresponding mainly to Villages that can-

not be refinanced in the near term. They include Villages

owned jointly with partners, Villages built on leasehold land,

restricted assets that cannot be sold in the near term and other

items of property, plant and equipment.

VALUATION OF THE CLUB MED BRAND

(in € millions)

2002 2004 2006

Value of the Club Med brand 302 362 438

Club Méditerranée’s main asset - its brand - is not recognized

in the consolidated balance sheet.

The brand was valued in fiscal 2006, 2004 and 2002 by UK-

based Brand Finance.

The results of the latest valuation show that the brand has

grown steadily in value, to €438 million or around €22-23 per

share in fiscal 2006 from €20 per share in 2004.

Brand Finance’s valuation does not take into account certain

aspects of Club Méditerranée’s strategy that can be expect-

ed to add value to the brand, such as development opportu-

nities in the vacation villa market and the Group’s strong

growth potential in Asia. As a result, the valuation may be con-

sidered as conservative.

CASH FLOW STATEMENT

(in € millions)

Fiscal 2005 Fiscal 2006(including IAS 32/39)

Cash flow 15 22

Change in working capital 9 22

Change in provisions (2) 3

Net cash from operations 22 47

Investments (114) (151)

Proceeds from disposals 246 143

Free cash flow 154 39

Effect of changes in exchange rates and other (4) (10)

Decrease in net debt 150 29*

*After taking into account the impact on net debt of applying IAS 32and IAS 39.

72

WINTER 2007

CAPACITY BY CATEGORY AND REGION

(in % and thousands of hotel days)

Winter Winter Winter 2007 2005 2006 2007 vs. 2006

2 Tridents 6% 4% 3%3 Tridents 57% 53% 46%4 Tridents 35% 41% 50%Other 2% 2% 1%

Total 100% 100% 100%

Europe 2,984 3,011 2,919 - 3%Asia 786 844 927 9.8%Americas 1,461 1,414 1,523 7.7%

Total worldwide 5,231 5,269 5,370 1.9%

The resegmentation process is continuing, with 3 and 4-Trident

Villages now representing 96% of capacity. More importantly,

for the first time this year, 4-Trident units represent half of total

capacity.

Forecast capacity for the 2007 winter season is up 1.9% compared

with last winter, with variations from one region to another:

• In Europe, the 3% decline is mainly due to the closure of the

Opio Village for renovation.

• In Asia, capacity will increase 10% this winter, with the full

reopening of the Kani Village and the conversion of the

Cherating Village in Malaysia to a year-round unit.

• In the Americas, capacity will expand 8% despite the

closure of Crested Butte, thanks to the reopening of the

Cancún Village and the availability of total capacity at Les

Boucaniers.

The closure of year-round Villages for renovation leads to a

loss of contribution while they are closed. The effect mainly

concerns fiscal 2006 and 2007, with:

• In fiscal 2006, Les Boucaniers, Louxor, the first phase in the

renovation of La Caravelle and Cancún, for the costs not

covered by insurance.

• In fiscal 2007, the closure during the summer of La Pointe

aux Canonniers, Opio and Ixtapa for renovation, and the

final phase in the renovation of La Caravelle.

Management Report


4-Trident Villages, for example, gained 44,000 customers over

the year, an increase of 11%.

These gains in the core target segment helped to partially

offset the reduction in the number of entry-level beds. In

addition, average customer spend improved by nearly 12%.

Lastly, measured customer satisfaction has hit record levels,

especially in the 4-Trident Villages. The figures for "intend to

return" and "good value for the money" are also trending

upwards.

Two high-potential and fast changing regionsThe Americas region has been repositioned in the upmarket

family segment. Based on IPSOS surveys, the number of

potential Club Med customers in the United States has been

estimated at around 28 million people. Club Med enjoys high

local brand awareness, since nearly 90% of high-income

Americans have heard of the Club, far more than for the

Group’s major competitors. In 2008, the Club will offer 12 ren-

ovated Villages in the region, including eight 4-Trident units.

Club Med is making significant inroads in Asia, gaining

20,000 customers in China, Singapore, Hong Kong and Taiwan.

The move upmarket corresponds perfectly to the new demand

from these customers, who want to vacation in exceptional

locations and very comfortable accommodation. Club Med’s

objective is to welcome more than 100,000 GMs from these

countries in 2008.

In both the Americas and Asia, teams have been renewed and

strengthened, to ensure the strategy’s successful implemen-

tation.

MAIN CHANGES IN THE VILLAGE BASE IN FISCAL 2006

The following Villages were sold or permanently closed

in fiscal 2006:

- Flaine (France)

- Valbella (Switzerland)

- Cadaqués (Spain)

- Crested Butte (USA)

- Pakostane (Croatia)

The following Villages were refinanced through sale-and-

leaseback transactions:

- Chamonix (France)

- Avoriaz (France)

- Les Deux Alpes (France)

- Les Almadies (Senegal)

74

BOOKINGS FOR WINTER 2007 COMPAREDWITH WINTER 2006, AS OF 9 DECEMBER 2006

(like-for-like revenue)

Total as of 9 December 2006

Europe + 8.9%Americas + 0.6%Asia + 47.4%

Total Club Med + 10.2%

Jet tours + 2.0%

Bookings are expressed as revenue at constant exchange

rates. As of 9 December 2006, winter 2007 bookings were up

10.2% on the prior-year date.

In Asia, bookings are up by a strong 47.4%.

DIVIDENDNo dividend will be paid in respect of fiscal 2006 (see "General

Information").

OTHER INFORMATION

DIRECTORS’ COMPENSATION

(see "General Information").

OWNERSHIP STRUCTURE

Based on the disclosures received pursuant to Articles L.233-7

and L.233-11 of the French Commercial Code, Richelieu

Finance held more than 20% of the Company’s capital as of

October 31, 2006 (information provided in accordance with

Article L.233-12 of the Code).

At October 31, 2006, 277,305 shares were held in treasury,

representing 1.4% of the capital.

A shareholders’ pact was signed on 9 June 2006 between

Accor (with 6% of the capital), Caisse de Dépôt et de Gestion

du Maroc through its subsidiary Fipar Holding (10% of the

capital), Air France Finance (2% of the capital) and Icade

(4% of the capital). The total shares held by the members of

the pact represented 22% of the capital at the time of signa-

ture. On 1 October 2006, the percentage was reduced to 18%,

following the withdrawal of Icade whose participation was

linked to the execution of a real estate transaction.

(See "General Information").

ACQUISITIONS OF CONTROLLING ANDOTHER INTERESTS IN FRENCH COMPANIES

None.

DEPENDENCE ON PATENTS OR SUPPLYCONTRACTS

None.

EXCEPTIONAL EVENTS, CLAIMS AND LITIGATION

To the best of the Company’s knowledge, there are no claims,

litigation or exceptional events that could have a material adverse

effect on the results of operations, assets and liabilities or finan-

cial position of the Company or the Group.

MAIN COMPETITORS

Because Club Med is not a pure tour operator or a pure hotel

group, unlike most companies in the tourism industry, it does not

have any direct competitors operating on a worldwide scale.

The only companies offering anything close to a competing

product are local in scope.

SUBSEQUENT EVENTS

None.

RISK FACTORS

Club Méditerranée’s corporate risk management policy is

designed to effectively protect both the interests of share-

holders and customers and the environment. It is based on a

map of critical operational risks (see Chairman’s report on

internal control procedures) which serves to prioritize risks

based on their frequency and their financial and business

impact.

1. Economic and geopolitical risksThe Group’s vacation village operations are particularly sen-

sitive to economic cycles and weather conditions. Economic

slowdowns in the regions where the Group does business

adversely affect demand for leisure activities generally and for

vacation travel in particular. Economic-driven fluctuations in

demand can cause significant changes in revenue. The relat-

ed risk is reduced by our business model which focuses on

variabilizing operating costs. Our presence in over forty coun-

tries increases our exposure to worldwide geopolitical risks.

To limit our exposure in high-risk countries, we adopt the most

flexible operating formulas, such as management contracts.

Examples of where this solution is applied include the

El Gouna Village in Egypt and Coral Beach in Israel. In view

of the unpredictability of these risks, it is very difficult to assess

their potential impact on our financial statements.


2. Environmental risks2.1 PREVENTION AND COMPLIANCE

Environmental risk prevention and management

Our businesses do not give rise to any specific environmen-

tal risks. The risk of environmental damage caused by the

technical installations at vacation villages is managed by

performing regular inspections.

Due to the absence of material risks, no environmental pro-

visions or warranties have been recognized in the fiscal 2006

accounts.

More information about the Group’s sustainable development

practices is provided in the Sustainable Development report,

pages 38 to 64.

Compliance

No provisions for environmental liabilities arising from court

decisions have been recorded in the fiscal 2006 financial state-

ments of Club Méditerranée SA.

Objectives assigned to subsidiaries

Our subsidiaries outside France are required to apply our

general environmental policy. They are also encouraged to

share experience and best practices in the areas of business,

the environment and labor relations. We also obtain assur-

ance that our subsidiaries comply with local regulations.

3. Legal risks3.1 LEGAL RISKS ARISING FROM THE GEOGRAPHICDIVERSIFICATION OF THE BUSINESS

The nature of our business and the fact that our operations are

conducted in a large number of countries with differing and

sometimes contradictory regulations is a source of operating

difficulties and can lead to disputes with suppliers, owners or

local authorities.

Provisions are booked for the cost of identified risks, taking

into account the nature of the business and its international

nature, as soon as the amounts involved can be reasonably

estimated.

3.2 LEGAL PROCEEDINGS AND EXCEPTIONAL EVENTS

Information about legal proceedings and exceptional events

that may have, or have had in the recent past, significant effects

on the group’s results of operations is provided in Appendix 10.

To the best of the Company’s knowledge, there are no other

legal proceedings pending or in progress that could have

a material impact on its business or results of operations.

Accounting policies for the recognition of provisions and

liabilities are described in Appendix 10.

4. Insurance - Risk coverageInsurable risks are managed by taking out insurance cover

at Group level. Risk management tools and global insurance

programs have been set up in partnership with pools of

leading insurers. Where necessary, separate cover is purchased

locally or for specific activities.

After the natural disasters of 2005, in fiscal 2006 we followed

a policy of transferring risks to the insurance market whenev-

er possible, without using a captive insurance or reinsurance

company.

The main global insurance programs are as follows:

- Global Third-Party Liability Program, covering the Group’s

liability towards customers and other third parties. The max-

imum insured value of €110 million has been maintained,

based on the nature of our business, an overall assessment

of the risks associated with Club Med sites and case law. The

program provides worldwide cover. To reduce our exposure

to risks, in the interests of our customers, we have set up

reporting systems providing detailed and summary informa-

tion by Village, country and region, on the number and

circumstances of claims, as well as the related cost. This

information ensures that immediate action is taken to

implement preventive and safety measures.

- Property Damage and Business Interruption Program. This

program covers all risks affecting our assets, such as fire and

natural disasters. Coverage is capped at €100 million per

claim, based on the insurance values of assets at the Club

Med sites, with lower caps applying in some specific cases

depending on the type of risk.

In 2006, we purchased insurance cover primarily through the

Marsh global insurance brokerage network. The insurance

pool for our property damage and business interruption pro-

gram was lead-managed by Zurich Assurances and the

London insurance market, and included ACE Europe, AIG

and Swiss Ré International. The new property damage and

business interruption program set up in January 2007 offers

better cover at a more attractive price. The new program is

lead-managed by ACE Europe.

Management Report

76

The insurance pool for the 2006 third-party liability program

is lead-managed by Generali and includes GAN, AWAC and

ACE. In addition to insuring our own risks, we offer all of our

customers throughout the world extensive assistance cover

purchased from Europ Assistance.

5. Market risksIn the normal course of business, we are exposed to various

financial risks, including liquidity risks, market risks (particularly

currency and interest rate risks) and credit risks. The Treasury

and Financing unit of the Corporate Finance department is

responsible for managing liquidity, interest rate, currency and

counterparty risks at Group level.

From time to time, we may use derivative financial instruments

to hedge currency risks arising in the course of our business

and interest rate risks on floating rate debt. In practice, these

instruments are used primarily to hedge currency risks on

future transactions. The Treasury and Financing unit identifies,

assesses, manages and hedges financial risks in accordance

with the policies approved by the Audit Committee. Specific

rules have been drawn up and approved banning the use of

derivative instruments for trading purposes.

5.1 LIQUIDITY RISK

Liquidity risk is managed by the Treasury and Finance unit with

the aim of ensuring that the Group will be able to replace its

sources of financing when they mature, while at the same time

optimizing annual borrowing costs.

Diversified sources of financing are used, according to the

Group’s needs.

The categories and characteristics of debt and other interest-

bearing liabilities are described in Note 18 to the consolidated

financial statements. The breakdown of financial liabilities by

maturity is presented in Note 19.3.

Loan agreements include covenants which, if breached,

could result in the outstanding loan becoming immediately

repayable.

These covenants have been redefined, effective from

30 April 2006, to take into account the transition to

International Financial Reporting Standards (IFRS). The

covenants define EBITDA as Operating income - Leisure

before depreciation, amortization and provisions.

The financial ratios to be complied with under the bank

covenants are as follows:

- Off-balance sheet commitments Less than €200 million

- Gearing Less than 1

- Leverage (net debt/Ebitda (as defined above)) See below

Ratios applicable to the €70 million syndicated line of credit

and loan secured by the Club Med 2 cruise ship and the

Da Balaïa Village*:

30 April 31 October

2007 4.17 4.17

2008 3.88 3.88

2009 and beyond 3.58 3.58

* Until 30 April 2008 for Da Balaïa.

The covenants were complied with at 31 October 2006:

- Off-balance sheet commitments

(less than €200 million): €91 million

- Gearing (less than 1): 0.57

- Leverage (net debt/Ebitda (as defined above))

(less than 4.47): 3.26

In addition the Group’s confirmed lines of credit and other

facilities include acceleration clauses that would apply in the

case of any breach of its covenants or significant asset sales

(see Note 19 to the consolidated financial statements).

5.2 INTEREST RATE RISK

A weekly debt reporting system has been set up, using Finance

Active software.

The Group does not hold any material interest-bearing assets.

It is exposed to two types of interest rate risk:

- Fair value risk on fixed rate net debt. This type of risk is not

hedged. The carrying amount of financial assets and liabili-

ties is not adjusted for changes in interest rate risk and fair

value risk therefore corresponds to the opportunity cost of

a fall in rates.

- Cash flow risk on floating rate net debt, corresponding to

the impact on finance costs of an increase in interest rates.

The Group has a combination of fixed and floating rate debt.


In fiscal 2006, no interest rate hedges were set up as average

floating rate net debt represented less than €50 million. Our

exposure to the risk of an increase in interest rates therefore

corresponded to this amount. A 100-basis point increase or

decrease in short-term interest rates would have the effect of

raising or lowering finance costs by €500,000.

5.3 CURRENCY RISK

The geographic diversification of our Villages and sales offices

exposes us to the risk of fluctuations in the exchange rates

of our transaction currencies compared to our functional

currency.

To reduce this risk, we use derivative financial instruments to

hedge budgeted cash flows for the coming year. The policy

consists of:

• Hedging the main currencies in which sales are denominated

(British pound, Japanese yen, Canadian dollar, Australian

dollar, Korean won, etc.).

• Hedging our exposure to the US dollar, which is both a billing

currency and a functional currency.

• Not systematically hedging other functional currencies

(Moroccan dirham, Turkish pound, Tunisian dinar, Indonesian

rupee, Thai bath, etc.), which are purchased as and when

required.

Hedging instruments consist of forward purchases and sales

of foreign currencies and non-deliverable forwards.

Our net exposure to currency risks on operating transactions

is presented in Note 19.5.2 to the consolidated financial

statements.

Our exposure to currency risks on external debt is limited and

intra-group financing is generally denominated in the sub-

sidiary’s functional currency. Changes in the value of hedges

of the net investment in foreign operations are recognized

directly in equity.

The Group’s net investment in foreign operations is exposed

to the risk of fluctuations in foreign currencies against the euro.

The impact of these fluctuations on net investments in inde-

pendent subsidiaries is recognized as a separate component

of equity. This risk is not hedged using derivative instruments.

5.4 CREDIT AND COUNTERPARTY RISK

Most customers pay for their vacation before they leave and

our exposure to credit risk on commercial transactions is

therefore limited.

Transactions involving derivative instruments and borrowings

are entered into with a wide range of leading counterparties.

Temporary cash surpluses, representing limited amounts,

are invested in certificates of deposit or Sicav mutual funds

purchased from leading banks.

5.5 EQUITY RISK

We do not hold any listed equities, apart from treasury stock

which is recorded as a deduction from equity. As a result, we

are not exposed to any risk of fluctuations in stock prices.

PARENT COMPANY

The parent company of the Club Méditerranée Group is Club

Méditerranée SA. As well as acting as the Group holding

company, Club Méditerranée SA operates Villages under the

Club Med brand in France and abroad.

Consequently, its financial results and their year-on-year

change only partially express the Group’s performance and

do not reflect the same trends as the consolidated financial

statements.

Club Méditerranée SA ended the year with a net loss of €14

million compared with net income of €94 million for the year

ended 31 October 2005.

The loss was primarily due to the swing to net financial

expense of €9 million from net financial income of €94 million

in fiscal 2005, following a change in the method of calculating

provisions on subsidiaries.

Management Report

78

8 March 2007: Annual Shareholders’ Meeting and first-quarter revenue announcement

8 June 2007: Interim results announcement

September 2007: Third-quarter revenue announcement

13 December 2007: Fiscal 2007 results announcement

2007 financial reporting calendar


Chairman’s report

This report has been drawn up in accordance with para-

graph 6 of Article L.225-37 of the French Commercial

Code, as amended by Act 2005-842 of 26 July 2005.

Its purpose is to report to shareholders on the condi-

tions underlying the preparation and organization of

the work of the Board of Directors ("the Board") and

the internal control procedures set up by Club

Méditerranée SA ("the Company").

I. PRACTICES AND PROCEDURES

The Board’s practices and procedures are governed by French

law, the Company’s by-laws, and the internal rules of the Board

and the Board Committees.

1.1 MEMBERSHIP, PRACTICES ANDPROCEDURES

1.1.1 Members of the BoardArticle 14 of the Company’s by-laws states that "The Company

shall be administered by a Board of Directors comprising

between three and eighteen members".

At 31 October 2006, the Board was composed of eleven

voting directors and two non-voting directors. The directors’

biographies and details of their other directorships and func-

tions are provided on page 158.

In compliance with its internal rules, the Board regularly checks

that its members include the requisite number of independent

directors, based on the independence criteria defined

in France’s Bouton report on corporate governance. In

accordance with these criteria, a director is deemed to be

independent when he or she:

- has not been a director of the Company for more than

twelve years;

- is not an employee or corporate officer of the Company,

nor an employee or director of its parent or one of its

consolidated subsidiaries, and has not been one during the

previous five years;

- is not a corporate officer of a company in which the

Company is a corporate director, either directly or indirectly,

or in which an employee appointed in that role, or a

corporate officer of the Company (currently in office or

having held such office in the past five years), is a director;

- is not a customer, supplier, investment banker or commercial

banker (i) that is material for the Company or Group, or (ii)

for which the Company or Group represents a significant

portion of the business of the director concerned;

- does not have close family ties with a corporate officer;

- has not been an auditor of the Company within the previous

five years;

- does not, in whole or in part, control the Company; for direc-

tors holding in excess of 10% of the Company’s capital

and/or voting rights, the classification as independent takes

into account the Company’s ownership structure and any

potential conflict of interests.

Based on these criteria, at its meeting on 28 September 2006

the Board classified eight of the eleven directors as independent.

1.1.2 Board practices and proceduresINTERNAL RULES

At its meeting on 16 March 2005 the Board adopted a set of

internal rules governing its organization, practices and proce-

dures. These are based on French law, the Company’s by-laws

and the recommendations set out in the France’s AFEP-

MEDEF Corporate Governance Code for listed companies

published in October 2003.

Chairman’s Reporton the practices and procedures of the Board ofDirectors and internal control procedures

80

The internal rules stipulate that the Board should meet as

often as required in the Company’s interests. They describe

the terms of reference and powers of the Board, define the

practices and procedures of the Board Committees, and

impose a duty on directors to treat as strictly confidential all

information obtained in their capacity as Board members, as

well as the duty to comply with the fundamental principles of

independence, ethical conduct and integrity. The internal

rules also require each director to disclose to the Board any

actual or potential conflict of interest in which he or she may

be directly or indirectly involved, and in such a case to abstain

from taking part in any discussion and/or vote on the matters

in question. In addition, they set out the rules applicable

to trading in the Company’s shares, as set out in Article

L.621-18-2 of the French Monetary and Financial Code and

Articles 222-14 and 222-15 of the AMF’s General Regulations.

The internal rules state that directors may participate in Board

meetings by videoconference or using other forms of

telecommunication technology (including conference calls

and any other interactive means of electronic communication)

that enable them to be identified and to effectively participate

in the discussion and vote, subject to compliance with the

applicable regulations. Accordingly, directors who take part

in Board meetings through such means are deemed to be

present for the purposes of calculating the quorum and

voting majority, except for Board meetings held to approve

the financial statements of the Company and the Group and

the related management report.

BOARD MEETINGS

• Average period of notice for calling Board meetings

The provisional schedule of meetings of the Board and Board

Committees is sent to each director at the beginning of the

fiscal year. The average period of notice for calling these

meetings is approximately two weeks.

• Chairman

Board meetings are chaired by the Chairman of the Board or,

in his or her absence, by the Vice-Chairman or by a director

designated as acting Chairman or by another director desig-

nated by the Board. All of the meetings in fiscal 2006 were

chaired by the Chairman of the Board.

• Directors’ right to information

The Chairman of the Board is required to provide directors

on a timely basis with any and all documents and information

they may need to fulfill their duties.

During fiscal 2006 the Board met four times with an average

attendance rate of 85%. Each meeting lasted an average of

two hours.

The Company’s Chief Financial Officer and the Senior

Executive Vice-President - Europe-Africa & North America

attended all of the Board meetings.

1.2 ROLE AND RESPONSIBILITIES OF THEBOARD AND BOARD COMMITTEES

1.2.1 Role of the BoardIn accordance with Article L.225-35 of the French Commercial

Code, the Board determines the Company’s strategy and

oversees its implementation. Except for the powers directly

vested in shareholders, the Board considers all matters

concerning the efficient management of the Company and

makes all related decisions within the limits set by the

Company’s corporate purpose.

In fiscal 2006, the Board examined the financial statements

of the Company and the Group for the year ended 31 October

2005, approved the reports and resolutions to be presented

at the Annual Shareholders’ Meeting of 14 March 2006,

reviewed the Group’s quarterly performance and results,

reviewed the budget and the business plan, examined the

impact on the consolidated accounts of the transition to

International Financial Reporting Standards (IFRS), analyzed

the financial statements of the Company and the Group for

the first half of fiscal 2006, set up stock option plans for

members of senior management and certain employees, and

reviewed the plan drawn up with the aim of leveraging syner-

gies with the Accor group. The Board also examined and

approved capital expenditure requests (including for asset

acquisitions and hotel renovation projects) and planned

disposals for amounts requiring the Board’s prior approval

pursuant to its internal rules.

During the year the Board also reviewed the reports of the

various Board Committees.

1.2.2 Roles of the Board CommitteesAt its meeting on 16 March 2005, the Board set up three stand-

ing Committees whose role is to facilitate the work of the

Board and efficiently contribute to preparing Board decisions

– the Audit Committee, the Nominations and Compensation

Committee and the Strategy Committee.

The Board of Directors appoints the members of these

Committees (including the Chairman) from among its members.


THE AUDIT COMMITTEE

The Audit Committee has four members – including three

independent members – who are appointed for their term of

office as director.

The current Audit Committee members are David Dautresme

(Chairman), Véronique Morali, Philippe Adam and Pascal

Lebard. In accordance with best corporate governance prac-

tice, no executive directors sit on the Audit Committee.

The rules governing the Audit Committee’s organization,

modus operandi, tasks and duties are described in a specific

Charter that was unanimously approved by the Committee’s

members during its meeting of 8 June 2005. The Audit

Committee is one of the key components of the corporate

governance structure set up by the Company. It is responsible

for assisting the Board with reviewing and approving the interim

and annual financial statements, as well as for advising on

transactions or events that could have a material impact on

the financial position of the Group or its subsidiaries in terms

of commitments and/or risk.

The roles and responsibilities of the Audit Committee are to:

- Review the annual and interim financial statements of the

Company and the Group, together with the related reports.

- Ensure that the data in these financial statements are consis-

tent with other information available to the Committee.

- Ensure that the accounting policies used to prepare the

financial statements are appropriate and have been applied

consistently from one period to the next.

- Check the effectiveness of internal reporting and control

procedures.

- Analyze recent regulatory developments and assess their

impact on the financial statements.

The Committee reviews the work performed by the Statutory

Auditors. In addition, it examines audit service proposals and

makes recommendations concerning the appointment or

re-appointment of the Statutory Auditors. At its meeting

on 5 December 2006, the Audit Committee recommended

renewing the appointment of the current Auditors and their

substitutes.

The Audit Committee met twice in fiscal 2006, with an average

attendance rate of 75%.

During these two meetings, which were dedicated to review-

ing the annual and interim financial statements, the Committee

checked that the closing process had gone smoothly and was

presented with a report on the work of the Statutory Auditors.

The Committee also examined (i) the tax audits in progress

within the Group, (ii) ongoing measures to rationalize the

Group’s legal structure by reducing the number of separate

companies, (iii) hedging operations, (iv) the Group’s real-estate

portfolio, and (v) refinancing operations.

In addition the Audit Committee reviewed the work of the

internal auditors and their internal control assessments, and

gave its opinion on the internal audit plan.

Lastly, the Committee was informed of the work performed by

the Internal Audit Department to update the Chairman of

the Board’s report to shareholders on internal control.

THE NOMINATIONS AND COMPENSATION COMMITTEE

The Nominations and Compensation Committee has three

members, all of whom are independent: Thierry de La Tour

d’Artaise (Chairman), Anne-Claire Taittinger and Saud

Al Sulaiman. In accordance with best corporate governance

practice, no executive directors sit on the Committee.

The roles and responsibilities of the Nominations and

Compensation Committee are to:

- Review candidates for election to the Board – either at its

own initiative or on the request of the Board – based on

the candidates’ skills, business experience, and economic,

social and cultural background.

- Review candidates for the position of Chief Executive Officer

and, where appropriate, Chief Operating Officer.

- Review the membership structure of Board Committees and

make related recommendations.

- Recommend methods for determining the compensation

payable to the Chairman of the Board, the Vice-Chairman

and the Chief Executive Officer and, at the Chairman’s

request, compensation payable to the Group’s Executive

Vice-Presidents and senior executives.

- Review proposed stock option plans and stock grants for the

management and employees of the Group (including exec-

utive directors).

- Obtain all the required information concerning the compen-

sation and status of Group executives.

- Make proposals and recommendations concerning atten-

dance fees and any other compensation and benefits for

members of the Board (including non-voting directors).

The Nominations and Compensation Committee met twice

in fiscal 2006, with a 100% attendance rate. During these

meetings the Committee recommended that the Board grant

250,000 stock options to executive directors and selected

members of management. This recommendation was adopted

by the Board at its meeting of 14 March 2006.

Chairman’s report

82

THE STRATEGY COMMITTEE

The Strategy Committee has eight members, five of whom

are independent. The current Committee members are

Henri Giscard d’Estaing (Chairman), Véronique Morali,

Philippe Adam, Mustapha Bakkoury, Paul Jeanbart, Aimery

Langlois-Meurinne, Pascal Lebard and Tetsuya Miyagawa

(non-voting director).

The role of the Strategy Committee is to review:

- The main growth strategies of the Company and its

subsidiaries, from both a financial and commercial perspec-

tive – focusing particularly on ensuring that changes to the

product offering appropriately reflect the Company’s image

and corporate culture.

- The three-year business plan presented annually by the Chief

Executive Officer.

The Strategy Committee receives input from all of the Group’s

corporate departments.

The Strategy Committee met once in fiscal 2006, with an

attendance rate of 89%. The purpose of the meeting – which

was held on 27 October 2006 – was to review and approve the

2007-2009 business plan.

1.3 RESTRICTIONS ON THE POWERS OF THE CHIEF EXECUTIVE OFFICERIMPOSED BY THE BOARD OF DIRECTORS

RESTRICTIONS RESULTING FROM INTERNAL RULES

At its first meeting, which was held on 16 March 2005, the

Board decided to combine the functions of Chairman of the

Board and Chief Executive Officer, and appointed Henri

Giscard d’Estaing as Chairman and CEO. This decision

reflected the Board’s view that combining these two positions

would be the best way of ensuring the success of the Group’s

upmarket strategy.

In accordance with Article L.225-56 of the French Commercial

Code the Chief Executive Officer has the broadest powers to

act on behalf of the Company under all circumstances within

the scope of the corporate purpose, except for those powers

directly vested by law in shareholders and the Board of

Directors. The Chief Executive Officer represents the Company

in its dealings with third parties.

For internal purposes, the Board decided that certain trans-

actions and decisions require its prior approval due to their

nature and/or the amounts involved. These include:

• The annual budget.

• The 3-year business plan.

• Any capital projects or asset disposals not included in the

annual budget representing an aggregate amount of more

than €9.2 million.

- Purchases and sales – for cash or stock – of property, plant

and equipment, intangible assets, rights or securities, and

the creation of any and all companies, partnerships and

business ventures, representing an investment or disposal

proceeds in excess of €15.3 million. This restriction does

not apply, however, to related party transactions not

governed by Article L.225-38 of the French Commercial

Code.

- New loans and borrowings (including bond issues and

short-term advances) in excess of €45.8 million.

- Transactions in settlement of claims or litigation repre-

senting over €6.1 million.

REPORTING RULES

The Chief Executive Officer is required to report regularly to

the Board on the use of his powers, particularly in relation to

share buyback programs and the issuance of guarantees, as

well as regularly updating the Board on specific matters such

as changes in the Company’s ownership structure and strate-

gic partnerships.

II. INTERNAL CONTROL PROCEDURES

2.1 DEFINING INTERNAL CONTROL OBJECTIVES

DESCRIPTION OF INTERNAL CONTROL OBJECTIVES

According to the internal control reference framework pub-

lished on 31 October 2006 by the working group of the

Autorité des Marchés Financiers, internal control is a system

developed and implemented by a company that provides

assurance concerning:

- The company’s compliance with the applicable laws and

regulations.

- Application of senior management instructions and

strategic guidelines.

- The effectiveness of internal processes, particularly those

contributing to the protection of assets.

- The reliability of financial information.

The system contributes to the overall control of the business,

the effectiveness of its operations and the efficient utilization

of resources.


By helping to limit and manage the risk of the Company fail-

ing to meet its objectives, the internal control system plays a

key role in the conduct and management of the business.

However, no system of internal control can provide an absolute

guarantee that the company’s objectives will be met.

Club Méditerranée’s internal control system is organized

on a decentralized basis, underpinned by rules relating to

organization, strategies, procedures and practices aimed at

controlling risks that may have a material impact on the

Group’s assets or on its ability to achieve its objectives.

The purposes of the procedures in place within the Company

and its subsidiaries are to:

- Ensure that all acts of management, all transactions, and

the behavior of all Company employees comply with the

general strategic guidelines established by the Company’s

corporate governance bodies, the applicable laws and

regulations, and the Company’s corporate values, standards

and internal rules.

- Protect the Group’s assets.

- Provide assurance that the accounting, financial and

management information submitted to the Company’s

corporate governance bodies gives a true and fair view of

the Company’s operations and financial position.

In order to meet these goals, internal control procedures in

each Business Unit extend to every level of the organization

and are the responsibility of the operating and corporate

departments.

THE CONTROL ENVIRONMENT

• Internal standards

Code of Ethics and best practices

Following a decision by the Executive Board on 23 June 1997,

the Group drew up a Code of Ethics in order to raise employ-

ee awareness about the fact that certain types of activities

and relationships are heavily restricted, and in some cases

must be avoided at all costs. This Code covers topics such as

potential conflicts of interest, Group policy concerning gifts,

benefits, invitations and payments to employees, as well as

the use of confidential information, compliance with applica-

ble laws in the Group’s host countries and adherence to Group

strategy. A questionnaire is sent to all Group employees, in

which they are required to answer yes or no to questions about

whether they (i) may have direct or indirect conflicts of inter-

est with the Group, (ii) are prepared to comply with all aspects

of the Code of Ethics and have taken all requisite measures

to ensure that close members of their family do likewise, and

(iii) will promptly inform the Human Resources Department

of any event or situation covered in the Code that may con-

cern them.

Internal Audit Charter

The aim of the Internal Audit Charter is to define the role,

objectives and responsibilities of the Group’s Internal Audit

team and ensure that this team can perform its duties appro-

priately.

Procedures

Accounting and financial procedures, as well as general

procedures relating to each of the Group’s main businesses

are sent out to the various managers and their teams and are

centralized within the Internal Audit Department.

The procedures concerning the Group’s Villages can be

viewed on Club Med’s intranet and are regularly updated.

Crisis management manual

The purpose of this manual is to set out the procedures to

be applied in the event of a sensitive or emergency situation.

Compiled by the Health, Safety and Security Department with

a view to both preventing and dealing with such events, the

manual contains numerous examples of typical situations that

may occur at the Group’s facilities or in its host countries,

including outbreaks of diseases, hostilities and natural disasters.

The manual is also used in all internal training sessions on

crisis management and communication.

2.2 MEETING INTERNAL CONTROL OBJECTIVES

2.2.1 Internal control proceduresrelating to operating controls andregulatory compliance OPERATING CONTROLS

Effective operating controls consist of gauging client satisfac-

tion and monitoring quality, as well as ensuring that the

Group’s global information systems are sustainable and

adequately backed up.

• Quality

Improving quality has always been an essential part of Club

Méditerranée’s corporate culture. For this reason, in recent

years the Quality Department has taken steps to set up a struc-

tured process in line with developments concerning the

Company as well as its products and markets. This process

hinges on tracking products and carefully assessing feedback

from the Group’s customers (“GMs”).

Chairman’s report

84

GM Feedback

GM Feedback is a satisfaction survey sent to all GMs around

the globe. Over 390,000 questionnaires are sent out, in nine

different languages, and GMs can respond either by post or

online via “e-Feedback”. The average response rate is 40%,

with highs of 44% in France and 47% in Switzerland. The

response rate is also very high for non-European customer

bases, such as the United States (31%).

GM Feedback is a valuable tool for monitoring progress made

by the Group and serves as an internal benchmark. The results

are analyzed and taken into account in the day-to-day man-

agement of the Villages and also in selecting long-term strate-

gic options. The results are sent to a wide range of people

within the Group, from the Village Manager to the Senior

Management Committee, as well as to the operating depart-

ments concerned.

Quality standards

Club Méditerranée required a set of quality standards that

would be sufficiently rigorous to ensure consistent levels of

service over time and from one Village to another, while also

being flexible enough to let the Group’s teams give free rein

to spontaneous and creative ideas. These standards – called

“Quali Signs” – were drafted by over 600 GOs throughout the

world. A manual was then compiled for each Village depart-

ment, which can be viewed on the Group’s intranet. Quali

Signs have also been put in place for Club Med Agencies and

for visitor reception areas at the Company’s headquarters.

Practical guidelines have been drawn up for each Club

Méditerranée profession in order to deliver the service quality

that customers expect and that complies with the Quali

Signs standards. Procedures and best practices for more than

110 of the Group’s professions were developed by experts in

each field and grouped together as standards called “Pro

Signs”. The Human Resources, Purchasing and Safety depart-

ments all contributed towards creating the Pro Signs, which

define the duties of members of each hotel profession and

set out rules relating to attitudes, behavior and safety, as well

as the procedures to be implemented before, during and after

the season. A list of the available tools is also provided, with

a view to continually enhancing the professional approach of

the Group’s GOs and GEs.

Mystery visits

Mystery visitors from an external specialist company visit

the Group’s Villages and carry out checks covering some

650 issues. A report is sent to the Village manager within ten

days of these visits, enabling numerous points to be improved.

• Information systems

The reservation system and related data, as well as Club

Méditerranée’s accounting system, are major assets for the

Group. The Information Systems Department has set up the

following procedures in order to minimize the risks of system

downtime due to major failures, fire or site damage or other

incidents:

- All hardware and software components are split between

two distinct but interconnected sites.

- Data is replicated in real time between the two sites and can

be accessed indifferently by either of the two sites.

- A recovery plan has been drawn up so that key applications

such as reservations and accounting can be restarted with-

out delay. Less important applications – including resource

management and decision-making tools – also form part of

this plan wherever possible.

Each information system user can store important data on a

secure server.

The Group’s information systems are accessed via an interna-

tional telecommunications network that operates around

the globe. Strict access controls prevent unauthorized

access to the Group’s systems from the computer terminals

and work stations linked up to this network. The risk of an

intruder hacking into the network and/or a centralized appli-

cation is assessed and tested on a periodic basis.

User profiles and access rights are managed jointly with the

Human Resources Department in order to ensure that only

people within the Group can access its systems.

REGULATORY COMPLIANCE – THE LEGAL AFFAIRS AND INSURANCE DEPARTMENTS

• Structure

The role of the Legal Affairs Department is to protect and

safeguard the assets and operations of the Group as a whole,

as well as to defend the interests of the Group, its officers and

employees in the performance of their duties, and to ensure

that Club Méditerranée complies with local laws and regula-

tions in its host countries.

The Americas and Asia regions each have their own Regional

Legal Director who is responsible for protecting and defend-

ing Club Méditerranée’s interests. The Group Legal Affairs

Department performs this role for Europe and Africa.


The role of the Insurance Department – which reports to the

Group General Counsel – is to ensure that the Group has

adequate insurance coverage in relation to the nature and

extent of its risks. Risk management and insurance policies are

organized on a consolidated basis. The Group has set up risk

management tools and global insurance programs with pools

of top-ranking insurers, and specific insurance coverage is

taken out at a local level.

In light of the specific nature of the US market, particularly in

terms of liability and litigation, Club Méditerranée has set up

a local Risk Management department in that country which

works closely with the Group Insurance Department.

• Procedures

The Regional Legal Directors are required to notify the Group

Legal Affairs Department of issues which are deemed to be

sensitive. A list of these sensitive issues is provided at the

beginning of each fiscal year and generally includes:

- Significant arbitration or legal proceedings.

- Any criminal proceedings taken against Club Méditerranée

or any of its executives or employees.

- Growth projects requiring the authorization of the Board of

Directors or that involve a particular risk for the Group (e.g.

legal or financial risks).

- Guarantees issued in the name of the Company and/or its

subsidiaries and any liens or charges on the Group’s assets.

- Material purchases or sales of property, plant and equip-

ment, intangible assets, rights or securities, and the creation

of companies, partnerships or other business ventures.

- Projects involving the creation of an entity in which the share-

holders have unlimited liability.

- Any matters that could have a future impact on the Group’s

day-to-day operations or that raise issues of principle con-

cerning the running of the Group.

- Any transactions between Club Méditerranée SA and any

one of its subsidiaries or between Group subsidiaries or

between companies with common directors.

- Any matter that is considered as needing to be brought to

the attention of senior management as it could damage the

image of the Group or be contrary to its corporate ethics.

2.2.2 Internal control procedurescovering the preparation and processing of accounting and financialinformation The Group’s financial information is directly derived from its

integrated accounting and management system, which is

linked up to a global database. This technology enables the

Group to monitor, on a real time basis, accounting changes

from numerous input locations throughout the world, such as

Villages and representative offices at country or regional level.

Data is automatically transferred to the Group’s management

and consolidation system on a monthly basis.

The Group publishes financial information based on its

internal reporting format. Accounting and financial informa-

tion is prepared by the Finance Department which oversees

the work of the Accounting, Management Control, Treasury

& Financing, Tax and Internal Audit Departments. The Internal

Audit Department performs cross-business controls for all of

the Group’s operations and cash flows.

Each Business Unit has a Managing Director and a Finan-

cial/Management Control Department whose manager

reports to the Executive Vice-President, Chief Financial Officer.

One of the main objectives of an internal control system is to

contribute to ensuring that the financial statements of the

Company and the Group provide a true and fair view of the

Group’s assets, liabilities and results of operations as well as

a reasonable assessment of any potential risks to which the

Group may be exposed.

Club Méditerranée has set up a series of controls at each

Business Unit in order to monitor the principal risks inherent

in their operations and the related financial consequences.

These controls include checks on the input of monthly

revenue figures, the tracking of capital expenditure and debt

recovery data, as well as the monitoring of local tax regula-

tions, purchases, and financial information reported by all of

the Group’s host countries. They are performed regularly by

members of the Finance Department at country, regional and

Group level.

THE ACCOUNTING DEPARTMENT

• Structure

The Accounting Department organizes and plans all of the

Group’s accounting tasks in order to ensure that consolidated

data is consistent and reliable. This task is facilitated by the

use of a Group chart of accounts.

The Management Controller of each Village is responsible

for accounting, management and internal control issues at

his or her site, while the representative office in each country

deals with specific local issues and performs an accounting

oversight role.

The Group produces monthly accounts.

Chairman’s report

86

• Procedures

The main monthly accounting controls are as follows:

- Suppliers: a check is carried out to ensure that the different

systems are correctly interfaced (trade payables balance in

the aged payables system and the trade payables balance

in the general ledger system). A control is also performed

on amounts due from suppliers.

- Trade receivables: the Sales Departments analyze and

explain any differences compared with the Group’s gen-

eral terms of sales, such as extended payment terms. The

Receivables Accounting Department at the Head Office

and the Finance Managers then check these explanations

based on the receivables ledgers.

- Checks performed by the Headquarters Accounting

Department on current account balances between Club

Méditerranée SA and other Group entities.

- Bank reconciliations.

- Revenue by country: the various entities validate that

revenue and receivables figures have been correctly

entered by type of structure (Reseller or Agent) and that

data from the reservation system is properly fed into the

accounting system.

- A system has been set up to control the automatic interfaces

with fixed asset management systems. Automatically gen-

erated depreciation and amortization charges are checked

on a monthly basis.

The Consolidation Department also performs the following

key controls:

- Reconciliation of intra-group current accounts at Group level.

- Monthly analysis of the components of consolidated profit:

Operating profit – Leisure, Operating profit – Management

of assets, Other operating income & expense, Finance costs

and other financial income & expense.

- Reconciliation between the asset management system and

the accounting system in order to ensure data consistency.

The consolidation system includes programmed controls to

ensure that accounting flows such as increases, decreases

and reclassifications have been correctly recorded by the

various entities.

- Extensive balance sheet analyses, performed in March and

September. At the interim and annual balance sheet dates

in April and October an in-depth analysis is performed of all

balance sheet, off-balance sheet and cash flow statement

items, and is subsequently published in the notes to the

financial statements.

- Analyses of foreign exchange gains and losses, by currency

pair.

The following controls are also performed on a monthly basis

in coordination with the Management Control and Treasury

& Financing Departments:

- Reconciliation of revenue to sales data.

- Reconciliation of Operating profit – Leisure to profit reported

in the management accounts.

- Capital expenditure analyses.

- Analyses of finance costs and other financial income and

expense, including foreign exchange gains and losses.

- Net debt analyses.

The Group’s transition to International Financial Reporting

Standards was completed in fiscal 2006 and these standards

are now applied by all local entities for consolidated reporting

purposes.

THE MANAGEMENT CONTROL DEPARTMENT

• Structure

The Management Control Department is responsible for

coordinating this function worldwide. Each region also has a

management control department staffed by locally based

controllers.

• Procedures

Three-year business plan

The rolling three-year business plan reflects the main changes

expected to affect the Group during the period as well as their

financial impacts. The narrative section of the plan includes

data from market research carried out in the Group’s strategic

countries and the related action plans. The business plan

schedules simulate the financial impacts of the Group’s strat-

egy and the macro-economic environment, including such

variables as growth in the tourism sector and changes in

exchange rates.

Rolled forward annually, the plan forms the basis for income

statement, balance sheet and cash flow projections.

Budgetary process

The budgetary process – which is coordinated by the

Management Control Department - begins at Village and sales

office level. Local budgets are consolidated first by Business

Unit and then at Group level.

The budgetary process is an effective internal control tool that

enables the Group to analyze all of its financial flows.

The budget is presented to the Board of Directors for approval

in October of each year.


A detailed monthly reporting process

All entities submit monthly reporting packages. Each Business

Unit presents its results for the month at a Senior Management

Committee meeting. Monthly consolidated income state-

ments are also produced, based on the management accounts

which comprise the same underlying transaction data as the

statutory accounts.

Forecasts

The Management Control Department draws up forecasts for

the remainder of the season based on actual figures for the

first two months and updated forecasts for the remaining

months. This process enables the Group to assess the impact

of any changes in operations. The forecasts are revised after

each monthly close until the end of the season.

The main controls performed by the Management Control

Department are as follows:

- Detailed analyses of revenue by outbound and inbound zone.

- Detailed profitability analyses covering, in particular, trans-

port margins, operating margins, Village and Headquarters

cost controls.

- Reviews of employee numbers.

THE TREASURY & FINANCING DEPARTMENT

• Structure

The Treasury & Financing Department is responsible for man-

aging the Group’s capital and liquid resources. As part of

this role it is responsible for relations with the banks, and for

managing cash flows, currency and interest rate risks, as well

as debt. It is also in charge of asset management and assists

the Development Department in arranging financing for new

projects.

• Procedures

A monthly reporting system has been set up, covering funds

generated by operations, debt and finance costs, cash fore-

casts and currency and interest rate hedges.

A summary of the Group’s dealings with its banks is drawn up

– including details of fund flows and commitments, account

movements and banking terms and conditions – to enable the

Group to decide whether any changes are required, such as

adjusting currency and interest rate hedges or cash forecasts.

This reporting process is also used to closely monitor liquidity

risk.

The Treasury & Financing Department has set up procedures

aimed at limiting the risk of fraud and error concerning trans-

fers of funds. These procedures include strict rules applica-

ble on an international scale for bank transfers to third parties,

authorized signatories (including a double signature process)

and payments by bank card.

The Group regularly checks that its cash pool is operating

efficiently and tracks and analyzes bank charges.

Tasks relating to financial market transactions are segregated

with orders, execution and controls carried out by three

different people.

All currency hedges are systematically presented to the Audit

Committee.

THE TAX DEPARTMENT

• Structure

The Tax Department is responsible for coordinating interna-

tional tax issues, ensuring that taxation policies are applied

consistently by each Business Unit and monitoring all tax audits

carried out on Group companies. At the level of the parent

company, the Department ensures that the company complies

with all its tax reporting obligations as head of the French tax

group, monitors tax audits carried out on the companies in

the tax group and manages tax disputes. The American and

Asian regions have their own Tax Director who is responsible

for these issues on a regional basis, while the Group Tax

Department covers Europe and Africa.

• Procedures

- The Finance Directors in the national representative offices

for the Europe-Africa region and the Tax Directors for the

other regions have a duty to report any emerging tax issues.

- Bi-monthly reporting to the Executive Vice-President, Chief

Financial Officer.

- Six-monthly reporting to the Finance Department, including

the following data for each country in the Europe-Africa

region – legal organization chart, taxable profit for each com-

pany and intra-group current accounts, summary data sheets

showing key figures for the previous period, an analysis of

exceptional transactions that could have a tax impact, and

other events that may affect the Group’s accounts.

Chairman’s report

88

- Six-monthly reporting to the Audit Committee on any tax

audits and/or disputes that could impact the Group’s

accounts.

THE INTERNAL AUDIT DEPARTMENT

The Internal Audit Department ensures that internal control

procedures are effectively conveyed and respected across the

Group and verifies that they are properly applied throughout

the various departments. It also helps to enhance the Group’s

performance and operations by assisting the Executive

Management team in its decision-making process.

• Structure

The Internal Audit Department is a centralized structure based

at the Company’s headquarters. It comprises six people who

carry out cross-functional audits of all of the Group’s opera-

tions and transaction flows.

The Internal Audit Department reports directly to the Executive

Vice-President, Chief Financial Officer.

• Role and responsibilities

The internal auditors perform audits of specific functions or

businesses at Group, Headquarters, country and Village level.

They coordinate their work with that of the Statutory Auditors.

The internal auditors’ activities cover:

- Financial audits, which consist of reviewing the financial

statements and examining the systems and rules set up to

ensure the reliability of financial information.

- Operational audits, which include reviewing the various

cycles (such as sales, purchasing and human resources) and

assessing internal control procedures in order to obtain

assurance that the organization in place contributes to man-

aging Group risks and meeting Group objectives.

- Specific engagements, corresponding to various one-off

projects such as providing support for operations staff, or

organizational and diagnostic work.

The Internal Audit Department also takes part in events such

as financial seminars and training sessions for both new and

experienced managers, with a view to relaying a control culture

throughout the Group and driving changes to improve the

internal control and risk management environment.

• Operational structure and procedures

The Internal Audit Department draws up an annual audit pro-

gram and an audit plan covering all of the Group’s operations.

The audit program is based on maps of the main risks at

Group level and by country and domain (Human Resources,

Purchasing, Legal/Tax/Asset Management, Sales, Accounting,

Treasury, Information Systems, Geopolitical Risks/Quality/

Security).

The audit program is presented twice a year to the Audit

Committee along with a progress report and a summary of

the audits performed since the start of the year.

Internal audits are conducted in four phases:

- Collecting information on the entity or domain concerned.

- On-site checks to ensure that appropriate controls have been

set up to address the risk areas identified in the mapping

process and to assess the quality of internal controls.

- Drawing up reports on the main identified weaknesses,

updating the risk map and proposing action plans. These

reports are then sent to senior management and to the

audited unit, and the internal auditors’ findings and recom-

mendations are presented to two members of the Senior

Management Committee.

- Follow-up to check that the internal auditors’ recommenda-

tions have been implemented and, if necessary, to assist the

audited units with their risk management action plans.

In 2005, the frequency of the audits carried out on the Group’s

Villages by the Internal Audit team was stepped up, to sup-

port Club Méditerranée’s upmarket strategy and the imple-

mentation of a leaner management organization in certain

Villages. The aim behind these more frequent audits was to

ensure that new processes were being applied correctly. In

2006, the Internal Audit team continued to focus on auditing

the Villages, which accounted for an average of 46% of the

total time spent by the internal auditors.

As part of the Group’s phased project to asses its internal

control procedures, two processes have been set up:

- In early 2006, questionnaires were developed summarizing

the main control areas in the Villages.

These questionnaires are filled in each month by the

Management Controllers at each Village with input from

department managers, and are submitted to the country-level

Finance manager. The questionnaires help to ensure that key

controls are carried out on a regular basis and that timely

corrective action is taken when necessary.

- After each internal audit of a Village or a national represen-

tative office, the entity is given marks out of 10. This enables

the Group to assess the internal controls in place, compare

performance between the audited entities and measure their

progress. The three follow-up audits carried out in fiscal 2006

showed that internal control processes are continuing to

improve and that the Department managers are much more

aware of the importance of strictly implementing procedures.


STATUTORY AUDITORS

The Statutory Auditors certify the annual financial statements

of Club Méditerranée SA and its subsidiaries and the annual

consolidated financial statements of the Group. They also per-

form a limited review of the interim consolidated financial

statements and verify the information given in the interim

report. They attend meetings of the Audit Committee and are

regularly informed of the work carried out by the Internal Audit

team.

2.3 RAISING AWARENESS OF INTERNALCONTROL

2.3.1 Rolling out the new Villageorganization to strengthen internalcontrol As part of its overall upmarket strategy, the new organization

structure trialed at ten Villages in 2005 was rolled out on a per-

manent basis to thirteen Villages in 2006. Under the new leaner

organization structure, each Village Manager has just five direct

reports compared with an average of fifteen previously. The

aim of this approach is to enhance the management of each

Village’s P&L by fully leveraging the available products and

resources.

The new organization is also more customer-focused, enabling

the Group to build the skill-sets of its GOs by providing train-

ing in specific skills and creating new professions.

Introduction of the new Village organization led to the creation

of a new recruitment/placement unit whose first season began

in February 2006. The unit was tasked with improving the GO

placement process and reducing turnover – an aim that was

achieved in the first season with the GO turnover rate decreas-

ing by 16%.

At the same time, the Group has created a new position of Cost

Controller reporting to the Village Management Controller.

The Cost Controller is responsible for closely monitoring the

Village’s P&L and ensuring that purchasing procedures are

correctly applied. The creation of this position as part of the

new Village structure will help the Management Controllers

fulfill their duty of ensuring compliance with internal control

processes.

The Group plans to roll out the new structure to 25 Villages

in 2007 and to all of the Villages by the end of 2009.

2.3.2 Other measures implementedto strengthen internal control PRODUCT INNOVATIONS

As part of its continued drive to tighten control over revenue

and in order to reduce the circulation of cash within the

Villages, the Group extended the “Bar & Snacking Included”

and “Club Med Pass” formulas to all of its Villages as from the

summer of 2006. After paying a deposit, customers can use

the Club Med Pass to pay for drinks that are not included in

the Bar & Snacking formula (such as champagne and VSOP)

as well as for additional services (such as spa treatments).

NEW PURCHASING STRUCTURE

In line with its aim to enhance cost controls, the Group has set

up a Global Purchasing Department reporting to the Executive

Vice-President, Chief Financial Officer. This new department

uses a central purchasing system to monitor purchases in real

time and provide users with lists of products for which prices

have been negotiated by product family purchasers. It also

tracks implementation of action plans and savings on pur-

chasing costs. The information system enables the Global

Purchasing Department to verify that negotiated contracts are

being properly used in order to optimize purchases.

CONCLUSION

During the year, the Group continued to focus on raising

awareness of the risks inherent in its operations and of the

related internal control procedures. In 2007, Club Méditerranée

plans to analyze its internal control procedures based on the

internal control reference framework published by the Working

Group of the French securities regulator (AMF) on 31 October

2006.

Chairman’s report

90

Statutory Auditors’ report on internal controlStatutory Auditors’ report prepared in accordance with

Article L. 225-235 of the French Commercial Code, on the

report of the Chairman of the Board of Directors of Club

Méditerranée on internal control procedures related to the

preparation and processing of accounting and financial

information

YEAR ENDED 31 OCTOBER 2006

To the shareholders,

In our capacity as Statutory Auditors of Club Méditerranée and

in accordance with the requirements of Article L. 225-235

of the French Commercial Code, we present below our

report on the report prepared by the Chairman of the Board

of Directors of Club Méditerranée in application of Article

L.225-37 of the French Commercial Code for the year ended

31 October 2006.

In his report, the Chairman of the Board of Directors is required

to comment on the conditions applicable for the preparation

and organization of the work carried out by the Board of

Directors and the internal control procedures implemented

within the Company.

Our responsibility is to report to you our comments on the

information contained in the Chairman’s report concerning the

internal control procedures related to the preparation and

processing of accounting and financial information.

We performed our procedures in accordance with profession-

al guidelines applicable in France. Those guidelines require us

to perform procedures to assess the fairness of the informa-

tion set out in the Chairman’s report concerning the internal

control procedures related to the preparation and processing

of financial and accounting information. These procedures

included:

- Examining the objectives and general organization of the

Company’s internal control environment and the internal con-

trol procedures related to the preparation and processing

of accounting and financial information, as described in the

Chairman’s report.

- Acquiring an understanding of the work performed to

support the information given in the report.

Based on the procedures performed, we have no matters to

report concerning the information provided on the Company’s

internal control procedures related to the preparation and

processing of accounting and financial information, as con-

tained in the report of the Chairman of the Board of Directors

prepared in accordance with the final paragraph of Article

L. 225-37 of the French Commercial Code.

Neuilly-sur-Seine and Paris-La Défense, 12 February 2007

The Statutory Auditors

Deloitte & Associés Ernst & Young Audit

Alain Pons Dominique Jumaucourt Pascal Macioce


Consolidated Financial Statements

Club Méditerranée Group

92 // CONSOLIDATED STATEMENTS OF INCOME

93 // CONSOLIDATED BALANCE SHEETS

94 // CONSOLIDATED CASH FLOW STATEMENT

94 // CHANGE IN CONSOLIDATED NET DEBT

95 // CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

96 // NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

96 // Note 1 - General information

96 // Note 2 - Summary of significant accounting policies, scope of consolidation

104 // Note 3 - First-time adoption of IAS 32 and IAS 39 104 // Note 4 - Changes in scope of consolidation105 // Note 5 - Segment information108 // Note 6 - Goodwill109 // Note 7 - Intangible assets110 // Note 8 - Property, plant and equipment111 // Note 9 - Non-current financial assets112 // Note 10 - Assets held for sale113 // Note 11 - Other receivables113 // Note 12 - Cash and cash equivalents113 // Note 13 - Equity114 // Note 14 - Share-based payments115 // Note 15 - Pension and other long-term benefits117 // Note 16 - Provisions117 // Note 17 - Income taxes119 // Note 18 - Borrowings and other interest-bearing liabilities 122 // Note 19 - Financial instruments125 // Note 20 - Other liabilities125 // Note 21 - Employee benefits expense125 // Note 22 - Operating income - Management of assets125 // Note 23 - Other operating income & expense126 // Note 24 - Finance cost, net126 // Note 25 - Share of income of associates126 // Note 26 - Earnings per share126 // Note 27 - Notes to the consolidated cash flow statement 127 // Note 28 - Related party transactions127 // Note 29 - Commitments and contingencies128 // Note 30 - Transition to IFRS136 // Note 31 - Scope of consolidation at 31 October 2006

140 // AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

141 // GROUP STRUCTURE AS OF 31 OCTOBER 2006

92

Consolidated Statements of Income(in € millions)

Notes 2005 2006excl. IAS

32/39

Revenue 5.2 & 5.3 1,590 1,679

Other income 40 41

Total income from ordinary activities 1,630 1,720

Purchases (721) (751)External services (350) (377)Employee benefits expense 21 (306) (328)Taxes other than on income (31) (32)

EBITDAR - Leisure 2.1 222 232

Rent 29.2 (125) (142)Depreciation and amortization expense (70) (63)Provision expense, net (2) (3)

Operating income - Leisure 5.2 25 24Operating income - Management of assets 22 89 40Other operating income & expense 23 (33) (29)

Operating income 5.2 81 35

Finance cost, net 24 (38) (32)

Income before tax 43 3

Income tax expense 17.1 (36) (1)Share of income of associates 9.1 & 25 3 3

Net income 10 5

Attributable: Equity holders of the parent 9 5Minority interest 13.2 1 -

(in €)

Basic earnings per share 26 0.48 0.24 Diluted earnings per share 26 0.48 0.24

If IAS 32 and IAS 39 had been applied from 1 November 2004, net income for fiscal 2005 would have amounted to €4 million,

including €3 million attributable to equity holders of the parent.

Consolidated Balance Sheets


ASSETS(in € millions)

Notes 31 October 2005 1 November 2005 31 October excl. IAS 32/39 incl. IAS 32/39 2006

Goodwill 6 103 103 103Intangible assets 7 79 79 79Property, plant and equipment 8 975 975 859Non-current financial assets 9 66 66 80

Total fixed assets 1,223 1,223 1,121

Deferred tax assets 17.2 44 42 35

Non-current assets 1,267 1,265 1,156

Inventories 21 21 21Trade receivables 66 66 81Other receivables 11 99 96 108Cash and cash equivalents 12 168 160 165

Current assets 365 354 467

Assets held for sale 10 11 11 92

Total assets 1,632 1,619 1,623

EQUITY AND LIABILITIES(in € millions)

Notes 31 October 2005 1 November 2005 31 October excl. IAS 32/39 incl. IAS 32/39 2006

Share capital 77 77 77Additional paid-in capital 562 562 562Retained earnings (194) (179) (185)Net income for the year 9 9 5

Equity attributable to shareholders 13.1 454 469 459

Minority interest 13.2 54 54 55

Total equity 508 523 514

Pensions and other long-term benefits 15 26 26 28Long-term borrowings and other interest-bearing liabilities 18 455 435 346Other non-current liabilities 20 30 30 36Deferred tax liabilities 17.2 98 102 86

Non-current liabilities 609 593 496

Provisions 16 50 38 41Borrowings and other interest-bearing liabilities 18 48 48 109Trade payables 160 160 170Other current liabilities 20 164 164 177Customer prepayments 20 93 93 112

Current liabilities 515 503 609

Liabilities related to assets held for sale 10 4

Total equity and liabilities 1,632 1,619 1,623

Consolidated FinancialStatements

94

Consolidated Cash FlowStatement(in € millions)

Notes 2005 2006excl. IAS 32/39

Cash flows from operating activitiesNet income 10 5Adjustments for:Depreciation, amortization and provisions 27.1 83 70Share of income of associates (3) (4)Disposal (gains) and losses, net (107) (49)Finance costs and other financial income & expense 38 32Income tax expense 36 1Other 1 (4)Change in working capital (1) 12 24

Cash generated from operations 70 75

Interest paid (38) (22)Income taxes paid (3) (6)

Net cash from operating activities 29 47

Cash flows from investing activitiesAcquisitions of non-current assets (2) 27.2 (114) (151)Proceeds from disposals of non-current assets 27.3 246 143

Net cash from (used in) investing activities 132 (8)

Free cash flow 161 39

Cash flows from financing activitiesProceeds from long-term borrowings 169 102Repayments of long-term borrowings (320) (118)Increase (decrease) in short-term bank loans (5) (12)Dividends paid and other (2) (4)

Net cash used in financing activities (158) (32)

Effect of changes in exchange rates on cash and cash equivalents and other 5 (2)

Net increase in cash and cash equivalents 8 5

Cash and cash equivalents at the beginning of period 12 160 168Effect of a change in method (adoption of IAS 32 and IAS 39) on the opening balance sheet at 1 November 2005 - (8)Cash and cash equivalents at the end of period 12 168 165

(1) Including charges to/(releases from) short-term provisions considered as accrued expenses.(2) Net of government grants.

Change in Consolidated Net Debt(in € millions)

18.1 2005 2006excl. IAS 32/39

Net debt at beginning of period (485) (335)Impact of the adoption of IAS 32 and IAS 39 on net debt at 1 November 2005 12Decrease in net debt 150 29

Net debt at end of period (335) (294)

Consolidated Statement of Changes in Equity


(in € millions)

Shares Share Additional Treasury Retained Equity Minority Totaloutstanding capital paid-in stock earnings attributable interest equity

capital and net to share-income for holders

the year

At 1 November 2004Excluding IAS 32/39 19,358,005 77 562 - (217) 422 50 472Exchange differences on translating foreign operations 21 21 4 25

Income and expenses recognized directly inequity 21 21 4 25

Net income for the year 9 9 1 10

Total recognized income and expense for the period 30 30 5 35

Share-based payments 2 2 2Dividends (1) (1)

At 31 October 2005Excluding IAS 32/39 19,358,005 77 562 - (185) 454 54 508Effect of a change ofmethod (adoption of IAS 32 & 39) (9) 24 15 15

At 1 November 2005Including IAS 32/39 19,358,005 77 562 (9) (161) 469 54 523Gains (losses) on cash flow hedges taken toequity (1) (1) (1)Exchange differences on translating foreign operations (15) (15) (15)

Income and expenses recognized directly inequity (16) (16) (16)

Net income for the year 5 5 5

Total recognized income and expense for the period (11) (11) (11)

(Purchases) and sales of treasury shares (1) (1) (1)Share-based payments 2 2 2Dividends (1) (1)Effect of changes in scope of consolidation 2 2

At 31 October 2006 19,358,005 77 562 (10) (170) 459 55 514


96

NOTE 1. GENERAL INFORMATION

Club Méditerranée SA is a société anonyme (joint stock

corporation) governed by the laws of France. Its registered

office is at 11, rue de Cambrai, 75957 Paris Cedex 19, France.

Club Méditerranée shares are traded on the Euronext Paris

First Market and are included in the SBF 120 index.

The consolidated financial statements include the financial

statements of Club Méditerranée SA and its subsidiaries

(“the Group”), and associated companies. The Company’s

fiscal year covers the twelve-month period ended 31 October.

The subsidiaries’ financial statements cover the same period

and are prepared using consistent accounting policies.

The Group is one of the world’s leading providers of

all-inclusive vacation packages and also operates in related

businesses (tour operating, fitness clubs and Club Med World).

The consolidated financial statements for the year ended

31 October 2006 were approved by the Board of Directors

on 11 December 2006. All amounts are presented in millions

of euros, unless otherwise specified.

NOTE 2. SUMMARY OF SIGNIFICANTACCOUNTING POLICIES,SCOPE OF CONSOLIDATION

2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In accordance with European Council Regulation 1606/2002/EC

dated 19 July 2002, the consolidated financial statements

for the year ended 31 October 2006 have been prepared in

accordance with the International Financial Reporting

Standards (IFRSs), adopted by the European Union at that date.

Comparative financial information has been restated on the

same basis for the year ended 31 October 2005, with the

exception of IAS 32 – Financial Instruments: Disclosure and

Presentation and IAS 39 – Financial Instruments:

Recognition and Measurement, which have been applied as

from 1 November 2005, as allowed under IFRS 1. Information

about the effects of applying these two standards as from

1 November 2005 is disclosed in Note 3.

The IFRSs applied to prepare the consolidated financial

statements for the year ended 31 October 2006 correspond

to the standards and interpretations whose application by

European Union companies at that date was mandatory.

The Group decided not to early adopt any standard, revised

standard or interpretations applicable in accounting periods

commencing after 31 October 2006. These include:

Standards, revised standards and interpretations applicable

by the Group as from 1 November 2006:

- Amendment to IAS 19: Actuarial Gains and Losses, Group

Plans and Disclosures.

- Amendment to IAS 39: Fair Value Option.

- Amendment to IAS 39: Cash Flow Hedge Accounting of

Forecast Intragroup Transactions.

- IFRIC Interpretation 4: Determining Whether an Arrangement

Contains a Lease.

- IFRIC Interpretation 8: Scope of IFRS 2.

Standards, revised standards and interpretations applicable

by the Group as from 1 November 2007:

- Amendment to IAS 1: Capital Disclosures.

- IFRS 7 – Financial Instruments: Disclosures.

The practical implications of applying these standards, revised

standards and interpretations and their effect on the consol-

idated financial statements are currently being assessed.

In accordance with IFRS 1– First-Time Adoption of IFRS, the

transition effects were recognized in the opening IFRS balance

sheet at 1 November 2004. Details of the transition effects

on the opening and closing balance sheets and the income

statement for fiscal 2005 are disclosed in Note 30.

2.1.1 Options chosen by the Group for the preparation of the openingbalance sheet at 1 November 2004Under IFRS 1 – First-Time Adoption of IFRS, certain optional

exemptions from full retrospective application of IFRSs are

available to first-time adopters. In line with these exemptions,

the Group has elected to prepare its IFRS transition balance

sheet at 1 November 2004 as follows:

- Business combinations carried out prior to 1 November 2004

have not been restated.

- Cumulative translation differences at the transition date have

been reset to zero at the IFRS transition date by adjusting

retained earnings.

Notes to the ConsolidatedFinancial Statements


- Unrecognized actuarial gains and losses on pension and

other long-term benefit obligations at the transition date

have been recognized directly in equity.

- Certain items of property, plant and equipment (land and

buildings) have been measured at fair value at the transition

date.

- IFRS 2 has been applied only to stock options granted

after 7 November 2002 that had not fully vested as of

1 November 2005.

2.1.2 Accounting treatment chosenwhen IFRS permits alternativeaccounting treatmentCertain standards offer a choice between applying a bench-

mark treatment and an allowed alternative treatment for

the recognition and measurement of assets and liabilities.

The main treatments selected by the Group are as follows:

- Property, plant and equipment and intangible assets are

measured using the cost model and not the fair value model

(IAS 16).

- The cost of inventories is determined using the weighted

average cost formula (IAS 2).

- Actuarial gains and losses are recognized using the corridor

method, which consists of recognizing the portion that

exceeds the greater of 10% of the present value of the

benefit obligation and 10% of the fair value of the related

plan assets over the average remaining service lives of plan

participants (IAS 19).

- Borrowing costs that are directly attributable to the acqui-

sition, construction or production of qualifying assets are

capitalized as part of the cost of those assets (IAS 23).

2.1.3 Measurement methods appliedfor the preparation of the consolidatedfinancial statementsThe consolidated financial statements have been prepared

according to a historical cost basis, except for derivative finan-

cial instruments which have been measured at fair value. As

explained above, the Group opted to measure certain laws

and buildings at the IFRS transition date at their fair value.

The preparation of financial statements in accordance with

IFRS requires management to make certain estimates and

assumptions. These assumptions are determined on a going

concern basis according to the information available at the

time. At each period-end, assumptions and estimates may be

revised to take into account any changes in circumstances or

any new information that has come to light. Actual results may

differ from these estimates and assumptions. Estimates and

assumptions are used in particular:

- For non-current asset impairment tests, which are based on

estimated future cash flows and assumptions concerning

growth rates and discount rates.

- For the determination of provisions for claims and litigation.

- For the calculation of pension and other long-term employee

benefit obligations, which is based on actuarial assumptions.

- For the determination of deferred taxes, particularly in

assessing the recoverability of deferred tax assets.

2.1.4 Financial statement presentationIn the consolidated income statement, is presented by nature

of expense.

a - Income from ordinary activities

Revenue is recognized when it is probable that the economic

benefits associated with the transaction will flow to the Group

and the amount of revenue can be measured reliably.

Revenue from the sale of goods and services by fully consoli-

dated companies in the normal course of business is recognized

as follows:

• Service revenues: land package revenues are recognized

over the period of service provision. Transport revenues are

recognized on the travel date. Other operating revenues are

recognized in the period in which the transaction takes place.

• Sales of goods: revenue from the sale of goods is recognized

when the significant risks and rewards of ownership of the

goods are transferred to the buyer.

Other income includes mainly insurance settlements compen-

sating for business interruption losses.

b - Operating income

Operating income is broken down in the statement of income

between:

- Operating income – Leisure, corresponding to all the

income and expenses directly related to the Group’s

operations. In order to analyse the Village’s performance

(wherever owned or leased), the Group monitors is using

the EBIDAR – Leisure.

- Operating income – Asset Management, corresponding

to all the costs related to changes in the scope of consoli-

dation, including gains and losses on disposals of assets,

the costs of temporary and permanent Village closing, all

the costs related to new Village opening, and impairment

losses (operating and marketing units).

- Other operating income & expense, corresponding mainly

to restructuring costs, claims and litigation, the impact of

natural disasters and credit card costs.


98

c - Finance cost, net

This item includes:

- Interest costs, net, corresponding to interest expense and

income on net debt.

- Bank charges.

- Discounting adjustments to provisions for pensions and

other long-term employee benefit obligations.

- Gains and losses on derivative instruments.

- Exchange gains and losses.

- Dividends received from non-consolidated companies.

- Impairment charges on financial assets.

d - Earnings per share

Basic earnings per share corresponds to net income attrib-

utable to equity holders divided by the weighted average

number of shares outstanding during the period, net of

treasury shares.

Diluted earnings per share takes into account dilutive poten-

tial ordinary shares, corresponding in the Group’s case to stock

options exercisable for existing shares and convertible bonds.

The average number of potential dilutive shares correspon-

ding to stock options is determined by the treasury stock

method. The calculation only includes options that are in

the money (i.e. options whose exercise price is higher than

the average Club Méditerranée share price for the period).

The exercise price takes into account the fair value of the

services remaining to be received, determined in accordance

with IFRS 2.

For convertible bonds, income attributable to shareholders

is adjusted for the interest paid on the bonds, net of tax. This

adjusted income is then divided by the average number of

shares that would be issued assuming conversion of all the

outstanding bonds. Potential ordinary shares corresponding

to bond conversions are included in the calculation only if they

are dilutive.

2.2 BASIS OF CONSOLIDATION

All companies that are controlled by Club Méditerranée,

directly or indirectly, are fully consolidated. Control is the

power to govern the financial and operating policies of an

entity so as to obtain benefits from its activities.

Companies over which the Group exercises significant influ-

ence (“associates”) are accounted for by the equity method.

Holiday Villages of Thailand, which is 49.21%-owned, and

Recreational Villages, 21%-owned, are fully consolidated

because Club Méditerranée exercises de facto control.

Société Martiniquaise des Villages de Vacances, which is

10%-owned, is also fully consolidated because the majority of

associated risks are assumed by the Group.

New subsidiaries are consolidated from the acquisition date,

being the date on which the Group obtains and continue to

be consolidated until the date that such control ceases. The

results of consolidated subsidiaries acquired or divested

during the year are included in consolidated income from

the acquisition date or up to the divestment date.

All intra-group balances and transactions, income and

expenses are eliminated in full, together with the results from

intra-group transactions recognized in assets.

The list of consolidated companies and the consolidation

methods applied are presented in Note 31.

2.3 FOREIGN CURRENCY TRANSLATION

2.3.1 Translation of the financialstatements of foreign subsidiariesThe consolidated financial statements are presented in euros.

The financial statements of independent subsidiaries whose

functional currency is not the euro are translated into euros by

the closing rate method, as follows:

- Balance sheet items are translated at the closing exchange

rate at the balance sheet date.

- Income statement and cash flow statement items are

translated at the average rate for the period.

The resulting exchange differences are recognized as a

separate component of equity, under “Translation reserve”.

The financial statements of operating and real estate com-

panies that are not independent from the parent, Club

Méditerranée SA, are translated using the historical rate

method, as follows:

- Non-current assets and the corresponding amortization and

depreciation charges are translated at the historical rate,

being the exchange rate at the transaction date.

- Monetary assets and liabilities are translated at the closing

exchange rate.

- Income statement items (other than amortization and

depreciation charges) and cash flow statement items are

translated at the average rate for the period.

The resulting exchange differences are recorded in finance

cost, net.


2.3.2 Transactions in currenciesother than the functional currencyExchange differences on monetary assets and liabilities

that are an integral part of the Group’s net investment in a

consolidated foreign operation are taken directly to equity

until the foreign operation is sold or liquidated.

The same accounting treatment applies to monetary items

that are receivable from or payable to a foreign operation for

which settlement is neither planned nor likely to occur in the

foreseeable future, as these items are considered as repre-

senting, in substance, part of the Group’s net investment in

the foreign operation.

2.4 BUSINESS COMBINATIONS, GOODWILLAND INTANGIBLE ASSETS

2.4.1 Business combinations and goodwillBusiness combinations recorded prior to 1 November 2004

have not been retrospectively restated in accordance with

IFRS. Business combinations carried out since that date are

accounted for using the acquisition accounting method, by

measuring the assets acquired and liabilities and contingent

liabilities assumed at their fair value at the date of the combi-

nation.

The excess of the cost of the business combination over the

Group’s interest in the net fair value of the identifiable assets,

liabilities and contingent liabilities of the acquired entity at the

date of the combination is recognized as goodwill.

For business combinations not achieved in stages, minority

interest in the identifiable assets and liabilities of the acquired

entity are also measured at fair value.

2.4.2 Intangible assetsIntangible assets consist mainly of brands, lease premiums and

software. Purchased intangible assets are carried at cost less

accumulated amortization and any accumulated impairment

losses.

Intangible assets are analyzed to determine whether they have

a finite or indefinite life. Based on this analysis, the Jet tours

brand and lease premiums in France have been qualified as

having an indefinite life. Consequently, they are not amortized

but are tested for impairment at least once a year and when-

ever events or circumstances indicate that their recoverable

amount may be less than their carrying amount, in accordance

with the principle described in Note 2.7 “Impairment of assets”.

All other intangible assets (software and licenses) are assessed

as having a finite life and are amortized over their estimated

useful life. The main useful lives are as follows:

Financial information system 3 to 15 yearsMarketing system 3 to 24 yearsOther software 3 to 8 yearsOther intangible assets 3 to 10 years

These useful lives are reviewed at each year-end and adjusted

if necessary. The adjustments are treated as a change in

accounting estimates and are made prospectively.

Intangible assets with a finite life are tested for impairment

whenever there is an indication that their recoverable amount

may be less than their carrying amount (see Note 2.7

“Impairment of assets”).

2.5 PROPERTY, PLANT AND EQUIPMENT

At the IFRS transition date (1 November 2004), certain items

of land and buildings were measured at fair value, in accor-

dance with the option available under IFRS 1.

Property, plant and equipment are measured using the cost

model, and are therefore stated at cost less accumulated

depreciation and any accumulated impairment losses. Cost

corresponds to the asset’s purchase or production cost

plus the directly attributable costs of bringing the asset to

the location and condition necessary for it to be capable of

operating in the manner intended. Production cost includes

materials and direct labor, as well as borrowing costs that

are directly attributable to the construction or production of

the asset.

Property, plant and equipment are depreciated on a straight-

line basis over their estimated useful lives. Villages are expected

to be used throughout their useful life and depreciation is

therefore calculated without deducting any residual value.

Useful lives are reviewed at each year-end and adjusted if

necessary. The adjustments are treated as a change in account-

ing estimates and are made prospectively.

The individual parts of each item of property, plant and equip-

ment are recognized separately when their estimated useful

life is different from that of the asset as a whole.


100

The main useful lives are as follows:

Groundworks, foundations and structures 50 yearsRoof structures and coverings 30 yearsExternal and internal walls 25 yearsUtility installations (plumbing, electricity, heating, etc.) 20 yearsFixed hotel equipment 15 yearsFixtures and fittings (joinery, wall and floor coverings, windows, etc.) 10 yearsOther 3 to 10 years

Property, plant and equipment are tested for impairment

whenever there is an indication that their recoverable amount

may be less than their carrying amount (see Note 2.7

“Impairment of assets”).

Finance leases that transfer substantially all the risks and

rewards of ownership of the assets to the lessee are recog-

nized as assets.

2.6 LEASES

Leases are classified as either finance leases or operating

leases based on the substance of the transaction. Leases are

classified as finance leases if they transfer substantially all the

risks and rewards of ownership to the lessee. All other leases

are classified as operating leases.

Finance leases Finance leases that transfer substantially all the risks and

rewards of ownership of the assets to the Group are initially

recognized in the balance sheet at amounts equal to the fair

value of the leased asset or, if lower, the present value of the

minimum lease payments, each determined at the inception

of the lease. Lease payments are apportioned between

the finance charge and the redemption of the finance lease

obligation. The finance charge is allocated to each period

during the lease term so as to produce a constant periodic

rate of interest. Finance charges are recorded directly in the

income statement. Assets under finance leases are depre-

ciated over their estimated useful life or the lease tenue, if

shorten and there is no reasonable certainty that the Group

will obtain ownership by the end of the lease term, they are

fully depreciated over the shorter of the lease term and their

useful life.

Operating leases Leases that do not transfer substantially all the risks and

rewards of ownership to the lessee are classified as oper-

ating leases. Lease payments under operating leases are

recognized as an expense on a straight-line basis over the

lease term.

2.7 IMPAIRMENT OF ASSETS

2.7.1 Goodwill and intangible assetswith indefinite lifeIn accordance with IAS 36 – Impairment of Assets, goodwill

and intangible assets with an indefinite life are tested for

impairment annually and whenever there is an indication that

their recoverable amount may be less than their carrying

amount.

For impairment testing purposes, goodwill is allocated to

the cash-generating unit to which it relates. A cash-generating

unit (CGU) is the smallest identifiable group of assets at

the level at which the Group organizes its businesses and

analyzes their results. Goodwill related to the Village business

is allocated and analyzed by region (see Note 5 “Segment

information”). Goodwill related to the other businesses (tour

operating, Club Med Gym, etc.) is tested for impairment at the

level of these businesses.

Impairment tests are based on recoverable amounts estimated

by reference to market multiples (to determine estimated

fair value less costs to sell) and discounted cash flows (to deter-

mine estimated value in use) (see Note 2.7.2).

When the CGU’s recoverable amount determined by the above

methods is less than its carrying amount, an impairment loss is

recognized to write down the CGU carrying amount to recover-

able amount, defined as the higher of value in use and fair value

less costs to sell. Impairment losses are allocated first to the

goodwill.

Estimates of recoverable amounts are based on assumptions

concerning Village occupancy rates, growth rates for the region

or the business, perpetual growth rates and discount rates.

2.7.2 Property, plant and equipmentand depreciable intangible assetsThese assets are tested for impairment whenever there is an

indication that their recoverable amount may be less than their

carrying amount. Indications of impairment include:

- Evidence that an asset’s physical condition has deteriorated

beyond the effects of normal wear and tear.

- Plans to discontinue or restructure the operation to which the

asset belongs.

- Evidence that the asset’s economic performance is worse than

expected.

- Changes in the economic or legal environment, leading to a

significant decline in the asset’s market value.


The Group has determined that each Village represents

a CGU. Impairment tests are therefore performed Village

by Village, whenever there is an indication that their recov-

erable amount may be less than their carrying amount.

Recoverable amount corresponds to the higher of the Village’s

fair value less costs to sell and its value in use.

Fair value is estimated based on independent valuations or

earnings multiples. Value in use is determined by estimating

the future cash flows expected to be derived from the asset.

Estimates of future cash flows are based on the budget and

three-year business plan, and on a growth rate beyond that

period equal to inflation, taking into account the discounted

present value of the asset’s residual value at the end of its

estimated use.

If the carrying amount of a Village’s assets is greater than the

Village’s recoverable amount, an impairment loss is recorded

for the difference. In subsequent periods, if there is indication

that condition that lead to impairement have changed, the

impairment may be reversed. Impairement losses are also

recorded on assets that are considered as being permanently

impaired.

2.8 AVAILABLE-FOR-SALE FINANCIAL ASSETSAND OTHER FINANCIAL ASSETS

Financial assets are classified in four categories in accordance

with IAS 39, as follows:

- Financial assets at fair value through profit or loss.

- Held-to-maturity investments.

- Loans and receivables.

- Available-for-sale financial assets.

Financial assets are initially recognized at cost, being the

fair value of the consideration paid plus directly attributable

transaction costs. Their subsequent measurement depends

on their classification.

Financial assets at fair value through profit or loss are classi-

fied in current assets and measured at fair value, with changes

in fair value recognized in finance cost, net. Derivative instru-

ments are included in this category, except for the portion

representing an effective hedge in a designated hedging

relationship.

Held-to-maturity investments and loans and receivables

are measured at amortized cost, determined by the effective

interest method, less any accumulated impairment losses.

Gains and losses are recognized the statement of income.

Held-to-maturity investments are financial assets with fixed or

determinable payments and a fixed maturity. At each period-

end, the recoverability of loans is assessed and an impairment

loss is recognized if their recoverable amount is less than their

carrying amount.

Other financial assets are classified as available-for-sale

financial assets and measured at fair value. Gains and losses

arising on remeasurement at fair value are recognized directly

in equity until the asset is sold. The fair value of listed securi-

ties corresponds to their market value. The fair value of unlist-

ed securities corresponds to their estimated value in use,

determined using the most appropriate financial criteria for

the issuer’s specific situation. When there is objective evidence

that available-for-sale financial assets have to be impaired, the

cumulative loss that had been recognized directly in equity

is transfered from equity to statement of income. Investments

in non-consolidated companies are classified as available-

for-sale financial assets.

2.9 NON-CURRENT ASSETS HELD FOR SALE

In accordance with IFRS 5, non-current assets and groups of

non-current assets (disposal groups) are classified as held for

sale when their carrying amount will be recovered principally

through a sale transaction rather than through continuing use.

This is considered to be the case when (i) the asset (or disposal

group) is available for immediate sale in its present condition,

(ii) (or disposal group) and a plan to sell the asset has been

initiated by management, and (iii) its sale is highly probable.

Non-current assets (and disposal groups) classified as held for

sale are measured at the lower of their carrying amount prior

to reclassification and fair value less costs to sell. They are

not depreciated.

Non-current assets held for sale and the related liabilities are

presented on separate lines of the balance sheet.

2.10 INVENTORIES

Inventories are measured at the lower of cost, calculated by

the weighted average cost method, and net realizable value.

Net realizable value is the estimated selling price in the

ordinary course of business less the estimated costs of com-

pletion and the estimated costs necessary to make the sale.

2.11 TRADE AND OTHER RECEIVABLES

Trade receivables are recognized and measured based on the

initial invoice amount. A provision is recorded when there is

objective evidence of impairment. Bad debts are written off

when they are certain of not being recovered.


102

2.12 CASH AND CASH EQUIVALENTS

Cash and cash equivalents are held to meet the Group’s

short-term cash needs. They include cash at bank and in hand,

short-term deposits with an original maturity of less than

three months and marketable securities that are readily

convertible into cash. Cash equivalents are defined as short-

term, highly liquid investments that are readily convertible

into known amounts of cash and which are subject to an

insignificant risk of changes in value.

2.13 PROVISIONS

Provisions are recognized when the Group has a present obli-

gation (legal or constructive) as a result of a past event, it is

probable that an outflow of resources embodying economic

benefits will be required to settle the obligation and a reliable

estimate can be made of the amount of the obligation. Where

some or all of the expenditure required to settle a provision

is expected to be reimbursed by another party, for example

under an insurance policy, the reimbursement is recognized

as a separate asset when, and only when, it is virtually certain

that reimbursement will be received. The provision expense

is shown in the income statement, net of any expected reim-

bursement. Where the effect of the time value of money is

material, provisions are discounted using a pre-tax discount

rate that reflects any specific risks associated with the obli-

gation. The increase in discounted provisions due to the

passage of time is recognized in financial cost, net.

2.14 PENSION AND OTHER LONG-TERMBENEFITS

Group employees are covered by various plans providing for

the payment of supplementary pensions, justice awards and

other long-term benefits in line with the laws and practices in

force in the Group’s host countries. A description of the main

plans is provided in Note 15.

2.14.1 Post-employment benefits

Defined contribution plans

Contributions to government plans and other defined contri-

bution plans are recognized as an expense for the period in

which they are due. No provision is recorded as the Group’s

obligation is limited to its contributions to the plan.

Defined benefit plans

Obligations under defined benefit plans are measured using

the projected unit credit method. This method involves the

use of long-term actuarial assumptions concerning demo-

graphic variables (such as employee turnover and mortality)

and financial variables (such as future increases in salaries

and discount rates). These variables are reviewed each year.

Actuarial gains and losses – corresponding to the effect of

changes in actuarial assumptions on the amount of the obli-

gation – are recognized as explained below. The interest cost,

corresponding to the increase in the obligation due to the

passage of time, is recognized in financial expense.

Treatment of actuarial gains and losses

Actuarial gains and losses are recognized in income by the

corridor method, applied separately to each individual plan.

Under this method, actuarial gains and losses are recognized

in the statement of income when cumulative unrecognized

gains and losses exceed the greater of 10% of the present

value of the defined benefit obligation and 10% of the fair

value of plan assets. The portion of actuarial gains and

losses that exceeds the 10% corridor is recognized in income

over the average remaining service lives of plan participants.

Past service cost

Past service cost is the increase in the present value of

the defined benefit obligation, resulting from the changes

to, post-employment benefits or other long-term benefits.

Past service cost is recognized as an expense over the average

period until the benefits become vested. If the benefits are

already vested, past service cost is recognized immediately.

Curtailments and settlements

Gains or losses on the curtailment or settlement of defined

benefit plans are recognized when the curtailment or settle-

ment occurs. The gain or loss on a curtailment or settlement

comprises any resulting change in the present value of the

defined benefit obligation and any related actuarial gains

and losses and past service cost that had not previously been

recognized.

2.14.2 Other long-term benefitsActuarial gains and losses and past service cost on other

long-term benefit plans are recognized immediately in the

statement of income.

2.15 DEFERRED TAX

In accordance with IAS 12 – Income Taxes, deferred taxes are

recognized for temporary differences between the carrying

amounts of assets and liabilities and their tax bases, as well

as on tax loss carryforwards, by the liability method. Deferred

tax assets are recognized for deductible temporary differences

to the extent that it is probable that taxable income will be

available against which the deductible temporary difference

can be utilized. The carrying amount of deferred tax assets is

reviewed at each period-end.

Tax assets and tax liabilities are offset when the Group has a

legally enforceable right to set off the recognized amounts,

they relate to income taxes levied by the same taxation author-

ity and the Group intends to settle on a net basis.


Income tax expense is recognized in the statement of income,

except when it relates to items recognized directly in equity

in which case it is also recognized in equity.

2.16 BORROWINGS AND OTHER FINANCIALLIABILITIES

Borrowings and other financial liabilities are initially recognized

at fair value, adjusted for directly attributable transaction

costs. They are subsequently measured at amortized cost,

using the effective interest method.

2.16.1 OCEANEs (Bonds convertibleinto new or existing shares)The Group debt includes two convertible bond issues

(OCEANEs). These financial instrument comprise both a

liability component and conversion option recognized as an

equity component.

The component classified as a financial liability is valued at the

present value of the future contractual cash flows (including

interest, redemption premiums and the settlement of the obli-

gation at maturity), discounted at the market interest rate on the

issue date for debt instruments with the same characteristics

in terms of maturity and cash flows but without a conversion

option. The equity component is obtained by deducting, from

the instrument as a whole, the liability component’s fair value.

Issue costs are allocated to each compnents pro rata to their

respective carrying amounts. The difference between inter-

est expense determined by the effective interest method and

the interest actually paid is added to the carrying amount of

the liability, so as to increase the carrying amount over the

life of the debt to the amount payable at maturity to settle the

obligation if the bonds are not converted.

2.16.2 Other financial liabilitiesOther financial liabilities are measured at amortized cost using

the effective interest method, including issue costs and issue

and redemption premiums.

2.17 DERIVATIVE FINANCIAL INSTRUMENTSAND HEDGING INSTRUMENTS

2.17.1 Measurement of derivativefinancial instrumentsDerivative financial instruments are initially recognized at their

fair value on the date when the Group becomes a party to the

contractual provisions of the contract. They are subsequently

measured at fair value. Derivative instruments with a positive

fair value are recognized as an asset and derivative instruments

with a negative fair value are recognized as a liability.

2.17.2 Hedge accountingThe Group uses financial instruments to optimize its borrow-

ing costs and to hedge budgeted future net cash flows in

foreign currencies over periods not exceeding 18 months.

Derivative instruments are used by the Group as part of its

cash flow hedging strategy, to hedge the Group’s exposure

to fluctuations in exchange rates. No interest rate hedges have

been set up and the Group does not implement any fair value

hedging strategy.

Cash flow hedges are hedges of the exposure to variability in

cash flows that is attributable either to a particular risk asso-

ciated with a recognized asset or liability, or a highly probable

forecast transaction or a firm commitment.

The effective portion of changes in the fair value of cash flow

hedges eligible for hedge accounting is recognized directly

in equity and subsiquently reclassified into finance cost, net in

the period when the firm commitment or future transaction

affects profit or loss. The ineffective portion is recognized in

finance cost, net.

If the forecast transaction is no longer expected to occur, the

cumulative gain or loss recognized directly in equity is reclas-

sified immediately into finance cost, net. If the hedging instru-

ment no longer meets the criteria for hedge accounting and

the forecast transaction is still expected to occur, the cumula-

tive gain or loss recognized directly in equity remains recog-

nized in equity until the forecast transaction occurs. In both

cases, the derivative instrument is classified as a financial instru-

ment at fair value through profit or loss and subsequent

changes in fair value are recognized in finance cost, net.

The Group’s risk management policy is presented in Note 19.

2.18 GOVERNMENT GRANTS

Government grants are recognized when there is reasonable

assurance that the conditions attached to them will be met

and the grants will be received. Grants that are intended to

compensate costs are recognized as income over the periods

necessary to match the related costs which they are intended

to compensate, on a systematic basis. Government grants

related to assets are initially recognized as deferred income

(other liabilities) at fair value and subsequently recognized as

income over the useful life of the asset components.


104

2.19 SHARE-BASED PAYMENTS

The Group has set up stock option plans for members of

senior management and certain employees. In accordance

with IFRS 2, the benefit granted to employees in the form of

stock options is recognized as an expense over the vesting

period (corresponding to the period up to the start date of

the exercise period). The cost of stock options – correspon-

ding to the fair value of the employee services rendered,

determined using the Black & Scholes option pricing model

– is recognized in personal cost with a corresponding increase

in equity. This cost is adjusted based on the actual number of

options that will be exercisable at the start of the exercise peri-

od. In accordance with the transitional provisions of IFRS 2,

only options granted after 7 November 2002 that had not yet

vested at 1 November 2005 were recognized and measured

at the IFRS transition date.

2.20 TREASURY SHARES

All Club Méditerranée shares held by the Group, for what-

ever purpose, are recorded as a deduction from consolidated

equity at cost. No gain or loss is recognized in the statement

of income on the purchase, sale, issue or cancellation of

equity instruments issued by the Group.

NOTE 3. FIRST-TIME ADOPTION OF IAS 32 AND IAS 39

IAS 32 and IAS 39 have been applied as from 1 November

2005, without restating comparative financial information.

The following table shows the effect, net of deferred taxes,

on consolidated equity at 1 November 2005 of applying

IAS 32 and IAS 39.

(in € millions)

Equity at 31 October 2005 508excluding IAS 32 and IAS 39

OCEANEs 22Treasury shares (9)Foreign currency derivatives 2

Equity at 1 November 2005 523including IAS 32 and IAS 39

Accounting treatment of OCEANEbondsOCEANEs, which were recognized in full in borrowings in the

French GAAP accounts, have been restated based on the

accounting policy described in Note 2.16 “Borrowings and

other financial liabilities”.

Accounting treatment of treasurysharesEquity instruments purchased by the Group, which were

recognized in marketable securities in the French GAAP

accounts, are now recorded as a deduction from equity.

Accounting treatment of foreign currency derivativesForeign currency derivatives and the underlyings form part

of documented cash flow hedging relationships. The effective

portion of cumulative gains and losses on hedging instruments

at 1 November 2005 was recognized in equity in the amount

of €2 million. The hedge accounting policies applied by the

Group are described in Note 2.17 “Derivative financial instru-

ments and hedging instruments”.

NOTE 4. CHANGES IN SCOPE OF CONSOLIDATION

Number of consolidated Full Equity Totalcompanies consolidation method

Scope of consolidation at 31 October 2005 115 10 125

Newly consolidated companies 11 1 12Liquidations (6) (6)Disposals (3) (3)Mergers (7) (7)Change in consolidation method 2 (2)

Scope of consolidation at 31 October 2006 112 9 121

Twelve companies were consolidated for the first time in

fiscal 2006:

• Carthago, following an increase in the Group’s interest from

12.43% to 37.43% on 13 December 2005 (accounted for by

the equity method).

• Club Med Ukraine, created on 22 December 2005 and

wholly-owned.

• Sunport Property Corporation, acquired on 23 March 2006

and wholly-owned.

• SNC Caravelle 2006, created on 23 March 2006 and

wholly-owned.

• Sun Mexico Holding Inc. and its subsidiaries, Sun Cancun I,

Sun Cancun II, Ixtapa I, Ixtapa II, Cancun Property SRL and

Ixtapa Property SRL, acquired on 1 May 2006 and wholly-

owned.

• Société Immobilière et de Gestion Hôtelière de Cap Skirring,

created on 1 September 2006.


These acquisitions and company creations had no material

effects on the consolidated financial statements.

In line with the ongoing rationalization of the Group’s legal

structure, the following operations were carried out during the

year:

Six companies were liquidated:

• Club Med Resorts BV on 3 January 2006.

• Holiday Village Paradise Island on 15 May 2006.

• Club Med Haiti on 17 July 2006.

• Société Hôtelière d’Oyster Pond on 20 July 2006.

• Club Mepe Ltd on 31 July 2006.

• CM Crested Butte LLC on 31 August 2006.

Three companies were sold:

• Club Med Gym Belgique on 26 July 2006.

• Vacances Cap Skirring on 30 October 2006.

• Club Del Mar on 31 October 2006.

Seven companies were merged:

• Condominios Med de San Carlo was merged into Opera-

dora de Aldeas Vacacionales SA de CV on 1 November 2005.

• Jet Hôtel Tunisie was merged into Jet Eldo Tunisie on

14 November 2005.

• Grand Hotel Parisien was wound up without being liquidated

on 19 April 2006.

• Jet Hotel was wound up without being liquidated on

26 August 2006.

• Société Civile de la Tour d’Opio was wound up without being

liquidated on 28 September 2006.

• Sun Mexico Holdings was merged into CM Sales Inc. on

10 October 2006.

• Instituts des Métiers de la Forme was wound up without

being liquidated on 12 October 2006.

The consolidation method applied to four companies has

changed:

• CM Middle East, previously accounted for by the equity

method, was fully consolidated as from 1 November 2005.

• Club Méditerranée Albion Resorts Ltd, previously fully

consolidated, was accounted for by the equity method as

from 25 April 2006.

• Columbus Isle Casino, previously accounted for by the equity

method, was fully consolidated as from 30 April 2006.

• Société Immobilière des Résidences Touristiques, previously

accounted for by the equity method, was fully consolidated

as from 30 April 2006.

In addition, the Group sold 22% of the shares of Taipe

Trancoso.

The impact of these changes in scope of consolidation on the

consolidated financial statements was not material.

NOTE 5. SEGMENT INFORMATION

5.1 BUSINESS SEGMENTS

The Group is organized around four business segments:

- Villages

- Tour operating

- Club Med Gym

- Club Med World

The Group’s operating activities are organized and managed

separately, based on the type of products and services sold.

Each segment offers different products and serves different

markets.

The business segment therefore represents the Group’s

primary reportable segment.

The Villages business segment comprises the Villages, the

cruise business (Club Med 2) and marketing of Club Med

Découverte tours. The Villages activity corresponds to all-

inclusive vacation packages and covers the marketing and

organization of the vacation, transport and related services.

It also includes the management of Village property assets.

The Tour Operating business segment includes the devel-

opment and marketing of tours and vacations by Jet tours,

as well as the development of tours marketed by Club Med

Découverte.

The Club Med Gym business segment corresponds to the

marketing and management of fitness clubs.

The Club Med World business segment corresponds to the

management of a leisure and entertainment complex,

comprising conference facilities, restaurants, theaters or

concert halls, a night club and areas used to organize activi-

ties for children.

Inter-segment transactions are limited. The main transactions

concern the organization by the Tour Operating segment

of tours sold by the Villages’ marketing network (Club Med

Découverte) and the sale by the Jet tours marketing network

of vacations in the Villages.

The Group’s secondary reportable format is the geographi-

cal segment. Operations are organized around three geo-

graphical segments:

- Europe-Africa

- Americas

- Asia

Geographical segments can correspond to the location of

customers and, therefore, to the region where the vacations

are sold. These segments are qualified as outbound zones.

Alternatively, geographical segments may correspond to the

location of assets, in which case they are qualified as inbound

zones.


106

The Europe-Africa segment comprises the countries of

Europe, the Middle East and Africa.

The Americas segment comprises the countries of North and

South America and the West Indies.

The Asia segment comprises the countries of Asia and

Oceania.

Segment assets include goodwill, intangible assets and prop-

erty, plant and equipment, non-current assets held for sale,

and current assets other than cash and cash equivalents and

tax receivables.

Segment liabilities include provisions – other than provisions

for taxes – and other liabilities, with the exception of borrow-

ings and financial liabilities which are included in net debt.

5.2 INFORMATION BY BUSINESS SEGMENT

(in € millions)

2005 2006

Gross Inter-segment Revenue Gross Inter-segment RevenueRevenue transactions Revenue transactions

Villages 1,250 (3) 1,247 1,326 (3) 1,323Tour operating 319 (30) 289 335 (35) 300Club Med Gym 46 46 47 47Club Med World 8 8 9 9Eliminations (33) 33 (38) 38

Total 1,590 - 1,590 1,679 - 1,679

(in € millions)

2005

Operating Operating Depreciation and Share of incomeincome - Leisure income amortization of associates

and impairment

Villages 21 85 (71) 3Tour operating 4 3 (2)Club Med Gym 3 (1) (4)Club Med World (3) (6) (4)

Total 25 81 (81) 3

(in € millions)

2006

Operating Operating Depreciation and Share of incomeincome - Leisure income amortization of associates

and impairment

Villages 19 31 (61) 3Tour operating 3 3 (1)Club Med Gym 4 3 (4)Club Med World (2) (2) (1)

Total 24 35 (67) 3

(in € millions)

31 October 2005 31 October 2006

Segment Segment Capital Segment Segment Capital assets liabilities expenditure (1) assets liabilities expenditure (1)

Villages 1,190 417 (128) 1,180 473 (141)Tour operating 83 52 (1) 87 48 (2)Club Med Gym 74 39 (3) 72 40 (3)Club Med World 4 3 4 3

Total 1,351 511 (132) 1,343 564 (146)

(1) Excluding government grants

Reconciliation of segment assets and liabilities to the amounts reported in the balance sheet:

(in € millions)

31 October 2005 31 October 2006Including IAS 32/39

Segment assets 1,351 1,343Non-current financial assets 66 80Deferred tax assets 42 35Cash and cash equivalents 160 165

Total assets 1,619 1,623

Segment liabilities 511 564Equity 523 514Borrowings and other interest-bearing liabilities 483 459Deferred tax liabilities 102 86

Total equity and liabilities 1,619 1,623

5.3 INFORMATION BY GEOGRAPHICAL SEGMENT

Revenue (issuing zones)

(in € millions)

2005 2006

Europe-Africa 1,278 1,338Americas 194 196Asia 118 145

Total 1,590 1,679

Revenue in France amounted to €613 million in fiscal 2006 and €585 million in fiscal 2005.

Segment assets and capital expenditure (location of assets)

(in € millions)


Segment Capital Segment Capital assets expenditure (1) assets expenditure (1)

Europe-Africa 694 (68) 869 (60)Americas 558 (52) 367 (71)Asia 99 (12) 107 (15)

Total 1,351 (132) 1,343 (146)

(1) Excluding government grants



NOTE 6. GOODWILL

6.1 ANALYSIS

There were no changes in goodwill during 2006.

(in € millions)

31 October 2005 31 October 2006Net Net

Villages – Europe-Africa 19 19Tour operating 33 33Club Med Gym 43 43

Europe-Africa 95 95

Villages – Americas 3 3Villages – Asia 5 5

Total 103 103

108

6.2 IMPAIRMENT TESTS

Goodwill is allocated to cash-generating units (CGUs), which

are the Villages by geographical segment, the tour operat-

ing business and Club Med Gym. Goodwill was tested for

impairment at the IFRS transition date and since then has been

tested once a year. The principles underlying these tests are

described in Note 2.7 “Impairment of assets”.

The recoverable amount of the main CGUs to which material

goodwill has been allocated, has been determined by the

value in use approach. Value in use is determined by the

discounted cash flows method. Future cash flows are estimated

on the basis of the budget and the three-year business plan,

with a perpetual growth rate applied beyond this period. They

are discounted by applying a discount rate corresponding to

the weighted average cost of capital (WACC). Both estimated

future cash flows and the discount rate are determined on an

after-tax basis.

The assumptions used for impairment tests on the CGUs to

which material goodwill has been allocated are as follows:

(in € millions)

2005 2006

CGU Net allocated After-tax Perpetual Net allocated After-tax Perpetualgoodwill discount rate growth rate goodwill discount rate growth rate

Villages – Europe-Africa 19 7.5% 1.5% 19 7.5% 1.5%Tour operating 33 7.5% 1.5% 33 7.5% 1.5%Club Med Gym 43 7.5% 1.5% 43 7.5% 1.5%

Based on the results of the impairment tests performed in 2005 and 2006, no impairment losses were recognized on goodwill

in either of these two years.


NOTE 7. INTANGIBLE ASSETS

(in € millions)

Brands and Software Lease Other Intangible Totallicenses premiums intangible assets

assets in progress

Cost at 1 November 2004 28 103 16 10 3 160

Accumulated amortization (3) (68) (5) (3) (79)

Net carrying amountat 1 November 2004 25 35 11 7 3 81

Acquisitions 3 1 1 4 9Disposals (1) (1) Amortization for the period (9) (2) (11)Reclassifications and translation adjustments 2 1 (2) 1

Cost at 1 November 2005 28 104 17 11 5 165


Net carrying amount at 1 November 2005 25 30 13 6 5 79

Acquisitions 3 1 4 8Disposals 1 (2) (1)Amortization for the period (6) (1) (7)Reclassifications and translation adjustments 5 (5)

Cost at 31 October 2006 28 112 18 6 4 168


Net carrying amount at 31 October 2006 25 32 15 3 4 79

Following extensive development work on the Group’s

reservation and accounting systems, the estimated useful

lives of these systems were adjusted in 2006. The adjustment

was treated as a change in estimates and made prospec-

tively. The impact on annual amortization expense was

€2.6 million.

Intangible assets with an indefinite useful life amount to

€32 million, including €23 million for the Jet tours brand which

was acquired in a business combination. Based on the results

of the impairment tests performed in 2005 and 2006, no

impairment losses were recognized on these assets in either

of these two years.


110

Capital expenditure in fiscal 2006 mainly concerned the

Villages of La Caravelle (€19 million), Cancún (€15 million),

Les Boucaniers (€15 million), Peisey-Vallandry (€10 million),

Kanifinolhu (€10 million) and Cervinia (€3 million). As well as

the acquisition of Sandpiper, Ixtapa and Cancún buildings and

fixtures previously held under finance leases for a total of

€14 million.

Disposals mainly included the sale of the Crested Butte, Flaine,

Valbella and Cadaques Villages, and the sale-and-operating-

leaseback of the Chamonix, Les Deux Alpes and Avoriaz

Villages.

NOTE 8. PROPERTY, PLANT AND EQUIPMENT

8.1 ANALYSIS

(in € millions)

Land Buildings and Equipment Other Assets under Totalfixtures construction

Cost at 1 November 2004 314 1,200 168 138 41 1,861

Accumulated depreciation (1) (599) (114) (85) (799)

Net carrying amount at 1 November 2004 313 601 54 53 41 1,062

Acquisitions 7 37 12 6 61 123Disposals (7) (84) (1) (34) (126)Changes in scope of consolidation (3) (15) (2) 1 (21)Depreciation for the period (38) (12) (9) (59)Impairment losses (7) (1) (3) (11)Transfers to assets held for sale (3) (8) (11)Translation adjustment 2 15 (1) 1 1 18Reclassifications 12 2 1 (15)

Cost at 1 November 2005 310 1,040 154 139 53 1,696


Net at 1 November 2005 309 513 51 49 53 975

Acquisitions 48 25 7 58 138Disposals (9) (50) (4) (2) (65)Changes in scope of consolidation (20) (7) (1) (4) (32)Depreciation for the period (34) (13) (9) (56)Impairment losses (4) (4)Transfers to assets held for sale (50) (27) (2) (2) (81)Translation adjustment (7) (6) (2) (1) (16)Reclassifications 48 2 6 (56)

Cost at 31 October 2006 224 858 150 130 48 1,410


Net at 31 October 2006 223 481 56 51 48 859


8.2 OTHER INFORMATION

Property, plant and equipment break down as follows by business and geographical segment:

(in € millions)


Cost Depreciation and Net Cost Depreciation and Netprovisions carrying provisions

amount

Europe-Africa 807 (393) 414 679 (332) 347Americas 566 (169) 397 483 (110) 373Asia 248 (114) 134 182 (68) 114

Sub-total Villages 1,621 (676) 945 1,344 (510) 834

Tour operating 14 (7) 7 5 (3) 2Club Med Gym 48 (28) 20 47 (27) 20Club Med World 13 (10) 3 14 (11) 3

Total 1,696 (721) 975 1,410 (551) 859

Asset under finance leases amounted to €16 million at

31 October 2006 (€85 million at 31 October 2005). During

the year, the Group purchased the ownership of the assets

of the Sandpiper Village in the United States and the Ixtapa

and Cancún Villages in Mexico.

Finance lease obligations at 31 October 2006 stood at

€8 million at 31 October 2006 (€103 million at 31 October 2005).

At 31 October 2006, property, plant and equipment worth

€37 million had been given as collateral (montgage and

pledge) for debts of €36 million (€39 million and €41 million

respectively at 31 October 2005).

NOTE 9. NON-CURRENT FINANCIALASSETS

(in € millions)

31 October 31 October2005 2006

Investments in associates 12 31Available-for-sale financial assets 6 5Deposits 36 33Other non-current financial assets 12 11

Total 66 80

9.1 INVESTMENTS IN ASSOCIATES

(in € millions)

31 October 2005 2006 Changes in scope of 31 October income consolidation and other 2006

Sviluppo Turistico per Metaponto (Italy) 5 2 7Société Immobilière de la Mer (Morocco) 5 5SPFT - Carthago (Tunisia) (1) 10 10Club Med Albion Resorts (Mauritius) (2) 4 4Other 2 1 2 5

Total 12 3 16 31

(1) Increase in the Group’s stake from 12.43% to 37.43%.(2) Reduction in the Group’s stake from 100% to 22.5% following a share capital issue underwritten by our partners.


112

9.2 AVAILABLE-FOR-SALE FINANCIAL ASSETS

Investments in non-consolidated companies are classified as

available-for-sale financial assets, in accordance with IAS 39.

The following table shows movements for the last two fiscal

years:

(in € millions)

2005 2006

At 1 November 8 6

Changes in scope of consolidation (2) (1)

At 31 October 6 5

Available-for-sale financial assets consist exclusively of shares

in unlisted companies. The amount held at cost was €5 mil-

lion. No impairment losses were recorded on these assets in

fiscal 2006 or fiscal 2005.

Since the beginning of fiscal 2006, Carthago has been

accounted for by the equity method following an increase in

the Group’s stake to 37.43%.

9.3 OTHER NON-CURRENT FINANCIAL ASSETS

(in € millions)

31 October 31 October 2005 2006

Loans 2 1Deposits 36 33Loans to building organizations 6 6Other 4 4

Total 48 44

NOTE 10. ASSETS HELD FOR SALE

The assets and liabilities attributable to certain Villages have been classified as disposal groups held for sale and reported on

a separate line of the balance sheet, as their sale within 12 months from the date of their classification is considered highly

probable.

An impairment loss of €3 million has been recorded on these disposal groups, to write down the assets to their estimated fair

value less costs to sell. The impairment loss is included in “Operating income – Management of assets”.

(in € millions)

Land Buildings and Equipment Other Total assets fixtures held for sale

Cost at 1 November 2005 3 18 2 1 24

Accumulated depreciation (10) (2) (1) (13)

Net carrying amount at 1 November 2005 3 8 11

Acquisitions 51 31 2 2 86Disposals or reclassification (1) (4) (5)

Net at 31 October 2006 53 35 2 2 92

Cost at 31 October 2006 53 112 11 5 181Accumulated depreciation (77) (9) (3) (89)

Liabilities related to assets held for sale at 1 November 2005Liabilities related to assets held for sale at 31 October 2006 4

These assets do not correspond to discontinued operations as defined in IFRS 5.


NOTE 11. OTHER RECEIVABLES

(in € millions)

31 October 2005 1 November 2005 31 October 2006Excluding Including Cost Provisions NetIAS 32/39 IAS 32/39

Net Net

Tax receivables 23 23 29 29Accrued income 3 3 3 3Prepayments to suppliers 14 14 11 11Receivables on sales of non-current assets 7 7 7 7Current account advances to associates 3 3 2 2Employee advances and prepaid payroll taxes 1 1 1 1Other receivables 11 11 14 (3) 11Prepaid expenses 37 34 44 44

Total 99 96 111 (3) 108

NOTE 12. CASH AND CASH EQUIVALENTS

(in € millions)

31 October 2005 1 November 2005 31 October 2006Excluding IAS 32/39 Including IAS 32/39

Marketable securities 21 21 9Treasury shares 9 - -Derivative instruments - 1 -Cash 138 138 156

Total 168 160 165

Marketable securities consist of money market instruments

subject to an insignificant risk of changes in value.

NOTE 13. EQUITY

13.1 CHANGES IN EQUITY

At 31 October 2006, a total of 19,358,005 fully-paid €4 par

value ordinary shares were issued and outstanding, unchanged

from the previous fiscal year-end.

The 277,305 shares held in treasury at 31 October 2006 (257,165

shares at 31 October 2005) are stripped of dividend rights.

Under a liquidity agreement as part of the buyback programs

approved by the Annual Shareholders’ Meetings of 16 March

2005 and 14 March 2006, during fiscal 2006 a total of 156,709

Club Méditerranée SA shares were purchased at an average

price of €41.53 and 136,569 shares were sold at an average

price of €43.42.

The translation reserve amounted to €10 million at 31 October

2006, including €6 million attributable to shareholders

(€25 million, including €21 million attributable to sharehold-

ers, at 31 October 2005). The decrease in fiscal 2006 was

primarily due to changes in the dollar/euro exchange rate.

The impact on equity of cash flow hedges was not material.

Information about stock option plans is provided in Note 14.

All receivables are due within one year.

Prepaid expenses correspond mainly to services paid before travel (such as transport and fee-based services), and prepaid leases.


114

13.2. MINORITY INTEREST

(in € millions)

31 October 2006 Dividends Capital Changes in 31 October2005 income decrease scope of 2006

consolidation

Itaparica (Brazil) 19 1 (1) (1) 18Holiday Villages Thailand 5 (1) 4Belladona Company for H&T (Egypt) 3 3Holiday Hotels AG (Switzerland) 7 7Taipe Trancoso (Brazil) 4 3 7Sté Villages Hôtels des Caraïbes (France) 11 11Covifra (Mauritius) 2 2Other 3 3

Total 54 (1) (1) 3 55

NOTE 14. SHARE-BASED PAYMENTS

14.1. DESCRIPTION OF STOCK OPTIONPLANS

The stock options granted to members of senior management

and certain permanent employees of the Group are exercis-

able for new shares, with the exception of Plan H options, which

are exercisable for existing shares. The plans do not allow for

options to be cash-settled and do not include any vesting con-

ditions based on market conditions or performance targets.

All outstanding options have a ten-year life, with the exception

of those granted under Plans J and K, which have an eight-year

life.

The main characteristics of the plans outstanding at 31 October

2006 are as follows:

On 14 March 2006, the Board used the authorization given at the Annual Shareholders’ Meeting of 16 March 2005 to grant

250,000 stock options at an exercise price of €42.67 (Plan K).

The exercise price corresponds to the average of the closing prices quoted for Club Méditerranée shares over the twenty

trading days preceding the grant date. No options were exercised during the year.

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006Plan F Plan F2 Plan F3 Plan F4 Plan F5 Plan G Plan G2 Plan G3 Plan G4 Plan G5 Plan H Plan I Plan J Plan K

Date of Shareholders’ Meeting 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 29.03.02 17.03.03 17.03.03 16.03.05

Date of Board 18.08.97 24.03.98 24.08.98 17.02.99 29.07.99 07.02.00 26.07.00 06.02.01 24.07.01 05.02.02 28.02.03 15.01.04 11.01.05 14.03.06meeting

Number of optionsgranted 663,370 73,500 9,000 21,000 46,000 258,400 21,815 212,530 37,400 127,000 283,000 272,000 300,000 250,000

Options granted to the Senior Management Committee (members as of 31 October 2006) 63,159 10,000 - 1,000 - 34,800 - 18,900 - 13,800 229,000 95,000 111,000 103,000

Starting date of exercise period 50%: 50%: 50%: 50%: 50%: 07.02.05 26.07.04 06.02.05 24.07.05 05.02.06 01.03.06 15.01.07 11.01.08 14.03.09

18.08.02 24.03.03 24.08.03 17.02.04 23.07.04 Lock-up Lock-up Lock-up Lock-up50%: 50%: 50%: 50%: 50%: until until until until

18.08.03 24.03.04 24.08.04 17.02.05 23.07.05 28.02.07 14.01.08 10.01.09 13.03.10

Exercise period ends 17.08.07 23.03.08 23.08.08 16.02.09 22.07.09 06.02.10 25.07.10 05.02.11 23.07.11 04.02.12 27.02.13 14.02.14 10.01.13 13.03.14

Exercise price (in €) 68.8 70.81 79.12 81.13 92.79 111.11 136.13 92.78 63.99 44.74 35 31.03 35 42.67

Options outstanding at 31 October 2006 119,063 13,500 3,000 10,000 3,000 89,542 6,200 105,315 13,900 86,500 245,000 226,800 268,600 247,000

Remaining life 0.8 1.4 1.8 2.3 2.8 3.3 3.8 4.3 4.8 5.3 6,3 7.3 6.3 7.5


14.2 OUTSTANDING OPTIONS

2005 2006

Number Average Number Averageexercise price exercise price

(in €) (in €)

Options outstanding at 1 November 1,056,497 56.54 1,292,475 50.89

Options granted during the period 300,000 35.00 250,000 42.67Options exercised during the period - - - -Options canceled during the period (64,022) (69.66) (105,055) (48.48)

Options outstanding at 31 October 1,292,475 50.89 1,437,420 49.64Options exercisable at 31 October 387,125 88.10 695,020 63.84

14.3 SHARE BASED PAYMENTS

In accordance with the transitional provisions of IFRS 2, only

options granted after 7 November 2002 that had not yet

vested at 1 November 2005 were recognized and measured

at the IFRS transition date.

The plans concerned were the four plans set up between 2003

and 2006.

Fair value of options grantedFair values were calculated at the grant dates of the various

plans using the Black & Scholes option pricing model.

The main data and assumptions used to determine the fair

values of options granted under the 2005 and 2006 plans were

as follows:

Plan J Plan K

Club Méditerranée SA share price at grant date (in €) 35.18 45Exercise price (in €) 35 42.7Expected volatility (in %) 23.5 23.5Expected life of the options (in years) 5 5Risk free interest rate (%) 3.00 3.80Fair value per option 9.58 14.03

The weighted average fair value of options granted during

fiscal 2006 was €14.03 per option.

The cost recognized in respect of share-based payment plans

amounted to €2 million in 2006 and in 2005.

NOTE 15. PENSION AND OTHERLONG-TERM BENEFITS

15.1 DESCRIPTION OF THE MAIN PLANS

Group employees receive certain short-term benefits, such as

vacation pay, “13th month” bonuses, compensated absences,

health insurance and unemployment insurance in France.

The Group’s post-employment benefit plans are based on

legal obligations in each host country and on the subsidiaries’

compensation policies. Long-term benefit plans include both

defined contribution and defined benefit plans.

Defined contribution plans Under defined contribution plans, the Group pays contribu-

tions to an external fund which is responsible for paying the

benefits. The Group’s legal or constructive obligation under

these plans is limited to the amount that it agrees to contribute

to the fund. The main defined contribution plans consist of

government-sponsored basic and supplementary pension

plans in Europe and defined contribution plans in North

America. Senior management benefits for defined contribu-

tion supplementary pension plans.

Contributions to all of these plans are recognized as an

expense for the period in which they are incurved.


15.2.2 Funded status of defined benefit plans (in € millions)


Present value of the unfunded obligation 26 21Unrecognized actuarial gains and losses - 7

Net liability recognized in the balance sheet 26 28

15.2.3. Change in defined benefitobligations(in € millions)

2005 2006

Defined benefit obligation at 1 November 25 26Service cost 2 2Interest cost (discounting adjustment) - 1Actuarial gains and losses for the period - (7)Paid benefits (1) (1)

Defined benefit obligation at 31 October 26 21

15.2.4 Analysis of defined benefitplan costs (in € millions)

Fiscal 2005 Fiscal 2006

Service cost (2) (2)Actuarial gains and losses recognized in the period - -

Cost recognized in employee benefits expense (2) (2)

Interest cost (1)

Cost recognized in financial cost, net (1)

Total cost (2) (3)

15.3 DEFINED CONTRIBUTION PLANS

Contributions under defined contribution plans amounted

to €15 million in 2006 (€14 million in 2005).

Defined benefit plans Under defined benefit plans, the Group has an obligation to

pay benefits to employees upon retirement or after they have

retired. The Group’s defined benefit plans are unfunded and

provisions are recorded in the balance sheet.

The main defined benefit plans related to retirement indem-

nity payable to employees on retirement (France, Greece and

Turkey) or when they leave the Group (Italy, Japan and Mexico).

15.2 DEFINED BENEFIT PLANS

15.2.1 Main actuarial assumptionsThe Group’s obligations under defined benefit plans are meas-

ured by the projected unit credit method. This method

involves the use of long-term actuarial assumptions concern-

ing demographic variables (such as employee turnover and

mortality) and financial variables (such as future increases in

salaries and discount rates). These variables are reviewed each

year. Actuarial gains and losses – corresponding to the effect

of changes in actuarial assumptions on the amount of the

obligation – are recognized by the corridor method described

in Note 2.14 “Pension and other long-term employee benefit

obligations”.

The main discount rates applied by the Group are as follows:

Europe Turkey Japan Mexico

Discount rate 3.7% 18.6% 2.0% 8.4%

116


NOTE 16. PROVISIONS

(in € millions)

31 October 1 November Increases Utilizations Reversals 31 October2005 2005 (surplus 2006

Excluding Including provisions)IAS 32/39 IAS 32/39

Provisions for liability claims and damages 7 7 3 (2) (2) 6Restructuring provisions 10 10 13 (7) 16Provisions for litigation 12 12 6 (3) (2) 13Provision for OCEANE convertible bond redemption premiums 13 1 (1)Tax provisions 3 3 1 (1) (1) 2Other provisions 5 5 2 (2) (1) 4

Total 50 38 25 (16) (6) 41

- o/w current 50 38 25 (16) (6) 41

NOTE 17. INCOME TAXES

17.1. INCOME TAX ANALYSIS

Current and deferred taxes can be analyzed as follows:

(in € millions)

2005 2006

Current income tax (3) (6)Deferred taxes on temporary differences (33) (3)Effect of changes in tax rates - 3Reassessment of deferred tax assets - 5Deferred income tax (33) 5

Total (36) (1)

In 2006, corporate income tax rates were reduced in Greece and Turkey. The impact of these reductions on the net deferred

tax liabilities of the companies concerned was €3 million.

Club Méditerranée SA has set up a tax group comprising twenty French subsidiaries.

The nature of the Group’s business and the fact that its

operations are conducted in a large number of countries with

differing and sometimes contradictory regulations is a source

of operating difficulties and can lead to disputes with suppli-

ers, owners or local authorities.

Restructuring provisions include €10 million in provisions for

site closure costs.

Provisions for litigation cover commercial claims, employees

claims and disputes with government agencies. Provisions

are booked for the estimated cost of identified risks on the

basis described in Note 2.13 “Provisions”.


118

Effective tax rateThe following reconciliation is based on the current French income tax rate of 34.43% for fiscal 2006 (34.93% for fiscal 2005).

Tax (in € millions) Tax rate

2005 2006 2005 2006

Income before tax 43 3

Current tax rate 34.93% 34.43%Tax at current rate (15) (1)Effect of different foreign tax rates 2 (1)Effect of changes in tax rates - 3Unrecognized deferred tax assets on tax losses for the year (37) (49)Deferred tax assets recognized on tax losses generated in prior years 5Tax loss carryforwards utilized during the year 13 37Permanent differences and other 1 5

Total (21) 0

Effective tax rate (36) (1) 83.7% 33.3%

17.2. DEFERRED TAX ASSETS AND LIABILITIES

(in € millions)


Deferred tax assets 44 42 35Deferred tax liabilities (98) (102) (86)

Net deferred tax liability (54) (60) (51)

Deferred taxes recognized directly in equity are not material.

Deferred tax analysed by balance sheet captions:

(in € millions)


Property, plant and equipment (103) (103) (94)Tax loss carryforwards 55 53 53

Total assets (48) (50) (41)

Intangible assets (8) (8) (8)Property, plant and equipment 2 2 1Borrowings and other interest-bearing liabilities (4) (3)

Total liabilities (6) (10) (10)

Net deferred tax liability (54) (60) (51)

Deferred tax assets recognized on tax loss carryforwards concern the tax losses of tax groups in France and the United States.

Their recoverability was assessed based on the two tax groups’ earnings forecasts, particularly in France where the tax losses

were viewed as non-recurrent based on business plan outlook.


17.3. TAX LOSS CARRYFORWARDS BY EXPIRATION DATE

Tax loss carryforwards at 31 October 2006 can be analyzed as follows by expiration date:

(in € millions)

31 October 2006

2007 232008 to 2012 176 Beyond 107 Evergreen tax losses 271

Total tax loss carryforwards 576

Deferred tax assets corresponding to these loss carryforwards break down as follows by geographical region:

(in € millions)

Recognized Unrecognized Total

French tax group 35 33 68 Other – Europe-Africa 64 64

Total – Europe-Africa 35 97 132

US tax group 13 4 17 Other – Americas 2 7 9

Total – Americas 15 11 26

Asia 3 9 12

Total deferred tax assets on tax loss carryforwards 53 117 170

NOTE 18. BORROWINGS AND OTHER INTEREST-BEARING LIABILITIES

18.1 NET DEBT

(in € millions)

Balance sheet items 31 October 2005 1 November 2005 31 October 2006Excluding IAS 32/39 Including IAS 32/39

Cash and cash equivalents 168 160 165

Long-term borrowings and other interest-bearing liabilities 455 435 346 Short-term borrowings and other interest-bearing liabilities 48 48 109 Liabilities related to assets held for sale 4Total borrowings and other interest-bearing liabilities 503 483 459

Net debt 335 323 294


120

18.2. BORROWINGS AND OTHER INTEREST-BEARING LIABILITIES BY CATEGORY

(in € millions)


OCEANE convertible bonds 290 270 269Long-term bank borrowings 70 70 57Drawdowns on credit lines - - 16Finance lease obligation 95 95 4

Total borrowings and other interest-bearing liabilities, non current 455 435 346

OCEANE convertible bonds 10 10 10Current portion of long-term bank borrowings 8 8 10Current portion of lease liabilities 8 8 -Drawdowns on credit lines 80Short-term bank loans and overdrafts 22 22 9

Total borrowings and other interest-bearing liabilities, current 48 48 109

Finance lease obligation - - 4

Liabilities related to assets held for sale 4

Total 503 483 459

Debt secured by collateral amounted to €36 million at 31 October 2006 (€41 million at 31 October 2005).

During 2006, Club Méditerranée purchased the ownership of the Sandpiper, Ixtapa and Cancún Villages previously held on

finance lease.

18.3 CHARACTERISTICS OF DEBT

31 October 2006 Nominal interest Effective interest Maturityrate rate date

OCEANE due 2008 fixed rate 137 (1) 5.25% 8.40% Nov-2008OCEANE due 2010 fixed rate 141 4.38% 7.39% Oct-2010

Total bonds 278

Drawdowns on €70 million credit line 55 Euribor + (a) 3.60% (2) Oct-2009 Mortgage loan on Da Balaïa Village 18 Euribor + (b) 5.16% (2) Oct-2008Mortgage loan on Club Med 2 18 Euribor + (c) 4.55% (2) Dec- 2010Drawdown on confirmed short-term credit line 41 USD Libor + 1.2 7.20% (2) April-2007 Other (including short-term bank loans and overdrafts) 49

Total borrowings and other interest-bearing liabilities 459

(1) Yield to maturity including redemption premium.(2) Average rate in 2006 including fees.

Margins (a), (b) and (c) depend on the Group’s net debt/Ebitda ratio. The ranges are as follows:(a) 1.10% to 0.7%(b) 1.60% to 1.20%(c) 1.75% to 1.35%


18.3.1 OCEANE convertible bondsThe Group’s borrowings include two OCEANE convertible bond issues. The bonds’ main characteristics are as follows:

OCEANEs due 2008 OCEANEs due 2010

Amount of the issue (in €) 139,474,514 149,999,976Number of bonds issued 2,404,733 3,092,783Starting date for interest accruals 30.04.02 03.11.04Maturity 01.11.08 01.11.10Nominal interest rate 3.00% 4.375%Yield to maturity 5.25% 4.375%Effective interest rate 8.40% 7.39%

Any unconverted OCEANE due 2008 will be redeemed at

maturity at a premium to their face value. Increasing the yield

to maturity to 5.25%. Bond holders had the option of redeem-

ing the bonds early, on 30 April 2006, at a price representing

a yield of 5.25%.

A total of 211,002 bonds were redeemed early on 30 April 2006,

for a total of €13.6 million including accrued interest.

(in € millions)

OCEANE due 2008 OCEANE due 2010

Nominal amount of the issue 140 150Issuance costs (3) (3)Equity components (21) (18)

Initial amount recognized in liability 116 129

Recognized interest 38 9Interest paid (10)

Liability at 1 November 2005 under IFRS 144 138

Interest recognized in 2006 10 10Interest paid in 2006 (4) (7)Bonds redeemed early in April 2006 (13)

Liability at 31 October 2006 137 141

Of which accrued interest 4 6

18.3.2. Syndicated line of creditClub Méditerranée has a €70 million line of credit obtained

on 25 October 2004 and expiring in 2009. At 31 October 2006,

the line was drawn down in the amount of €55 million.

18.3.3 Other long-term facilitiesThe Da Balaïa Village and the Club Med 2 cruise ship are

financed by two loans due in October 2008 and October 2010

respectively. The loans are secured by mortgages and pledges

on the Village’s assets and the cruise ship. The balance

outstanding on the two loans at 31 October 2006 totaled

€36 million.


122

NOTE 19. FINANCIAL INSTRUMENTS

19.1 FINANCIAL RISK MANAGEMENT POLICY

In the normal course of business, the Group is exposed to

various financial risks, including, market risks (particularly cur-

rency and interest rate risks), credit risks and liquiduty risks.

The Group may use derivative financial instruments to hedge

currency risks arising in the course of its business and interest

rate risks on floating rate debt. In practice, these instruments

are used primarily to hedge currency risks on future transac-

tions. The Treasury and Financing unit identifies, assesses,

monitors and hedges financial risks on a centrally basis in

accordance with the policies approved by the Audit

Committee. Specific rules have been drawn up and approved

banning the use of derivative instruments for trading purposes.

19.1.1 Market risks

Currency risk

Club Méditerranée’s international operations expose the

Group to the risk of fluctuations in foreign exchange rates

affecting its income and equity.

Three types of risk may be identified:

- Currency risks on billing currencies and operating cash flows.

- Currency risks on financing denominated in a currency other

than the borrower’s functional currency.

- Risks of a change in consolidated equity arising from the

Group’s net investment in foreign operations.

The Group’s policy based on budgeted cash flows for the

coming year consists of:

- Hedging the main currencies in which sales are denomi-

nated (British pound, Japanese yen, Canadian dollar,

Australian dollar, Korean won, etc.), using options, forward

sales, non-deliverable forwards.

- Hedging the Group’s exposure to the US dollar, correspon-

ding to both a billing currency and an operating currency,

using instruments such as options and forward purchases.

- Not systematically hedging other functional currencies

(Moroccan dirham, Turkish pound, Tunisian dinar, Indonesian

rupee, Thai bath, etc.), which are purchased as and when

required.

The Group’s exposure to currency risks on external debt is

not significant. Intra-group financing is generally denominat-

ed in the subsidiary’s functional currency. When identifical

as hedges of the net investment in foreign operations, their

unrealized change in value is recognized directly in equity.

The Group’s net investment in foreign operations is exposed

to the risk of fluctuations in foreign currencies against the euro.

The impact of these fluctuations on net investments in inde-

pendent subsidiaries is recognized as a separate component

of equity. This risk is not hedged using derivative instruments.

Equity risk

The Group does not hold any listed securities, apart from treas-

ury shares which is recorded as a deduction from equity. As a

result, it is not exposed to any risk of fluctuations in stock

prices.

Interest rate risk

There are two types of interest rate risk:

- Fair value risk on fixed rate net debt. This type of risk being

not hedged, the carrying amount of financial assets and lia-

bilities is not adjusted for changes in interest rate. Fair value

risk therefore corresponds to the opportunity cost in case of

a fall in rates.

- Cash flow risk on floating rate net debt, corresponding to

the impact on finance costs of an increase or decrease in

interest rates.

No cash flow hedges of interest rate risks have been put in

place as the Group’s net floating rate debt is not material.

The Group does not hold any interest-bearing assets.

19.1.2 Credit and counterparty riskMost customers pay in advance for their vacations and the

Group’s exposure to credit risk on commercial transactions is

therefore limited.

Derivative instruments and borrowings are entered into with

a wide range of leading counterparties.

In case of cash surpluses, first rank, they are invested in certifi-

cates of deposit or Sicav mutual funds of leading banks.

19.1.3 Liquidity riskLiquidity risk is monitored by using diversified sources of

financing.

Some of the Group’s debt facilities include early redemption

clauses that are triggered in the event of a breach of the debt

covenants or of asset disposal.


19.2 FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table shows the carrying amounts and fair values

of financial instruments at 31 October 2006:

(in € millions)

Carrying Fair valueamount

Cash and cash equivalents 165 165

Financial assets 165 165Bonds 278 302Other fixed rate long-term borrowings and interest-bearing liabilities 15 14Other floating rate long-term borrowings and interest-bearing liabilities 157 157Short-term bank loans and overdrafts 9 9

Financial liabilities 459 483

The above table does not include trade receivables or trade

payables. In light of their short-term nature, there is no differ-

ence between the carrying amount of trade receivables and

trade payables and their fair value.

The fair value of derivative instruments is not material.

19.3 MATURITIES OF FINANCIAL LIABILITIESAND DEBT COVENANTS

19.3.1 Analysis of financial liabilitiesby maturity

(in € millions)


Due within one year (including short-term bank loans and overdrafts) 49 113

2006-2007 272007-2008 31 20 2008-2009 153 158 2009-2010 15 5 2010-2011 167 145 Beyond 61 18

Total due beyond one year 454 346

Total 503 459

The discounted present value of finance lease obligations,

including those related to assets held for sale, is as follows:

(in € millions)


Due within one year 8 4

Due in one to five years 49Due beyond five years 46 4

Total due beyond one year 95 4

Total 103 8

19.3.2 Confirmed lines of creditClub Méditerranée has a €70 million line of credit obtained

on 25 October 2004 and expiring in 2009. At 31 October 2006,

the line was drawn down in the amount of €55 million. Following

the asset disposals carried out at the end of the year, the

Group repaid €18 million in November 2006. Under the terms

of the facility agreement, the amount of the line will be

reduced to €16 million in October 2007. The line is subject to

various covenants (see 19.3.3 “Debt covenants”).

19.3.3 Debt covenantsThe debt covenants have been redefined, effective from

30 April 2006, to take into account the transition to IFRS. Under

the redefined covenants, EBITDA is defined as Operating

income - Leisure before depreciation, amortization and

provisions. Any breach of the ratios defined in the covenants

the outstanding debt may become immediately repayable.

Ratios applicable to the €70 million syndicated line of credit

and the occured loans financing the Club Med 2 cruise ship

and the Da Balaïa Village are as follows:

- Off-balance sheet commitments: less than €200 million

- Gearing: less than 1

- Leverage (net debt/Ebitda (as defined above): less than the

following:

30 April 31 October

2006 4.47 4.472007 4.17 4.172008 * 3.88 3.88

2009 and beyond 3.58 3.58

* Da Balaïa until 2008.

The covenants were complied with at 31 October 2006:

- Off-balance sheet commitments

(less than €200 million): €91 million

- Gearing (less than 1): 0.57

- Leverage (net debt/Ebitda (as defined above))

(less than 4.47): 3.26


124

19.5.2 Exposure to currency risk on operating activities

At 31 October 2006

(in millions of foreign currency)

USD GBP AUD JPY CAD MXN KRW TND MAD TRY

Net exposure to currency risk on operating activities (62) 15 7 1,000 27 (327) 10,200 (41) (155) (16)

Cash flow hedges (derivative notional amount) 20 (10) (5) (19) 105 (4,000)

Net exposure of 2007 cash flows after hedges at 31 October 2006 (42) 5 2 1,000 8 (222) 6,200 (41) (155) (16)

Net exposure after converted into euros (in € millions) (33) 7 1 7 6 (16) 5 (24) (14) (9)

NOTE: Amounts in parentheses correspond to purchases of foreign currencies; amounts not in parentheses correspond to sales of foreigncurrencies. GBP: British pound; AUD: Australian dollar; JPY: Japanese yen; CAD: Canadian dollar; MXN: Mexican peso; KRW: South Korean won;USD: US dollar; TND: Tunisian dinar; MAD: Moroccan dirham; TRY: Turkish pound.

Net exposures correspond to the exposure of estimated operating cash flows for the following year. Hedges are set up grad-

ually over the year.

All hedging instruments outstanding the year-end expire within one year.

Currency hedges consist of forward contracts, including non-delivery forwards on the South Korean won, qualifying for cash

flow hedge accounting.

19.4 MANAGEMENT OF INTEREST RATE RISK

The Group has a combination of fixed and floating rate debt.

In fiscal 2006, no interest rate hedges were set up as average

floating rate net debt represented less than €50 million.

At 31 October 2006, the Group’s exposure to interest rate

risk by maturity was as follows:

(in € millions)

Total Less One More than to five thanone years fiveyear years

Cash and cash equivalents (165) (165)Floating rate debt * 166 100 56 10Net floating rate debt 1 (65) 56 10Fixed rate debt 293 14 272 7

Net debt 294 (51) 328 17

* Including short-term bank loans and overdrafts.

19.5 CURRENCY RISK MANAGEMENT

19.5.1 Analysis of financial liabilitiesby currency

(in € millions)

31 October 2005 31 October 2006Excluding IAS 32/39

Euros 378 389US dollars 96 41Swiss francs 13 12Brazilian reals 10 17Other 6

Total 503 459

Most external financing is in the borrower’s functional currency

and the Group’s exposure to currency risk on external borrow-

ings is therefore limited.


NOTE 20. OTHER LIABILITIES

(in € millions)


Customer prepayments 93 112Accrued expenses 16 13Accrued payrollexpense 44 47Taxes payables 22 20Payables to suppliersof non-current assets (1) 18 20Accrued rentals 8 8Deferred income 63 67Government grants 22 28Other liabilities 1 10

Total 287 325- Of which non-current (2) 30 36- Of which current 257 289

(1) At 31 October 2006, these liabilities mainly concerned three Villages,Peisey-Vallandry (€4 million), La Caravelle (€7 million) and LesBoucaniers (€2 million).

(2) Non-current liabilities consist of government grants and accrualsarising from the recognition of rental expenses on a straight-linebasis.

NOTE 21. EMPLOYEE BENEFITSEXPENSE

(in € millions)

2005 2006

Wages and salaries (234) (250)Payroll taxes (43) (49)Pension contributions (14) (15)Share based payment expense (2) (2)Other (13) (12)

Total (306) (328)


Number of employees

Full-time Full-time O/w temporary O/w temporaryequivalents equivalents contracts* contracts*

2005 2006 2005 2006

Villages 14,257 13,886 7,452 7,433Tour operating 280 339 70 49Club Med Gym 471 485 48 47Club Med World 166 135 17 24

Total number of employees 15,244 14,845 7,587 7,553

* Seasonal employees and employees under fixed-term contracts.

NOTE 23. OTHER OPERATINGINCOME & EXPENSE

(in € millions)

2005 2006

Restructuring costs (12) (14)Tsunami and hurricane costs (5) (1)Costs of claims and litigation (7) (5)Credit card costs (8) (9)Other (1)

Other operating income & expense (33) (29)

NOTE 22. OPERATING INCOME –MANAGEMENT OF ASSETS

(in € millions)

2005 2006

Gains on disposals of Villages 108 50Gains and losses on Village and site closures (7) 4Village opening costs (4) (6)Impairment losses (4) (4)Other (4) (4)

Operating income – Management of assets 89 40

Disposals included the sale of the Crested Butte, Flaine,

Valbella and Cadaques Villages, and the sale-and-operating-

leaseback of the Chamonix, Les Deux Alpes and Avoriaz

Villages. Details of the sale proceeds are provided in Note

27.3.

26.2 DILUTED EARNINGS PER SHARE

(in thousands of shares)

2005 2006

Weighted average number of shares 19,101 19,078 Dilutive potential ordinary shares (stock options) 38 111Diluted weighted average number of shares 19,139 19,189

In fiscal 2006, 687,020 potential ordinary shares (stock options)

were excluded from the calculation because they were anti-

dilutive (786,475 shares in fiscal 2005).

In fiscal 2006, 5,287 thousand anti-dilutive potential ordinary

shares corresponding to OCEANE convertible bonds were

also excluded (5,498 thousand shares in fiscal 2005).

(in €)

2005 2006

Basic earnings per share 0.48 0.24 Diluted earnings per share 0.48 0.24

No events occurred after the balance sheet date that would

have a material impact on the calculation of diluted earnings

per share

NOTE 27. NOTES TO THE CONSOLIDATED CASHFLOW STATEMENT

27.1 DEPRECIATION, AMORTIZATION AND PROVISIONS

(in € millions)

2005 2006

Amortization and impairment: intangible assets 11 7Depreciation and impairment: property, plant and equipment 70 60Other provisions 2 3

Depreciation, amortization and provisions 83 70

27.2 ACQUISITIONS OF NON-CURRENT ASSETS

(in € millions)

2005 2006

Acquisitions of intangible assets (9) (8)Acquisitions of property, plant and equipment (123) (138)Government grants 22 7Acquisitions of non-current financial assets (4) (12)

Total acquisitions of non-current assets (114) (151)

126

NOTE 24. FINANCE COST, NET

(in € millions)

2005 2005 2006(pro forma)

Excluding IncludingIAS 32/39 IAS 32/39

Interest income 2 2 2Interest on OCEANE convertible bonds (15) (22) (21)Other interest costs (23) (23) (15)

Interest costs, net (36) (43) (34)

Exchange gains and losses, net (4) (4) 5

Autres 2 2 2

Finance cost, net (38) (45) (32)

IAS 32 and IAS 39 have been applied prospectively as from

1 November 2005 and interest costs for 2006 and 2005 are

therefore not directly comparable. The main change in

accounting method concerned interest on OCEANE convert-

ible bonds, leading to an increase in finance costs without any

corresponding increase in cash payments. Pro forma informa-

tion is provided to facilitate year-on-year comparisons.

NOTE 25. SHARE OF INCOME OF ASSOCIATES

(in € millions)

2005 2006

Share of income of associates 3 3

Details of the contribution of associates to consolidated

income are provided in Note 9 “Non-current financial assets”.

NOTE 26. EARNINGS PER SHARE

26.1 BASIC EARNINGS PER SHARE

(in thousands of shares)

2005 2006

Number of shares at 1 November 19,358 19,358 Number of treasury shares at 1 November (257) (257) Weighted average number of treasury shares purchased/sold during the period - (23) Weighted average number of shares issued during the period - -

Weighted average number of shares at 31 October 19,101 19,078

27.3 PROCEEDS FROM DISPOSALS OF NON-CURRENT ASSETS

Proceeds from disposals of property, plant and equipment,

in the amount of €110 million, mainly correspond to sales of

the following Village properties: Chamonix (€27 million),

Crested Butte (€25 million), Les Deux Alpes (€23 million),

Avoriaz (€13 million), Flaine (€7 million), Valbella (€5 million)

and Cadaques (€4 million).

Proceeds from disposals of non-current financial assets corre-

spond to repayments of loans and deposits for €4 million and

the €29 million in proceeds from the sale of shares in Vacances

Cap Skirring (€21 million), Club del Mar (€5 million) and Taipe

Trancoso (€2 million).

NOTE 28. RELATED PARTY TRANSACTIONS

Related party transactions were as follows:

Transactions with associates(in € millions)


Other receivables 3 2Other current liabilities 1 4

Transactions with associates in fiscal 2006 were not material.


NOTE 29. COMMITMENTS AND CONTINGENCIES

29.1 AT 31 OCTOBER

(in € millions)


Total Less than One to five More than Totalone year years 5 years

Commitments givenGuarantees given (1)

Europe 55 17 25 23 65Americas 29 20 20Asia 5 3 1 2 6

Total commitments given 89 40 26 25 91

Commitments received (2) 16 6 3 4 13

Reciprocal commitmentsUnused lines of credit 70 15 15Rent guarantees 7 7 7

Total reciprocal commitments 77 15 7 22

(1) Guarantees given in connection with travel and transport agent licenses (€23 million), rent bonds (€6 million), guarantees for liabilities relatedto disposals (€31 million), guarantees for credit cards processors (€12 million) and tax and customs bonds (€3 million).

(2) Guarantees received by the Group in regard to travel agencies amounted to €7 million.

Financing for the Da Balaïa Village and the Club Med 2 cruise ship is secured by liens and mortgages on the underlying assets

(see Notes 8.2 and 18.3).

Senior management compensationDisclosures of senior management compensation relates the

members of the Senior Management Committee. Total gross

compensation and benefits paid in fiscal 2006 amounted to

€3,928 thousand (€3,624 thousand in fiscal 2005).

Members of senior management are covered by a defined

contribution pension plan managed by an external fund with

a contribution between 6.29% and 8% of their gross compen-

sation. Contributions to this plan paid on behalf of members

of the Senior Management Committee amounted to

€285 thousand in fiscal 2006.

During fiscal 2006, a stock option plan was granted for mem-

bers of senior management and certain employees of Club

Méditerranée, with an exercise price of €42.67. A total of

103,000 options were granted to members of the Senior

Management Committee under this plan. The total fair value

of these options, determined in accordance with IFRS 2, is

€1,445 thousand.

The cost recognized in fiscal 2006 for stock options granted

to members of the Senior Management Committee, as

determined in accordance with IFRS 2, was €756 thousand

(€642 thousand in fiscal 2005).

No loans or guarantees have been granted to or on behalf of

executive directors.

No stock options were exercised by members of the Senior

Management Committee during the year.


128

29.2 COMMITMENTS UNDER NON-CANCELABLE OPERATING LEASES

The Group leases offices and sales agencies under non-cancelable leases. Some office equipment and Village telephone and

video equipment is also leased.

Under its asset financing policy, certain Villages as well as other assets are also leased under non-cancelable operating leases.

The following table shows the minimum future lease payments due under these non-cancelable operating leases:

(in € millions)

Total 2006 2007 2008 2009 2010 2011 2016 2026minimum to to and

future lease 2015 2025 beyondpayments

Europe 1,657 113 114 115 112 113 543 481 66Americas 43 4 4 4 3 3 14 11Asia 144 12 11 11 11 10 52 37

Sub-total Villages 1,844 129 129 130 126 126 609 529 66

Tour operating 10 3 3 2 2Club Med World 12 1 1 1 1 1 4 3Club Med Gym 29 5 5 3 3 3 9 1

Total minimum future lease payments 1,895 138 138 136 132 130 622 533 66

Rental expense recognized in the income statement for operating leases amounted to €142 million in fiscal 2006 (fiscal 2005:

€125 million). The year-on-year increase resulted from Group’s asset financing policy.

NOTE 30. TRANSITION TO IFRS

30.1 BACKGROUND TO THE TRANSITION

In accordance with European Council Regulation 1606/2002/EC

dated 19 July 2002, the consolidated financial statements for

the year ended 31 October 2006 have been prepared in accor-

dance with the International Financial Reporting Standards

(IFRSs), International Accounting Standards (IASs) and related

interpretations adopted by the European Union at that date.

This note presents the effect of the IFRS transition on opening

equity at 1 November 2004, fiscal 2005 income and the closing

balance sheet at 31 October 2005. It also includes a descrip-

tion of the main differences between IFRS and the French

generally accepted accounting principles (French GAAP)

applied by the Group to prepare its published consolidated

financial statements for the year ended 31 October 2005.

Comparative financial information for fiscal 2005 has been

prepared in accordance with IFRS 1 - First-Time Adoption of IFRS,

and the IFRSs, IASs and related interpretations adopted by

the European Union as of 31 October 2006.

The Group has elected not to early adopt any standards,

amendments to standards or interpretations.

Certain IFRSs and IASs propose both a benchmark treatment

and an allowed alternative treatment for the recognition and

measurement of assets and liabilities, and various options

are also available to first-time adopters under IFRS 1. The

options selected by the Group are presented in Note 2.1 -

Summary of significant accounting policies.

Preliminary information about the transition to IFRS was

published in the fiscal 2005 Annual Report. The quantified

impact of the transition, effective 1 November 2004, on the

fiscal 2005 income statement and the balance sheet at

31 October 2005 was reviewed during the preparation of

the consolidated financial statements for the year ended

31 October 2006. The adjustments and reclassifications made

compared with the preliminary information are presented in

Note 30.2 below.

30.2 DESCRIPTION OF THE MAIN IFRSADJUSTMENTS

A. IFRS 1 & IAS 16: Property, Plant and Equipment

French GAAP

Property, plant and equipment were stated at purchase or

production cost, and were depreciated over their estimated

useful lives.

IFRS

As allowed under IFRS 1, the Group opted to measure certain

items of property, plant and equipment at the IFRS transition

date at their fair value and to use that fair value as their

deemed cost at that date. Club Méditerranée has frequently

been one of the first companies to develop new vacation

destinations and some of its assets, particularly land, were

significantly undervalued in the French GAAP accounts. The

Group therefore decided to measure assets at fair value at the


IFRS transition date. The process consisted of measuring either

the land only or the entire Village, as appropriate, based on

independent valuations.

In addition, for the application of IAS 16, the tracking of prop-

erty, plant and equipment according to a components-based

approach was fine-tuned.

The individual parts of each item of property, plant and equip-

ment are recognized separately when their estimated useful

life - and consequently their depreciation period - is different

from that of the asset as a whole. Villages are expected to be

used throughout their useful life and depreciation is therefore

calculated without deducting any residual value.

B. IAS 36 & IFRS 3: Impairment of Assets and Business CombinationsA. IAS 36: IMPAIRMENT OF ASSETS

French GAAP

The Group tested assets for impairment based on the higher

of fair value and the discounted present value of future cash

flows. The impairment tests were performed at the level of

cash-generating units (CGUs), with each CGU corresponding

to all the Villages in a given region.

IFRS

For the application of IAS 36, the Group reviewed the defini-

tion of its CGUs, which now correspond to individual Villages.

Impairment tests are performed, Village by Village, whenever

there is an indication that their recoverable amount might be

less than their carrying amount.

Recoverable amount is defined as the higher of fair value and

the discounted present value of future cash flows.

B. IFRS 3: BUSINESS COMBINATIONS

French GAAP

Goodwill was amortized over a maximum of 20 years. Goodwill

representing small amounts was amortized over the year in

which it was recognized.

IFRS

In accordance with IFRS 3, goodwill is no longer amortized

but is tested annually for impairment at the level of the CGU

to which it is allocated. Any impairment losses recognized in

the income statement are irreversible.

The Group has elected not to restate business combinations

recorded prior to the IFRS transition date and accumulated

amortization at 1 November 2004 has therefore been main-

tained in the opening IFRS balance sheet.

Impact on opening equity at 1 November 2004: + €158m Impact on fiscal 2005 net income: + €13m

Goodwill is no longer amortized, effective from 1 November

2004.

C. IAS 18 & 17: Sale-and-LeasebackTransactions/LeasesA. FINANCE LEASES

French GAAP

The Group applied the recommended method under stan-

dard CRC 99-02, which consists of recognizing finance leases

in the balance sheet. Sale-and-leaseback transactions were

accounted for by recording a sale and either an operating

lease or a finance lease.

IFRS

All of the Group’s operating leases and sale-and-leaseback

transactions were reviewed at 1 November 2004 based on the

criteria in IAS 17 and IAS 18. This review led to the identifica-

tion of five finance leases, which were recognized as assets

and liabilities in the opening IFRS balance sheet.

B. RECOGNITION OF RENTS ON A STRAIGHT-LINE BASIS

IFRS

Following a review of all of the Group’s leases based on the

criteria in IAS 17, rent on all operating leases is now recog-

nized on a straight-line basis.

D. IAS 38: Intangible Assets

French GAAP

Village pre-opening costs were recognized in intangible assets

and amortized on a straight-line basis over five years.

IFRS

Pre-opening costs do not qualify as intangible assets under

IAS 38 or as a component of property, plant and equipment

under IAS 36, and they are therefore recognized as an expense

for the period in which they are incurred.

Impact on opening equity at 1 November 2004: - €2m Impact on fiscal 2005 net income: €0m

Impact on opening equity at 1 November 2004: - €6m Impact on fiscal 2005 net income: - €2m

Impact on opening equity at 1 November 2004: - €41m Impact on fiscal 2005 net income: - €3m

Impact on opening equity at 1 November 2004: - €54m Impact on fiscal 2005 net income: + €8m


130

E. IFRS 2: Share-Based Payments

IFRS

In application of IFRS 2, the benefit granted to employees in

the form of stock options is recognized as an expense over

the option vesting period.

The Group has not elected for full retrospective application of

IFRS 2. Consequently, as allowed under IFRS 1, IFRS 2 has

been applied only to options granted after 7 November 2002

that have not yet vested.

F. IAS 19: Employee Benefits

French GAAP

The Group elected to apply the recommended method under

standard CRC 99-02, which consists of recording provisions

for pension obligations and for post-employment obligations

towards permanent employees.

IFRS

Provisions are recorded for length-of-service awards payable

to employees on retirement when the Group has a legal or

contractual obligation under the plan or a constructive obli-

gation based on its informal practices.

All cumulative actuarial gains and losses were recognized at

the IFRS transition date, in accordance with the option avail-

able to first-time adopters under IFRS 1.

(1) Including actuarial gains and losses recognized in accordance withIFRS 1 for - €2m.

G. IAS 38: IFRS Framework -Intangible Assets/Prepaid Expenses

French GAAP

Advertising and marketing services - including the design and

production of sales brochures -, services rendered in the Villages

before the fiscal year-end that relate to the next season and

pre-season employee travel expenses were recognized under

“Prepaid expenses”.

Impact on opening equity at 1 November 2004: - €6m Impact on fiscal 2005 net income: €0m

Impact on opening equity at 1 November 2004: €0mImpact on fiscal 2005 net income: - €2m

IFRS

The IFRS Framework states that application of the accrual basis

of accounting should not lead to the recognition of items that

do not satisfy the definition of an asset or a liability.

IAS 38 states that prepayments may be recognized as an asset

when payment for the delivery of goods or services has been

made in advance of the delivery of goods or the rendering of

services.

The prepaid expenses listed above do not satisfy the defini-

tion of an asset under IFRS and are therefore recognized as

an expense when the service is rendered.

H. Income Statement PresentationThe transition to IFRS has led to material changes in the

presentation of the income statement. In order to clearly

identify the different sources of income, operating income

has been analyzed between:

• Operating income - Leisure, corresponding to all the income

and expenses directly related to our operations.

• Operating income - Management of assets, corresponding

to all the costs related to changes in the scope of consolida-

tion, including gains and losses on disposals of assets, the

costs of temporary and permanent Village closures, all the

costs related to new Village projects, and impairment charges

on operating and marketing units.

• Other operating income & expense, corresponding mainly

to restructuring costs, claims and litigation, the impact of

natural disasters and credit card costs. Under French GAAP,

credit card costs - corresponding to the cost of deferred

payments - were recorded in interest expense. Under IFRS,

these costs are charged against operating income.

Impact on opening equity at 1 November 2004: - €20m Impact on fiscal 2005 net income: + €1m


I. Opening equity at 1 November 2004

ANALYSIS BY STANDARD

(in € millions)

Reported Additional Equity after equity adjustments additional

adjustments

Equity under French GAAP (including minority interests) 444 444

IFRS 1 & IAS 16: Property, Plant and Equipment 159 (1) 158IAS 36 & IFRS 3: Impairment of Assets and Business Combinations (49) (5) (54)IAS 17 & IAS 18: Sale-and-Leaseback Transactions and Leases (40) (7) (47)IAS 19: Employee Benefits (5) (1) (6)IFRS Framework & IAS 38: Intangible Assets/Prepaid Expenses (22) (22)Other (1) (1)

Total IFRS adjustments net of deferred taxes 43 (15) 28

Equity under IFRS 487 (15) 472

ANALYSIS OF ADDITIONAL ADJUSTMENTS BY TYPE

(in € millions)

Impact on equity

Reported equity under IFRS 487IAS 16: Property, Plant and Equipment (2)Deferred tax adjustment (12)Other adjustments (1)

Total additional IFRS adjustments net of deferred taxes (15)

Equity under IFRS after additional adjustments 472


132

J. Closing IFRS Balance Sheet at 31 October 2005 (in € millions)

Assets French GAAP IAS 38: IFRS 1 IAS 17 & 18: IAS 17: IAS 36: IAS 19: IFRS 2: IFRS Other Reclassifications Total IFRS IFRS balance balance Intangible & IAS 16: Sale-and- Recognition Impairment Employee Share-based Framework: adjustments sheet

sheet assets Revaluation/ leaseback of rents on a of assets benefits payments Prepaid 31 October 31 October Components transactions straight-line IFRS 3: expenses 2005

2005 method and leases basis Business combination

Intangible assets 103 (23) (1) (24) 79Goodwill 72 28 3 31 103Property, plant and equipment 685 234 100 (48) 15 (11) (4) 290 975Available-for-sale financial assets 15 (7) (7) 8Investments in associates 12 12Loans 10 4 4 14Deposits 52 (20) (20) 32Non-current financial assets 89 (7) (20) 4 (23) 66

Total fixed assets 949 (2) 234 80 (46) 15 (7) 274 1,223

Deferred tax assets 1 43 (1) 44 44

Total non-current assets 949 (2) 234 81 (46) 15 36 318 1,267

Assets held for sale 11 (4) 11 11Inventories 21 21Trade receivables 65 1 1 66Other receivables 138 (17) (13) ( 5) (4) (39) 99Deferred tax assets 60 (60) (1) (60)Cash and cash equivalents 168 168

Total current assets 452 (17) (13) (5) (52) (87) 365

Total assets 1,401 (2) 234 64 (46) (13) 10 (16) 231 1,632

Equity and liabilities French GAAP IAS 38: IFRS 1 IAS 17 & 18: IAS 17: IAS 36: IAS 19: IFRS 2: IFRS Other Reclassifications Total IFRS IFRS balance balance Intangible & IAS 16: Sale-and- Recognition Impairment Employee Share-based Framework: adjustments sheet

sheet assets Revaluation/ leaseback of rents on a of assets benefits payments Prepaid 31 October 31 October Components transactions straight-line IFRS 3: expenses 2005

2005 method and leases basis Business combination

Share capital and additional paid-in capital 640 640Deficit (204) (2) 132 (41) (6) (55) (6) 2 (20) 5 9 (195)Net income for the year 4 13 (3) (2) 8 (2) 1 (10) 5 9Equity attributable to shareholders 440 (2) 145 (44) (8) (47) (6) (19) (2) 14 454Minority interests 27 26 1 27 54

Total equity 467 (2) 171 (44) (8) (46) (6) (19) (5) 41 508

Long-term provisions 92 6 (72) (2) (66) 26Long-term borrowings and other interest-bearing liabilities 408 88 1 (41) (3) 48 456Other non-current liabilities 8 22 (5) 30 30Deferred tax 63 15 13 7 (2) 98 98

Total non-current liabilities 500 63 103 8 6 14 (84) 110 610

Short-term provisions 49 (2) 49 49Trade payables 150 6 4 10 160Other current liabilities 191 (27) (5) (27) 164Customer prepayments 93 93Short-term borrowings and other interest-bearing liabilities 5 1 42 (3) 48 48

Total current liabilities 434 5 6 68 80 514

Total equity and liabilities 1,401 (2) 234 64 (46) (13) 10 (16) 231 1,632

Reclassifications:(1) Deferred tax assets classified as non-current for €60 million and deferred tax assets and liabilities set off by entity for €17 million.(2) Provisions classified as current (provisions other than for length-of-service awards payable to employees on retirement) for €49 million

and deferred tax liabilities for €23 million on an identified line. (3) Interest-bearing liabilities classified as current for €42 million.(4) Assets intended to be sold within 12 months.(5) Including government grants classified as non-current for €22 million.


IAS 19: IFRS 2: IFRS Other Reclassifications Total IFRS IFRS balance Employee Share-based Framework: adjustments sheet

benefits payments Prepaid 31 October expenses 2005

(24) 7931 103

15 (11) (4) 290 975(7) 8

124 4 14

(20) 324 (23) 66

15 (7) 274 1,223

43 (1) 44 44

15 36 318 1,267

11 (4) 11 1121

1 1 66(13) ( 5) (4) (39) 99

(60) (1) (60)168

(13) (5) (52) (87) 365

(13) 10 (16) 231 1,632

IAS 19: IFRS 2: IFRS Other Reclassifications Total IFRS IFRS balance Employee Share-based Framework: adjustments sheet

benefits payments Prepaid 31 October expenses 2005

640(6) 2 (20) 5 9 (195)

(2) 1 (10) 5 9(6) (19) (2) 14 454

27 54

(6) (19) (5) 41 508

6 (72) (2) (66) 26

1 (41) (3) 48 45622 (5) 30 30

13 7 (2) 98 98

6 14 (84) 110 610

49 (2) 49 496 4 10 160

(27) (5) (27) 16493

1 42 (3) 48 48

6 68 80 514

(13) 10 (16) 231 1,632


134

K. Fiscal 2005 income statement (in € millions)

French GAAP IFRS 1 & IAS 17 & 18: IAS 17: IAS 36: IFRS 2: IFRS Other Reclassifications: Total IFRS IFRS net net income IAS 16: leases Recognition Impairment Share-based Framework: adjustments income

Revaluation/ of rent on a of assets payments Prepaid Components straight-line IFRS 3: expenses

method basis Businesscombinations

Revenue 1,590 1,590Other income 59 (19) (1) (19) 40

Total revenue 1,649 (19) (19) 1,630

Purchases (721) (721)External services (476) 7 (2) 1 1 2 (2) 9 (467)Taxes other than on income (31) (31)Employee benefits expense (325) (2) 1 20 (1&2) 19 (306)Other expenses (9) 1 (2) 1 (8)Depreciation and amortization expense (70) (2) (2) 3 1 (70)Provision expense, net 5 (7) (2&3) (7) (2)

Total operating expense - Leisure (1,627) (2) 5 (2) 3 (2) 1 3 16 22 (1,605)

Operating income - Leisure 22 (2) 5 (2) 3 (2) 1 3 (3) 3 25Operating income - Management of assets 22 (1) (1) 69 89 89Other operating income & expense (2) (31) (3) (33) (33)

Operating income 22 20 5 (2) 2 (2) 1 35 59 81

Exchange gains and losses, net (4) (4)Other financial income & expense (34) 36 (3&4) 36 2Interest income 2 (4) 2 2Finance costs (8) (30) (4) (38) (38)

Finance costs and other financial income & expense, net (38) (8) 8 (38)

Loss before exceptional items and tax (16) 20 (3) (2) 2 (2) 1 43 59 43

Exceptional items 43 (1) (42) (43)

Income before tax 27 20 (3) (2) 1 (2) 1 1 16 43

Income tax expense (17) (7) (1) (10) (1) (19) (36)Net income of fully consolidated companies 10 13 (3) (2) (2) 1 (10) (3) 7Share of income of associates 3 3

Net income 13 13 (3) (2) (2) 1 (10) (3) 10

Minority interests (1) (1)Income attributable to shareholders before amortization of goodwill 12 13 (3) (2) (2) 1 (10) (3) 9Amortization of goodwill (8) 8 8

Income attributable to shareholders 4 13 (3) (2) 8 (2) 1 (10) 5 9

Reclassifications:(1) Expense transfers (€7 million) and own work capitalized (€11 million), corresponding to payroll costs deducted from “Employee benefits expense”. (2) Provision reversals set off against the corresponding expense (€7 million).(3) Exceptional items reclassified as operating items.(4) Reclassifications to comply with the IFRS presentation of finance costs and other financial expense.


IAS 36: IFRS 2: IFRS Other Reclassifications: Total IFRS IFRS net Impairment Share-based Framework: adjustments income

of assets payments Prepaid IFRS 3: expenses

Businesscombinations

1,590(19) (1) (19) 40

(19) (19) 1,630

(721)1 1 2 (2) 9 (467)

(31)(2) 1 20 (1&2) 19 (306)

1 (2) 1 (8)3 1 (70)

(7) (2&3) (7) (2)

3 (2) 1 3 16 22 (1,605)

3 (2) 1 3 (3) 3 25(1) 69 89 89(2) (31) (3) (33) (33)

2 (2) 1 35 59 81

(4)36 (3&4) 36 2

2 (4) 2 2(30) (4) (38) (38)

8 (38)

2 (2) 1 43 59 43

(1) (42) (43)

1 (2) 1 1 16 43

(1) (10) (1) (19) (36)(2) 1 (10) (3) 7

3

(2) 1 (10) (3) 10

(1)

(2) 1 (10) (3) 98 8

8 (2) 1 (10) 5 9


136

NOTE 31. SCOPE OF CONSOLIDATION AT 31 OCTOBER 2006

GROUP Member of the tax

group

Club Méditerranée SA Parent company •

% voting rights % interest Method

Europe region

FranceClub Aquarius (ex. SECAG) 100.00% 100.00% Full •Club Med Centre d’Appels Européen 100.00% 100.00% Full •Club Med Croisières & Tourisme 100.00% 100.00% Full •Club Med Événements 100.00% 100.00% Full •Club Med Marine 100.00% 100.00% Full •Hoteltour 100.00% 100.00% Full •Loin SAS 100.00% 100.00% Full •SAS du Domaine de Dieulefit 100.00% 100.00% Full •SCI Edomic 100.00% 100.00% FullSociété de Gestion Hôtelière et de Tourisme SA - SGHT 100.00% 100.00% Full •Sté Immobilière des Résidences Touristiques - S.I.R.T. 100.00% 100.00% Full •Sté des Villages de Vacances 100.00% 100.00% Full •

South AfricaVacances (Pty) ltd 100.00% 100.00% Full

GermanyClub Méditerranée Deutschland 100.00% 100.00% Full

BelgiumClub Méditerranée SA Belge 100.00% 100.00% Full

Côte d’IvoireClub Méditerranée Côte d’Ivoire 100.00% 100.00% Full

CroatiaClub Méditerranée Odmaralista 100.00% 100.00% Full

EgyptBelladona Hotels & Tourisme 50.00% 50.00% Full

SpainClub Méditerranée SA Espagne 100.00% 100.00% FullHoteles y Campamentos - HOCASA 100.00% 100.00% FullServicios Auxiliares del Club Mediterraneo - SACM 100.00% 100.00% Full

United KingdomClub Méditerranée UK Ltd 100.00% 100.00% FullClub Méditerranée Services Europe Ltd 100.00% 100.00% Full

GreeceClub Méditerranée Hellas 100.00% 100.00% FullFunhotel ltd (Ermioni) 100.00% 100.00% Full

MauritiusHoliday Villages Management Services Ltd 100.00% 100.00% FullCompagnie des Villages de Vacances de l’Isle de France - COVIFRA 84.43% 84.43% FullClub Méditerranée Albion Resorts Ltd 22.50% 22.50% Equity

IsraelClub Méditerranée Israël Ltd 100.00% 100.00% Full

ItalyCentrovacanze Kamarina Sole e sabbia di Sicilia spa 100.00% 100.00% FullSta Alberghiera Porto d’Ora - S.A.P.O. spa 40.52% 40.52% EquitySviluppo Turistico per Metaponto 38.00% 38.00% Equity



group



MoroccoSociété Immobilière de la Mer - S.I.M. 24.28% 24.28% EquitySociété Civile Immobilière des Villages de Vacances CIVAC 47.47% 47.47% EquitySociété Marocaine des Villages de Vacances SOMAVIVAC 40.00% 40.00% Equity

NetherlandsClub Méditerranée Holland bv 100.00% 100.00% FullCM Middle East bv 60.00% 60.00% Full

PortugalSociedade Hoteleira Da Balaïa SA 100.00% 100.00% FullClub Med Viagens lda 60.00% 60.00% Full

SenegalSociété Immobilière et de Gestion Hôtelière de Cap Skirring 100.00% 100.00% Full

SwitzerlandClub Méditerranée Suisse 100.00% 100.00% FullHoliday Hotels AG 50.00% 50.00% FullNouvelle Société Victoria 100.00% 100.00% Full

TunisiaClub Méditerranée Voyages 49.00% 49.00% EquityClub Med Basic Tunisie 100.00% 100.00% FullSPFT Carthago 37.43% 37.40% Equity

TurkeyAkdeniz Turistik Tesisler AS 100.00% 100.00% Full

UkraineClub Méditerranée Ukraine 100.00% 100.00% Full

South America region

FranceClub Med Amérique du Sud 100.00% 100.00% Full •Vacation Resort 100.00% 100.00% Full •

ArgentinaClub Med Argentina SRL 100.00% 100.00% Full

BrazilClub Med Brasil SA 100.00% 100.00% FullClub Méditerranée do Brasil Turismo Ltda 100.00% 100.00% FullItaparica SA Empreendimentos Turisticos 50.10% 50.10% FullTaipe Trancoso Empreendimentos SA 50.00% 50.00% FullClub Med Brasil Boutiques Ltda 100.00% 100.00% Full

North America region

FranceClub Med Amérique du Nord 100.00% 100.00% Full •

Grand CaymanClub Med Inc. 100.00% 100.00% Full

French West IndiesSNC Caravelle 2006 100.00% 100.00% FullSociété Villages Hôtels des Caraïbes - SVHC 53.91% 53.91% FullSociété Hôtelière du Chablais 100.00% 100.00% Full •Société Martiniquaise des Villages de Vacances 100.00% 10.00% Full


138


group



BahamasClub Méditerranée (Bahamas) Ltd 100.00% 100.00% FullColumbus Isle Casino 100.00% 100.00% FullHoliday Village (Columbus Island) 100.00% 100.00% FullShipping Cruise Services Ltd 100.00% 100.00% Full

CanadaClub Med Sales Canada Inc. 100.00% 100.00% Full

United StatesClub Med Management Services Inc. 100.00% 100.00% Full •Club Med Sales Inc. 100.00% 100.00% Full •Holiday Village of Sandpiper 100.00% 100.00% Full •Sandpiper Resort Properties Inc/srp 100.00% 100.00% Full •Sun Cancun I 100.00% 100.00% Full •Sun Cancun II 100.00% 100.00% Full •Sun Ixtapa I 100.00% 100.00% Full •Sun Ixtapa II 100.00% 100.00% Full •Sunport Property Corporation 100.00% 100.00% Full •Vacation Wholesaler Inc 100.00% 100.00% Full •

MexicoCancun Property SRL 100.00% 100.00% FullIxtapa Property SRL 100.00% 100.00% FullOperadora de Aldeas Vacacionales SA de cv 100.00% 100.00% FullProfotur SA de cv 100.00% 100.00% FullVacation Properties de Mexico SA de cv 100.00% 100.00% FullVilla Playa Blanca SA 100.00% 100.00% Full

Dominican RepublicHoliday Village of Punta Cana (ex Newco) 100.00% 100.00% Full

Turks & CaïcosHoliday Villages Providenciales Turks & Caicos Ltd 100.00% 100.00% Full

Asia region

LuxembourgClub Med Asie 100.00% 100.00% Full

AustraliaClub Med Management (Australia) Pty Ltd 100.00% 100.00% FullClub Med Australia Pty Ltd 100.00% 100.00% FullHoliday Village (Australia) Pty Ltd 100.00% 100.00% Full

South KoreaClub Med Vacances (Korea) Ltd 100.00% 100.00% Full

Hong KongClub Méditerranée Hong Kong Ltd 100.00% 100.00% FullClub Méditerranée Management Asia Ltd 100.00% 100.00% FullMaldivian Holiday Villages Ltd 100.00% 100.00% Full

IndonesiaPT Bali Holiday Village 100.00% 100.00% Full

JapanClub Méditerranée KK 100.00% 100.00% FullSCM Leisure Development Co Ltd 100.00% 100.00% Full



group



MalaysiaHoliday Villages of Malaysia sdn bhd 100.00% 100.00% FullRecreational Villages sdn bhd 100.00% 21.00% FullVacances (Malaysia) sdn bhd 100.00% 100.00% Full

SingaporeClub Med Services Singapore pte Ltd 100.00% 100.00% FullVacances (Singapore) pte Ltd 100.00% 100.00% Full

TaiwanClub Med Vacances (Taiwan) Ltd 100.00% 100.00% Full

ThailandHoliday Villages Thailand Ltd 49.21% 49.21% FullVacances Siam Club Med Ltd 100.00% 100.00% Full

Polynesia and New CaledoniaSociété Polynésienne des Villages de Vacances 98.45% 98.45% Full

Tour Operating

FranceJet tours 99.85% 99.85% Full •Jet Eldo 100.00% 99.85% Full •Jet Loisirs 100.00% 99.85% Full •Jet Marques 100.00% 99.98% FullJet Stim 49.00% 49.00% Equity

TunisiaJet Eldo Tunisie 100.00% 99.85% Full

MoroccoFST 65.00% 65.00% FullJet Eldo Maroc 100.00% 99.85% Full

Club Med World

FranceClub Med World Holding 100.00% 100.00% Full •Club Med World France 100.00% 100.00% Full •

CanadaCM World Montréal Inc 100.00% 100.00% FullCM World Montréal Holding Inc 100.00% 100.00% Full

Club Med Gym

FranceClub Med Gym SA 100.00% 100.00% FullEdifit 100.00% 100.00% FullClub Med Gym Corporate 100.00% 100.00% Full

Full: fully consolidated Equity: accounted for by the equity method


Auditors’ report on the consolidated financial statements

140

YEAR ENDED 31 OCTOBER 2006

In accordance with the terms of our appointment by the

Annual Shareholders’ Meeting, we have examined the

accompanying consolidated financial statements of Club

Méditerranée for the year ended 31 October 2006.

The consolidated financial statements have been approved

by the Board of Directors. Our role is to express an opinion

on these financial statements based on our audit. These con-

solidated financial statements have been prepared for the first

time in accordance with the International Financial Reporting

Standards (IFRSs), International Accounting Standards (IASs)

and related interpretations adopted by the European Union.

They include comparative financial information for the year

ended 31 October 2006, prepared according to the same stan-

dards, except for IAS 32, IAS 39 and IFRS 4, which have been

adopted as from 1 November 2005 as allowed under IFRS 1.

I. Opinion on the consolidatedfinancial statementsWe conducted our audit in accordance with the professional

standards applicable in France. Those standards require that

we plan and perform the audit to obtain reasonable assurance

about whether the consolidated financial statements are free

from material misstatement. An audit includes examining, on

a test basis, evidence supporting the amounts and disclosures

in the financial statements. An audit also includes assessing

the accounting principles used and significant estimates made

by management, as well as evaluating the overall financial

statement presentation. We believe that our audit provides a

reasonable basis for our opinion.

In our opinion, the consolidated financial statements have

been properly prepared and give a true and fair vies of the

assets and liabilities, financial position and results of opera-

tions of the consolidated companies, in accordance with the

International Financial Reporting Standards (IFRSs), Interna-

tional Accounting Standards (IASs) and related interpretations

adopted by the European Union.

II. Justification of our assessmentsIn accordance with the requirements of article L.823-9 of the

French Commercial Code (Code de Commerce) relating to

the justification of our assessments, we draw to your attention

the following matters:

• Notes 2.7 (Impairment of assets) and 2.15 (Deferred taxes)

describe the accounting policies and methods used to

determine asset impairments and to assess the recover-

ability of deferred tax assets. As part of our assessment of

the reasonableness of the underlying estimates, we assessed

the appropriateness of these accounting policies and

methods, as well as of the disclosures made in the notes.

We also reviewed the consistency of the underlying data and

assumptions, and the documents provided.

The assessments were made in the context of our audit of the

consolidated financial statements, taken as a whole, and

therefore contributed to the formation of the unqualified

opinion expressed in the first part of this report.

III. Specific proceduresWe also examined the information about the Group given in

the Management Report, in accordance with the professional

standards applicable in France. We have no matters to report

concerning the fairness of this information and its consistency

with the consolidated financial statements.

Neuilly-sur-Seine and Paris-La Défense, 12 February 2007

The Statutory Auditors

Deloitte & Associés Ernst & Young Audit

Alain Pons Dominique Jumaucourt Pascal Macioce


Group Structure as of 31 October 2006

Marketing Service Real estate Service and Othercompanies companies companies real estate

companies

EUROPE

France CM Centre d’Appels SAS Domaine CMSA

Européen de Dieulefit Club AquariusCM Croisières Hoteltour

et Tourisme SIRT Loin SASCM Evénements Sté Civile Edomic

CM MarineSGHT

SVVBelgium CM Belgique

Côte d’Ivoire CM Côte d’Ivoire

Croatia CM Odmaralista

Egypt Belladona Hotels& tourisme

CM Germany Deutschland

Greece CM Hellas Funhotel

Israel CM Israël

Italy CentrovacanzeKamarina

Ste AlberghieraPorto d’Ora

Sviluppo Turisticoper Metaponto

Mauritius HV Management Covifra CM Albion ResortsServices

Morocco CIVACSOMAVIVAC

Ste Immobilièrede la Mer

Netherlands CM Holland CM Middle East

Portugal CM Viagens Sociedade Hoteleirade Balaia

Senegal Société Immobilièreet

de Gestion Hôtelièrede Cap skirring

South Africa Vacances Pty

Spain CM Espagne SACMHocasa

Switzerland CM Suisse Holiday HotelsNouvelle Société Victoria

Tunisia SPT - Carthago Club Med VoyagesCM Bazic Tunisie

Turkey Akdeniz TuristikTesisler

Ukraine CM Ukraine

United Kingdom CM UK CM Services


142


companies

SOUTH AMERICA

France Vacation Resort CM Amérique du Sud

Argentina CM Argentina

Brazil CM do Brasil Turismo Itaparica CM BrasilCM Brasil Boutiques Taipe Trancoso

Empredimentos

NORTH AMERICA

France CM Amérique du Nord

French West Indies Sté Martiniquaise SVHC Sté Hôtelièredes Villages SNC Caravelle 2006 du Chablaisde Vacances

Bahamas Holiday village CM Bahamas(Columbus Island) Columbus Isle Casino

ShippingCruise Services

Canada CM Sales Canada Inc.

Dominican Republic HV ofPunta Cana

Grand Cayman CM Inc.

Mexico Villa PlayaOperadora de Blanca Vacation Properties

Aldeas Vacacionales Profotur de MexicoCancun SRL

Ixtapa SRL

Saint Lucia HV Ste Lucie

Turks & Caicos HV Providenciales

United States CM Sales CM Management Sandpiper Resort Holiday Villageservices Properties of Sandpiper

Vacation Sun PropertyCorporation

Sun Cancun I et IIWholesaler Inc Sun Ixtapa I et II

ASIA

Luxembourg CM Asie

Australia CM Australie CM Managementa Holiday VillageAustralia Australia

Beach Club

Hong Kong CM Hong Kong Maldivian HVCM Management

Asia

Indonesia PT Bali HV

Japan CM KK SCM LeisureDevelopment Co

Malaysia Vacances (Malaysia) HV Malaysia Recreational Villages

Sdn Bhd

Polynesia & New Caledonia SPVV

Singapore CM Services (Singapore) Vacances (Singapore)

South Korea CM Vacances Korea


companies

Taiwan CM Vacances (Taiwan)

Thailand Vacances Siam CM HV (Thailand)

TOUR OPERATING

France Jet tours SAJet Eldo

Jet LoisirsJet Marques

Jet Stim

Morocco Four Season Travel Jet Eldo Maroc

Tunisia Jet Eldo Tunisie

CLUB MED WORLD

France CM World France CM World Holding

Canada CM World Montréal CM World MontréalHolding

CLUB MED GYM

France Club Med Gym SAEdifit

CM Gym Corporate



144

General information

146 // GENERAL INFORMATIONABOUT CLUB MÉDITERRANÉE

149 // GENERAL INFORMATION ABOUT THE COMPANY’S CAPITAL

153 // THE MARKET FOR CLUB MÉDITERRANÉE SECURITIES

154 // DIVIDENDS

155 // CORPORATE GOVERNANCE


146

COMPANY NAMEClub Méditerranée.

REGISTERED OFFICE AND HEAD OFFICE11, rue de Cambrai, 75957 Paris Cedex 19, France.

LEGAL FORM AND GOVERNING LAWClub Méditerranée (the Company) is a French société

anonyme (public limited company) governed by the laws

of France, including Articles L. 225-57 to L. 225-93 of the

Commercial Code.

TERMThe Company will be dissolved on 31 October 2095 unless it

is wound up in advance or its term is extended by decision of

an Extraordinary Shareholders’ Meeting.

CORPORATE PURPOSE (ARTICLE 2 OF THE BYLAWS)

Club Méditerranée was established to develop and manage

hotels or holiday centers and/or leisure facilities and/or enter-

tainment facilities and any and all activities relating thereto,

whether directly or indirectly, in France or abroad, including

the prospecting, purchase and/or sale and leasing, on any

basis, of land, movable property and real estate; the creation

and operation of design offices; the construction, fitting out,

management and maintenance of hotels, restaurants and

holiday centers and/or leisure facilities and/or entertainment

facilities; the promotion, organization or delivery of travel and

holiday packages; the provision of accommodation, food

and transport for participants; the organization of tours

and excursions; the organization and execution of sporting,

educational, tourist, cultural or artistic activities; the organi-

zation or events and shows, the performance thereof and

the provision of any related consulting services; the creation

or acquisition and development of any and all equipment,

organizations and facilities for sporting, educational, tourist,

cultural or artistic purposes; the drafting and signature of

any and all contracts for the same purposes; the creation or

acquisition and operation of any and all businesses or facilities

conducting the same activities; participation by any method

and in any form in any and all existing or future ventures or

companies; the design, creation, production and marketing

– directly or indirectly through a licensee or other partner –

of any and all products and services that can be distributed

under the brands, logos or emblems owned by the Company,

or under any new brand, logo or emblem owned or registered

by the Company in the future.

The Company may assist its subsidiaries by any method,

including by extending loans, advances and credits, subject

to compliance with applicable laws and regulations.

More generally, the Company may conduct all industrial,

commercial or financial operations, involving both movable

property and real estate, including the acquisition, holding

and management of interests in any industrial or commercial

venture, directly or indirectly related to the corporate purpose

of the Company as described above and any other similar or

related purposes.

INCORPORATION DETAILS

572 185 684 RCS Paris - APE Code 552 E

CONSULTATION OF CORPORATE DOCUMENTS

The by-laws, minutes of Shareholders’ Meetings, financial

statements and auditors’ reports are available for consultation

at the Company’s head office.

FISCAL YEAR

The Company’s fiscal year begins on 1 November and ends

on 31 October.

APPROPRIATION OF INCOME

Article 36 of the by-laws states that at least five percent of

net income for the year, less any prior year losses, is appro-

priated to the legal reserve. This appropriation ceases to be

compulsory once the legal reserve represents one-tenth of the

Company’s capital. However, if for any reason, the legal reserve

falls to below one-tenth of the capital, it must be restored to

the required level by the same method. The income remain-

ing, less any prior year losses and any other amounts to be

credited to reserves pursuant to the law or the Company’s

bylaws, plus any unappropriated retained earnings brought

forward from prior years, is then appropriated as follows:

General information about Club Méditerranée


• To any extraordinary reserves or to revenue reserves, by deci-

sion of the Annual Shareholders’ Meeting.

• To the payment of a dividend provided that, except in the

case of a capital reduction, no distributions may be made

to shareholders if shareholders’ equity represents – or would

represent if the distribution were to be made – less than the

sum of capital and non-distributable reserves.

The Annual Shareholders’ Meeting may also decide to pay all

or part of the dividend out of revenue reserves or to effect

an exceptional distribution of revenue reserves. In this case,

the reserves against which the dividend is to be charged must

be designated in the related resolution. However, no distri-

butions of reserves may be decided if distributable earnings

for the year have not been fully distributed.

Any losses recorded in the financial statements approved by

the Annual Meeting are recorded in a special reserve account

and set off against income earned in subsequent years until

they have been absorbed in full.

The Annual Meeting may offer shareholders the option to

reinvest all or part of the interim or final dividend in new

shares. The method of payment of cash dividends is decided

by the Annual Meeting or, failing that, by the Board of

Directors. In all cases, dividends must be paid within nine

months of the year-end, unless the court grants an extension.

If the audited annual or interim financial statements show that

the Company has generated a profit for the period – after

deducting depreciation, amortization and provision expense

as well as any prior year losses and any amounts to be appro-

priated to reserves pursuant to the law or the by-laws, and

taking into account any unappropriated retained earnings –

an interim dividend may be paid prior to the approval of the

financial statements for the year. Under no circumstances may

interim dividends exceed the profit available for distribution

thus defined.

ATTENDANCE AND REPRESENTATIONAT SHAREHOLDERS’ MEETINGS

1 - All shareholders have the right to attend Shareholders’

Meetings and take part in the vote, in person or by proxy,

whatever the number of shares held, upon presentation of

evidence of their identity, provided that they have settled all

capital calls within thirty days of receiving notification of the

amount called and that their shares are recorded in an account

opened in their name at least five days prior to the date of

the meeting.

2 - All shareholders may vote by mail, using the postal voting

form issued by the Company. Details of how to obtain postal

voting forms are provided in the notice of meeting.

3 - Shareholders may give proxy only to their spouse or another

shareholder.

4 - In order to be entitled to participate in Shareholders’

Meetings or to vote by mail, holders of registered shares are

required to have their shareholdings recorded in the share

register kept by the Company or the registrar at least five days

prior to the date of the Shareholders’ Meeting. Holders of

bearer shares wishing to attend the Shareholders’ Meeting

are required to lodge at the Company’s head office or at any

other address specified in the notice of meeting, at least five

days prior to the date of the meeting, a certificate issued by

their stockbroker, bank or other intermediary attesting to the

holder’s ownership of the shares and certifying that they are

being held in a blocked account until after the date of the

Shareholders’ Meeting.

5 - Holders of registered shares will be admitted to the meeting

on presentation of evidence of their identity. Holders of bearer

shares will be admitted on presentation of the certificate

referred to above.

The Board of Directors may decide to issue individual admis-

sion cards to shareholders, in which case only the named

shareholder or proxy may use the card.

DOUBLE VOTING RIGHTS

Article 8 of the by-laws stipulates that all fully paid shares

registered in the name of the same holder for at least two

years carry double voting rights. Evidence of eligibility for

double voting rights must be provided at least five days prior

to the date of the Shareholders’ Meeting. In the event such

shares are transferred or converted to bearer form, they

are stripped of their double voting rights. However, double

voting rights are not lost and the two-year qualifying

period continues to run if the shares are transferred in the

estate of a deceased shareholder, or in connection with the

settlement of the marital estate, or a donation inter vivos

to a spouse or relative in the direct line of succession.

General information

148

DISCLOSURE THRESHOLDS

Article 7 of the by-laws stipulates that any natural person or

legal entity acting alone or in concert with others that acquires

0.5% of the Company’s capital or any multiple thereof is

required to disclose to the Company the total number of

shares and voting rights held. Disclosure must be made by

registered letter with return receipt requested, within five

trading days of the date on which the disclosure threshold is

crossed. For the purpose of determining whether a disclosure

threshold has been crossed, account is taken of any securities

that are convertible, exchangeable, redeemable or other-

wise exercisable for shares of the Company. These disclosure

thresholds apply in addition to the one-twentieth, one-tenth,

three-twentieths, one-fifth, one-quarter, one-third, one-half,

two-thirds, eighteen-twentieths and nineteenth-twentieths

thresholds provided for in Article L 233-7 of the Commercial

Code. The same disclosure rules apply if a shareholder’s inter-

est is reduced to below any of the above thresholds.

For the purpose of applying these rules, the terms “shares”

and “voting rights” have the same meaning as in Articles

L.233-3, L.233-9 and L.233-10 of the Commercial Code.

In the case of failure to comply with these requirements, duly

noted in the minutes of the Shareholders’ Meeting, the shares

in excess of the relevant threshold will be stripped of voting

rights at all Shareholders’ Meetings for the period provided

for by law at the request of one or several shareholders together

holding at least 5% of the Company’s capital or voting rights.

IDENTIFIABLE BEARER SECURITIES

The by-laws authorize the Company to apply at any time

to the French securities clearing agency for details of the

identity of holders of voting shares and any securities convert-

ible, exchangeable, redeemable, or otherwise exercisable for

voting shares, and of the number of securities held by each

such holder, pursuant to Article L.228-2 of the Commercial

Code. The Company makes such applications each year.

SERVICES PROVIDED BY THE COMPANYTO SUBSIDIARIES

Services provided by Club Méditerranée SA in its capacity as

parent company to its subsidiaries include the usual senior

management and support services, including administrative,

financial, legal, communication, marketing, human resources,

training, IT and sales services. They are billed at cost.

SHARE CAPITAL

At 31 October 2006, the Company’s share capital amounted

to €77,432,020, divided into 19,358,005 common shares with

a par value of €4.00, all fully paid-up. These figures were

unchanged from 31 October 2005. Shares registered in the

name of the same holder for at least two years carry double

voting rights (193,985 at 31 October 2006).

POTENTIAL CAPITAL

The exercise of all outstanding equity warrants and stock

options would result in the capital being increased to

€104,327,756 consisting of 26,081,939 shares of common stock,

or a potential dilution of 34.7%. These figures take into account

all the securities outstanding at 31 October 2006 that are

convertible, redeemable, exchangeable or otherwise exercis-

able for common shares at a future date.

19,358,005 shares outstanding at 31 October 2006:

+ 2,193,731 convertible bonds (OCEANEs) due

1 November 2008

+ 3,092,783 convertible bonds (OCEANEs) due

1 November 2010

+ 1,437,420 stock options outstanding at 31 October 2006

= 26,081,939 potential shares at 31 October 2006

AUTHORIZED, UNISSUED CAPITAL

The Extraordinary Shareholders’ Meeting of 16 March 2005

approved several resolutions authorizing the Board of

Directors to increase the Company’s capital. The Board of

Directors may delegate the right to use these authorizations

in accordance with the Company’s by-laws and Articles

L.225-127 et seq of the Commercial Code.

The purpose of these authorizations is to enable the Company

to issue shares and share equivalents in order to raise any

necessary financial resources required in a swift and flexible

manner. They expire in May 2007, and the shareholders will be

invited to grant new and similar authorizations at the next

Annual Meeting.

General information about the Company’s capital


FINANCIAL AUTHORIZATIONS AT 31 OCTOBER 2006

Authorization Maximum Duration Expiry date Used in fiscal Total usedamount 2005/2006

Issue of shares and share Equity: €20 million(1) 26 months 15 May 2007 Not usedequivalents with pre-emptive Debt: €300 millionsubscription rights

Issue of shares and share Equity: €20 million(1) 26 months 15 May 2007 Not usedequivalents without pre-emptive Debt: €300 millionsubscription rights

Issue of shares and share 10% of capital 26 months 15 May 2007 Not usedequivalents with no set issue price per year

Capital increase to be paid Equity: 26 months 15 May 2007 Not usedup by capitalizing retained earnings, €226.5 million(1)

additional paid-in capital or profit

Issue of shares and share equivalents Equity: €20 million(2) 26 months 15 May 2007 Not usedin connection with a public exchange offer

Issue of shares and share equivalents 10% of capital 26 months 15 May 2007 Not usedin payment for contributed assets

Increase in the number of securities 15% of the initial 26 months 15 May 2007 Not usedto be issued in the event of the issue, based on issue of shares and share equivalents the same priceeither with or without pre-emptivesubscription rights (greenshoe option)

Employee share issue €3.5 million(1) (2) 26 months 15 May 2007 Not used

Stock options for corporate (3) 26 months 15 May 2007 250,000 250,000officers and employees options options

Shares awarded free of consideration (1) 14 months 15 May 2007 Not used

(1) Amount included in the overall authorized ceiling: €270 million (40th resolution of the Shareholders’ Meeting of 16 March 2005).(2) Amount included in the €20 million ceiling relating to the issue of shares and share equivalents without pre-emptive subscription rights.(3) The number of outstanding options may not exceed one-third of the Company’s common stock (Article L.225-182 of the Commercial Codeand Article D.174-17 of the Decree of 23 March 1967).

General information

150

CHANGES IN CAPITAL SINCE 31 OCTOBER 2001

Share capital Additional paid-in Number of shares Type of transactioncapital

€’000s €’000s

At 31 October 2001 77,432 - 19,358,005

- Conversion of capital- Employee share issue

Exercise of warrantsAt 31 October 2002 77,432 - 19,358,005









ANALYSIS OF OWNERSHIP STRUCTURE

Number of shares Voting rights31 Oct. 2006 % 31 Oct. 2006 %

Fipar Holding (CDG Maroc) 1,935,801 10.0 1,935,801 9.9Accor 2,212,349 11.4 2,212,349 11.3Rolaco 909,577 4.7 909,577 4.7Nippon life 769,731 4.0 769,731 3.9

Total Board of Directors 5,827,458 30.1 5,827,458 29.8

Treasury stock 277,305 1.4 277,305 1.4

Employees 31,241 0.2 58,591 0.3

Richelieu mutual fund 5,107,492 26.4 2,187,946 11.2

Air France 387,160 2.0 387,160 2.0

French institutions 2,692,116 13.9 2,749,939 14.1

Foreign institutions 2,259,401 11.7 2,269,421 11.6

Public and other 2,775,832 14.3 2,969,817 15.2

Total 19,358,005 100.0 19,551,990 100.0

Single voting rights 19,164,020

Double voting rights 387,970

Total voting rights 19,551,990*

* Taking into account 3,196,851 shares without voting rights (277,305held in treasury and 2,919,546 held by the Richelieu mutual fundstripped of voting rights in accordance with a decision issued by theFrench securities regulator (AMF) on 18 March 2005).


General information

CHANGES IN OWNERSHIP STRUCTUREOVER THE LAST THREE YEARS

Changes in ownership structure over the last three years have

been as follows:

• 2004: On 22 October 2004, Accor acquired a 28.9% interest

in the Company by purchasing the shares held by its two

historic shareholders, the Agnelli Group (through its Exor and

IFIL subsidiaries) and Caisse des Dépôts et Consignations.

On 19 October 2004 Richelieu Finance disclosed to

the Autorité des Marchés Financiers that the number of

Club Méditerranée shares held in its managed funds and

portfolios had exceeded the 10% threshold, at 10.22% of

the capital.

• 2005: On 25 January 2005, Richelieu Finance informed the

Company that it held 3,668,857 shares of Club Méditerranée

common stock, representing 18.95% of the capital.

On 9 February 2005, Richelieu Finance disclosed to the

Autorité des Marchés Financiers that its holdings had

exceeded the 20% threshold, at 20.13% of the capital.

Having reduced its holdings in the Company to below the

20% threshold at 18.06%, representing 3,495,635 shares,

on 9 June 2005, Richelieu Finance disclosed to the Autorité

des Marchés Financiers that it had once again exceeded the

20% threshold through the ownership of 3,871,780 shares.

Richelieu Finance subsequently continued to raise its

shareholdings and at 31 October 2005 held 4,564,212

shares, representing 23.57% of the Company’s capital.

• 2006: On 21 November 2005, Richelieu Finance informed the

Company that it held 4,784,817 shares of Club Méditerranée

common stock, representing 24.71% of the capital.

On 18 April 2006, Richelieu Finance informed the Company

that it had raised its interest to 4,895,369 shares, represent-

ing 25.28% of the capital.

As part of its strategy to refocus operations on its Hotels and

Services businesses, on 9 June 2006 Accor announced that it

had decided to sell the bulk of its stake in Club Méditerranée,

representing 22.9% of the capital out of its total holding of

28.9%. Accor first sold a 16% interest to a group of investors

which have signed a shareholders’ pact with Accor (see

“Shareholders’ Pacts” below). Following this transaction, Fipar

Holding (a subsidiary of Caisse de Dépôt et de Gestion du

Maroc), Icade and the Air France-KLM group held respective

interests of 10%, 4% and 2%. Accor then sold a further 1.5%

of the Company’s shares to Generali France, following which

it had a remaining 5.4% to divest.

On 7 August 2006, Richelieu Finance increased its holdings

in the Company to 5,107,492 shares, representing 26.38% of

the capital.

• 2007: On 23 January 2007, Accor divested part of its interest

in Club Méditerranée in the open market, reducing its stake

in the Company to below the 10% capital and voting rights

threshold. Following this divestment Accor disclosed that it

held 1,912,349 shares of Club Méditerranée common stock,

representing 9.88% of the capital and 9.78% of the voting

rights.

AUTHORIZATION TO TRADE IN THE COMPANY’S SHARES

The authorization given to the Board of Directors to trade in

the Company’s shares on the stock market, in accordance with

Articles L.225-209 et seq. of the French Commercial Code and

European Commission Regulation 2273/2003 , was renewed

at the Annual Shareholders’ Meeting of 14 March 2006

(seventh resolution) for a further period of eighteen months,

expiring on 13 September 2007.

Under the terms of this authorization, the number of shares

purchased may not exceed 10% of the capital.

The authorization may be used, in the following order of

priority:

• To maintain a liquid market in the Company’s shares under

a liquidity agreement that complies with the Code of Ethics

of the French Association of Investment Firms (AFEI).

• To purchase shares for allocation on exercise of stock options

granted to employees.

• To purchase shares to be exchanged for stock in other com-

panies or to be used as consideration in connection with

acquisitions.

• To purchase shares for subsequent cancellation.

For transactions to stabilize the share price, the maximum

purchase price per share under this authorization is €70 and

the minimum sale price is €30. This minimum sale price applies

to the resale of shares acquired under this share buyback

program and/or any programs authorized by previous share-

holders’ meetings.

152

Club Méditerranée entered into an AFEI liquidity agreement

with CA Cheuvreux as part of the share buyback program

authorized by the Annual Shareholders’ Meeting of 16 March

2005. This agreement came into effect on 15 November 2005

for an automatically renewable one-year term. The Company

originally allocated €2 million in liquidity under the agreement,

followed by a further €2 million on 14 March 2006, bringing

the total available amount to €4 million.

At 31 October 2006, the Company had used the 16 March

2006 authorization to purchase 156,709 shares at an average

price of €41.53 per share and sell 136,569 shares at an average

price of €43.42.

At 31 October 2006, a total of 277,305 shares were held in

treasury.

At the Annual Meeting on 8 March 2007, shareholders will be

asked to approve a new share buyback authorization.

SHAREHOLDERS’ PACTS

In connection with the reorganization of Club Méditerranée’s

ownership structure, a shareholders’ pact relating to 22% of

the Company’s shares was signed on 9 June 2006 between

Accor (which has retained a 6% stake in the Company), Caisse

de Dépôt et de Gestion du Maroc (through its subsidiary Fipar

Holding which has acquired a 10% interest), Air France Finance

(holder of a 2% interest) and Icade (whose interest amounts

to 4%).

By signing this pact, these shareholders have illustrated their

long-term commitment to holding a stake in Club Méditerranée

with a view to enabling the Company to continue to imple-

ment its strategy via the backing of a solid ownership struc-

ture. The pact includes a two-year lock-up and standstill clause.

Icade’s signature of the pact was subject to a condition prece-

dent of entering into a real estate partnership agreement with

Club Méditerranée by 30 September 2006. The planned trans-

action – which concerned refinancing three Club Med Villages

– could not be completed by that date as the related economic

and financial conditions were not suitably advantageous for

Club Méditerranée. As a result Icade has withdrawn from the

shareholders’ pact.

To the best of the Company’s knowledge, no other share-

holders’ pacts exist.

Club Méditerranée shares were originally floated on the Paris

stock exchange in 1966 and are currently traded on the first

market of Euronext. Club Méditerranée is one of the 120 stocks

included in the SBF 120 index. At 31 December 2006, its index

weighting was 0.05%. Club Méditerranée shares are eligible

for Euronext’s deferred settlement service.

Common shares are traded under ISIN code FR 0000 121568.

Between the beginning of each fiscal year and the ex-dividend

date, new shares issued ex-dividend are traded on the cash

settlement market. For several years, Club Méditerranée

shares have been selected as a support for covered warrants

issued by various banks.

To inform shareholders, financial analysts, brokers, portfolio

managers and private investors of developments affecting

the Group, press releases are distributed to the main press

agencies and published in a number of newspapers, as well

as on the Company’s website.

Prices and trading volumes for Club Méditerranée common

stock and OCEANE convertible/exchangeable bonds are

presented below.

The market for Club Méditerranéesecurities


General information

TRADING PERFORMANCE OF CLUB MÉDITERRANÉE SA SECURITIES

Common stock Monthly share price Monthly average daily (ISIN: FR 0000 121568) (euros) trading volume

(number of shares traded and thousands of euros)

High Low Average (1) No. of shares Capital

July 2005 39.60 37.11 39.38 32,070 1,238

August 2005 40.36 38.70 38.85 22,805 907

September 2005 40.30 38.50 39.10 19,233 755

October 2005 39.15 36.20 36.45 25,770 973

November 2005 39.43 36.30 37.79 25,360 964

December 2005 39.40 37.20 39.32 27,259 1,037

January 2006 42.45 39.00 41.51 36,359 1,504

February 2006 42.96 40.80 42.17 13,670 574

March 2006 48.91 41.46 45.79 48,335 2,208

April 2006 47.60 43.28 47.05 49,600 2,259

May 2006 48.59 44.45 47.40 17,151 803

June 2006 48.00 38.50 39.80 25,438 1,054

July 2006 39.89 35.25 37.00 18,033 674

August 2006 41.99 36.25 41.60 10,774 415

September 2006 44.70 40.56 42.00 15,920 675

October 2006 43.00 41.37 42.21 10,902 462

November 2006 43.50 40.40 42.80 25,738 1,086

December 2006 42.96 40.31 40.80 18,636 772

Source: Fininfo(1) Average calculated based on daily closing prices.

154

3% OCEANE convertible/exchangeable bonds Monthly price Monthly average daily trading volume(face value €58) (euros) (number of bonds traded and(ISIN: FR 0000 180184) thousands of euros)

High Low Average (1) No. of bonds Capital

July 2005 65.50 64.20 65.18 873 57

August 2005 65.95 64.50 65.44 2,888 190

September 2005 66.50 65.50 65.91 2,634 174

October 2005 66.50 65.83 66.12 200 13

November 2005 66.00 63.50 65.03 380 25

December 2005 69.00 64.35 64.93 741 49

January 2006 66.35 64.80 65.77 333 22

February 2006 66.45 64.80 65.80 1,842 121

March 2006 66.70 65.40 65.89 4,780 315

April 2006 66.40 65.60 65.98 206 14

May 2006 66.80 65.70 66.31 389 26

June 2006 66.80 65.70 66.13 335 22

July 2006 66.90 65.15 65.89 147 10

August 2006 66.40 65.25 66.00 96 6

September 2006 67.10 65.25 65.81 298 20

October 2006 67.15 65.00 66.17 251 17

November 2006 66.00 65.00 65.35 305 20

December 2006 66.00 65.00 65.24 212 14

4.375% OCEANE convertible/exchangeable bonds Monthly price Monthly average daily trading volume(face value €48.50) (euros) (number of bonds traded(ISIN: FR 00 10130732) and thousands of euros)

High Low Average (1) No. of bonds Capital

November 2005 50.2 46.50 49.30 189 9

December 2005 51.6 44.40 50.00 545 27

January 2006 52.0 50.05 51.00 4,348 219

February 2006 54.9 51.05 51.05 631 33

March 2006 55.3 49.00 54.00 3,088 166

April 2006 54.9 50.00 54.00 4,175 225

May 2006 55.2 53.00 54.80 289 16

June 2006 54.8 49.50 51.80 144 7

July 2006 53.0 49.00 53.00 246 13

August 2006 52.7 49.13 49.21 63 3

September 2006 52.7 49.20 50.35 2,002 102

October 2006 51.4 50.00 50.00 351 18

November 2006 49.4 48.25 48.60 851 41

December 2006 50.0 48.65 49.00 753 37

(1) Average calculated based on daily closing prices - Source: Fininfo

DividendsYears ended Number of Dividend for the year Share price Yield incl. tax creditOctober 31 shares based on 31 Oct.

share price

Net Tax credit Total High Low 31 Oct.

2004 19,358,005 - - - 40.00 29.20 35.30

2005 19,358,005 - - - 42.28 34.00 36.45

2006 19,358,005 - - - 48.39 35.90 42.21

The Company complies with the principles of corporate

governance applicable in France.

At the Annual Shareholders’ Meeting of 16 March 2005,

the shareholders approved an amendment to the Company’s

corporate governance involving a switch from the two-tier

system of an Executive Board and Supervisory Board to that

of a Board of Directors.

COMPENSATION AND BENEFITS PAIDTO DIRECTORS AND OFFICERS

CompensationThe compensation paid to executive officers is made up of a

fixed and variable portion. The rules used to calculate the

variable portion are set by the Board of Directors each year

on the basis of recommendations issued by the Nominations

and Compensation Committee.

Corporate governance


General information

Gross compensation in euros

Fiscal 2005 annual compensation Fiscal 2006 annual compensation

Fixed Variable(1) Benefits Fixed Variable(2) BenefitsTarget Paid in-kind Target Paid in-kind

Henri Giscard d’Estaing 648,653* 435,000 261,000 17,388 640,020 450,000 288,000 24,184François Salamon 320,000 160,000 64,000 7,083 320,000 160,000 104,300 4,865Michel Wolfovski 302,500 137,500 82,500 16,800 332,300 155,200 121,600 19,131

(1) Paid in January 2005 for fiscal 2004.(2) Paid in January 2006 for fiscal 2005.(*) This figure includes the balance paid in relation to amounts due when the Company’s corporate governance structure was changed. Henri Giscardd’Estaing’s annual basic compensation in his capacity as Chairman and Chief Executive Officer was €640,020 for the period under review.

Henri Giscard d’Estaing’s variable compensation paid in

January 2006 for fiscal 2005 in his capacity as Chairman and

Chief Executive Officer was linked to the Company’s earnings.

He received 64% of the target amount set for that year.

The variable portion of the compensation of François Salamon

and Michel Wolfovski – who are Executive Vice-Presidents

(non-directors) – is based partly on the Company’s earnings

and partly on the attainment of individual objectives. These

factors respectively represent 60% and 40% of the Executive

Vice-Presidents’ target bonus.

Benefits in-kind correspond to a company car and fringe

benefits associated with stays at Club Méditerranée Villages.

No exceptional payments were made in fiscal 2006.

No loans or guarantees have been granted by the Company

to its executive officers.

Other benefits and commitmentsStock options were granted to executive officers during fiscal

2006 under Plan K.

At 31 October 2006, the Company’s executive officers held

the following stock options:

Outstanding stock options granted in prior years

Plan F Plan F2 Plan G Plan G3 Plan G5 Plan H Plan I Plan J Plan K

Exercise dates 50 % at 50% at 7 Feb. 2005 6 Feb. 2005 5 Feb. 2006 1 March 2006 15 Jan. 2007 11 Jan. 2008 14 March 200918 Aug. 2002 24 March 2003+ balance at + balance at

18 Aug. 2003 24 March 2004

Exercise price (in euros) 68.80 70.81 111.11 92.78 44.74 35.00 31.03 35.00 42.67

Henri Giscard d’Estaing 51,099 25,000 130,000 33,000 40,000 30,000

François Salamon 10,000 25,000 15,000 15,000 10,000

Michel Wolfovski 10,000 5,000 5,000 30,000 10,000 25,000 20,000

156

On 6 April 2006, Michel Wolfovski set up hedges in relation to

15,000 options and filed a notice of the transaction with the

Autorité des Marchés Financiers.

No stock options were exercised during the period under

review.

The Company’s executive officers are covered by supplemen-

tary defined-contribution pension plans. The contributions

paid under these plans represent 8% of the officers’ gross

compensation.

Henri Giscard d’Estaing, François Salamon and Michel

Wolfovski are entitled to a contractual lump-sum severance

payment in the event that their employment contracts are

terminated, other than for gross or willful misconduct. The

amount payable corresponds to two years’ gross remunera-

tion, including variable compensation. For Henri Giscard

d’Estaing and Michel Wolfovski, this severance pay will be

increased to three years’ gross compensation (including vari-

able compensation) if the termination occurs within six months

of a third party acquiring a controlling interest in the Company.

Compensation paid to members of the Executive CommitteeTotal gross compensation paid to the members of the

Executive Committee (including executive officers) in fiscal

2006 amounted to €3,928,000 (€3,624,000 in fiscal 2005).

The members of the Executive Committee (excluding

executive officers) are covered by supplementary defined-

contribution pension plans. The contributions paid under

these plans represent 6.29% of their gross compensation.

Attendance fees The Annual Shareholders’ Meeting of 16 March 2005 set the

aggregate amount of attendance fees payable to members

of the Supervisory Board and subsequently the Board of

Directors (including the non-voting director) at €305,000 for

fiscal 2005, unchanged from the previous fiscal year.

Based on the recommendations of the Nominations and

Compensation Committee, on 12 December 2005 the Board

of Directors decided to allocate these fees based on members’

actual attendance at meetings held by the Board of Directors

and Board Committees during fiscal 2005.

The total amount of €305,000, which was paid in January 2006,

was allocated as follows: €244,000 for Board of Directors’

meetings and €61,000 for meetings of the Board Committees.

Total compensation and benefits paid to each of the members

of the Board of Directors in fiscal 2006 was as follows (infor-

mation disclosed in accordance with Article L.225-102-1 of the

Commercial Code):

In euros

Members of the Board of Directors

Ph. Adam -

M. Bakkoury -

S. Al Sulaiman 18,007.95

E. Bertier 5,500.00

Y. Caillère -

D. Dautresme 33,730.45

T. Delaunoy de La Tour d’Artaise 21,412.11

R. Espirito Santo Silva Salgado 0.00

J-M. Espalioux 27,020.45

H. Giscard d’Estaing 22,835.45

P. Jeanbart 25,602.83

A. Langlois-Meurinne -

P. Lebard 23,497.95

T. Miyagawa -

V. Morali 28,850.45

G. Pélisson -

S. Ragozin 27,020.45

J. Stern 28,850.45

P. Todorov 34,137.11

K. Ujihara 0.00

A-C. Taittinger -

David Dautresme received additional compensation of €30,625

for specific advisory work carried out in fiscal 2005 for the

Chairman and Chief Executive Officer.

No loans or guarantees have been granted by the Company

to any member of the Board of Directors.

Stock optionsStock options grants are discretionary. They are primarily

awarded based on the level of responsibility and potential of

the beneficiaries.

Plan K

Number of potential new shares to be issued 250,000

Exercise price €42.67

Expiry date of exercise period 13 March 2014


Details of the stock option plans in place at 31 October 2006 for corporate officers and full-time GOs are presented below.

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006Plan F Plan F2 Plan F3 Plan F4 Plan F5 Plan G Plan G2 Plan G3 Plan G4 Plan G5 Plan H* Plan I Plan J Plan K

Date of Shareholders’ Meeting 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 29.03.02 17.03.03 17.03.03 16.03.05

Date of Executive 18.08.97 24.03.98 24.08.98 17.02.99 29.07.99 07.02.00 26.07.00 06.02.01 24.07.01 05.02.02 28.02.03 15.01.04 11.01.05 14.03.06Board/Board of Directors’ Meeting

Number of options granted 663,370 73,500 9,000 21,000 46,000 258,400 21,815 212,530 37,400 127,000 283,000 272,000 300,000 250,000

o/w number of new or existing shares to be purchased by members of the Executive Committee (based on composition at 31 October 2006) 63,159 10,000 - 1,000 - 34,800 - 18,900 - 13,800 229,000 95,000 111,000 103,000

Number of executives concerned 3 1 - 1 - 5 - 4 - 3 7 9 8 9

Start date of exercise period 50% at 50% at 50% at 50% at 50% at 07.02.05 26.07.04 06.02.05 24.07.05 05.02.06 01.03.06 15.01.07 11.01.08 14.03.09

18.08.02 24.03.03 24.08.03 17.02.04 23.07.04 + sale of + sale of + sale of + sale of+ balance + balance + balance + balance + balance shares shares shares shares

18.08.03 24.03.04 24.08.04 17.02.05 23.07.05 prohibited prohibited prohibited prohibitedbefore before before before

28.02.07 14.01.08 10.01.09 13.03.10

Expiry date 17.08.07 23.03.08 23.08.08 16.02.09 22.07.09 06.02.10 25.07.10 05.02.11 23.07.11 04.02.12 27.02.13 14.02.14 10.01.13 13.03.14

Exercise price(in euros) 68.8 70.81 79.12 81.13 92.79 111.11 136.13 92.78 63.99 44.74 35 31.03 35 42.67

Number of options outstanding at 31 October 2006 119,063 13,500 3,000 10,000 3,000 89,542 6,200 105,315 13,900 86,500 245,000 226,800 268,600 247,000

* The options granted under Plan H entitle beneficiaries to purchase shares of common stock which have already been issued and are heldin treasury. Their exercise will not therefore have the effect of increasing the Company’s capital.

General information

THE BOARD OF DIRECTORS

1. GENERAL INFORMATION

In accordance with Article L.225-35 of the Commercial Code,

the Board of Directors determines the Company’s strategy and

oversees its implementation. Except for the powers directly

vested in shareholders and within the scope of the corporate

purpose, the Board considers all matters related to the efficient

management of the Company and makes all related decisions.

The Board of Directors comprises a minimum of three and a

maximum of eighteen members, elected by shareholders in

an Ordinary Meeting. At the filing date of this report the Board

comprised eleven voting directors and two non-voting direc-

tors. No directors are elected by the Company’s employees.

In application of Article 14 of the Company’s by-laws, each

member of the Board must own at least 50 Club Méditerranée

shares.

French law provides that a company’s management may be

placed under the responsibility of either the Chairman of the

Board of Directors or another individual appointed by the

Board as Chief Executive Officer.

At its first meeting held on 16 March 2005, Club Méditerranée’s

Board of Directors resolved to combine these two functions

and appointed Henri Giscard d’Estaing as Chairman and Chief

Executive Officer.

David Dautresme was appointed Vice-Chairman of the Board,

François Salamon was named Executive Vice-President,

Europe and North America, and Michel Wolfovski became

Executive Vice-President, Chief Financial Officer.

The Board met four times in fiscal 2006, with an average atten-

dance rate of 85%. Eleven out of twelve members attended

the 12 December 2005 meeting, ten out of twelve members

were present at both the 14 March 2006 and 8 June 2006

meetings, and nine out of eleven members attended the

28 September 2006 meeting.

158

The structure and operations of the Board of Directors are

governed by internal rules which establish the terms of refer-

ence and powers of the Board, define the operating rules

for the Board Committees and set out the confidentiality

principle applicable to information obtained by members in

their capacity as directors, as well as the duty of directors to

comply with the fundamental principles of independence,

ethical conduct and integrity. The internal rules require each

director to disclose to the Board any actual or potential conflict

of interest in which he or she may be directly or indirectly

involved, and in such a case to abstain from taking part in

any discussion and/or vote on the matters in question. They

also set out the regulations applicable to trading in the

Company’s securities, in compliance with Article L.621-18-2 of

the French Monetary and Financial Code and Articles 222-14

and 222-15 of the AMF’s General Regulations.

2. INDEPENDENT DIRECTORS (AS DEFINEDIN THE AFEP/MEDEF REPORT ISSUED IN OCTOBER 2003 ON PROMOTING CORPORATE GOVERNANCE IN FRENCHLISTED COMPANIES)

At its meeting on 28 September 2006, the Board of Directors

reviewed the assessment of the independence of Board

members, based on the criteria set out in the AFEP/MEDEF

report on corporate governance. According to these criteria,

directors in the following situations are not independent:

directors who represent a shareholder that owns more than

10% of the Company’s capital, directors with close family ties

with a corporate officer of the Company, directors with an

employment contract, directors with a seat on the Board of

another company of which the Company is also a director,

directors who have been director of the Company for more

than a certain period of time, directors who have been an

auditor of the Company in any of the five preceding years, and

directors who have material business interests with the

Company.

Based on these criteria, eight of the eleven current Board

members can be deemed independent, corresponding to

more than the 50% minimum recommended in the AFEP/

MEDEF report. The detailed information below concerning

each director indicates whether or not he or she is classified

as independent.

3. CHANGES SINCE THE ANNUAL SHAREHOLDERS’ MEETING OF 14 MARCH 2006

At its 14 March 2006 meeting the Board of Directors noted the

resignations of Jacques Stern, Serge Ragozin and Kiyoshi

Ujihara and appointed Philippe Adam, Yann Caillère and Anne-

Claire Taittinger to replace them. Acting on the recommen-

dation of the Chairman and Chief Executive Officer, and in

accordance with Article 23 of the by-laws, the Board also

appointed Tetsuya Miyagawa as a non-voting director.

At its 28 September 2006 meeting the Board of Directors

noted the resignations of Yann Caillère, Gilles Pélisson and

Pierre Todorov and appointed Mustapha Bakkoury and Aimery

Langlois-Meurinne as their replacements.

4. MEMBERS OF THE BOARD OF DIRECTORS

The Board of Directors comprises eleven directors - eight of

whom are independent - and two non-voting directors. It is made

up of individuals with complementary skills and backgrounds.

MEMBERS OF THE BOARD OF DIRECTORS AND POSITIONS

HELD IN OTHER COMPANIES

HENRI GISCARD D’ESTAING

Chairman and Chief Executive Officer

Born on 17 October 1956

French

Appointed on 16 March 2005

Term expires at the Annual Shareholders’ Meeting to

be called to approve the accounts for the year ending

31 October 2007

First term of office within the Company began

on 17 July 1997

Non-independent director

Number of shares held: 50

Biography: Henri Giscard d’Estaing graduated from Institut

d’Etudes Politiques de Paris and has a masters degree in eco-

nomics. He began his career with Cofremca where he served

as an Associate Director between 1982 and 1987, specializing

in researching changes in food consumption patterns and their

marketing and strategic impacts. In 1987 he entered the

Danone group and was successively Head of Development,

Chief Executive Officer of the British subsidiary HP Food Lea

and Perrins, Chief Executive Officer of Evian-Badoit and Head

of the Mineral Water division.

Henri Giscard d’Estaing joined Club Méditerranée in 1997,

holding the positions of Chief Operating Officer in charge of

Finance, Development and International Relations (1997-2001),

Chief Executive Officer (2001-2002), and Chairman of the

Executive Board (2002-2005) before being appointed Chairman

and Chief Executive Officer.


OTHER POSITIONS WITHIN THE GROUP

Chairman of the Board of Directors of:

Club Med World Holding

Jet tours SA

Chairman and Founding Director of:

Fondation d’entreprise Club Méditerranée

Senior Executive of:

Club Med Management Asia Ltd. (Hong Kong)

Chairman of the Board of:

Club Med Services Singapore Pte Ltd (Singapore)

Director of:

Holiday Hôtels AG (Switzerland)

Carthago (Tunisia)

OTHER POSITIONS OUTSIDE THE GROUP

Director of:

Casino, Guichard-Perrachon

Member of the Supervisory Board of:

Vedior (Netherlands)

OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

Chairman of the Executive Board of:

Club Méditerranée

Chairman of:

Grand Hôtel Parisien

Hôteltour

Club Med Marine

Centrovacanze Kamarina (Italy)

CM U.K Ltd (United Kingdom)

Gregolimano Etabe (Greece)

Vice-Chairman of:

Nouvelle Société Victoria (Switzerland)

Legal Manager of:

Loin

Permanent Representative of:

Club Méditerranée SA on the Board of Directors of STCL 2

Hôteltour on the Board of Directors of CM Middle East BV

(Netherlands)

Loin on the Boards of Directors of Flèche Bleue Voyages and

SECAG Caraïbes

Chairman of:

Club Méditerranée Trustee Ltd (United Kingdom)

DAVID DAUTRESME

Vice-Chairman of the Board of Directors

Born on 5 January 1934

French




31 October 2007


on 23 April 1997

Number of shares held: 1,591

Independent director

Biography: A graduate of ENA, David Dautresme held the

post of Officer in charge of Algerian Affairs for the French gov-

ernment between 1958 and 1960. He was subsequently an

auditor at and then honorary advisor to the Cour des Comptes

(French National Audit Office), following which he served as

a Policy Officer at the French Ministry of the Economy and

Finance. In 1966 he was appointed Comptroller at Caisse des

Dépôts et Consignations before joining Crédit Lyonnais in

1968 as Deputy Director, where he subsequently became Chief

Operating Officer. He served as Chairman and Chief Executive

Officer of Crédit du Nord between 1982 and 1986 before

entering Banque Lazard Frères et Cie where he was Managing

Partner until 2000 and appointed Senior Advisor in 2001. Since

2006 he has also been a Senior Advisor to Barclays Capital

France.

Main position outside the Group: Senior Advisor

to Lazard Frères



AXA (France)

Sole Legal Manager of:

DD Finance (France)

Director of:

Fimalac (France)

Non-voting director of:

Eurazeo (France)


Executive Deputy Chairman of:

Crédit Agricole - Lazard Financial Products Bank

Vice-Chairman and director of:

Fonds - Partenaires Gestion (F.P.G.)

General information

160


Eurazeo

Groupe Go Sport

Lazard Frères Banque

Chairman of:

Parande Développement SAS


Club Méditerranée

Casino

Managing Partner of:

Lazard Frères

Maison Lazard

Partena

Director of:

Société Immobilière Marseillaise

Axa Investment Managers

Lazard Frères Banque

Crédit Agricole Lazard Financial Products Ltd

Rue Impériale

Permanent representative of:

Lazard SA

Compagnie de Crédit (director)

PHILIPPE ADAM*

Director

Born on 1 May 1957

French




31 October 2007



Biography: Philippe Adam is a graduate of Institut d’Etudes

Politiques de Strasbourg and also holds an MBA degree.

He began his career in 1984 as a financial analyst before

joining Accor in 1986. In 1993 he entered the Compass Group,

the worldwide leader in contract catering. Philippe Adam is

currently Executive Vice-President, Strategy and Hotel

Development with the Accor Group.

Main position outside the Group: Executive Vice-President,

Strategy and Hotel Development - Accor


Chairman and Chief Executive Officer of:

Devimco


SAMINVEST, on the Board of Directors of GO Voyages


Managing Director of:

Carlson Wagon Lit Travel

*Appointment subject to ratification by the shareholders at the AnnualMeeting of 8 March 2007.

SAUD AL SULAIMAN

Director

Born on 8 December 1961

Saudi-Arabian




31 October 2007


on 12 December 2003



Biography: Saud Al Sulaiman graduated in Finance from the

University of New York in the United States. Since he began

his career he has held several management positions within

the Rolaco Trading & Contracting group, which is partly owned

by the Al Sulaiman family. He has contributed to driving the

group’s expansion in a number of areas including manufactur-

ing, finance, real estate development and tourism.

Main position outside the Group: Partner and Managing

Director of Rolaco Trading and its subsidiaries (Jeddah,

Saudi Arabia)


Member of the Board of Directors of:

Arabian Cement Company (Saudi Arabia)

Saudi Arabian Refineries Company (Saudi Arabia)

Saudi Industrial Development Company (Saudi Arabia)

Capital Finance Company SAL. (Lebanon)

Rolaco Holding SA (Luxembourg)

Hadhan Holding SA (Luxembourg)

Oryx Finance Ltd. (Grand Cayman)

Semiramis Intercontinental Hotel (Egypt)

Sharjah National Lube Oil Company (United Arab Emirates)

This Works (United Kingdom)

Muzun International Aviation Fund (Bahamas)



Club Méditerranée (France)

MUSTAPHA BAKKOURY*

Director

Born on 20 December 1964

Moroccan

First appointed on 28 September 2006



31 October 2007



Biography: Mustapha Bakkoury graduated from Ecole Nationale

des Ponts et Chaussées de Paris and also holds a degree in

Banking and Finance. He spent some ten years working in the

banking industry, including with BNP Paribas in France and

BMCI in Morocco, and in August 2001 was appointed Chief

Executive Officer of Caisse de Dépôt et de Gestion du Maroc

in Morocco. Mustapha Bakkoury is also Vice-Chancellor of

Al Akhawayn University, a member of the Mohammed VI

Foundation (which promotes the teaching profession and

performs charity work), a member of the Employers’ Fede-

ration (Conseil du Patronat) and Co-Chairman of Groupe

d’Impulsion Economique France Maroc, aimed at furthering

economic relations between France and Morocco.

Main position outside the Group: Chief Executive Officer

of Caisse de Dépôt et de Gestion du Maroc



Fipar Holding (Morocco)

Société Générale de Réassurance (Morocco)

CDG Capital (Morocco)

SOFAC Crédit (Morocco)

Société Immobilière de la Mer (Morocco)

Société d’Aménagement Ryad (Morocco)

Massira Capital Management (Morocco)

Chairman of the Supervisory Board of:

CDG Développement (Morocco)

Crédit Immobilier et Hôtelier (Morocco)


TMSA (Tanger Med Special Agency)

Banque Marocaine pour le Commerce et l’Industrie (Morocco)

Director of:

Banque Centrale Populaire (Morocco)

Méditélécom (Morocco)

Ciments du Maroc

Lafarge Maroc

Air Liquide (Morocco)

Carnaud Metalbox (Morocco)

Fonds d’Equipement Communal (Morocco)

Poste Maroc


Compagnie d’Assurance Atlanta

Crédit Eqdom

Médi 1 Sat (Morocco)



Banque Nationale de Développement Economique (Morocco)

Compagnie Générale Immobilière (Morocco)

Cellulose du Maroc

Papelera de Tétouan (Morocco)

SOGATOUR (Société d’Aménagement Touristique) (Morocco)

Loterie Nationale (Morocco)

Maroc Leasing

Caisse Marocaine des Marchés (Morocco)

Director of:

CNIA Assurances (Morocco)

Régie des Tabacs (Morocco)

Chairman of the Management Board of:

TMSA (Agence spéciale Tanger Med)


THIERRY DELAUNOY DE LA TOUR D’ARTAISE

Director

Born on 27 October 1954

French


Term expires at the Annual Shareholders’ Meeting to be

called to approve the accounts for the year ending 31

October 2007



Biography: A graduate of Ecole Supérieure de Commerce de

Paris, Thierry Delaunoy de La Tour d’Artaise served as head

of internal audit with the Chargeurs group from 1983 to 1984,

before joining Croisères Paquet where he held the post of

Chief Financial Officer from 1984 to 1986 and subsequently

Chief Executive Officer from 1986 to 1993. He then went on to

work at Calor SA from 1994 to 1997 as Chief Executive Officer

and subsequently Chairman and Chief Executive Officer. In

1998 he joined Groupe SEB where he was Chairman of the

Home Appliances Division and Senior Vice-President, Chief

Executive Officer, before being appointed Chairman and Chief

Executive Officer in 2000.

General information

162

Main position outside the Group: Chairman of the board

and Chief Executive Officer of Groupe SEB


Chairman of:

SEB Internationale (France)


Rowenta Invest BV (Netherlands)


Sofinaction, director of Lyonnaise de Banque (France).

Director of:

Tefal UK (United Kingdom)

Groupe Seb Japan (Japan)

Groupe Seb Mexicana (Mexico)

Siparex Associés (France)

Plastic Omnium (France)

Legrand


Chairman of:

Groupe SEB Moulinex (France)


Rowenta Werke (Germany)


Groupe SEB Deutschland (Germany)


SEB Internationale for Groupe SEB UK (United Kingdom)

SEB Internationale for Groupe SEB Iberica (Spain)

SEB Internationale for Rowenta France

SEB Internationale for Calor (France)

SEB Internationale for Tefal (France)

Director of:

T-Fal Corp (United States)

T-Fal de Mexico (Mexico)

Rowenta Inc (United States)

Groupe Seb Colombia (Colombia)

SEB SA (France)

Tefal UK (United Kingdom)

Seb Benrubi (Greece)

Groupe Seb South Africa (South Africa)

Legal Manager of:

Rowenta Deustchland GmbH (Germany)

Krups GmbH (Germany)

PAUL JEANBART

Director

Born on 23 August 1939

Canadian




31 October 2007.


on 23 April 1997



Biography: After graduating in civil engineering from the

University of Alep in Syria, Paul Jeanbart co-founded the

Rolaco Trading & Contracting Group, which started out as a

construction firm and also specialized in trading construction

materials, vehicles and road and maritime freight equipment.

He worked at Rolaco Trading & Contracting from 1964 until

1982 when he moved to Geneva to manage the investments

of the Luxembourg-based company Rolaco Holding SA Group

in various sectors, including tourism, hotel services, finance,

insurance and the maritime industry (covering both ship owners

and operators).

Main position outside the Group: Managing Director of

Rolaco Holding SA (Luxembourg)



Oryx Finance Limited, Grand Cayman

Hôtels Intercontinental Genève SA

Managing Director of:

All of the subsidiaries of Rolaco Holding S.A, Luxembourg

Director of:

Sodexho Alliance SA

Luxury Brand Development SA

Semiramis Hôtel Co, Egypt

Nasco Insurance Group, Bermuda


Director of:

Orfèverie Christofle SA

XL Capital Limited, Bermuda

Delta Bank Intenational, Egypt


Club Méditerranée


AIMERY LANGLOIS-MEURINNE*

Director

Born on 27 May 1943

French

First appointed on 28 September 2006



31 October 2007.

Number of shares held: 1,000


Biography: Aimery Langlois-Meurinne graduated from

Sciences Po in Paris in 1965, earned a doctorate in law in 1966

and graduated from France’s Ecole Nationale d’Administration

in 1970. He joined the Paribas group in 1971 where he worked

for 12 years before being appointed Managing Director of

G. Becker Paribas (New York) and subsequently Merrill Lynch

Capital Markets (New York). Between 1987 and 1998, he served

as Chief Executive Officer and then Senior Vice-President,

Chief Executive Officer of Parfinance Paris. In 1998, he was

appointed Chairman of the Supervisory Board of Imerys and

has been the Chairman of that company’s Board of Directors

since 2005. He has also been Managing Director of Pargesa

Holding in Geneva since 1990.

Main position outside the Group: Chief Executive Officer

and Member of the board of Pargesa Holding SA (Geneva)


Director of:

Groupe Bruxelles Lambert SA (Belgium)

Eiffage (France)

PAI Management (France)

Pascal Investment Advisers SA (Switzerland)

Director and Chairman of:

Pargesa Luxembourg SA (Luxembourg)

Pargesa Netherlands BV (Netherlands)

Imerys (France)


Director of:

Power Financial Corporation (Canada)

Axis Capital Management (United Kingdom)

Club Français du Livre (France)


PASCAL LEBARD

Director

Born on 15 May 1962

French




31 October 2007.


on 23 April 1997



Biography: After graduating from EDHEC, Pascal Lebard

became a Chargé d’Affaires at Crédit Commercial de France

in 1986. He held the post of Associate Director at 3I SA from

1989 until 1991, before becoming a Director at Ifint, the

predecessor of the Exor Group. In 2003 he joined Worms

& Cie (which was renamed Sequana Capital in 2005) as a

member of the Supervisory Board (2003-2004), a member of

the Management Board (2004-2005) and Deputy Managing

Director (since 2005).

Main position outside the Group: Deputy Managing Director

of Sequana Capital


Chairman of:

Safic Alcan


Permal Group SAS


ArjoWiggins SAS

Antalis SAS

Director of:

LISI (Paris)

SGS (Geneva)

Financière Worms SA (Geneva)

Greysac (formerly Domaines Codem)


Chairman of the Supervisory Board of

MICEL (Saint-Chamond)

Club Méditerranée

Chief Executive Officer of:

Exor SA (Paris)


Domaines Codem (Begadan)

General information

Director of:

Domaines Codem (Begadan)

Européenne de Financement (Paris)

Soficol (Paris)

Exint. (Paris)

Member of the Executive Board of:

Worms & Cie (Paris)

VÉRONIQUE MORALI

Director

Born on 12 September 1958

French




31 October 2007.


on 22 October 2004



Biography: Having graduated from Institut d’Etudes Politiques

and Ecole Supérieure de Commerce de Paris, Véronique

Morali entered Ecole Nationale d’Administration in 1984. She

became part of the Inspectorate General team at the French

Finance Ministry in 1986 before joining Fimalac in 1990.

Véronique Morali is President of the Force Femmes Association

and Chairman of the Economic Dialog Committee for MEDEF,

the French employers’ organization. In 1999 and 2004 respec-

tively she received the prestigious titles for services to the

French state - Chevalier dans l’Ordre National du Mérite and

Chevalier de la Légion d’Honneur.

Main position outside the Group: Director and Chief

Operating Officer of Fimalac


Director of:

Eiffage

Valeo

Sole director of:

FCBS GIE

Director :

Fimalac, Inc. (United States)

Fitch Group Inc. (United States)

Fitch Ratings (United States)



Fimalac Communication

Fimalac Investissements

Revue des Deux Mondes

164


Fimalac on the Board of Directors of Facom

Fimalac, Inc. on the Board of Directors of Fitch France SA

Fimalac Investissements on the Board of Directors of Clestra

Minerais et Engrais on the Board of Directors of Monde Presse


Club Méditerranée

Director of:

Minerais et Engrais

Legal Manager of:

Pandour

Silmer

Member of:

Conseil des Marchés Financiers

Chairman of:

Strafor Facom, Inc. (United States)

Member of the Board of:

Core Ratings Ltd (United Kingdom)

ANNE-CLAIRE TAITTINGER*

Director

Born on 3 November 1959

French




31 October 2007


on 12 June 2003



Biography: Anne-Claire Taittinger is a graduate of Institut

d’Études Politiques de Paris. She also holds ordinary and

advanced degrees in urban planning as well as a diploma

awarded by a specialized executive training institution (Centre

de perfectionnement aux affaires). She spent four years at

Caisse des Dépôts et Consignations (1976-1979), before hold-

ing various managerial positions within Groupe du Louvre and

subsequently Groupe Taittinger, as follows:

- Head of the Manufacturing Division (1979-1995) of Groupe

du Louvre. In her capacity as Chairman and CEO of Groupe

du Louvre she oversaw the gradual sale of this division

between 1994 and 2000.

- Chairman and CEO of Annick Goutal Fragrances (1986-1992)

where she was responsible for the launch of the company

and subsequent operations.

- CEO and then Chairman and CEO of Baccarat (1993-1994

and 1994-2002 respectively), and subsequently Chairman

of Baccarat’s Board of Directors from 2002.


- Executive director of Groupe Taittinger and Société du

Louvre holding companies (between 2002 and 2005), as well

as executive director of Groupe du Louvre from 1997 to

2006).

- Corporate Secretary, CEO and subsequently Chairman of

the Management Board of Groupe du Louvre (1985-2006) –

positions she held in parallel with those of Corporate

Secretary and subsequently Chairman of the Management

Board of Groupe Taittinger. These positions involved over-

seeing the various strategic and financial developments of

Groupe Taittinger-Louvre, optimizing returns on the group’s

prestigious property portfolio, and ensuring the smooth

implementation of changes in the group’s ownership struc-

ture - including the recent sale of Groupe Taittinger to an

investment fund.

Main position outside the Group: Corporate Secretary –

Groupe Taittinger


Director of:

Dexia

Baccarat


Carrefour

Senior Advisor to:

Wefcoms-Women’s Forum


Chairman of:

Louvre Hôtels SAS

A. Hôtels SAS

L. Hôtels SAS

S. Hôtels SAS

Groupe Envergure SAS

Permanent representative of Groupe Taittinger on the

Boards of:

Société Hôtelière Lutétia Concorde

Taittinger CCVC

Legal Manager of:

SAS du Riffray

Chairman of the Management Board of:

Groupe Taittinger

CEO of:

Société du Louvre

Groupe du Louvre

Chairman and Director of:

Baccarat Inc. (USA)

Baccarat Pacific KK (Japan)

Director of:

Baccarat Pacific Ltd. (USA)


ÉTIENNE BERTIER

Non-voting director

Born on 25 February 1960

French

Appointed on 9 June 2005

Biography: Etienne Bertier graduated from Institut d’Etudes

Politiques de Paris, Essec and the Human Sciences Faculty of

Paris X Nanterre University. He began his career as a journal-

ist for the Expansion newspaper (1984-1987), Libération (1987-

1990) and Le Point (1990-1993). He was appointed Technical

Advisor to the French Ministry of the Economy in 1993 before

becoming a Policy Officer. In 1995 he joined EDF as Corporate

Secretary until his appointment in 1998 as Deputy Director of

the International Division, a position he held until 2003. In

January of that year he was appointed as advisor to the Chief

Executive Officer of Caisse des Dépôts and has been

Chairman and Chief Executive Officer of Icade since October

2003.

Main position outside the Group: Chairman of the board

and Chief Executive Officer of Icade SA


Director of:

Icade de Foncière des Pimonts SA

MAP Holding SA (formerly Financière Lille SA)

Fineco Vita SA


CNP Assurances SA


Club Méditerranée SA


Icade, as director of Icade Patrimoine SA

Icade, as director of Icade EMGP SA

Icade, as Legal Manager of SCI Patrimoniales, comprising:

SCI Construction du Bassin Parisien, Fontaine au Roi, Rhône,

Résidence de Sarcelles, Résidence d’Epinay/Seine, St Etienne

du Rouvray, Seloge, Vénissieux Grandes Terres des Vignes

General information

Henri Giscard d’Estaing is assisted by two ExecutiveVice-Presidents:

FRANÇOIS SALAMON

Executive Vice-President, Europe and North America -

Non-director

Born on 23 July 1953

French


Legal Manager of:

Club Med Viagens Lda (Portugal)

Director of:

Club Méditerranée Israel Ltd (Israel)

Vacances (Proprietary) Ltd (South Africa)

Director of:

Sociedade Hoteleira Da Balaia (Portugal)

HOCASA (Spain)

SACM (Spain)

TEK AE (Greece)

Carthago (Tunisia)

Director and founder of:

Fondation d’Entreprise Club Méditerranée


N/A




MICHEL WOLFOVSKI

Executive Vice-President, Chief Financial Officer

Non-director

Born on 3 April 1957

French



Club Méditerranée SA for Club Med World Holding (Paris)

Director of:

Jet tours SA (Ivry)


N/A

166

Permanent representative of Icade as co-legal manager of:

SNC Capri Danton


Permanent representative of Icade, as director of:

SCIC Habitat SA

SCIC Habitat Ile de France SA

SCET SA

CAPRI SA

CIRP SA



CNCE SA

Crédit Foncier de France SA

Director of:

C3D SA

Representative of SCI Domaine IDF on the Management

Board of:

GIE Icade Patrimoine


Budapest EROMU SA

TETSUYA MIYAGAWA

Non-voting director

Born on 6 April 1955

Japanese


Biography: After graduating from the University of Tokyo in

Japan, Tetsuya Miyagawa joined Nippon Life Insurance

Company in 1978. He was appointed General Manager in

charge of the International Investment Department in 2001

and has been Nippon Life’s chief representative in London

since 2005.

Main position outside the Group: Chief Representative of

Nippon Life Insurance Company at its London office


Director of:

Nippon Life Insurance International PLC

Nippon Life Insurance Investments Europe Ltd.


N/A




Club Méditerranée SA (Paris)

Director of:

Club Med Gym (Paris)

Chairman of:

Club Med Amérique du Nord (Paris)

Club Med Amérique du Sud (Paris)

Club Med Asie (Luxembourg)

As far as the Company is aware, none of its corporate officers

have any convictions in relation to fraudulent offences in the

past five years and none have been involved in any bankrupt-

cies, receiverships or liquidations in the past five years.

In addition no official public incriminations and/or sanctions

have been pronounced against any of the Company’s offi-

cers by any statutory or regulatory authorities and they have

never been disqualified by a court from acting as a member

of the administrative, management or supervisory bodies of

an issuer or from acting in the management or conduct of

the affairs of any issuer. Finally, to the best of the Company’s

knowledge, there are no potential conflicts of interests

between the duties of the corporate officers to the Company

and their private interests.

5. BOARD COMMITTEES

At its meeting of 16 March 2005, the Board of Directors set up

three specialized committees:

• A Strategy Committee.

• An Audit Committee.

• A Nominations and Compensation Committee

The members of the Board Committees are appointed by the

Board of Directors.

The responsibilities of the Committees, whose role is exclu-

sively advisory, are set by the Board of Directors.

The Committees report on their work to the Board of Directors.

The Strategy CommitteeThe Strategy Committee is chaired by Henri Giscard d’Estaing

and has seven other members: Véronique Morali, Philippe

Adam, Mustapha Bakkoury, Paul Jeanbart, Aimery Langlois-

General information

Summary of transactions carried out during fiscal 2006 concerning the Company’s securities (disclosed inaccordance with Article L.621-18-2 of the French Monetary and Financial Code)

Transaction Officer Financial instrument Type of transaction Number of date securities

6 April 2006 Michel Wolfovski Derivative instrument Sale of call 15,000relating to ordinary shares option – Purchase

of put option16 October 2006 Aimery Langlois-Meurinne Shares Purchase 1,000

Meurinne, Pascal Lebard and Tetsuya Miyagawa (non-voting

director). Five of the Committee’s members are independent.

The roles and responsibilities of the Strategy Committee are

described in the Report of the Chairman of the Board of

Directors on Preparing and Organizing Board Meetings and

on the Company’s Internal Control Procedures (see page 82).

The Strategy Committee met once in fiscal 2006.

The Audit CommitteeThe Audit Committee is chaired by David Dautresme and

has three other members: Véronique Morali, Philippe Adam

and Pascal Lebard. Three of the Committee’s members are

independent.

The Audit Committee is one of the key components of the

corporate governance structure set up by the Company. It is

responsible for assisting the Board with reviewing and approv-

ing the financial statements, analyzing risks and ensuring that

the Group’s internal control system operates efficiently.

The roles and responsibilities of the Audit Committee are

described in the Report of the Chairman of the Board of

Directors on Preparing and Organizing Board Meetings and

on the Company’s Internal Control Procedures (see page 81).

The Audit Committee met twice in fiscal 2006, prior to the

presentation of the financial statements. The Statutory

Auditors attended both of these meetings.

Nominations and CompensationCommitteeThe Nominations and Compensation Committee has three

members, all of whom are independent: Anne-Claire Taittinger,

Thierry de La Tour d’Artaise and Saud Al Sulaiman. It is chaired

by Thierry de La Tour d’Artaise.

The roles and responsibilities of the Nominations and

Compensation Committee are described in the Report of the

Chairman of the Board of Directors on Preparing and

Organizing Board Meetings and on the Company’s Internal

Control Procedures (see page 81).

The Nominations and Compensation Committee met twice

in fiscal 2006.

168

Additionalinformation


170 // RESOLUTIONS

170

A - ORDINARY RESOLUTIONS

FIRST RESOLUTION - APPROVAL OF THE FINANCIALSTATEMENTS OF THE COMPANY FOR THE YEAR ENDED31 OCTOBER 2006

The Ordinary General Meeting, having considered the

report of the Board of Directors, the Chairman’s report on the

practices and procedures of the Board of Directors and the

Company’s internal control procedures, the Auditors’ report,

and the financial statements of the Company for the year

ended 31 October 2006 presented by the Board of Directors,

approves the financial statements as presented, which show

a net loss of €14,480,839, as well as the transactions reflected

in these financial statements and described in these reports.

As a result, the Ordinary General Meeting gives discharge to

the Board of Directors for the fulfillment of its duties for the

year ended 31 October 2006.

SECOND RESOLUTION - APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 2006


report of the Board of Directors, the Chairman’s report on

the practices and procedures of the Board of Directors and

the Company’s internal control procedures, the Auditors’

report, and the consolidated financial statements for the year

ended 31 October 2006 presented by the Board of Directors,

approves the consolidated financial statements as presented,

which show net income of €4.58 million, as well as the trans-

actions reflected in these consolidated financial statements

and described in these reports.

THIRD RESOLUTION - APPROPRIATION OF PROFIT

The Ordinary General Meeting, considering the deficit carried

forward from the previous year and the recommendation of

the Board of Directors, resolves to appropriate the Company’s

net loss for the year, in the amount of €14,480,839, to the

deficit. Including this loss and the €12,893,044 effect of a

change in accounting method concerning the measurement

of assets, the deficit will amount to €258,485,594.

As required by law, the Ordinary General Meeting notes that

dividends for the last three fiscal years were as follows:

Fiscal 2003 Fiscal 2004 Fiscal 2005

Number of shares carrying dividend rights 19,358,005 19,358,005 19,358,005Net dividend per share - - -Tax credit - - -

FOURTH RESOLUTION - APPROVAL OF RELATED PARTYAGREEMENTS

The Ordinary General Meeting, having considered the report

of the Auditors on related party agreements governed by

Articles L.225-38 et seq. of the French Commercial Code and

– for agreements entered into prior to the change in manage-

ment system – Articles L.225-86 et seq, approves the related

party transactions and agreements that were entered into or

remained in force during the year.

FIFTH RESOLUTION - APPROVAL OF DIRECTORS’ FEES


report of the Board of Directors, sets the total amount of

directors’ fees payable for the period from 1 November 2006

to 31 October 2007 at €305,000.

SIXTH RESOLUTION - RATIFICATION OF THE APPOINTMENTOF YANN CAILLÈRE AS DIRECTOR

The Ordinary General Meeting ratifies the appointment of

Yann Caillère as director to replace Jacques Stern for the

remainder of the latter’s term expiring at the Annual

Shareholders’ Meeting to be called to approve the fiscal 2007

financial statements, as decided at the Board meeting of

14 March 2006.

SEVENTH RESOLUTION - RATIFICATION OF THE APPOINTMENT OF PHILIPPE ADAM AS DIRECTOR


Philippe Adam as director to replace Serge Ragozin for the

remainder of the latter’s term expiring at the Annual



14 March 2006.

EIGHTH RESOLUTION - RATIFICATION OF THE APPOINTMENT OF ANNE-CLAIRE TAITTINGER AS DIRECTOR


Anne-Claire Taittinger as director to replace Kiyoshi Ujihara

for the remainder of the latter’s term expiring at the Annual



14 March 2006.

NINTH RESOLUTION - RATIFICATION OF THE APPOINTMENT OF MUSTAPHA BAKKOURY AS DIRECTOR


Mustapha Bakkoury as director to replace Yann Caillère for

the remainder of the latter’s term expiring at the Annual



28 September 2006.

Resolutions


TENTH RESOLUTION - RATIFICATION OF THE APPOINTMENT OF AIMERY LANGLOIS-MEURINNE AS DIRECTOR


Aimery Langlois-Meurinne as director to replace Pierre Todorov

for the remainder of the latter’s term expiring at the Annual



28 September 2006.

ELEVENTH RESOLUTION - RENEWAL OF THE APPOINTMENT OF DELOITTE & ASSOCIÉS AS STATUTORYAUDITOR

The Ordinary General Meeting, considering that the term of

Deloitte & Associés as Statutory Auditor expires at this Annual

General Meeting, renews the appointment as Statutory

Auditor of Deloitte & Associés (185, avenue Charles de Gaulle,

92524 Neuilly-sur-Seine Cedex), for the statutory period of

six years expiring at the Annual Shareholders’ Meeting to be

called to approve the fiscal 2012 financial statements.

TWELFTH RESOLUTION - RENEWAL OF THE APPOINTMENTOF ERNST & YOUNG AUDIT AS STATUTORY AUDITOR


Ernst & Young Audit as Statutory Auditor expires at this Annual

General Meeting, renews the appointment as Statutory

Auditor of Ernst & Young Audit (Faubourg de l’Arche 92037

Paris-La Défense Cedex), for the statutory period of six years

expiring at the Annual Shareholders’ Meeting to be called to

approve the fiscal 2012 financial statements.

THIRTEENTH RESOLUTION - RENEWAL OF THE APPOINTMENT OF BEAS AS SUBSTITUTE AUDITOR


Beas as Substitute Auditor expires at this Annual General

Meeting, renews the appointment as Substitute Auditor of

Beas (185, avenue Charles de Gaulle, 92524 Neuilly-sur-Seine

Cedex), for the statutory period of six years expiring at the

Annual Shareholders’ Meeting to be called to approve the

fiscal 2012 financial statements.

FOURTEENTH RESOLUTION - RENEWAL OF THE APPOINTMENT OF FRANÇOIS CARREGA AS SUBSTITUTEAUDITOR


François Carrega as Substitute Auditor expires at this Annual

General Meeting, renews the appointment as Substitute

Auditor of François Carrega (13, boulevard des Invalides, 75007

Paris), for the statutory period of six years expiring at the

Annual Shareholders’ Meeting to be called to approve the

fiscal 2012 financial statements.

FIFTEENTH RESOLUTION - AUTHORIZATION TO TRADE IN THE COMPANY’S SHARES


of the Board of Directors, resolves to authorize the Board of

Directors to buy back shares of the Company in accordance

with Articles L.225-209 et seq. of the French Commercial Code,

European Commission Regulation 2273/2003 of 22 December

2003 implementing Directive 2003/6/EC of 28 January 2003,

and Articles 241-1 to 241-6 of the Autorité des Marchés

Financiers’ general regulations or any regulations that may be

substituted therefor. The number of Club Méditerranée SA

shares held under this authorization at any given time shall not

represent more than 10% of the Company’s capital, currently

19,358,005 shares. Authority to act on this resolution may be

delegated by the Board, subject to compliance with the appli-

cable laws and regulations.

The Ordinary General Meeting authorizes the Board of

Directors (or any person duly authorized by the Board) to buy

back shares for the following purposes:

• To permit transactions under a liquidity contract complying

with a code of ethics approved by the Autorité des Marchés

Financiers, entered into with an investment service provider

acting on an independent basis without any influence from

the Company.

• For allocation to directors and/or employees of the Company

and/or the Group, upon exercise of stock options or under

an employee stock ownership plan or stock grant plan.

• For allocation upon the issue or exercise of rights attached

to shares or share equivalents.

• To constitute a stock of shares to be used (i) to pay for future

business acquisitions or (ii) for future mergers, demergers or

acquisitions of assets in exchange for shares. The number of

shares used for this latter purpose shall not exceed 5% of

the Company’s capital as of the transaction date, currently

19,358,005 shares.

• For cancellation of the acquired shares, including any shares

bought back pursuant to earlier authorizations (provided

that 28th resolution authorizing the Board to reduce the

Company’s capital is voted).

• For any other purpose that is currently authorized by law or

may be authorized in the future, provided that the Company

informs shareholders of said new purpose or purposes by

press release or by any other legally authorized means.

The shares may be purchased, sold or otherwise transferred

by any appropriate method, on the market or over the count-

er, through a public cash or exchange offer, or through the use

of options or derivatives, in compliance with the applicable

regulations. The shares acquired, including those bought back

under earlier authorizations, may be cancelled, provided that

28th resolution authorizing the Board to reduce the Company’s

capital is voted.

The maximum buyback price is set at €70 per €4 par value

share and the minimum resale price at €30. Considering the

number of shares making up the Company’s capital as of the

date of this General Meeting, and any adjustments that may

result from corporate actions, the amount invested in the

buybacks shall not exceed €135,506,035.


The Board of Directors shall have full powers to adjust the

prices or the number of shares specified above to take into

account the effects of any corporate actions. In the case of any

such corporate actions, particularly a stock split or reverse

stock split, an issue of bonus shares or an increase in the par

value of existing shares paid up by capitalizing reserves or

earnings, the adjustment will be determined by multiplying

the price by the ratio between the number of shares outstand-

ing before and after the transaction.

The buybacks, sales and transfers may be carried out and

settled by any means, including through the use of derivatives

and notes and the purchase of call options, in compliance with

the Autorité des Marchés Financiers’ general regulations. The

entire program may be carried out through a single block

purchase.

The Company may use this authorization to continue imple-

menting its share buyback program and to take any and all

measures related to the program, including in connection with

a takeover bid for the Company or a public exchange offer

initiated by the Company in compliance with the applicable

regulations.

The Ordinary General Meeting gives full powers to the Board

of Directors to use this authorization, to set the terms and

conditions of the program, where necessary, to carry out any

and all necessary formalities and generally to do everything

necessary to implement this authorization. Authority to act

on this resolution may be delegated by the Board, subject to

compliance with the applicable laws and regulations.

This authorization will expire at the end of a period of eighteen

months from the date of this Meeting. It supersedes the

existing authorization given in the 7th resolution of the Ordinary

General Meeting of 14 March 2006.

SIXTEENTH RESOLUTION - POWERS


of the Board of Directors, gives full powers to the bearer of a

copy or extract of the minutes of this Meeting to carry out all

legal filing and other formalities.

B - EXTRAORDINARY RESOLUTIONS

SEVENTEENTH RESOLUTION - AUTHORIZATION TO ISSUESHARES AND SHARE EQUIVALENTS WITH PRE-EMPTIVESUBSCRIPTION RIGHTS FOR EXISTING SHAREHOLDERS

The Extraordinary General Meeting, having considered the

reports of the Board of Directors and the Auditors, resolves,

in accordance with Articles L.225-127, L.225-129, L.225-129-2,

L.225-132 and L.228-92 et seq. of the French Commercial

Code:

1) To terminate, with immediate effect, the powers granted

in the 31st resolution of the Extraordinary General Meeting

of 16 March 2005.

2) To give the Board of Directors a 26-month authorization

to increase the Company’s share capital on one or more

occasions, by the amounts and at the times that it considers

appropriate, by issuing, in France and abroad, shares and

securities exchangeable, convertible, redeemable or otherwise

exercisable for shares or debt securities – including stand-

alone warrants issued with or without consideration and rights

– to be paid up in cash or by capitalizing debt. Securities

other than shares may be denominated in euros, in foreign

currency or in any monetary unit determined by reference to

a basket of currencies. Existing shareholders shall have a

pre-emptive right to subscribe for the shares and securities

issued pursuant to this resolution. In accordance with Article

L.228-93 of the French Commercial Code, this resolution may

be used to carry out one or several issues.

However, it may not be used to issue preferred shares or

securities exchangeable, convertible, redeemable or other-

wise exercisable for preferred shares.

3) That the aggregate par value of shares issued pursuant to

this resolution, either directly or on exchange, conversion,

redemption or exercise of share equivalents, shall not exceed

€20 million, provided that this ceiling shall not include the

effect of any adjustments to be made to protect the rights of

holders of share equivalents pursuant to the law. Share issues

carried out pursuant to this resolution will be deducted from

the blanket ceiling of €75 million set in the 27th resolution.

4) That the Board of Directors may give existing shareholders

a pre-emptive right to subscribe for any shares or share

equivalents not taken up by other shareholders pursuant to

their pre-emptive rights. If the issue is oversubscribed,

participating shareholders will be allocated a number of

additional shares or share equivalents determined pro rata

to their existing interests. If the issue is not taken up in full by

shareholders, the Board may take one or more of the following

courses of action, in the order that it considers appropriate:

• Limit the issue to the amount of the subscriptions received,

provided that at least three-quarters of the original issue has

been taken up, in accordance with the law.

• Freely allocate all or some of the unsubscribed shares or

share equivalents.

• Offer all or some of the unsubscribed shares or share equiv-

alents to the public.

5) That this resolution shall automatically entail the waiver of

shareholders’ pre-emptive rights to subscribe for the shares

to be issued on exchange, conversion, redemption or exer-

cise of share equivalents.

6) That the price of each share issued directly or indirectly

pursuant to this resolution, after taking into account the issue

price of any stand-alone warrants or rights, shall not be less

than the minimum price stipulated in the laws and regulations

applicable on the issue date, whether or not the new shares

rank pari passu with existing shares.

172



This resolution may be used to issue bonds or notes with an

equity component, or securities exchangeable, convertible,

redeemable or otherwise exercisable for bonds or notes with

an equity component, including dated or perpetual senior

or junior bonds or notes, denominated in euros, in foreign

currency or in any monetary unit determined by reference to

a basket of currencies, provided that the life of dated bonds

or notes issued pursuant to this resolution shall not exceed

twenty years. The aggregate nominal amount of debt securi-

ties issued pursuant to this resolution shall not exceed €300

million or the equivalent in foreign currency or monetary units

on the date when the issue is decided. Said aggregate

nominal amount shall be deducted from the blanket ceiling

on debt issues authorized by this Meeting.

The debt securities may consist of fixed or floating rate or zero

coupon bonds or notes and may be issued with or without a

redemption premium. They may be repayable in installments

or in full at maturity. The securities may be bought back on the

market or through a public offer initiated by the Company.

If this resolution is used to issue debt securities, the Board of

Directors shall have full powers to decide whether such debt

securities will be subordinated or not and to set the interest

rate, the life of the securities, the fixed or variable redemption

price – which may or may not include a premium –, the terms

and conditions of their repayment and the manner in which

the securities will be exchangeable, convertible, redeemable

or otherwise exercisable for shares. Authority to act on this

resolution may be delegated by the Board, subject to com-

pliance with the applicable laws and regulations.

The Board of Directors shall have full powers to use this author-

ization, including the power of delegation provided for by law

and by the Company’s bylaws. In particular, the Board shall

have full discretionary powers to set the terms and condi-

tions of the issue(s), place on record the capital increase(s)

resulting from the use of this authorization, amend the bylaws

to reflect the new capital, set the subscription date or period

and the terms and conditions of subscription, decide the char-

acteristics of the securities to be issued, enter into any and

all underwriting or other agreements and generally carry out

any and all formalities required to place the issues, have the

securities listed and make interest and principal payments.

The Board shall decide the amount of each issue, the issue

price of the shares or share equivalents and the subscription

price of the shares issued directly or indirectly on conversion,

redemption or exercise of share equivalents – in both cases

with or without a premium –, the cum-dividend or cum-inter-

est date, which may or may not be retroactive, the terms and

conditions of payment of the subscription price and, where

appropriate, the life and exercise price of warrants or the terms

and conditions of exchange, conversion, redemption or exer-


The Board of Directors shall have full powers, including the

power of delegation as permitted by the applicable laws

and regulations, to:

• Determine, pursuant to the law, the method to be used to

adjust the exchange, conversion, redemption or exercise

price of share equivalents, including warrants.

• Determine the method of dealing with fractions of shares

created on exchange, conversion, redemption or exercise

of share equivalents, particularly warrants.

• Determine any and all special provisions to be included in

the issue agreement.

• Provide for the temporary suspension of the rights attached

to the share equivalents for a period not exceeding the

maximum period specified in the applicable laws and

regulations.

• Set the terms and conditions of any allotment of stand-alone

warrants issued without consideration and the procedures

for the buyback or exchange of shares and share equivalents,

including warrants, or the allotment of shares in repayment

of share equivalents.

• Set the terms and conditions of purchase or exchange, at

any time or during fixed periods, of shares and share equiv-

alents issued or to be issued pursuant to this resolution.

• Charge any and all transaction or other costs against the

related premiums.

• Protect the rights of holders of securities exchangeable,

convertible, redeemable or otherwise exercisable for shares,

in accordance with applicable laws and regulations.

EIGHTEENTH RESOLUTION - AUTHORIZATION TO ISSUE SHARES AND SHARE EQUIVALENTS WITHOUTPRE-EMPTIVE SUBSCRIPTION RIGHTS FOR EXISTINGSHAREHOLDERS



in accordance with Articles L.225-127, L.225-129, L.225-129-2,

L.225-135, L.225-136 and L.228-92 et seq. of the French

Commercial Code:


in the 32nd resolution of the Extraordinary General Meeting of

16 March 2005.

2) To give the Board of Directors a 26-month authorization to

increase the Company’s share capital on one or more occasions,

by the amounts and at the times that it considers appropri-

ate, by issuing, in France and abroad, shares and securities

exchangeable, convertible, redeemable or otherwise exercis-

able for shares or debt securities – including stand-alone

warrants issued with or without consideration and rights – to

be paid up in cash or by capitalizing debt. Securities other

than shares may be denominated in euros, in foreign currency

or in any monetary unit determined by reference to a basket

of currencies. In accordance with Article L.228-93 of the French

Commercial Code, this resolution may be used to carry out

one or several issues.

3) That shareholders shall not have a pre-emptive right to

subscribe for the shares or share equivalents issued pursuant

to this resolution.

This resolution may not be used to issue preferred shares

or securities exchangeable, convertible, redeemable or

otherwise exercisable for preferred shares.




€20 million, less the amount of any issues carried out pursuant

to the 21st resolution. However, this ceiling shall not include

the effect of any adjustments to be made to protect the

rights of holders of share equivalents pursuant to the law.

Share issues carried out pursuant to this resolution will be

deducted from the blanket ceiling of €75 million set in the

27th resolution.

5) To give the Board of Directors discretionary powers, in

accordance with the law, to determine whether to offer exist-

ing shareholders a priority right to subscribe for the issue –

which may or may not include a priority right to subscribe for

any securities not taken up by other shareholders – for a peri-

od at least equal to the minimum period specified by decree,

and to set the terms and conditions of exercise of this right in

accordance with Article L.225-135 of the French Commercial

Code.

If the issue is not taken up in full by shareholders, the Board

may take one or more of the following courses of action, in

the order that it considers appropriate:

• Limit the issue to the amount of the subscriptions received,

provided that at least three-quarters of the original issue

has been taken up, in accordance with the law.

• Freely allocate all or some of the unsubscribed shares or

share equivalents.

• Offer all or some of the securities for subscription by the

public.


shareholders’ pre-emptive rights to subscribe for the shares

to be issued on exchange, conversion, redemption or exer-


7) That the price of each share issued directly or indirectly

pursuant to this resolution, after taking into account the issue

price of any stand-alone warrants or rights, shall not be less

than the minimum price stipulated in the laws and regulations

applicable on the issue date, whether or not the new shares

rank pari passu with existing shares.

This resolution may be used to issue bonds or notes with an

equity component, or securities exchangeable, convertible,

redeemable or otherwise exercisable for bonds or notes

with an equity component, including dated or perpetual

senior or junior bonds or notes, denominated in euros, in

foreign currency or in any monetary unit determined by

reference to a basket of currencies, provided that the life of

dated bonds or notes issued pursuant to this resolution shall

not exceed twenty years. The aggregate nominal amount of

debt securities issued pursuant to this resolution shall not

exceed €300 million or the equivalent in foreign currency or

monetary units on the date when the issue is decided. Said

aggregate nominal amount shall be deducted from the

blanket ceiling on debt issues authorized by this Meeting.

If this resolution is used to issue debt securities, the Board of

Directors shall have full powers to decide whether such debt

securities will be subordinated or not and to set the interest

rate, the life of the securities, the fixed or variable redemption

price – which may or may not include a premium –, the terms

and conditions of their repayment and the manner in which

the securities will be exchangeable, convertible, redeemable

or otherwise exercisable for shares. Authority to act on this

resolution may be delegated by the Board, subject to com-

pliance with the applicable laws and regulations.


ization, including the power of delegation provided for by law

and by the Company’s bylaws. In particular, the Board shall

have full discretionary powers to set the terms and condi-

tions of the issue(s), place on record the capital increase(s)

resulting from the use of this authorization, amend the bylaws

to reflect the new capital, set the subscription date or period

and the terms and conditions of subscription, decide the

characteristics of the securities to be issued, enter into any

and all underwriting or other agreements and generally carry

out any and all formalities required to place the issues, have

the securities listed and make interest and principal payments.

The Board shall decide the amount of each issue, the issue

price of the shares or share equivalents – which may or may

not include a premium –, the cum-dividend or cum-interest

date, which may or may not be retroactive, the terms and

conditions of payment of the subscription price and, where

appropriate, the life and exercise price of warrants or the terms

and conditions of exchange, conversion, redemption or

exercise of share equivalents.

The Board of Directors shall have full powers, including the

power of delegation as permitted by the applicable laws and

regulations, to:

• Determine, pursuant to the law, the method to be used to

adjust the exchange, conversion, redemption or exercise

price of share equivalents, including warrants.

• Determine any and all special provisions to be included in

the issue agreement.

• Provide for the temporary suspension of the rights attached

to the share equivalents for a period not exceeding the

maximum period specified in the applicable laws and

regulations.

174



• Set the terms and conditions of purchase or exchange,

at any time or during fixed periods, of shares and share

equivalents issued or to be issued pursuant to this reso-

lution.

• Charge any and all transaction or other costs against the

related premiums.

• Protect the rights of holders of securities exchangeable,

convertible, redeemable or otherwise exercisable for shares,

in accordance with applicable laws and regulations.

NINETEENTH RESOLUTION - AUTHORIZATION TO ISSUE SHARES AND SHARE EQUIVALENTS AND FREELY SET THE ISSUE PRICE



in accordance with Article L.225-136-1, of the French Commercial

Code and within the limit of 10% of the Company’s capital in

any given year:


in the 33rd resolution of the Extraordinary General Meeting of

16 March 2005.


to issue shares or securities exchangeable, convertible,

redeemable or otherwise exercisable for shares or debt secu-

rities based on market opportunities and to determine the

issue price in the case of a public placement without pre-emp-

tive subscription rights provided that the amount received

by the Company for each share issued directly or on exchange,

conversion, redemption or exercise of share equivalents shall

be at least equal to its par value. As required by law, if this

resolution is used, the Board shall issue a report – certified by

the Auditors – describing the terms and conditions of the issue

and its impact on the situation of existing shareholders.

TWENTIETH RESOLUTION - AUTHORIZATION TO INCREASETHE COMPANY’S CAPITAL BY CAPITALIZING RESERVES,PROFIT OR PREMIUMS


report of the Board of Directors, resolves, in accordance with

Articles L.225-129, L.225-129-2 and L.225-130 of the French

Commercial Code:


in the 34th resolution of the Extraordinary General Meeting of

16 March 2005.


to increase the Company’s capital on one or more occasions,

in the amounts and at the times that it considers appropri-

ate, by issuing bonus shares or by increasing the par value of

existing shares, to be paid up by capitalizing reserves, profit

or premiums.

3) That any rights to fractions of shares shall not be tradable

or transferable, and that the corresponding shares will be sold,

with the proceeds from the sale allocated among the holders

of rights to fractions of shares within the period specified in a

decree of the French Council of State.

4) That the aggregate amount by which the capital may be

increased pursuant to this resolution shall not exceed €32 mil-

lion, to be deducted from the blanket ceiling of €75 million

set in the 27th resolution.

5) To give the Board of Directors full powers to use this author-

ization and to do everything necessary to permit the issue of

bonus shares or an increase in the par value of existing

shares in accordance with the law and the Company’s bylaws.

Authority to act on this resolution may be delegated by the

Board, subject to compliance with the applicable laws and

regulations and the Company’s bylaws.

TWENTY-FIRST RESOLUTION - AUTHORIZATION TO ISSUESHARES OR SHARE EQUIVALENTS IN CONNECTION WITHA TAKEOVER BID INITIATED BY THE COMPANY



in accordance with Articles L.225-148 and L.225-129 to

L.225-129-6 of the French Commercial Code:



16 March 2005.


to issue shares, other equity securities, debt securities

exchangeable, convertible, redeemable or otherwise exercis-

able for shares or debt securities and stand-alone warrants in

payment for shares of another company listed on a regulated

market – as defined in Article L.225-148 of the French

Commercial Code – that are tendered to a public exchange

or cash-and-exchange offer initiated by the Company, and to

cancel, if necessary, existing shareholders’ pre-emptive rights

to subscribe to the issue.


shareholders’ pre-emptive rights to subscribe for shares to be

issued on exchange, conversion, redemption or exercise of

share equivalents.




€20 million, less the par value of any shares issued pursuant

to the 18th resolution. However, this ceiling shall not include

the effect of any adjustments to be made to protect the

rights of holders of share equivalents pursuant to the law.

Share issues carried out pursuant to this resolution will be

deducted from the blanket ceiling of €75 million set in the

27th resolution.

5) That the price of each share issued directly or indirectly pur-

suant to this resolution, after taking into account the issue price

of any stand-alone warrants or rights, shall not be less than the

minimum price stipulated in the laws and regulations applica-

ble on the issue date, whether or not the new shares rank

pari passu with existing shares.

The Extraordinary General Meeting gives full powers to the

Board of Directors to carry out the public offers referred to

above and to issue shares or share equivalents in payment for

the shares or other securities tendered to the offer, to set the

exchange ratio and to place on record the number of securi-

ties tendered to the offer. Authority to act on this resolution

may be delegated by the Board, subject to compliance with

the applicable laws and regulations and the Company’s bylaws.

TWENTY-SECOND RESOLUTION - AUTHORIZATION TO ISSUE SHARES AND SHARE EQUIVALENTS IN PAYMENTFOR THE SECURITIES OF ANOTHER COMPANY



in accordance with Article L.225-147, paragraph 6, of the

French Commercial Code:



16 March 2005.


issue shares, other equity securities, securities exchangeable,

convertible, redeemable or otherwise exercisable for shares

or other securities in payment for the shares or share equiva-

lents of another company in a transaction not governed by

Article L.225-148 of the French Commercial Code, provided

that the aggregate par value of shares issued directly or indi-

rectly pursuant to this authorization shall not exceed 10% of

the Company’s capital at the issue date. In accordance with

the law, the aggregate value of shares or other securities

issued pursuant to this resolution shall be based on the values

reflected in the report of the Merger Auditor(s) provided for

in Article L.225-147 of the Code.

3) That shareholders shall not have a pre-emptive right to

subscribe for the shares or share equivalents issued pursuant

to this resolution, or the shares to be issued on conversion,

redemption or exercise of said share equivalents.

The price of each share issued directly or indirectly pursuant

to this resolution shall not be less than the minimum price

stipulated in the laws and regulations applicable on the issue

date, whether or not the new shares rank pari passu with

existing shares.

The Board of Directors shall have full powers to approve the

value attributed to the shares or other securities to be

acquired, set the exchange ratio and any cash payment, place

on record the exchange, charge any costs and expenses

against the issue premium, increase the capital, amend the

bylaws to reflect the new capital, and generally take any and

all measures, enter into any and all agreements and carry out

any and all formalities required to permit the exchange. The

balance of the issue premium, after deducting any and all costs

and expenses, shall be allocated by decision of the Board or

of the shareholders in General Meeting.

TWENTY-THIRD RESOLUTION - AUTHORIZATION TO GRANT STOCK OPTIONS TO EXECUTIVE DIRECTORSAND/OR EMPLOYEES OF GROUP COMPANIES



in accordance with Articles L.225-177 et seq. of the French

Commercial Code, to give the Board of Directors a 26-month

authorization to grant stock options, on one or several occa-

sions, to all or some of the employees and executive directors

of the Company and related companies and intercompany

partnerships as defined in Article L.225-180 of the French

Commercial Code, subject to the limits specified in the appli-

cable legislation. This resolution may be used to grant:

• Options to subscribe for new shares to be issued by the

Company, and/or;

• Options to purchase existing shares bought back by the

Company in accordance with the law.

The total number of options outstanding at any given time

shall not be exercisable for a number of shares in excess of

the legal limit or the blanket ceiling set in the 27th resolution.

This resolution automatically entails the waiver, by existing

shareholders, of their pre-emptive right to subscribe for the

shares to be issued upon exercise of the options.

The option exercise price shall be set by the Board of Directors

at the time of grant, within the limits and in the manner pre-

scribed by law.

The options shall have a ten-year life.

The shares issued upon exercise of the options shall carry

dividend and voting rights from the date of issue.

The Extraordinary General Meeting gives the Board of

Directors full powers to use this resolution within the above

limits and the limits specified in the Company’s bylaws.

Authority to act on this resolution may be delegated by the

Board, subject to compliance with the applicable laws and

regulations and the Company’s bylaws. In particular, the Board

of Directors shall have full powers to:

• Set the option grant dates.

• Set the terms and conditions of the options – which may

include a lock-up clause preventing the sale of all or some

of the shares acquired upon exercise of the options within

a specified period –, the option exercise price, the list of

grantees and the number of shares that may be acquired by

each grantee.

176



• Set the terms and conditions of exercise of the options,

including the exercise period, and decide to allow for the

temporary suspension of the right to exercise the options

in accordance with the applicable laws and regulations.

• Decide the basis for adjusting the price and the number of

shares to be acquired upon exercise of the options in the

cases provided for by law.

• Determine the deadline for exercising the options, which

may not be more than ten years after the grant date, and

the exercise period.

• Carry out any and all formalities to effect the capital

increase(s) that may result from the exercise of options

granted pursuant to this resolution.

• Amend the Company’s bylaws to reflect the new capital and

generally do everything necessary.

The Board of Directors shall report to each Annual General

Meeting on the transactions carried out pursuant to this

authorization.

This authorization supersedes, with immediate effect, the

authorization given in the 37th resolution of the Extraordinary

General Meeting of 16 March 2005.

TWENTY-FOURTH RESOLUTION - AUTHORIZATION TOINCREASE ISSUES OF SHARES AND SHARE EQUIVALENTSWITH OR WITHOUT PRE-EMPTIVE SUBSCRIPTION RIGHTS



in accordance with Article L.225-135-1 of the French Commercial

Code:



16 March 2005.


increase the number of shares or share equivalents offered in

the event that an issue of shares or share equivalents with or

without pre-emptive subscription rights is oversubscribed,

provided that the additional issue is decided within the peri-

od and for no more than the maximum amount prescribed by

the laws and regulations in force on the issue date (currently

thirty days from the close of the initial subscription period and

15% of the original issue) and the additional shares or share

equivalents are offered at the same price as the original issue.

3) That the aggregate par value of shares issued directly or

indirectly pursuant to this resolution will be deducted from the

blanket ceiling of €75 million set in the 27th resolution.

TWENTY-FIFTH RESOLUTION - AUTHORIZATION TO MAKESTOCK GRANTS



in accordance with Articles L.225-197-1 et seq. of the French

Commercial Code:

• To authorize the Board of Directors to grant new or existing

shares of the Company, on one or several occasions, to

selected qualifying employees and/or executive directors of

the Company and/or related companies and intercompany

partnerships as defined in Article L.225-197-2 of the French

Commercial Code.

• To give the Board of Directors full discretionary powers to

draw up the list of grantees, determine the number of grants

to be made to each grantee, set the terms and conditions

of grant and any related criteria, and make the grants

subject to vesting conditions based on the performance of

the Group or the grantee.

• That the total number of stock grants made pursuant to this

resolution shall not exceed 1% of the Company’s capital

as of the date of this Meeting, not including any additional

shares to be issued or allotted to protect the rights of

grantees in the case of any corporate actions carried out

during the vesting period. The aggregate par value of shares

issued pursuant to this resolution will be deducted from

the blanket ceiling set in the 27th resolution.

• That the stock grants shall be subject to a vesting period of

between two and four years, and that the vested shares shall

be subject to a lock-up period of between two and four

years.

• To authorize the Board of Directors to adjust the number of

stock grants in the case of any corporate actions carried

out during the vesting period in order to protect the rights

of grantees.

• That, if new shares are issued in respect of stock grants, said

shares shall be paid up by capitalizing reserves, profits or

premiums and existing shareholders shall automatically

waive their right to said reserves, profits or premiums; and

that the Board of Directors shall be authorized to carry out

said share issues.

This authorization is given for a period of 26 months and

supersedes, with immediate effect, the authorization given in

the 10th resolution of the Extraordinary General Meeting of

14 March 2006.


ization, including the power of delegation provided for by law.

In particular, the Board of Directors shall have full discretionary

powers to decide the timing and the terms and conditions of

the grants, and – if new shares are issued in respect of stock

grants – the amount and origin of the reserves, profits and/or

premiums to be capitalized, to increase the capital, to enter

into any and all agreements and to carry out any and all for-

malities to permit the grants, to place on record any capital

increases(s) resulting from the use of this resolution and to

amend the Company’s bylaws to reflect the new capital.

TWENTY-SIXTH RESOLUTION - AUTHORIZATION TO CARRY OUT AN EMPLOYEE SHARE ISSUE

The Extraordinary General Meeting, having considered

the reports of the Board of Directors and the Auditors,

resolves, in accordance with Articles L.443-1 et seq. of the

French Labor Code and Articles L.225-138 et seq., L.225-129-2

and L.225-129-6 of the French Commercial Code:



16 March 2005.


(i) issue shares or share equivalents to employees of

the Company and related companies as defined in Article

L.225-180 of the French Commercial Code who are members

of an employee stock ownership plan, for subscription either

directly by the employees concerned or through a corporate

mutual fund, and (ii) grant shares or share equivalents to said

employees without consideration, within the limits specified

in Articles L.443-5 et seq. of the French Labor Code, entail-

ing the waiver by existing shareholders of all rights to said

shares and share equivalents.




€3 million. However, this ceiling shall not include the effect of

any adjustments to be made to protect the rights of holders

of share equivalents pursuant to the law. Share issues carried

out pursuant to this resolution will be deducted from the blan-

ket ceiling of €75 million set in the 27th resolution.

4) That the issue price of shares issued pursuant to this

resolution will be determined in accordance with Article

L.443-5 of the French Labor Code.

5) That this resolution entails the waiver by existing share-

holders of their pre-emptive right to subscribe for shares

issued pursuant to this resolution and Article L.444-3 of the

French Labor Code to employees of the Company and

related companies as defined in Article L.225-180 of the French

Commercial Code who are members of an employee stock

ownership plan.

The Ordinary General Meeting gives full powers to the

Board of Directors to use this authorization on one or several

occasions, subject to the above conditions and limits, and to

set the terms and conditions of the issues. Authority to act

on this resolution may be delegated by the Board, subject to

compliance with the applicable laws and regulations and the

Company’s bylaws. In particular, the Board of Directors shall

be authorized to:

• Decide to issue shares or share equivalents either directly

to employees or through a corporate mutual fund.

• Determine the characteristics, amounts, terms and conditions

of the issues, including the cum-interest or cum-dividend

date and the terms and conditions of payment of subscrip-

tion monies.

• Set the subscription price of the new shares in accordance

with the provisions of the law.

• Set the opening and closing dates of the subscription period.

• Set the period allowed for the payment of subscription

monies, which shall not exceed the maximum period spec-

ified in the applicable laws and regulations, and the mini-

mum service period, if any, qualifying employees to subscribe

for the shares or share equivalents and to receive a match-

ing payment from the Company.

• Amend the Company’s bylaws to reflect the new capital and

generally do everything necessary; charge the share issue

costs against the related premium and deduct from the pre-

mium the amount necessary to increase the legal reserve

to 10% of the new capital after each issue.

TWENTY-SEVENTH RESOLUTION - BLANKET CEILING ON SHARE ISSUES



in accordance with Article L.225-129-2 of the French Commercial

Code, to set a blanket ceiling of €75 million on the aggregate

par value of share issues carried out directly or indirectly under

the authorizations given to the Board of Directors in the 17th,

18th, 19th, 20th, 21st, 23rd, 24th, 25th and 26th resolutions, before

taking into account any shares to be issued in accordance with

the applicable laws and regulations to protect the rights of

holders of share equivalents. Within this blanket ceiling:

a) Issues with pre-emptive subscription rights pursuant to the

17th resolution, plus any additional shares and share equiva-

lents issued pursuant to the 24th resolution, shall not have the

effect of increasing the capital by more than €20 million.

b) Issues without pre-emptive subscription rights pursuant to

the 18th, 19th and 21st resolutions, plus any additional shares

and share equivalents issued pursuant to the 24th resolution,

shall not have the effect of increasing the capital by more than

€20 million.

c) Share issues (or increases in the par value of the shares) paid

up by capitalizing reserves, profits or premiums pursuant to

the 20th resolution shall not have the effect of increasing the

capital by more than €32 million.

d) Share issues in payment of the securities of another com-

pany pursuant to the 22nd resolution shall not have the effect

of increasing the capital by more than the maximum amount

prescribed by law.

178



e) Share issues upon exercise of stock options pursuant to

the 23rd resolution shall not have the effect of increasing the

capital by more than the maximum amount prescribed by law,

determined separately from the ceiling specified in b) above.

f) Stock grants made pursuant to the 25th resolution shall not

have the effect of increasing the capital by more than the

maximum amount prescribed by law.

g) Employee share issues pursuant to the 26th resolution shall

not have the effect of increasing the capital by more than

€3 million.

The above limits within the blanket ceiling do not take into

account the effect of any adjustments to be made to protect

the rights of holders of share equivalents pursuant to the law.

TWENTY-EIGHTH RESOLUTION - AUTHORIZATION TO CANCEL SHARES



in accordance with Articles L.225-209 et seq. of the French

Commercial Code, to authorize the Board of Directors to

reduce the capital on one or several occasions by canceling

all or some of the shares held or bought back by the Company.

The Board of Directors shall have full discretionary powers to

decide the amount(s) and timing of such cancellations, with-

in the legal limit (currently 10% of the Company’s capital per

24-month period). The share capital used to calculate this 10%

limit shall be adjusted for the effects of any corporate actions

carried out after this Meeting.

This authorization will expire at the end of a period of eight-

een months from the date of this Meeting.

The Extraordinary General Meeting gives full powers to the

Board of Directors – including the power of delegation – to:

• Cancel shares and reduce the capital accordingly.

• Determine the method and the final amount of the capital

reduction and place the capital reduction on record.

• Charge the difference between the carrying amount of the

canceled shares and their par value to any reserve account

or to additional paid-in capital.

• Amend the bylaws to reflect the new capital and generally

do everything necessary in accordance with the provisions

of the law applicable when this resolution is used.

TWENTY-NINTH RESOLUTION - POWERS


report of the Board of Directors, gives full powers to the

bearer of a copy or extract of the minutes of this Meeting to

carry out all legal registration, filing, announcement and other

formalities.

180

INFORMATION INCORPORATED BY REFERENCE

The following information is incorporated by reference in theregistration document:

• The business report, the consolidated financial statements

of Club Méditerranée and the Auditors’ report on the con-

solidated financial statements for fiscal 2004, as presented

on pages 15 to 27, 43 to 81 and 78 of the registration

document filed with the Autorité des Marchés Financiers on

21 February 2005 under no. D.05-133.• The business report, the consolidated financial statements

of Club Méditerranée and the Auditors’ report on the con-solidated financial statements for fiscal 2005, as presentedon pages 60 to 78, 91 to 126 and 123 of the registrationdocument filed with the Autorité des Marchés Financiers on23 February 2006.

The information in these two registration documents not incor-

porated by reference in this registration document has been

replaced and/or updated by the information in this registra-

tion document where appropriate.

The two reference documents referred to above can be

downloaded from the Club Méditerranée website

(www.clubmed.com) and the Autorité des Marchés Financiers

website (www.amf-france.org).

STATUTORY AUDITORS

• Ernst & Young Audit SAS, Faubourg de l’Arche 92037 Paris-La Défense Cedex, represented by Pascal Macioce. Ernst &Young Audit’s appointment was renewed at the AnnualGeneral Meeting of 13 March 2001 for a period of six yearsexpiring at the Annual General Meeting to be called toapprove the fiscal 2006 financial statements. The firm wasappointed for the first time at the Annual General Meetingof 30 April 1981. Renewal of its current appointment will beproposed at the Annual General Meeting of 8 March 2007.• Deloitte & Associés, 185, avenue Charles de Gaulle 92524Neuilly-sur-Seine Cedex, represented by Alain Pons andDominique Jumaucourt. The firm was appointed for the firsttime at the Annual General Meeting of 17 March 2003, for theremainder of its predecessor’s term expiring at the AnnualGeneral Meeting to be called to approve the fiscal 2006 finan-cial statements. Renewal of the firm’s appointment will beproposed at the Annual General Meeting of 8 March 2007.

SUBSTITUTE AUDITORS

• François Carrega, 13, boulevard des Invalides 75007 Paris.François Carrega was appointed for the first time at the AnnualGeneral Meeting of 13 March 2001 for a period of six yearsexpiring at the Annual General Meeting to be called toapprove the fiscal 2006 financial statements. Renewal of hisappointment will be proposed at the Annual General Meetingof 8 March 2007.• Beas, 185, avenue Charles de Gaulle 92524 Neuilly-sur-SeineCedex. The firm was appointed for the first time at the AnnualGeneral Meeting of 17 March 2003 for the remainder of itspredecessor’s term expiring at the Annual General Meetingto be called to approve the fiscal 2006 financial statements.Renewal of its appointment will be proposed at the AnnualGeneral Meeting of 8 March 2007.

PERSON RESPONSIBLE FOR INFORMATION

• Michel Wolfovski,Executive Vice President and Chief Financial Officer, 11, rue de Cambrai - 75019 Paris. Phone: + 33 (1) 53 35 34 00

VICE PRESIDENT, INVESTOR RELATIONS AND FINANCIAL COMMUNICATION

• Caroline Bruel 11, rue de Cambrai - 75019 Paris. Phone: + 33 (1) 53 35 30 75 - Fax: + 33 (1) 53 35 32 73E-mail: [email protected]

PERSON RESPONSIBLE FOR THE REGISTRATION DOCUMENT

“To the best of our knowledge, having taken all reasonablecare to ensure that such is the case, the information containedin this registration document is in accordance with the factsand includes all the information needed by investors to assessthe Group’s assets and liabilities, business, financial position,results and outlook. No information has been omitted thatwould be likely to affect its import. We obtained a statementfrom the Statutory Auditors at the end of their engagementaffirming that they had examined, in accordance with the pro-fessional standards and guidelines applicable in France, theinformation about the financial position and the accounts con-tained in this reference document and had read the entirereference document.”

The Chairman and Chief Executive OfficerHenri Giscard d’Estaing

This registration document was filed with the Autorité des Marchés Financiers (AMF) on 14 February 2007 in accordancewith Article 212-13 of the AMF’s general regulations. It may be used in connection with a financial transaction providedthat it is accompanied by an information memorandum approved by the AMF.

Documents

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