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Case Study - Club Med

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Club Med case study
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Financial Report Fiscal Year 2007
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Page 1: Case Study - Club Med

Financial Report

Fiscal Year 2007

Page 2: Case Study - Club Med

2007 ANNUAL REPORT 61

FINANCIAL REPORT

136 – Note 10 - Other receivables136 – Note 11 - Cash and cash equivalents136 – Note 12 - Share capital and reserves137 – Note 13 - Share-based payments139 – Note 14 - Pensions and other long-term benefits141 – Note 15 - Provisions141 – Note 16 - Income taxes 143 – Note 17 - Borrowings and other

interest-bearing liabilities145 – Note 18 - Financial instruments148 – Note 19 - Other liabilities148 – Note 20 - Employee benefits expense

and number of employees149 – Note 21 - Operating income - Management

of assets149 – Note 22 - Other operating income and expense149 – Note 23 - Finance cost, net149 – Note 24 - Share of income of associates150 – Note 25 - Earnings per share 150 – Note 26 - Notes to the consolidated

cash flow statement 151 – Note 27 - Related party transactions152 – Note 28 - Commitments and contingencies153 – Note 29 - Scope of consolidation

at 31 October 2007157 – Auditors’ report on the consolidated financial

statements158 – Group structure at 31 October 2007

161 – ADDITIONAL INFORMATION

162 – Statutory Auditors’ special report on regulated agreements and commitments

165 – Report of the board of directors on the proposed resolutions

169 – Proposed resolutions

62 – MANAGEMENT REPORT62 – Consolidated financial results73 – Risk factors77 – 2008 financial calendar 79 – General information80 – General information about Club Méditerranée83 – General information about

the company’s capital88 – General information about

Club Méditerranée securities90 – Corporate governance

102 – Chairman’s report on the practices and procedures of the board of directors and internal control procedures

113 – Statutory Auditors’ report on internal control114 – Fees paid to the Statutory Auditors

115 – CONSOLIDATED FINANCIAL STATEMENTS

116 – Consolidated statements of income117 – Consolidated balance sheets118 – Consolidated cash flow statement118 – Change in consolidated net debt119 – Consolidated statement

of changes in equity (Note 12)120 – Notes to the consolidated financial statements120 – Note 1 - General information 120 – Note 2 - Summary of significant accounting

policies, scope of consolidation 128 – Note 3 - Changes in scope of consolidation128 – Note 4 - Segment information131 – Note 5 - Goodwill and business combinations132 – Note 6 - Intangible assets133 – Note 7 - Property, plant and equipment134 – Note 8 - Non-current financial assets135 – Note 9 - Assets held for sale

Page 3: Case Study - Club Med

Other operating income and expense, corresponding to

credit card costs, litigation and restructuring, represented a

net expense of €21 million.

Operating income stood at €14 million, reflecting an improve-

ment in the leisure businesses and a lower contribution from

the management of assets.

1.2. BUSINESS REVIEW

FY FY Change vs.2006 2007 FY 2006

Number of customers (in thousands) 1,685 1,639 -2.7%

Of which Club Med 1,328 1,324 -0.2%Of which Jet tours 286 243 -15.1%Of which Club Med Gym 71 72 +1.1%

Revenuelike-for-like (in € thousands) 1,670 1,727 +3.4%Of which core business 1,292 1,367 +5.7%

Revenuelike-for-like per hotel day(2) €110.4 €119.4 +8.1%

Capacity in thousands of hotel days(2) 12,550 12,477 - 0.6%

Hotel days sold (in thousands)(2) 8,560 8,536 -0.3%

Occupancy rate(2) 68.2% 68.4% +0.2 pt

RevPAB(1) per hotel day, like-for-like €80.4 €86.5 +7.7 %

(1) RevPAB: Total like-for-like Village revenue excluding tax and trans-portation/Available beds.

(2) For the core business.

Like-for-like revenue per hotel day rose by 8.1%, with gains

in every region.

The €9 increase in revenue per hotel day was mainly attribut-

able to the nearly €6 effect of the ongoing upmarket strate-

gy, involving resegmentation of the Village base, the impact

of the “Bar & Snacking Included” formula introduced in Asia

during the year and the “Confort à la Carte” offering of rooms

in a higher comfort category.

Capacity was down 0.6% overall for Club Med Villages, includ-

ing a 4.5% decrease in Europe that was mainly attributable to

the closure of Opio en Provence and La Pointe aux Canonniers

for renovation. In the Americas, capacity increased 8.7%, with

the reopening of the newly renovated Cancún Yucatán,

Trancoso and La Caravelle Villages. In Asia, capacity was up

by 3.6%.

Club Med Gym reported a 3.5% increase in revenue. However,

due to the membership system, business growth is better

measured in terms of new subscriptions, which rose by a sat-

isfactory 5.3% in value over the prior year.

1. Consolidated FinancialResults1.1. FINANCIAL HIGHLIGHTS

(in € millions)

2006 2007

Consolidated revenueReported 1,679 1,727Like-for-like(1) 1,670 1,727

EBITDAR - leisure (2) 229 244Operating income - leisure 24 33Of which business interruption insurance settlements 21 2

Operating income - management of assets 40 2Other operating income & expense (29) (21)

Operating income 35 14

Net income/(loss) 5 (8)Net debt (294) (336)

(1) At constant exchange rates and comparable scope of consolidation.(2) EBITDAR - leisure: Earnings before interest, taxes, depreciation,

amortization and rents.* including a 3.3% increase in core business.

** including a 5.7% increase in core business.

Consolidated revenue amounted to €1,727 million, an increase

of 2.8% on a reported basis. Like-for-like revenue was up 3.4%,

reflecting 4% growth in the first half and 2.8% in the second.

The fourth quarter saw a strong 5.3% increase in revenue.

Core business rose by 5.7% like-for-like.

EBITDAR - leisure rose to €244 million from €229 million the

previous fiscal year. Excluding the impact of business interrup-

tion insurance settlements in fiscal 2006, EBITDAR was up 16%.

Operating income - leisure, at €33 million, showed a sharp

increase, particularly after taking into account the fiscal 2006

impact of business interruption insurance settlements.

Operating income - management of assets, corresponding

to the revenues and expenses generated by the management

of property assets, amounted to €2 million versus more than

€40 million in fiscal 2006. The sharp decline stemmed from the

cost of closing year-round Villages for renovation and a weak-

er contribution from disposals and asset refinancing transac-

tions, which were unusually high in fiscal 2006.

Borrowings were also affected, rising to €336 million at

31 October 2007, despite the decrease in average net debt

to €370 million in fiscal 2007 from €432 million in the pre-

vious year.

MANAGEMENT REPORT

62

+2,8%*

+3,4%**

Page 4: Case Study - Club Med

1.2.1. CUSTOMERS

In fiscal 2007, the Group welcomed over 1,639,000 customers.

The Villages business served 1,324,000 customers during the

year, in line with fiscal 2006 and up for the first time in the sum-

mer months since 2001.

The number of customers at 4-Trident Villages rose by 133,000

and by nearly 200,000 compared with fiscal 2005. These pos-

itive developments are key to the strategy to move upmarket.

Jet tours served far fewer customers in fiscal 2007 as the

upmarket strategy was pushed into higher gear, leading to

plans to build four Eldorador hotels being removed from the

catalogue. However, at the same time, the repositioning led

to an 11% increase in the average price per customer, which

is crucial to improving Jet tour’s future profitability.

1.2.2. HOTEL DAYS - VILLAGES

HOTEL DAYS BY OUTBOUND ZONE

Outbound zones generate revenue and sales costs (e.g. France,

United Kingdom, Belgium, Canada...).

(in thousands of hotel days sold)

FY 2006 FY 2007 Change

Europe 6,511 6,450 -0.9%Americas 1,290 1,253 -2.8%Asia 759 833 +9.7%

Total 8,560 8,536 -0.3%

HOTEL DAYS BY INBOUND ZONE

Inbound zones are where Villages are located and operated

(e.g. France, Morocco, Polynesia, Mexico...).

(in thousands of hotel days sold)

FY 2006 FY 2007 Change

Europe 5,885 5,717 - 2.8%Americas 1,733 1,766 +1.9%Asia 942 1,053 +11.8%

Total 8,560 8,536 -0.3%

1.2.3. OCCUPANCY RATE BY CATEGORY

Thousands of hotel days by destination Occupancy rate

FY 2006 FY 2007 FY 2006 FY 2007

2 Tridents 418 266 71.1% 75.4%3 Tridents 5,435 4,698 70.7% 70.0%4 and 5 Tridents 2,626 3,511 65.0% 66.9%Other 81 61 34.0% 38.0%

Total 8,560 8,536 68.2% 68.4%

4 Trident capacity grew 30% compared to fiscal 2006 and 53%

compared to fiscal 2005 to represent 42% of the total.

The number of hotel days sold during the period was in

line with fiscal 2006 at 8,536,000.

FY 2006 FY 2007

EuropeCapacity 8,142 7,778Occupancy rate 72.3% 73.5%

AmericasCapacity 2,621 2,847Occupancy rate 66.1% 62.0%

AsiaCapacity 1,787 1,852Occupancy rate 52.7% 56.9%

TotalCapacity 12,550 12,477Occupancy rate 68.2% 68.4%

The occupancy rate stood at 68.4% of available beds, an

increase of 0.2 points from the previous year.

1.2.4. REVPAB (REVENUE PER AVAILABLE BED)

(€/hotel day)

Cumulative at 31 October

(like-for-like) 2005 2006 2007 Change Change2007 vs. 2007 vs.

2006 2005

Europe 77.4 84.4 90.5 +7.3% +17.0%Americas 72.2 77.5 78.9 +1.9% +9.4%Asia 57.2 66.5 81.3 +22.3% +42,2%

Total Villages 73.7 80.4 86.5 +7.7% +17.4%

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

Revenue per available bed (RevPAB) is a key business indica-

tor since it measures how well customers are embracing the

upmarket strategy.

In fiscal 2007, RevPAB rose by 7.7% to nearly €87 per hotel day.

After rising by €7 per hotel day in fiscal 2006, RevPAB increased

by an additional €6 in fiscal 2007.

Growth was attributable to all the upmarket initiatives and

reflected advances across all zones.

MANAGEMENT REPORT

2007 ANNUAL REPORT 63

Page 5: Case Study - Club Med

Fiscal 2007 revenue rose by 3.4% like-for-like and by 2.8%

on a reported basis. The currency effect was a negative

€23 million, due to the strength of the euro, while changes in

the scope of consolidation – corresponding to the sale and

management-back of the Almadies Village in Senegal – had

an €8 million negative impact.

In fiscal 2007, revenue was affected by two major develop-

ments:

- Changes in price mix had a €75 million positive effect on rev-

enue, reflecting the ongoing rise in average prices.

- The volume effect was positive, at €2 million, for the first time

in five years. This indicator shows that the shift in the customer

base has been completed in a number of countries.

LIKE-FOR-LIKE REVENUE BY REGION AND BUSINESS(OUTBOUND ZONES)(in € millions)

FY 2005 FY 2006 FY 2007 FY 2007 vs. FY 2006

Europe 925 970 1 012 +4.3%Americas 194 185 188 +1.7%Asia 110 137 167 +21.4%

Villages 1,229 1,292 1,367 +5.8%

Jet tours 311 322 302 -6.1%Other businesses 53 56 58 +4.1%

Total 1,593 1,670 1,727 +3.4%

1.3.2. INCOME BY REGION AND BUSINESS

(in € millions)

EBITDAR Operating income -leisure

FY 2006 FY 2007 FY 2006 FY 2007

Europe 163 166 21.4 19.9Americas 22 21 (1.6) (2.2)Asia 20 32 (1.6) 9.6

Sub-total Villages 205 219 18.2 27.3

Jet tours 9 8 3.1 2.2Other businesses 15 17 2.4 3.4

Total 229 244 23.7 32.9

% of like-for-like revenue 13.7% 14.1%

This financial model shows gross operating profit (GOP) per

hotel day by comfort category. There is only a limited link

between cost and comfort category, whereas prices vary by

20% to 50% from one category to another.

For example, GOP per hotel day in the 4 Trident category is

€69, which is 1.5 times higher than in the 3 Trident category.

1.3. STATEMENT OF INCOME

1.3.1. CONSOLIDATED REVENUE

(in € millions)

FY 2006 FY 2007

Revenue 1,679 1,727

Operating income - leisure 23.7 32.9Operating income - management of assets 39.7 2.0Other operating income & expense (28.7) (20.5)

Operating income 34.7 14.4Finance costs and other financial income & expense (32.1) (26.4)Share of income of associates 3.6 1.2Income tax (1.2) 2.5

Net income/(loss) 5.0 (8.3)

Of which attributable to shareholders 4.6 (10.4)

64

1.2.5 FINANCIAL MODEL (at 31 october 2007)

Price

Costs

2 Tridents 3 Tridents 4 and 5 Tridents

2007 capacity

Comfort category

GOP*/hotel day

4% 54% 42%

€24

€46

€69

>

>

1,679

–31

+2

1,727

Fiscal 2007Fiscal 2006

FY 2007 VERSUS FY 2006

(1) Including €22 million due to changes in the scope of consolidation.

+2Jet tours(1)

+75

(€)

Currency effect and change in scope of consolidations

Volume effect

Change in price mix

Jet tours

* GOP: Village operating income before property costs.

Page 6: Case Study - Club Med

FIXED OPERATING COSTS(in € millions)

FY 2006 like-for-like (402.6)€(35.9) per hotel day(1)

Scope of consolidation/Capacity/Upmarket strategy (8.2)

Villages closed definitively 9.4

Villages closed for renovation 9.0

New or reopened Villages (21.9)

Upmarket strategy (1.8)

Other (2.9)

Cost increases (8.6)

FY 2007 (419.4)€(37.4) per hotel day(1)

(1) Excluding managed Villages.

Fixed operating costs rose by €17 million. Part of the increase

was due to growth in capacity. Adjusted for changes in capac-

ity, average fixed operating costs per hotel day were 4.2%

higher than in fiscal 2006, at €37.4.

The two main reasons for the increase were as follows:

- The ongoing shift of the Village base upmarket had an

inevitable impact. The operating cost per hotel day of the

4-Trident Villages opened during the year is roughly €40, but

this compares with an average price per hotel day of around

€135. The Group also closed entry-level Villages that repre-

sented an operating cost per hotel day of around €27 com-

pared with an average price, including Crested Butte, of

€93 per hotel day.

In all, changes in the scope of consolidation, both quantita-

tive and qualitative, resulted in an overall cost increase of

approximately €9 million.

- A residual increase in costs of nearly €9 million, or 2.4%, with

the effects of inflation partly offset by productivity gains.

PROPERTY COSTS

(in € millions - like-for-like)

Fiscal 2006 property costs (150.7)

Refinancing transactions (3.0)Changes in scope of consolidation 1.2 Upmarket strategy (4.5)Rent escalation clauses and other (6.3)

Fiscal 2007 property costs (163.3)

Property costs increased by €12.6 million due to the effect of

asset securitizations, the upmarket strategy and a particular-

ly large upward rent adjustment of 7%.

MANAGEMENT REPORT

2007 ANNUAL REPORT 65

LEISURE OPERATING INCOME - VILLAGES(in € millions - like-for-like)

FY 2006 FY 2007

Revenue 1,292.4 1,366.7Business interruption insurance settlements 19.1 1.9Other revenue 7.8 9.8

Total revenue 1,319.3 1,378.4

Margin on variable costs 807.5 845.4as a % of revenue (1) 61.0% 61.7%

Fixed selling costs (175.5) (171.8)Fixed operating costs (402.6) (419.4)Property costs (150.7) (163.3)Overheads (62.0) (63.6)

Operating income - leisure 16.7 27.3

(1) Adjusted to exclude insurance settlements.

Reported fiscal 2006 operating income - leisure 18

Currency effect 1Change in scope of consolidation (2)

Like-for-like fiscal 2006 operating income - leisure 17

Volume effect 0 Change in price mix 55Business interruption insurance settlements (17)

Change in margin on variable costs 38

Fixed selling costs 4Fixed operating costs (17)Property costs (13)Overheads (2)

Fiscal 2007 operating income - leisure 27

FIXED SELLING COSTS

Reduced catalog costs accounted for half of the savings in sell-

ing costs and lower administrative costs for the other half.

Page 7: Case Study - Club Med

Operating Income - leisure: Asia

(in € millions - like-for-like)

FY 2006 FY 2007

Revenue 137.3 166.5Business interruption insurance settlements 0.0 0.0Other revenue (including inter-regional revenue) 22.4 29.2

Total revenue 159.7 195.6

Margin on variable costs 84.4 105.7as a % of revenue(1) 61.4% 63.5%

Fixed selling costs (21.3) (23.1)Fixed operating costs (40.8) (45.1)Property costs (16.8) (18.6)Overheads (8.3) (9.3)

Operating income - leisure (3.0) 9.6

(1) Adjusted to exclude insurance settlements.

Reported fiscal 2006 operating income - leisure (1.6)

Currency effect (1.4)Change in scope of consolidation 0.0

Like-for-like fiscal 2006 operating income - leisure (3.0)

Volume effect 12.1Change in price mix 9.3Business interruption insurance settlements 0.0

Change in margin on variable costs 21.4

Fixed selling costs (1.8)Fixed operating costs (4.3)Property costs (1.8)Overheads (1.0)

Fiscal 2007 operating income - leisure 9.6

Operating income - leisure in Asia rose sharply, led by the 21%

growth in sales and the increased number of Europeans vaca-

tioning in Asia. The overall increase in business volume had a

€12-million impact.

LEISURE OPERATING INCOME - VILLAGES, BY REGION

Operating Income - leisure: Europe

(in € millions - like-for-like)

FY 2006 FY 2007

Revenue 970.2 1,012.1Business interruption insurance settlements 3.1 0.0Other revenue (including inter-regional revenue) 10.0 10.5

Total revenue 983.3 1,022.6

Margin on variable costs 566.0 576.2 as a % of revenue(1) 58.0% 56.9%

Fixed selling costs (120.5) (120.5)Fixed operating costs (270.4) (273.4)Property costs (115.5) (122.6)Overheads (37.6) (39.8)

Operating income - leisure 22.0 19.9

(1) Adjusted to exclude insurance settlements.

Reported fiscal 2006 operating income - leisure 21.4

Currency effect 2.9Change in scope of consolidation (2.3)

Like-for-like fiscal 2006 operating income - leisure 22.0

Volume effect (15.3)Change in price mix 28.7Business interruption insurance settlements (3.1)

Change in margin on variable costs 10.3

Fixed selling costs 0.0Fixed operating costs (3.0)Property costs (7.1)Overhead (2.2)

Fiscal 2007 operating income - leisure 19.9

Operating income - leisure in Europe decreased slightly while

revenue in the region rose 4.3%. Growth in revenue was main-

ly attributable to the 18% increase in the number of customers

booking vacations in the Americas and Asia. These regions

were the main beneficiaries of the increase. The price-mix

impact offset the higher costs incurred during the year.

66

Page 8: Case Study - Club Med

Operating Income - leisure: Americas

(in € millions - like-for-like)

FY 2006 FY 2007

Revenue 184.9 188.1Business interruption insurance settlements 16.0 1.9Other revenue (including inter-regional revenue) 47.4 65.2

Total revenue 248.3 255.2

Margin on variable costs 157.2 163.4 as a % of revenue (1) 74.3% 85.4%

Fixed selling costs (33.8) (28.1)Fixed operating costs (91.4) (100.9)Property costs (18.3) (22.1)Overheads (16.1) (14.5)

Operating income - leisure (2.3) (2.2)

(1) Adjusted to exclude insurance settlements.

Reported fiscal 2006 operating income - leisure (1.6)

Currency effect (0.7)Change in scope of consolidation 0.0

Like-for-like fiscal 2006 operating income - leisure (2.3)

Volume effect 3.2Change in price mix 17.1Business interruption insurance settlements (14.1)

Change in margin on variable costs 6.2

Fixed selling costs 5.6Fixed operating costs (9.5)Property costs (3.8)Overheads 1.6

Fiscal 2007 operating income - leisure (2.2)

Operating income - leisure was stable in the Americas region,

thanks to a strong favorable change in the price mix which off-

set the sharp decline in business interruption insurance set-

tlements, which amounted to €2 million in fiscal 2007 versus

€16 million in fiscal 2006.

OTHER BUSINESSES

Operating Income - leisure: Jet tours and other businesses

(in € millions)

FY 2006 FY 2007

Jet tours 3.1 2.2Club Med Gym 4.4 5.3Club Med World (2.0) (1.9)

Total 5.5 5.6

Operating income - leisure for Jet tours fell to €2.2 million due

to its stepped-up repositioning at the end of 2006.

Club Med Gym’s operating income continued to improve,

rising to €5.3 million in fiscal 2007 from €4.4 million the previ-

ous year.

Jet tours income

(in € millions)

FY 2006 FY 2007

Revenue 300 302Semi-net margin 36.9 36.9as a % of revenue* 12.0% 12.2%

Other costs (33.8) (34.7)

Operating income - leisure 3.1 2.2

*Semi-net margin = gross margin (revenue less purchases) after

agency commissions.

1.3.3. EBITDAR/OPERATING INCOME - LEISURE

REVENUE TO EBITDAR FLOW-THROUGH RATE(in € millions)

EBITDAR - leisure

FY 2005 FY 2006 FY 2007 Change vs.FY 2006

VillagesExcluding business interruption insurance settlements(1) 156.0 184.3 217.2 +18%

as a % of like-for-like revenue 12.7% 14.3% 15.9%

Business interruption insurance settlements 38.3 20.8 1.9

Villages 194.3 205.1 219.1 +7%Other businesses 20.7 23.9 24.5

EBITDAR - leisure 215.0 229.0 243.6 +6%

as a % of like-for-like revenue 13.5% 13.7% 14.1%

Operating income - leisure

FY 2005 FY 2006 FY 2007 Change vs.FY 2006

VillagesExcluding business interruption insurance settlements(1) (17.2) (2.6) 25.4 +€28 M

Business interruption insurance settlements 38.3 20.8 1.9

Villages 21.1 18.2 27.3 +50%Other businesses 3.7 5.5 5.6

Operating income - leisure 24.8 23.7 32.9 +39%

Change vs. FY 2006 - Villages revenue +€73.4 millionChange vs. FY 2006 - Villages EBITDAR +€32.9 millionFlow-through rate 44%

(1) Business interruption insurance settlements.

MANAGEMENT REPORT

2007 ANNUAL REPORT 67

Page 9: Case Study - Club Med

On a reported basis, EBITDAR - leisure increased by nearly

6.4% and operating income - leisure by 39%.

Villages EBITDAR before insurance settlements rose 18% to

€217 million from €184 million.

Growth was achieved in a difficult year primarily impacted by

low winter 2007 snow levels. Fiscal 2007 was also shaped by

the closure of several year-round Villages for renovation,

including Opio en Provence, La Pointe aux Canonniers, Ixtapa

Pacific and Punta Cana. Their closure represented a “lost” con-

tribution of approximately €5 million.

Despite these events, Village margins improved considerably,

driven by changes in the financial model.

The flow-through rate provides a means of comparing Villages

EBITDAR growth to revenue growth. An additional €74 million

in revenue generates nearly €33 million in EBITDAR, repre-

senting a flow-through rate of around 44%.

1.3.4. OTHER STATEMENT OF INCOME ITEMS

(in € millions)

FY 2006 FY 2007

Revenue 1,679 1,727

Operating income - leisure 23.7 32.9Operating income - management of assets 39.7 2.0Other operating income & expense (28.7) (20.5)

Operating income 34.7 14.4Finance costs and other financial income & expense (32.1) (26.4)

Share of income of associates 3.6 1.2

Income tax (1.2) 2.5

Net income/(loss) 5.0 (8.3)

Of which attributable to shareholders 4.6 (10.4)

OPERATING INCOME - MANAGEMENT OF ASSETS

Operating income from the management of assets amount-

ed to €2 million versus €40 million in fiscal 2006, when a high

volume of refinancing transactions was carried out.

The impact of costs relating to the closure of year-round

Villages for renovation totaled €11 million in fiscal 2007.

Property development profits from the sale of Villas are rec-

ognized under “Operating income – management of assets”.

NET INCOME/LOSS

Club Méditerranée ended the year with a net loss of €8 mil-

lion versus net income of €5 million in fiscal 2006.

68

FINANCE COSTS AND OTHER FINANCIAL INCOME & EXPENSE

(in € millions)

FY 2006 FY 2007

OCEANE convertible/exchangeable bonds (21) (21)Finance costs (12) (10)Other (4) (1)

Finance costs and other financial income & expense before exchange gains and losses (37) (32)Realized and unrealized exchange gains and losses 5 6

Finance cost, net (32) (26)

Average debt (432) (370)

Calculated cost of debt 7.72% 8.47%Cash cost of debt (excl. IFRS impact) 5.95% 6.41%

Finance costs and other financial income & expense amount-

ed to €26 million in fiscal 2007 compared with €32 million

the previous year. This includes the significant impact of

applying IFRS to OCEANE convertible/exchangeable bonds,

representing some €8 million in fiscal 2007.

The cost of debt can be measured in two ways:

- Based on finance costs recognized in the income statement,

or

- Based on the economic cost of debt (coupon rate + premi-

um), i.e. 6.41% in fiscal 2007.

Finance cost, net improved due to three factors:

- Fiscal 2006 finance costs included some €2 million in costs

arising on buybacks of bonds issued to finance operations in

the Americas.

- Net realized and unrealized exchange gains were €1 million

higher in fiscal 2007.

- Finance costs were lower due to a roughly 15% decrease in

average debt.

1.4. CONDENSED BALANCE SHEET

(in € millions)

ASSETS 31 October 31 October2006 2007

Property, plant and equipment 951 928Intangible assets 182 191Non-current financial assets 80 86

Total non-current assets 1,213 1,205Government grants (28) (37)

Total assets 1,185 1,168

Page 10: Case Study - Club Med

Net book Net book value at value at

31 Oct. 2006 31 Oct. 2007

I Assets held for sale(non-strategic and unused assets) 93 68

II Mortgaged assets 26 118

III Assets that could be refinanced in the near term 130 124

IV Other Village assets 540 439Total Village property,plant and equipment 789 749

Property, plant and equipment amounted to €928 million, of

which €904 million concerned Villages. Most of that amount

corresponded to 30 owned Villages representing €749 million.

A portion of property, plant and equipment concerned Villages

owned jointly with partners. The 30 owned Villages represent-

ed 39% of capacity, leased Villages represented 51% and

Villages operated under management contracts accounted

for 10%.

• Approximately 301 rooms (660 beds) per Village.

• The net book value per Village stood at €25 million for an

average value per room of €80,000.

1.5. PROPERTY PORTFOLIO (NET BOOK VALUE - IN € MILLIONS)

PROPERTY, PLANT AND EQUIPMENT Villages Surface area Beds Rooms Net book value(hectares) at 31 Oct. 2007

Fully or partially owned VillagesFrance 4 200 2,104 984 57Europe 6 103 4,922 2,321 120Africa 4 108 1,684 861 59Americas 11 244 8,043 3,502 395Asia 5 288 3,060 1,353 118

Subtotal Villages 30 944 19,813 9,021 749

Managed Villages 7 4,436Leased Villages 48 842 34,322 15,278 143Other assets (offices, machines) 12

Total Villages 85 1,786 58,571 24,589 904

EQUITY 31 October 31 OctoberAND LIABILITIES 2006 2007

Equity 514 490Provisions 69 51Deferred taxes, net 51 34

Working capital 257 257Net debt 294 336

Total equity and liabilities 1,185 1,168

Gearing 57.2% 68.6%

Equity declined by €24 million to €490 million at 31 October

2007, mainly due to a €29 million currency negative effect that

was primarily caused by the fall in the dollar and Mexican peso

against the euro.

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

Med, was unchanged from 31 October 2006 at €257 million or

around 15% of revenue.

Non-current assets totaled €1,205 million, a slight €8 million

lower than at 31 October 2006. The €63 million positive net

impact of net investments and depreciation and amortiza-

tion expense was offset by the €56 million effect of refinanc-

ing transactions and disposals and by a negative currency

effect of €29 million.

In fiscal 2007, the Group invested €108 million, net of govern-

ment grants. The main investments included renovation

expenditure of €16 million at La Pointe aux Canonniers,

€11 million at Ixtapa Pacific, €6 million at La Plagne 2100,

€6 million at Cancún Yucatán and €5.3 million at Opio en

Provence, as well as Jet tour’s acquisition of Quotidien Voyages

(Austral Lagons).

Net borrowings totaled €336 million, for gearing of 68.6%.

At 31 October 2007, Club Méditerranée had €234 million in

cash, including a €110 million undrawn line of credit expiring

in June 2010.

INVESTMENTS AND DISPOSALS(in € millions)

FY 2006 FY 2007

Total Club Med investments net of government grants and tax-advantaged investments (151) (108)

Disposals and asset refinancing transactions 143 65

Investments net of disposals (8) (43)

MANAGEMENT REPORT

2007 ANNUAL REPORT 69

Page 11: Case Study - Club Med

70

Fully or partially owned Villages

Villages Tridents Surface area Beds Rooms Net book value Notes(hectares) at 31 October 2007

(in € millions)

Arcs Altitude 1 2 0.25 460 191 9.1 -

Cargese 1 3 21.00 945 439 17.7 -

Club Med 2 1 4 - 394 196 25.3 -

Dieulefit 1 Closed 40.00 305 158 4.7 -

Le Fleix 0 Land 138.68 0.5 -

Cefalu 1 Closed 15.00 1,072 536 6.6 -

Gregolimano 1 3 21.40 901 419 32.8 -

Kemer 1 3 39.60 920 460 8.7 (3)

Kos 1 3 22.00 880 328 28.9 -

Sestrieres 1 3 2.50 569 267 12.1 -

St Moritz Roi Soleil 1 4 2.50 580 311 30.9 (1)

Assinie 1 Closed 9.00 407 238 0.1 -

Cap Skirring 1 4 87.00 420 205 12.1 -

La Pointe aux Cannoniers 1 4 11.00 585 280 33.5 (3) (4)

Louxor 1 3 1.40 272 138 13.7 (1)

Cancún Yucatán 1 4 7.30 785 376 59.2 -

Colombus Isle 1 4 43.00 473 236 23.8 -

Ixtapa Pacific 1 3 15.00 822 374 33.1 -

La Caravelle 1 4 19.00 620 250 42.4 (2)

Les Boucaniers 1 4 22.52 649 293 59.5 (2)

Punta Cana 1 3 30.00 1,399 519 51.5 -

Sandpiper 1 3 15.97 751 337 33.8 -

Mexican archeology 1 Villas 0.10 444 213 1.7 Sold in villas Nov. 2007

Itaparica 1 3 33.00 700 330 31.1 (1)

Rio das Pedras 1 4 30.70 810 324 30.3 (1)

Trancoso 1 4 27.40 590 250 28.3 (1)

Bali 1 4 14.00 840 400 29.4 (3)

Bora Bora 1 4 29.00 300 149 27.3 -

Cherating 1 4 85.00 800 297 19.0 (3)

Lindeman Island 1 3 136.00 475 216 17.4 (3)

Phuket 1 4 24.37 645 291 24.6 (3)

Total Villages 30 - 944.00 19,813 9,021 749.0

(1) Jointly owned in a 50/50 partnership.(2) Tax-advantaged investment.(3) Concession land.(4) Minority interests of less than 20%.

A few Villages representing a net book value of €68 million still

remain to be sold.

Club Méditerranée owns three mortgaged Villages represent-

ing €118 million and eight Villages representing a net book

value of roughly €124 million, which could be the subject of

financing or refinancing transactions in the near term.

The remaining assets, representing €439 million, include

Villages that cannot be refinanced in the short or medium

term. They correspond mainly to Villages owned jointly with

partners, Villages in countries where refinancing is more diffi-

cult to arrange and Villages on land that Club Med does not

own, for example in Asia

Page 12: Case Study - Club Med

MANAGEMENT REPORT

2007 ANNUAL REPORT 71

Net borrowings at 31 October 2007 breaks down as follows:

(in € millions)

31 Oct. 31 Oct. 31 Oct.2005 2006 2007

Cash and cash equivalents 160 165 108

Long-term borrowings and other interest-bearing liabilities 435 346 408

Short-term borrowings and other interest-bearing liabilities 48 109 36

Liabilities related to assets held for sale 0 4 0

Total borrowings and other interest-bearing liabilities 483 459 444Net debt 323 294 336

The following table analyzes borrowings by maturity:

(in € millions)

31 Oct. 31 Oct. 31 Oct.2005 2006 2007

Due within one year 49 113 36

Due beyond one yearFiscal 2007 27 0Fiscal 2008 31 20Fiscal 2009 153 158 152Fiscal 2010 15 5 17Fiscal 2011 167 145 145Fiscal 2012 6Beyond 61 18 88

Total due beyond one year 454 346 408Total 503 459 444

2. Significant Events of the YearCHANGES IN CAPITAL

Changes in the Group’s ownership structure in fiscal 2007 are

presented in the section “General information about the cap-

ital” on page 83 of this registration document.

ACQUISITION OF QUOTIDIEN VOYAGES (AUSTRAL LAGONS) BY JET TOURS

On 15 May, Jet tours announced that it had acquired

Quotidien Voyages, which does business under the name

Austral Lagons. The acquisition is part of Jet tours’ strategy to

build positions in the upscale travel market.

1.6. CASH FLOW STATEMENT

(in € millions)

FY 2006 FY 2007

Cash flow 22 24

Change in working capital 22 (2)Change in provisions 3 (9)

Net cash from operating activities 47 13

Acquisitions of non-current assets (151) (108)Proceeds from disposals of non-current assets 143 65

Free Cash Flow 39 (30)

Effect of changes in exchange rates on cash and cash equivalents and other (10) (12)

Change in debt 29 (42)

Cash flow remained stable at around €24 million and changes

in working capital were limited, leading to net cash from oper-

ating activities of €13 million. Net cash used by investing activ-

ities, after taking into account disposals and refinancing trans-

actions, amounted to €43 million in fiscal 2007 compared with

€8 million the previous year.

As a result, free cash flow was a negative €30 million and net

debt came to €336 million, representing a gearing ratio of 68.6%.

1.7. FINANCING

During fiscal 2007, Club Méditerranée actively implemented

its refinancing strategy, which is designed to strengthen the

Group’s balance sheet and extend the maturity of debt.

The main refinancing transactions in fiscal 2007 were as fol-

lows:

- In April, a €30 million loan was taken out to refinance the

Club Med 2 cruise ship. The loan is repayable in installments

through April 2018.

- On 31 May, Club Méditerranée obtained a new €120 mil-

lion syndicated line of credit due June 2010 from a pool of nine

banks.

- In May, a €50 million loan facility was arranged. Due in 2017,

the facility is secured by the Cancún Yucatán Village.

A specific €26 million loan was arranged in June 2007 to

finance work at the La Pointe aux Canonniers Village in

Mauritius.

Page 13: Case Study - Club Med

Implementation of the upscale strategy moved up a gear in

fiscal 2007. Six renovated villages came back on the market -

Opio en Provence, Ixtapa Pacific, Cancún Yucatán, La Caravelle,

Palmiye and Villars-sur-Ollon - leading to a sharp rise in

4-Trident capacity, and the first 5-Trident Village - La Plantation

d’Albion Club Med - was opened on Mauritius. A certain num-

ber of villas have been built around the Village, another inno-

vation that will help to drive future growth.

CHANGES IN THE VILLAGE BASE

Plots of land in Greece and Mexico were sold during fiscal

2007.

STRATEGIC ADVANCES

Attracting more affluent customers has been a critical chal-

lenge for Club Med since the Group announced its upmar-

ket strategy in 2004. This process is nearing completion, with

the 133,000-person increase in the number of 4-Trident cus-

tomers last year. In fiscal 2007, 4-Trident guests accounted

for 45% of the customer base compared with just 24% in fis-

cal 2003. In addition, in the summer of 2007 the Group attract-

ed 9,000 additional customers worldwide. Lastly, the Group

met its objective of generating €140 million in revenue via the

Internet, which is the preferred booking method for the afflu-

ent families targeted by Club Med.

72

3. Winter 20083.1. CAPACITY BY CATEGORY AND REGION

(in thousand hotel days)

Winter 2005 Winter 2006 Winter 2007 Winter 2008 vs Winter 2007

2 Tridents 6% 4% 3% 2% -1 pt3 Tridents 57% 53% 46% 44% -2 pts4 and 5 Tridents 35% 41% 50% 54% +4 ptsOther 2% 2% 1% 0% - 1 pt

Total 100% 100% 100% 100%

Europe 2,984 3,011 2,925 3,172 +8,4%Americas 1,461 1,414 1,484 1,406 -5,3%Asia 786 844 927 932 +0,6%

Total worldwide 5,231 5,269 5,336 5,510 +3,3%

The offering is continuing to be resegmented. The percent-

age of 3 to 5-Trident Villages has steadily risen to the point

that today they represent 98% of available capacity. Winter 4

and 5-Trident capacity is increasing and already represents

more than half of total Winter 2008 capacity.

Forecast capacity for the 2008 winter season is up 3.3% compa-

red with last winter, with variations from one region to another.

The 8.4% increase in Europe is due to the re-opening of the

Opio en Provence Village, while the 5.2% decline in the

Americas reflects the reduced capacity of the renovated Ixtapa

PacificVillage, and the closure of the archeology villas in

Mexico.

3.2. WINTER 2008 BOOKINGS

(compared with winter 2007)

As of 8 december 2007

Europe +16.3%Americas +3.2%Asia +16.6%

Total Club Med +14.4%Jet tours +27.2%

As of 8 December 2007, winter 2008 bookings were up

14.4% on the prior-year date.

Page 14: Case Study - Club Med

MANAGEMENT REPORT

2007 ANNUAL REPORT 73

These figures include a net gain of some 30,000 customers

compared with the prior-year date, helped by sales and mar-

keting initiatives designed to encourage customers to book

earlier.

The strong 16.3% growth in Europe is particularly noteworthy

in that gains have been balanced between France and the

other countries in the region. The increase is even greater for

sun Villages. Winter 2008 snow village bookings got off to a

slow start, due to the lack of snow in winter 2007, but have

since gained momentum.

The 3.2% growth in the Americas has been achieved despite

a 5.6% reduction in capacity.

Bookings in Asia are up 16.6%, representing a strong perform-

ance on the back of a 47.4% rise in year-to-date bookings as

of 8 December 2006.

The 27.2% increase in Jet tours bookings confirm the success

of its repositioning. The total includes Austral Lagons which

has increased bookings by 39%. Excluding Austral Lagons, Jet

tours bookings are up 25% compared with the prior-year date.

3.3. SUBSEQUENT EVENTS

None

3.4. OTHER INFORMATION

3.4.1. DEPENDENCE ON PATENTS

OR SUPPLY CONTRACTS

None

3.4.2. 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 liabili-

ties or financial position of the Company or the Group.

4. Risk FactorsClub Méditerranée’s corporate risk management policy is

designed to effectively protect both the interests of sharehold-

ers and customers and the environment. It is based on a map

of critical operational risks, which serves to prioritize risks based

on their frequency and their financial and business impact.

4.1. ECONOMIC AND GEOPOLITICAL RISKS

The 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.

4.2. ENVIRONMENTAL RISKS

4.2.1. PREVENTION AND COMPLIANCE

Environmental risk prevention and management

Our businesses do not give rise to any specific environ-

mental 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 provi-

sions or warranties have been recognized in the fiscal 2007

accounts.

More information about the Group’s sustainable development

practices is provided in the Sustainable Development report,

pages 34 to 60.

Compliance

No provisions for environmental liabilities arising from court

decisions have been recorded in the fiscal 2007 financial

statements of Club Méditerranée SA.

Objectives assigned to subsidiaries

Our subsidiaries outside France are required to apply our gen-

eral environmental policy. They are also encouraged to share

experience and best practices in the areas of business prac-

tices, the environment and labor relations. We also ensure that

our subsidiaries comply with local regulations.

Page 15: Case Study - Club Med

In fiscal 2007, we purchased insurance cover primarily through

the Marsh global insurance brokerage network.

The insurance pool for the Property Damage and Business

Interruption Program was led by ACE Europe and the London

insurance market, and included ACE Europe, RSA, Tokio

Marine, XL and AGF. The program was renewed in January

2007 for 16 months, with better cover at a more attractive price.

ACE Europe became the lead insurer for the program in 2007.

The insurance pool for the Third-Party Liability program was

unchanged in 2007. It is lead-managed by Generali and

includes GAN, AWAC, XL and ACE.

In addition to insuring our own risks, we offer all of our cus-

tomers throughout the world extensive assistance cover pur-

chased from Europ Assistance.

4.5. FINANCIAL RISK MANAGEMENT POLICY

(see also note 18 to the consolidated financial statements

“Financial instruments”).

In the normal course of business, the Group is exposed to

various market risks, including currency, interest rate and

liquidity risks.

From time to time, 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 prac-

tice, these instruments are used primarily to hedge currency

risks on future transactions. Financial risks are identified,

assessed, managed and hedged at Group level, by the

Treasury and Financing unit, in accordance with the policies

approved by the Audit Committee. Specific rules have been

drawn up and approved banning the use of derivative instru-

ments for trading purposes.

4.5.1. CURRENCY RISK

The international nature of our business exposes us to curren-

cy risks arising from the impact of changes in exchange rates

on revenue, income and balance sheet items.

Our exposure concerns three types of currency risk:

- Transaction risk arising from marketing activities (in outbound

zones) and operating activities (in inbound zones).

- Balance sheet risk arising from financing raised in a curren-

cy other than the Group’s functional currency and from the

Group’s net investment in foreign operations. In the latter case,

the resulting unrealized exchange gains and losses are recog-

nized directly in equity.

4.3. LEGAL RISKS

4.3.1. LEGAL RISKS ARISING FROM THE GEOGRAPHIC

DIVERSIFICATION OF THE BUSINESS

The nature of the Group’s business and the fact that its oper-

ations are conducted in a large number of countries with dif-

fering and sometimes contradictory regulations is a source

of operating difficulties and can lead to disputes with suppli-

ers, owners, employees 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.

4.3.2. LEGAL PROCEEDINGS AND EXCEPTIONAL EVENTS

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.

4.4. INSURANCE - RISK COVERAGE

Insurable risks are managed by taking out insurance cover at

Group level. Risk management tools and global insurance pro-

grams have been set up in partnership with pools of leading

insurers. Where necessary, separate cover is purchased local-

ly or for specific activities.

After the natural disasters of 2005, since fiscal 2006 we have

followed a policy of transferring risks to the insurance market

whenever possible, without using a captive insurance or rein-

surance 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 maxi-

mum insured value of €114 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 pro-

gram provides worldwide cover. To reduce our exposure to

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

ing systems providing detailed and summary information 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.

74

Page 16: Case Study - Club Med

TRANSACTION RISK

Our policy consists of obtaining protection against the effects

of exchange rate changes on reported net income compared

with the budget.

Based on budget forecasts, we hedge exposures for the com-

ing fiscal year in the principal billing currencies (mainly sterling,

yen, Canadian and Australian dollars and Korean won) and in

US dollars, which is both a billing and an operating currency.

As some operating expenses are paid in US dollars, the impact

of changes in the American currency on our operating income

in the US is entirely offset at Group level.

Exposures in some currencies are partially self-hedged. This is

the case for example of the yen, since Japan is both an out-

bound and an inbound zone.

Currency risks in our operating currencies (mainly Moroccan

dirham, Turkish lira, Tunisian dinar, Indonesian rupiah and Thai

baht) are not systematically hedged.

To permit transaction risks to be managed at Group level,

intra- and inter-regional payment flows are centralized at the

level of a regional “wholesaler”. Under this system:

- Marketing subsidiaries are billed in their local currency by

the “wholesaler”, and

- Operating subsidiaries bill the “wholesaler” in their local cur-

rency.

Currency risks are hedged using derivative instruments, main-

ly currency swaps and options, forward contracts and non-deliv-

ery forward contracts.

The notional amount of hedges is limited to the future cash

flows forecast in the budget. No derivative instruments are

acquired for trading purposes.

Our net exposure to currency risks on operating transactions

(transaction risk) is presented in the following table.

MANAGEMENT REPORT

2007 ANNUAL REPORT 75

Exposure to transaction risk at 31 October 2007

(in millions)

USD GBP AUD JPY CAD MXN MAD TND TRY KRW

Net exposure to currency risks on operating transactions (80) 15 10 1,700 29 (405) (350) (50) (18) 8,600

Notional amount of derivative instruments (cash flow hedges) 76 - (3) (500) (25) 340 - - - -

Net exposure of 2008 cash flows after hedging at 31 October 2007 (3) 15 8 1,200 4 (65) (350) (50) (18) 8,600

Net exposure converted into euros (2) 22 5 7 3 (4) (31) (28) (11) 7

Amounts in parentheses correspond to purchases of foreign currencies; amounts not in parentheses correspond to sales of foreign currencies.USD: US dollars, GBP: pounds sterling, AUD: Australian dollars, JPY: yen, CAD: Canadian dollars, MXN: Mexican pesos, MAD: Moroccan dirham,TND: Tunisian dinars, TRY: Turkish new lira, KRW: Korean won.

Page 17: Case Study - Club Med

Some of the Group’s debt facilities include acceleration claus-

es that are triggered in the event of a breach of debt covenants

or certain asset sales.

CONFIRMED LINE OF CREDIT

Club Méditerranée has a €120 million line of credit obtained

on 31 May 2007 and expiring in June 2010. At 31 October 2007,

the line was drawn down in the amount of €10 million. The

loan agreement includes certain debt covenants.

DEBT COVENANTS

The Group’s debt covenants were redefined on 30 April 2006,

to take into account the transition to IFRS. Under the rede-

fined covenants, EBITDA is defined as operating income -

leisure before depreciation, amortization and provisions.

Any breach of the ratios defined in the covenants constitutes

an event of default, and the outstanding debt may become

immediately repayable.

Ratios applicable to the €120 million syndicated line of credit

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

follows:

- Off-balance sheet commitments < €200 million

- Gearing (net debt/equity) < 1

- Leverage (net debt/EBITDA as defined above) < the fol-

lowing ratios:

30 April 31 Oct.

2007 4.02008 3.75 3.52009 and beyond 3.0 3.0

- Fixed charge cover (EBITDAR/(rent + net interest expense))

> the following ratios:

30 April 31 Oct.

2007 1.252008 1.25 1.352009 and beyond 1.45 1.45

The covenants were complied with at 31 October 2007:

- Off-balance sheet commitments < €200 million €118m

- Gearing < 1 0.69

- Leverage (net debt/EBITDA) < 4.00x 3.50x

- Fixed charge cover > 1.25x 1.42x

BALANCE SHEET RISK

The Group’s exposure to currency risks on external debt is

limited and intra-group financing is generally denominated in

the subsidiary’s functional currency. Changes in the value of

hedges of the net investment in foreign operations are recog-

nized 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.

4.5.2 INTEREST RATE RISK

There are 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 liabilities

is not adjusted for changes in interest rates 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 future finance costs of an increase in interest

rates.

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

In fiscal 2007, no interest rate hedges were set up as average

floating rate net debt represented just 16% of total debt.

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

At 31 October 2007, the Group’s exposure to interest rate

risk by maturity was as follows:

(in € millions)

Less One MoreTotal than one to five than five

year years years

Fixed rate debt 368 12 290 66Floating rate debt* 72 20 30 22Derivative instruments 4 4

Total 444 36 320 88

* Including bank overdrafts.

A 1-point increase in short-term interest rates applied to the

Group’s net floating rate debt would lead to a €0.7 million

increase in finance costs.

4.5.3 LIQUIDITY RISK

Liquidity risk is managed by using diversified sources of

financing.

Maturities of debt are presented on page 71 of this registra-

tion document.

76

Page 18: Case Study - Club Med

4.5.4 EQUITY RISK

The Group does not hold any listed equities, apart from treas-

ury stock which is recorded as a deduction from equity. As a

result, it is not exposed to any risk of fluctuations in stock

prices.

4.5.5 CREDIT AND COUNTERPARTY RISK

Most customers pay for their vacation before they leave and

the Group’s 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 money market funds

purchased from leading banks.

Parent CompanyThe parent company of the Club Méditerranée Group is Club

Méditerranée SA. As well as acting as the Group holding com-

pany, 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 €38

million compared with a net loss of €14 million for the year

ended 31 October 2006.

The loss was primarily due to the increase in net financial

expense to €41 million from €9 million in fiscal 2006, following

an increase in provisions related to subsidiaries.

MANAGEMENT REPORT

2007 ANNUAL REPORT 77

11 March 2008: Annual Shareholders’ Meeting and first-quarter revenue release.

June 13, 2008: Fiscal 2008 interim results release.

September 2008: Third quarter revenue release.

11 December 2008: Fiscal 2008 results release.

2008 FINANCIAL CALENDAR

Page 19: Case Study - Club Med

78

Page 20: Case Study - Club Med

GENERAL INFORMATION

80 – GENERAL INFORMATION ABOUT CLUB MÉDITERRANÉE

83 – GENERAL INFORMATION ABOUT THE COMPANY’S CAPITAL

88 – GENERAL INFORMATION ABOUT CLUB MÉDITERRANÉESECURITIES

90 – CORPORATE GOVERNANCE

2007 ANNUAL REPORT 79

Page 21: Case Study - Club Med

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 details572 185 684 RCS Paris - APE Code 552 E

Consultation of corporate documentsThe bylaws, minutes of Shareholders’ Meetings, financial

statements and Auditors’ reports are available for consultation

at the Company’s head office.

Fiscal yearThe Company’s fiscal year begins on 1 November and ends

on 31 October.

Appropriation of incomeArticle 36 of the bylaws states that at least five percent of net

income for the year, less any prior year losses, is appropriated

to the legal reserve. This appropriation ceases to be compul-

sory 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:

- 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 are made to

shareholders if shareholders’ equity represents – or would rep-

resent if the distribution were to be made – less than the sum

of capital and non-distributable reserves.

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. 225-17 to L. 225-56 of the

Commercial Code.

TermThe Company will be dissolved on October 31, 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, 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 excur-

sions; the organization and execution of sporting, education-

al, tourist, cultural or artistic activities; the organization of

events and shows, the performance thereof and the provision

of any related consulting services; the creation or acquisition

and operation 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 oper-

ation 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

GENERAL INFORMATION ABOUT CLUB MÉDITERRANÉE

80

Page 22: Case Study - Club Med

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 distributions

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 rein-

vest 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 bylaws, 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 representation at shareholders’ meetings1 - All shareholders have the right to attend Shareholders’

Meetings in accordance with the applicable law and to take

part in the vote, in person or by proxy, whatever the number of

shares held, upon presentation of evidence of their identity.

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 anoth-

er shareholder.

4 - Pursuant to the applicable laws and regulations, for share-

holders to be entitled to participate in Shareholders’ Meetings

or cast a postal vote, their shares must be recorded in accor-

dance with the relevant regulations no later than midnight

(CET) on the third business day preceding the meeting (the

record date). Shareholders who have cast a postal vote, lodged

a proxy or requested an admission card or participation cer-

tificate (attestation de participation) in accordance with the

applicable regulations may still sell all or some of their shares.

If the sale takes place prior to the record date, the Company

will take the appropriate measures to cancel or amend any

related postal vote, proxy, admission card and/or attestation

de participation. However, if any shares are sold by any method

after the record date, the sale will not be reported to the

Company by the shareholder’s bank or broker (intermédiaire

habilité) and will not be taken into account by the Company,

irrespective of any agreement providing otherwise.

5 - Holders of registered shares will be admitted to the meet-

ing on presentation of evidence of their identity. Holders of

bearer shares will be admitted on presentation of the proof

that their shares have been recorded as described 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 rightsArticle 8 of the bylaws stipulates that all fully paid shares reg-

istered in the name of the same holder for at least two years

carry double voting rights. In the event such shares are trans-

ferred 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 share-

holder, 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.

Disclosure thresholdsArticle 7 of the bylaws stipulates that any shareholder acting

alone or in concert with others that directly or indirectly

acquires a number of shares representing at least 0.5% of the

Company’s capital or voting rights or any multiple thereof is

required to notify the Company of the total number of shares

and voting rights held. Disclosure must be made by regis-

tered 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 thresh-

old has been crossed, account is taken of any securities that

are convertible, exchangeable, redeemable or otherwise

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 nineteen-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. At the

Annual Shareholders’ Meeting to be held on 11 March 2008,

shareholders will be invited to amend the disclosure thresh-

old provided for in the Company’s bylaws from 0.5% of the

GENERAL INFORMATION

2007 ANNUAL REPORT 81

Page 23: Case Study - Club Med

Identifiable bearer securitiesThe bylaws authorize the Company to apply at any time to

the French securities clearing agency for details of the iden-

tity of holders of voting shares and any securities convertible,

exchangeable, redeemable, or otherwise exercisable for vot-

ing 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 subsidiariesServices 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.

Company’s capital or voting rights to 1%, which corresponds

to a satisfactory level for precisely ascertaining the Company’s

ownership structure.

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 vot-

ing rights.

82

Page 24: Case Study - Club Med

GENERAL INFORMATION

2007 ANNUAL REPORT 83

19,370,705 shares outstanding at 31 October 2007:

+ 2,193,731 convertible bonds (OCEANEs)

due 1 November 2008

+ 3,092,783 convertible bonds (OCEANEs)

due 1 November 2010

+ 1,160,226 stock options outstanding at 31 October 2007

+ 44,490 shares to be granted free of consideration

=25,861,935 potential shares at 31 October 2007

Authorized, unissued capitalThe Ordinary and Extraordinary Shareholders’ Meeting of

8 March 2007 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 author-

izations in accordance with the Company’s bylaws and Articles

L.225-127 et seq of the Commercial Code.

The purpose of these authorizations – which expire in May

2009 – is to enable the Company to issue shares and share

equivalents in order to raise any necessary financial resources

in a swift and flexible manner.

Share capital At 31 October 2007 the Company’s share capital amounted

to €77,482,820, divided into 19,370,705 common shares with

a par value of €4, all fully paid up. Shares registered in the

name of the same holder for at least two years carry double

voting rights (949,592 at 31 October 2007). The Company’s

share capital was €50,800 higher at 31 October 2007 than

one year earlier due to the exercise of stock options during

the period which led to the issuance of 12,700 new shares.

Potential capitalThe exercise of all outstanding equity warrants and stock

options would result in the Company’s capital being

increased to €103,447,740 consisting of 25,861,935 shares of

common stock, representing a potential dilution of 33.5%.

These figures take into account all the securities outstanding

at 31 October 2007 that are convertible, redeemable,

exchangeable or otherwise exercisable for common shares

at a future date.

GENERAL INFORMATION ABOUT THE COMPANY’S CAPITAL

Financial authorizations at 31 october 2007Authorization Maximum Duration Expiry Used in fiscal Total used

amount date 2006/2007

Issue of shares and share Equity: €20 million(1) 26 months 7 May 2009 Not usedequivalents with pre-emptive Debt: €300 millionsubscription rightsIssue of shares and share Equity: €20 million(1) 26 months 7 May 2009 Not usedequivalents without pre-emptive Debt: €300 millionsubscription rightsIssue of shares and share 10% of capital 26 months 7 May 2009 Not usedequivalents with no set issue price per yearCapital increase to be paid up Equity: €32 million(1) 26 months 7 May 2009 Not usedby capitalizing retained earnings,additional paid-in capital or profit Issue of shares and share equivalents Equity: €20 million(2) 26 months 7 mai 2009 Not usedin connection with a public exchange offer Issue of shares and share equivalents 10% of capital 26 months 7 May 2009 Not usedin payment for contributed assetsIncrease in the number of securities 15% of the initial 26 months 7 May 2009 Not usedto be issued in the event of the issue based on theissue of shares and share equivalents same priceeither with or without pre-emptive subscription rights (greenshoe option)Employee share issue €3 million(1) (2) 26 months 7 May 2009 Not usedStock options for corporate 10% of capital(3) 26 months 7 May 2009 125,000 options 125,000 optionsofficers and employees Share grants 1% of capital(1) 26 months 7 May 2009 46,600 shares 46 600 shares

(1) Amount included in the overall authorized ceiling: €75 million (40th resolution of the Shareholders’ Meeting of 8 March 2007).(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 Code

and Article D.174-17).

Page 25: Case Study - Club Med

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

At 31 October 2002 77,432 - 19,358,005

At 31 October 2003 77,432 - 19,358,005

At 31 October 2004 77,432 - 19,358,005

At 31 October 2005 77,432 - 19,358,005

At 31 October 2006 77,432 - 19,358,00550 412 12,700 Exercise of options

At 31 October 2007 77,482 - 19,370,705

84

Analysis of ownership structure

Number of shares Voting rights

31 October 2007 % 31 October 2007 %

Fipar Int (CDG Maroc) 1,935,801 10.0 1,935,801 9.5Accor 1,162,630 6.0 1,162,630 5.7Rolaco 909,577 4.7 909,577 4.5Nippon Life* 769,731 4.0 769,731 3.8

Total Board of Directors 4,777,739 24.7 4,777,739 23.5

Treasury stock 201,588 1.0 201,588 1.0

Employees 27,591 0.1 54,741 0.3

Richelieu Finance 3,615,730 18.7 4,385,219 21.6

Air France Finance 387,160 2.0 387,160 1.9

GLG Partners LP 2,047,573 10.6 2,047,573 10.1

Susquehanna Ireland Ltd 993,666 5.1 993,666 4.9

French institutions 2,177,177 11.2 2,235,000 11.0

Foreign institutions 3,219,791 16.6 3,229,811 15.9

Public and other 1,922,690 9.9 2,007,800 9.9

Total 19,370,705 100.0 20,320,297 100.0

* Non-voting director.

Single voting rights 18,421,113

Double voting rights 1,899,184

Total voting rights 20,320,297*

* Taking into account 201,588 shares held in treasury that do not carryvoting rights.

Page 26: Case Study - Club Med

Trading in the company’s sharesAUTHORIZATION 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 Commercial Code and

European Commission Regulation 2273/2003 was renewed at

the Annual Shareholders’ Meeting of 8 March 2007 (fifteenth

resolution) for a further period of eighteen months, expiring

on 7 September 2008.

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 pri-

ority:

• 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 acqui-

sitions.

• To purchase shares for subsequent cancellation.

For transactions to stabilize the share price, the maximum pur-

chase 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.

On 11 July 2007, Club Méditerranée entered into a liquidity

agreement with Natixis Securities that complies with the AFEI

Code of Ethics as approved by the French securities regula-

tor (Autorité des Marchés Financiers) on 22 March 2005. A total

of €2,000,000 has been allocated to the related liquidity

account.

Between 8 March and 31 October 2007, the Company pur-

chased 251,717 shares at an average price of €49.53 and sold

277,510 shares at an average price of €49.03.

At 31 October 2007, a total of 201,588 shares were held in

treasury.

Shareholders will be asked to renew the share buyback author-

ization at the Annual Meeting on 11 March 2008.

On 11 January 2008, an additional one million shares were

transferred to the liquidity account, pursuant to an addendum

to the liquidity agreement.

GENERAL INFORMATION

2007 ANNUAL REPORT 85

Page 27: Case Study - Club Med

LIST OF TRADES IN THE COMPANY’S SECURITIES CARRIED OUT DURING THE YEAR ENDED 31 OCTOBER 2007 GOVERNED BY ARTICLE L.621-18-2 OF THE MONETARY AND FINANCIAL CODE (CODE MONÉTAIRE ET FINANCIER)

Date of Corporate officer Shares/Other Type of Numbertransaction financial instruments transaction of securities

30.03.2007 Michel Wolfovski - Other financial Sale of 15,000Executive Vice President instruments call options

30.03.2007 Michel Wolfovski - Other financial Purchase of 15,000Executive Vice President instruments put options

17.04.2007 Laurence Berman-Clément - Other financial Purchase 15,000Member of the Management Committee instruments

17.04.2007 Laurence Berman-Clément - Shares Sale 15,000Member of the Management Committee

18.04.2007 François Salamon - Other financial Purchase 15,000Executive Vice President instruments

18.04.2007 François Salamon - Shares Sale 15,000Executive Vice President

18.04.2007 Olivier Sastre - Other financial Purchase 5,000Member of the Management Committee instruments

18.04.2007 Olivier Sastre - Shares Sale 5,000Member of the Management Committee

18.04.2007 Michel Wolfovski - Other financial Purchase 15,000Executive Vice President instruments

02.05.2007 Olivier Sastre - Other financial Purchase 5,000Member of the Management Committee instruments

02.05.2007 Olivier Sastre - Shares Sale 5,000Member of the Management Committee

29.06.2007 Persons closely related Shares Sale 15,000to Michel Wolfovski - Executive Vice President

02.07.2007 Henri Giscard d’Estaing - Other financial Purchase 8,500Chairman and Chief Executive Officer instruments

02.07.2007 Henri Giscard d’Estaing - Shares Sale 8,500Chairman and Chief Executive Officer

10.07.2007 Michel Wolfovski - Other financial Purchase 7,500Executive Vice President instruments

10.07.2007 Michel Wolfovski - Shares Sale 7,500Executive Vice President

11.07.2007 Franck Gueguen - Other financial Purchase 5,000Member of the Management Committee instruments

11.07.2007 Franck Gueguen - Shares Sale 5,000Member of the Management Committee

86

Page 28: Case Study - Club Med

Changes in ownership structureover the last three yearsChanges in ownership structure over the last three years were

as follows:

• 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.

Richelieu Finance subsequently continued to raise its share-

holdings and at 31 October 2005 held 4,564,212 shares,

representing 23.57% of the Company’s capital.

• 2006 - On 18 April 2006, Richelieu Finance informed the

Company that it had raised its interest to 4,895,369 shares,

representing 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, following sales of Club

Méditerranée shares on the open market, Accor informed

the Company that it had reduced its holdings to below the

10% threshold for both capital and voting rights and that

it directly held 1,912,349 shares, representing 9.88% of the

capital and 9.78% of the voting rights.

In letters dated 12 and 17 April, Icade informed the Company

that it had sold its 4% stake in Club Méditerranée.

On 17 April 2007, Accor informed the Company that it had

further reduced its interest in Club Méditerranée to 6% of

the capital and 5.76% of the voting rights in accordance with

the Shareholders’ Pact signed on 9 June 2006.

In a letter dated 20 June 2007, Richelieu Finance disclosed

that following sales of Club Méditerranée shares on the open

market, on 14 June 2007 it had reduced its interest in the

Company to below the 25% threshold for capital and voting

rights and below the 20% threshold for capital, and that it held

3,377,978 shares representing 4,147,467 voting rights, corre-

sponding to 17.45% of the Company’s capital and 20.18% of

the voting rights. Following these sales the fund manager

Susquehanna Ireland Ltd. had acquired a stake in the Company

and the percentage interest held by GLG Partners – a London-

based investment firm – increased from 3.5% to 8.5%.

On 30 October 2007, GLG Partners informed the AMF that it

had crossed the threshold of 10% of the Company’s capital

and that it held 2,006,249 Club Méditerranée shares, repre-

senting 10.36% of the capital and 9.87% of the voting rights.

On the same date, Richelieu Finance disclosed that it once

again raised its interest in the Company, and that it held

3,615,730 shares and 4,385,219 voting rights, representing

18.67% and 21.58% of the Company’s total capital and voting

rights respectively.

Shareholders’pactsIn 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 had retained a 6% stake in the Company), Caisse

de Dépôt et de Gestion du Maroc (through its subsidiary Fipar

Holding which had acquired a 10% interest), Air France Finance

(holder of a 2% interest) and Icade (whose interest amounted

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 econom-

ic 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 sharehold-

ers’ pacts exist.

GENERAL INFORMATION

2007 ANNUAL REPORT 87

Page 29: Case Study - Club Med

To inform shareholders, financial analysts, brokers, portfolio

managers and private investors of developments affecting the

Group, press releases are distributed to the main press agen-

cies 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 pre-

sented below.

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. 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.

GENERAL INFORMATION ABOUT CLUB MÉDITERRANÉE SECURITIES

88

Trading performance of Club Méditerranée securities

Common stock Monthly share price Monthly average daily trading (ISIN: FR 0000 121568) (euros) volume (number of shares traded

and thousands of euros)

High Low Average No. of shares Capital

January 2007 44.49 40.40 42.22 21.10 13,748.61

February 2007 46.20 42.00 43.90 20.50 21,223.40

March 2007 45.40 40.00 42.41 48.60 17,369.98

April 2007 47.00 42.20 44.81 59.80 47,615.99

May 2007 49.95 46.95 48.68 32.00 52,143.64

June 2007 54.40 45.40 51.11 156.20 38,158.43

July 2007 56.11 51.00 53.73 46.20 169,001.10

August 2007 52.55 48.25 50.35 29.30 52,445.55

September 2007 52.99 45.00 47.81 54.10 32,545.46

October 2007 48.44 45.26 46.74 33.70 50,829.20

November 2007 46.47 39.75 43.09 44.40 33,757.72

December 2007 44.99 43.01 43.61 31.80 42,896.63

Page 30: Case Study - Club Med

GENERAL INFORMATION

2007 ANNUAL REPORT 89

3% OCEANE convertible/exchangeable bonds Monthly price Monthly average daily trading (face value €58) (euros) volume (number of bonds traded(ISIN: FR 0000 180184) and thousands of euros)

High(1) Low(2) Average(3) No. of bonds Capital

December 2006 66.00 65.00 65.24 212 14

January 2007 66.20 65.16 65.36 275 18

February 2007 70.00 65.06 66.17 130 9

March 2007 68.00 65.45 66.15 599 59

April 2007 66.25 65.88 66.02 86 6

May 2007 66.50 66.12 66.28 107 7

June 2007 67.00 66.10 66.53 147 10

July 2007 67.50 66.45 66.94 2,145 145

August 2007 66.54 66.50 66.51 82 5

September 2007 66.95 66.55 66.62 216 14

October 2007 67.30 66.56 66.84 99 7

November 2007 67.99 63.50 66.19 339 22

December 2007 - - - - -

4.375% OCEANE Monthly price Monthly average daily trading convertible/exchangeable bonds (euros) volume (number of bonds traded(face value €48.50) and thousands of euros)(ISIN: FR 00 10130732)

High(1) Low(2) Average(3) No. of bonds Capital

December 2006 50.00 48.65 49.04 753 37

January 2007 53.00 48.60 49.22 214 11

February 2007 51.50 48.60 50.28 637 32

March 2007 53.00 48.60 51.03 436 25

April 2007 54.00 51.05 52.67 1,225 65

May 2007 56.00 52.40 54.70 312 17

June 2007 60.95 51.13 56.09 8,444 470

July 2007 59.85 52.50 58.07 387 23

August 2007 56.15 50.00 54.75 178 10

September 2007 56.50 51.20 55.24 354 19

October 2007 55.00 47.92 53.33 116 6

November 2007 51.95 46.41 50.61 508 26

December 2007 - - - - -

Source: Fininfo(1) Highest intraday price during the period.(2) Lowest intraday price during the period.(3) Arithmetic average of closing prices.

Dividends

Years ended Number Dividend for the year Share price Yield incl. tax credit31 October of shares based on 31 Oct.

share price

Net Tax credit Total High Low 31 Oct.

2005 19,358,005 - - - 42.28 34.00 36.452006 19,358,005 - - - 48.39 35.90 42.212007 19,370,705 - - - 56.11 39.75 46.35

Page 31: Case Study - Club Med

system of an Executive Board and Supervisory Board to that

of a Board of Directors.

COMPENSATION

The compensation paid to executive officers is made up of a

fixed and variable portion. The rules used to calculate the vari-

able portion are set by the Board of Directors each year on

the basis of recommendations issued by the Nominations and

Compensation Committee.

Compensation and benefits paidto directors and officersThe Company complies with the principles of corporate gov-

ernance 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

CORPORATE GOVERNANCE

90

Gross compensation in euros

Fiscal 2006 annual compensation Fiscal 2007 annual compensation

Fixed Variable(1)

Benefits Fixed Variable(2)

BenefitsTarget Paid in-kind Target Paid in- kind

Henri Giscard d’Estaing 640,020 450,000 288,000 24,184 640,020 544,017 354,000 23,909François Salamon* 320,000 160,000 104,300 4,865 365,442 160,000 105,650 8,921Michel Wolfovski 332,300 155,200 121,600 19,131 352,430 170,015 132,640 12,721

(1) Paid in January 2006 for fiscal 2005. (2) Paid in January 2007 for fiscal 2006.

* François Salamon left Club Méditerranée on 28 September 2007.

Henri Giscard d’Estaing’s variable compensation paid in

January 2007 for fiscal 2006 in his capacity as Chairman and

Chief Executive Officer was based partly on the Company’s

earnings and partly on the attainment of individual objectives.

These performance criteria respectively represented 70% and

30% of his target bonus. The same criteria applied to the vari-

able compensation of François Salamon and Michel Wolfovski

in their capacity as Executive Vice Presidents (non-directors),

and respectively represented 60% and 40% of their target

bonuses.

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 2007.

No loans or guarantees have been granted by the Company

to its executive officers.

OTHER BENEFITS AND COMMITMENTS

During fiscal 2007, stock options were granted to executive

officers under Plan L, and share grants were also made.

At 31 October 2007, the Company’s executive officers held

the following stock options:

OUTSTANDING STOCK OPTIONS GRANTED IN PRIOR YEARS

Plan F2 Plan G Plan G3 Plan G5 Plan H Plan I Plan J Plan K Plan L

Exercise dates 50 % at 7 Feb. 6 Feb. 5 Feb. 1 March 15 Jan. 11 Jan. 14 March 8 March 24 March 2003 2005 2005 2006 2006 2007 2008 2009 2010

+ balance at 24 March 2004

Exercise price (in euros) 70.81 111.11 92.78 44.74 35 31.03 35 42.67 43.07

Henri Giscard d’Estaing 25,000 121,500 33,000 40,000 30,000 31,500

Michel Wolfovski 10,000 5,000 5,000 7,500 10,000 25,000 20,000 16,000

On the recommandation of the Board of Directors, François Salamon was authorised to retain the 60,000 stock options received

between 2002 and 2006 following termination of his employment contract on 31 October 2007.

Page 32: Case Study - Club Med

GENERAL INFORMATION

2007 ANNUAL REPORT 91

SHARE GRANTS MADE IN FISCAL 2007

Plan L

Start of vesting period 8 March 2010 + saleof shares prohibited before

7 March 2012

Henri Giscard d’Estaing 3,600Michel Wolfovski 1,850

TRADES IN THE COMPANY’S SECURITIES CARRIED OUT BY CORPORATE OFFICERS IN FISCAL 2007

Date of Corporate officer Shares/Other Type of Numbertransaction financial instruments transaction of securities

30.03.2007 Michel Wolfovski - Other financial Sale of 15,000Executive Vice President instruments call options

30.03.2007 Michel Wolfovski - Other financial Purchase of 15,000Executive Vice President instruments put options

18.04.2007 François Salamon - Other financial Purchase 15,000Executive Vice President instruments

18.04.2007 François Salamon - Shares Sale 15,000Executive Vice President

18.04.2007 Michel Wolfovski - Other financial Purchase 15,000Executive Vice President instruments

29.06.2007 Persons closely related Shares Sale 15,000to Michel Wolfovski - Executive Vice President

02.07.2007 Henri Giscard d’Estaing - Other financial Purchase 8,500Chairman and Chief Executive Officer instruments

02.07.2007 Henri Giscard d’Estaing - Shares Sale 8,500Chairman and Chief Executive Officer

10.07.2007 Michel Wolfovski - Other financial Purchase 7,500Executive Vice President instruments

10.07.2007 Michel Wolfovski - Executive Vice President Shares Sale 7,500

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 com-

pensation.

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 remuneration, including vari-

able compensation. For Henri Giscard d’Estaing and Michel

Wolfovski, this severance pay will be increased to three years’

gross compensation (including variable compensation) if the

termination occurs within six months of a third party acquiring

a controlling interest in the Company.

Termination benefits paid in fiscal 2007 amounted to €0.9 million.

COMPENSATION PAID TO MEMBERS OF THE MANAGEMENT COMMITTEE

Total gross compensation paid to the members of the

Management Committee (including executive officers) in fiscal

2007 amounted to €4,106,000 (€3,928,000 in fiscal 2006).

The members of the Management 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.

Page 33: Case Study - Club Med

STOCK OPTIONS AND SHARE GRANTS

Stock options grants are discretionary. They are primarily

awarded based on the level of responsibility and potential of

the beneficiaries.

Details of the stock option and share grant plans in place at

October 31, 2007 for corporate officers and full-time GOs are

presented below.

SHARE GRANT PLAN

2007

Plan L

Date of Shareholders’ Meeting 8 March 2007

Date of Board of Directors’ Meeting 8 March 2007

Number of shares granted 46,600

O/w number of shares granted to members of the Management Committee (based on membership at 31 October 2007) 10,250

Number of executives concerned 10

Start of vesting period 8 March 2010 + sale of shares

prohibited before7 March 2012

Number of shares held at 31 October 2007 44,490

Executive officers are required by law to retain a certain pro-

portion of the shares acquired through the exercise of stock

options and under share grants, for as long as they remain in

office. The proportion corresponds to the equivalent of 30%

of the capital gain realized on the exercise of the stock options

or the sale of the shares received under share grants. In addi-

tion, share grants made to members of the Executive

Committee and the Management Committee are subject to

performance criteria, as explained in note 13.1.

ATTENDANCE FEES

The Annual Shareholders’ Meeting of 14 March 2006 set the

aggregate amount of attendance fees payable to members

of the Board of Directors (including non-voting directors) at

€305,000 for fiscal 2006, unchanged from the previous fiscal

year.

Based on the recommendations of the Nominations and

Compensation Committee, on 11 December 2006 the Board

of Directors decided to allocate these fees based on mem-

bers’ actual attendance at meetings held by the Board of

Directors and Board Committees during fiscal 2006.

The total amount of €305,000, which was paid in January 2007,

was allocated as follows: €244,000 for Board of Directors’ meet-

ings and €61,000 for meetings of the Board Committees.

Total attendance fees paid to each of the members of the

Board of Directors in fiscal 2007 was as follows:

Members of the Board of Directors

Ph. Adam 21,858.32

S. Al Sulaiman 19,316.65

M. Bakkoury 7,625.00

E. Bertier 15,249.99

Y. Caillière 10,166.66

D. Dautresme 21,146.66

T. Delaunoy de La Tour d’Artaise 25,416.65

J-M. Espalioux (retired) 5,083.33

H. Giscard d’Estaing 25,314.99

P. Jeanbart 28,974.99

A. Langlois-Meurinne 1,525.00

P. Lebard 29,381.65

T. Miyagawa 17,791.66

V. Morali 21,858.32

G. Pelisson 10,166.66

S. Ragozin (retired) 5,083.33

J. Stern (retired) 2,440.00

P. Torodov 20,333.32

K. Ujihara (retired) 5,083.33

A-C. Taittinger 11,183.33

David Dautresme received additional compensation of €30,000

for specific advisory work carried out in fiscal 2006 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.

92

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GENERAL INFORMATION

2007 ANNUAL REPORT 93

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Plan 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 Plan L

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 29.03.02 17.03.03 17.03.03 16.03.05

Date of Executive Board/Board of Directors’ Meeting 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 14.03.06 08.03.07

Number of options granted 73,500 9,000 21,000 46,000 258,400 21,815 212,530 37,400 127,000 283,000 272,000 300,000 250,000 125,000

o/w number of new or existing shares to be purchased by members of the Management Committee (based on membership at 31 October 2007) 10,000 - 1,000 - 37,400 - 9,900 - 6,800 136,000 64,900 89,300 81,400 84,100

Number of executives concerned 1 - 1 - 7 - 4 - 4 4 9 10 10 10

Start of exerciseperiod 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 08.03.10

24.03.03 24.08.03 17.02.04 23.07.04 + sale of shares + sale of shares + sale of shares + sale of shares + sale of shares

+ balance + balance + balance + balance prohibited prohibited prohibited prohibited prohibited

24.03.04 24.08.04 17.02.05 23.07.05 before before before before before28.02.07 14.01.08 10.01.09 13.03.10 07.03.11

Expiry date 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 07.03.15

Exercise price (in euros) 70.81 79.12 81.13 92.79 111.11 136.13 92.78 63.99 44.74 35 31.03 35 42.67 43.07

Number of options outstanding at 31 October 2007 13,500 3,000 7,000 2,000 86,042 5,700 82,615 11,400 72,700 154,000 188,450 240,950 213,800 116,050

Number of optionsexerciced at 31.10.2007 5,000 81,500 7,700

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

and Michel Wolfovski was named Executive Vice President..

The Board met five times in fiscal 2007, with an average atten-

dance rate of 77%. Nine out of eleven members attended the

11 December 2006 meeting, ten out of eleven members were

present on 8 March 2007, and seven, six and eight of the total

ten members attended the meetings held on 21 May, 7 June

and 23 October 2007 respectively.

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 princi-

ple applicable to information obtained by members in their

capacity as directors, as well as the duty of directors to com-

ply with the fundamental principles of independence, ethical

conduct and integrity. The internal rules require each direc-

tor to disclose to the Board any actual or potential conflict of

The board of directorsGENERAL 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 ten voting directors and one non-voting director.

No directors are elected by the Company’s employees.

In application of Article 14 of the Company’s bylaws, 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

Page 35: Case Study - Club Med

MEMBERS OF THE BOARD OF DIRECTORS

The Board of Directors comprises ten directors – seven of

whom are independent – and one non-voting director. It is

made up of individuals with complementary skills and back-

grounds.

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 ended

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, specializ-

ing 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)

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 Monetary and Financial Code and Articles 222-14 and

222-15 of the AMF’s General Regulations.

INDEPENDENT DIRECTORS (AS DEFINED IN THEAFEP/MEDEF REPORT ISSUED IN OCTOBER 2003 ON PROMOTING GOOD CORPORATE GOVERNANCE IN FRENCH LISTED COMPANIES)

At its meeting on 28 September 2006, the Board of Directors

reviewed the assessment of the independence of Board mem-

bers, based on the criteria set out in the AFEP/MEDEF report

on corporate governance. According to these criteria, direc-

tors in the following situations are not independent: direc-

tors 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 employ-

ment 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 cer-

tain 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, seven of the ten current Board mem-

bers 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.

CHANGES SINCE THE ANNUAL SHAREHOLDERS’ MEETING OF 8 MARCH 2007

At its 8 March 2007 meeting the Board of Directors noted the

resignation of Véronique Morali from her position as a direc-

tor. On 7 June 2007 the Board noted Etienne Bertier’s resig-

nation as a non-voting director.

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Page 36: Case Study - Club Med

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:

Hôteltour

Club Med Marine

CM U.K Ltd (United Kingdom)

Vice-Chairman of:

Nouvelle Société Victoria (Switzerland)

Permanent representative of: Club Méditerranée SA,

on the Board of Directors of Hôteltour

Director of: SECAG Caraïbes

DAVID DAUTRESME

Vice-Chairman of the Board of Directors

Born on 5 January 1934

French

Appointed on 16 March 2005

Term expires at the Annual Shareholders’ Meeting

to be called to approve the accounts for the year ended

31 October 2007

First term of office within the Company began

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

OTHER POSITIONS OUTSIDE THE GROUP

Sole Legal Manager of:

DD Finance (France)

Director of:

Fimalac (France)

OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

Executive Deputy Chairman of:

Crédit Agricole - Lazard Financial Products Bank

Vice-Chairman and Director of:

Fonds - Partenaires Gestion (F.P.G.)

Non-voting Director of:

Eurazeo

Groupe Go Sport

Lazard Frères Banque

Chairman of:

Parande Développement SAS

Member of the Supervisory Board of:

AXA (France)

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 on the Board of Directors of Compagnie de Crédit

GENERAL INFORMATION

2007 ANNUAL REPORT 95

Page 37: Case Study - Club Med

SAUD AL SULAIMAN

Director

Born on 8 December 1961

Saudi-Arabian

Appointed on 16 March 2005

Term expires at the Annual Shareholders’ Meeting

to be called to approve the accounts for the year ended

31 October 2007

First term of office within the Company began

on 12 December 2003

Number of shares held: 50

Independent director

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 sub-

sidiaries (Jeddah, Saudi Arabia)

OTHER POSITIONS OUTSIDE THE GROUP

Member of the Board of Directors of:

Arabian Cement Company (Saudi Arabia)

Saudi Arabian Refineries 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)

OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

Member of the Supervisory Board of:

Club Méditerranée (France)

PHILIPPE ADAM

Director

Born on 1 May 1957

French

Appointed on 16 March 2005

Term expires at the Annual Shareholders’ Meeting

to be called to approve the accounts for the year ended

31 October 2007

Number of shares held: 50

Non-independent director

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

OTHER POSITIONS OUTSIDE THE GROUP

Chairman and Chief Executive Officer of: Devimco

OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

Permanent representative of:

SAMINVEST, on the Board of Directors of GO Voyages

Managing Director of:

Carlson Wagon Lit Travel

96

Page 38: Case Study - Club Med

Director of:

Banque Centrale Populaire (Morocco)

Méditélécom (Morocco)

Ciments du Maroc

Air Liquide (Morocco)

Fonds d’Equipement Communal (Morocco)

Poste Maroc

Compagnie d’Assurance Atlanta

Crédit Eqdom

Médi 1 Sat (Morocco)

THIERRY DELAUNOY DE LA TOUR D’ARTAISE

Director

Born on 27 October 1954

French

Appointed on 16 March 2005

Term expires at the Annual Shareholders’ Meeting

to be called to approve the accounts for the year ended

31 October 2007

Number of shares held: 100

Independent director

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 joined Groupe SEB in

1994 as Chief Executive Officer of Calor SA, of which he became

Chairman and Chief Executive Officer in 1996. He was appoint-

ed Chairman of the Home Appliances Division of Groupe SEB

in 1998, Senior Vice-President, Chief Executive Officer in 1999

and Chairman and Chief Executive Officer in 2000.

MAIN POSITION OUTSIDE THE GROUP

Chairman of the Board and Chief Executive Officer of Groupe

SEB

OTHER POSITIONS OUTSIDE THE GROUP

Chairman of:

SEB SA (France)

SEB Internationale (France)

Member of the Supervisory Board of:

Rowenta Invest BV (Netherlands)

Permanent representative of:

Sofinaction on the Board of Directors of Lyonnaise de Banque

(France)

GENERAL INFORMATION

2007 ANNUAL REPORT 97

MUSTAPHA BAKKOURY

Director

Born on 20 December 1964

Moroccan

Appointed on 28 September 2006

Term expires at the Annual Shareholders’ Meeting to be

called to approve the accounts for the year ended 31

October 2007

First term of office within the Company began on 28

September 2006

Number of shares held: 250

Non-independent director

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 work-

ing in the banking industry, including with BNP Paribas in

France and BMCI in Morocco, and in August 2001 was appoint-

ed 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 pro-

fession and performs charity work) 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

OTHER POSITIONS OUTSIDE THE GROUP

Chairman of the Board of Directors of:

Fipar Holding (Morocco)

CDG Capital (Morocco)

Société Immobilière de la Mer (Morocco)

Société d’Aménagement Ryad (Morocco)

Massira Capital Management (Morocco)

CDG Développement (Morocco)

Chairman of the Supervisory Board of:

Crédit Immobilier et Hôtelier (Morocco)

Compagnie Générale Immobilière

MEDZ

Member of the Supervisory Board of:

TMSA (Agence Spéciale Tanger Med)

Banque Marocaine pour le Commerce et l’Industrie (Morocco)

Page 39: Case Study - Club Med

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 own-

ers and operators).

MAIN POSITION OUTSIDE THE GROUP

Managing Director of Rolaco Holding SA (Luxembourg)

OTHER POSITIONS OUTSIDE THE GROUP

Chairman and Chief Executive Officer of:

Oryx Finance Limited, Grand Cayman

Hôtels Intercontinental Genève SA

Managing Director of:

All of the subsidiaries of Rolaco Holding SA, Luxembourg

Director of:

Sodexho Alliance SA

Luxury Brand Development SA

Semiramis Hôtel Co, Egypt

OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

Director of:

Orfèverie Christofle SA

XL Capital Limited, Bermuda

Delta Bank International, Egypt

Nasco Insurance Group Bermuda

Member of the Supervisory Board of:

Club Méditerranée

AIMERY LANGLOIS-MEURINNE

Director

Born on 27 May 1943

French

Appointed on 28 September 2006

Term expires at the Annual Shareholders’ Meeting

to be called to approve the accounts for the year ended

31 October 2007

First term of office within the Company began

on 28 September 2006

Number of shares held: 1,000

Independent director

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

Director of:

Tefal UK (United Kingdom)

Groupe Seb Japan (Japan)

Groupe Seb Mexicana (Mexico)

Plastic Omnium (France)

Legrand (France)

OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

Chairman of:

Groupe SEB Moulinex (France)

Chairman of the Supervisory Board

Rowenta Werke (Germany)

Member of the Supervisory Board of:

Groupe SEB Deutschland (Germany)

Permanent representative of:

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)

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

Appointed on 16 March 2005

Term expires at the Annual Shareholders’ Meeting

to be called to approve the accounts for the year ended

31 October 2007

First term of office within the Company began

on 23 April 1997

Number of shares held: 50

Independent director

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

98

Page 40: Case Study - Club Med

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)

OTHER POSITIONS OUTSIDE THE GROUP

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)

OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

Director of:

Corporation Financière Power (Canada)

Axis Capital Management (United Kingdom)

Club Français du Livre (France)

PASCAL LEBARD

Director

Born on 15 May 1962

French

Appointed on 16 March 2005

Term expires at the Annual Shareholders’ Meeting

to be called to approve the accounts for the year ended

31 October 2007

First term of office within the Company began

on 23 April 1997

Number of shares held: 54

Independent director

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 pred-

ecessor of the Exor Group, which is part of the Agnelli Group.

In 2003 he joined Worms & Cie (which was renamed Sequana

Capital in 2005) as a member of the Supervisory Board (2003-

2004), subsequently becoming a member of the Management

Board (2004-2005) and then Chief Operating Officer (2005-

2007).

MAIN POSITION OUTSIDE THE GROUP

Chief Executive Officer of Sequana Capital

OTHER POSITIONS OUTSIDE THE GROUP

Chairman of:

Safic Alcan

Boccafin (formerly Permal Group SAS)

Chairman of the Supervisory Board of:

ArjoWiggins SAS

Antalis SAS

Director of:

LISI (Paris)

SGS (Geneva)

Financière Worms SA (Geneva)

Greysac (formerly Domaines Codem)

OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

Chairman of the Supervisory Board of:

Club Méditerranée

MICEL (Saint-Chamond)

Chief Executive Officer of:

Exor SA (Paris)

Chairman and Chief Executive Officer of:

Domaines Codem (Begadan)

Director of:

Domaines Codem (Begadan)

Européenne de Financement (Paris)

Soficol (Paris)

Exint. (Paris)

Member of the Executive Board of:

Worms & Cie (Paris)

GENERAL INFORMATION

2007 ANNUAL REPORT 99

Page 41: Case Study - Club Med

Permanent Representative of Groupe Taittinger on the

Boards of:

Société Hôtelière Lutétia Concorde

Taittinger CCVC

Director of:

DIXIA

Chairman of:

SAS du Riffray II

TETSUYA MIYAGAWA

Non-voting director

Born on 6 April 1955

Japanese

Appointed on 14 March 2006

Biography: After graduating in economics 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

OTHER POSITIONS OUTSIDE THE GROUP

Director of:

Nippon Life Insurance International PLC

Nippon Life Insurance Investments Europe Ltd.

OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

N/A

At the Annual Shareholders’ Meeting to be held on 11 March

2008, shareholders will be asked to renew the terms of office

of all the Company’s directors for a three-year period expiring

at the Annual Shareholders’ Meeting to be held to approve

the accounts for the year ending 31 October 2010.

ANNE-CLAIRE TAITTINGER

Director

Born on 3 November 1959

French

Appointed on 14 March 2006

Term expires at the Annual Shareholders’ Meeting

to be called to approve the accounts for the year ended

31 October 2007

First term of office within the Company began

on 12 June 2003

Number of shares held: 400

Independent director

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 an executive

MBA from HEC-CPA. She spent four years working in the

regional urban development subsidiaries of Caisse des Dépôts

et Consignations (1976-1979), before occupying various man-

agerial and CEO positions within holding companies for

Groupe du Louvre and Groupe Taittinger until 2006.

MAIN POSITION OUTSIDE THE GROUP

Senior Advisor to the Women’s Forum for the Economy and

Society (WEFCOS)

OTHER POSITIONS OUTSIDE THE GROUP

Member of the Supervisory Board of:

Carrefour

OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

Chairman of the Executive Board of:

Groupe Taittinger

Chief Executive Officer of:

Société du Louvre - Groupe du Louvre

Groupe du Louvre

Chairman of:

Louvre Hôtels SAS

Chairman and Chief Executive Officer,

subsequently Chairman and subsequently Director of:

Baccarat

Chairman and Director of:

Baccarat Inc. (United States)

Baccarat Pacific KK (Japan)

100

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HENRI GISCARD D’ESTAING IS ASSISTED

BY AN EXECUTIVE VICE PRESIDENT:

MICHEL WOLFOVSKI

Executive Vice President, Chief Financial Officer

Non-director

Born on 3 April 1957

French

OTHER POSITIONS WITHIN THE GROUP

Permanent representative of:

Club Méditerranée SA for Club Med World Holding (Paris)

Director of: Jet tours SA (Ivry)

OTHER POSITIONS OUTSIDE THE GROUP

Member of the Supervisory Board of:

Adenclassifieds

OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

Member of the Executive Board of:

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, in the past five years none of

its corporate officers have been convicted of any fraudulent

offences or have been associated with any bankruptcies,

receiverships or liquidations.

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.

BOARD COMMITTEES

At its meeting on 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 COMMITTEE

The Strategy Committee is chaired by Henri Giscard d’Estaing

and has six other members: Philippe Adam, Mustapha Bakkoury,

Paul Jeanbart, Aimery Langlois-Meurinne, Pascal Lebard

and Tetsuya Miyagawa (non-voting director). Four 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 104).

The Strategy Committee met twice in fiscal 2007.

THE AUDIT COMMITTEE

The Audit Committee is chaired by David Dautresme and

has two other members: Philippe Adam and Pascal Lebard.

Two 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 interim and annual financial statements, as well as with

examining any operations or events that may have a signifi-

cant impact on the Group and its subsidiaries in terms of com-

mitments and/or risks.

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 103).

The Audit Committee met twice in fiscal 2007.

THE NOMINATIONS AND COMPENSATION COMMITTEE

The 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 104).

The Nominations and Compensation Committee met twice

in fiscal 2007.

GENERAL INFORMATION

2007 ANNUAL REPORT 101

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102

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 conditions

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 proceduresThe 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 AND PROCEDURES

1.1.1 MEMBERS OF THE BOARD

Article 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 2007, the Board was composed of ten voting

directors and one non-voting director. The directors’ biogra-

phies and details of their other directorships and functions are

provided on page 94 of this registration document.

In compliance with its internal rules, the Board regularly checks

that its members include the requisite number of independ-

ent directors, based on the independence criteria defined

in France’s AFEP-MEDEF 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 consol-

idated subsidiaries, and has not been one during the previ-

ous 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 commer-

cial 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 previ-

ous 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 poten-

tial conflict of interests.

Based on these criteria, seven of the ten directors are consid-

ered to be independent.

1.1.2 BOARD PRACTICES AND PROCEDURES

INTERNAL 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 France’s AFEP-MEDEF

Corporate Governance Code for listed companies published

in October 2003.

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 mat-

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

to trading in the Company’s shares, as defined in Article

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

Articles 222-14 and 222-15 of the General Regulations issued

by the French securities regulator (AMF).

CHAIRMAN’S REPORTON THE PRACTICES AND PROCEDURES OF THE BOARD OF DIRECTORS AND INTERNAL CONTROL PROCEDURES

Page 44: Case Study - Club Med

The internal rules state that directors may participate in Board

meetings by videoconference or using other forms of telecom-

munication 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 appli-

cable regulations. Accordingly, directors who take part in

Board meetings through such means are deemed to be pres-

ent for the purposes of calculating the quorum and voting

majority, except for Board meetings held to approve the finan-

cial statements of the Company and the Group and the relat-

ed 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 2007 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 2007 the Board met five times with an average

attendance rate of 77%. Each meeting lasted an average of

two hours.

The Company’s Executive Vice-Presidents attended all of the

Board meetings.

1.2 ROLE AND RESPONSIBILITIES OF THE BOARD

AND BOARD COMMITTEES

1.2.1 ROLE OF THE BOARD

In 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 con-

cerning the efficient management of the Company and

makes all related decisions within the limits set by the

Company’s corporate purpose.

In fiscal 2007, the Board examined the financial statements

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

2006, approved the reports and resolutions to be presented

at the Annual Shareholders’ Meeting of 8 March 2007,

reviewed the Group’s quarterly performance and results,

reviewed the budget and the business plan, examined the

financial statements of the Company and the Group for the

first half of fiscal 2007, and set up a stock option plan and stock

grant plan for members of senior management and certain

employees. The Board also examined and approved capital

expenditure requests (including for asset acquisitions and ren-

ovation projects) and planned disposals or asset refinancing

for amounts requiring the Board’s prior approval pursuant to

its internal rules.

During the year the Board also reviewed the reports of the var-

ious Board Committees.

1.2.2 ROLES OF THE BOARD COMMITTEES

At 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 mem-

bers.

THE AUDIT COMMITTEE

The Audit Committee has three members – including two

independent members – who are appointed for their term of

office as director.

The current Audit Committee members are David Dautresme

(Chairman), Philippe Adam, and Pascal Lebard. In accordance

with best corporate governance practice, no executive direc-

tors 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 responsi-

ble for assisting the Board with reviewing and approving the

interim and annual financial statements, as well as for advis-

ing 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.

2007 ANNUAL REPORT 103

CHAIRMAN’S REPORT

Page 45: Case Study - Club Med

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 grant plans

for the management and employees of the Group (including

corporate officers).

- 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).

In order to effectively perform its role of setting the amount

of remuneration and benefits for corporate officers, the

Nominations and Compensation Committee draws on the

expertise of a specialized independent consulting firm as well

as on market information obtained on an annual basis.

The principles and rules used to set the remuneration and

benefits of corporate officers are described on page 90 of

this registration document.

The Nominations and Compensation Committee met three

times in fiscal 2007, with a 100% attendance rate. During these

meetings the Committee recommended that the Board of

Directors grant 125,000 stock options to members of senior

management and certain employees, as well as 46,600 new or

existing shares without consideration. This recommendation

was adopted by the Board at its meeting of 8 March 2007.

THE STRATEGY COMMITTEE

The Strategy Committee has seven members, four of whom

are independent. The current Committee members are Henri

Giscard d’Estaing (Chairman), 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 sub-

sidiaries, from both a financial and commercial perspective,

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 twice in fiscal 2007, with an

attendance rate of 86%, notably to update the 2007-2009 busi-

ness plan taking into account Magellan, the new corporate

program aimed at positioning Club Méditerranée as the

worldwide specialist in all-inclusive upscale, friendly, multi-

cultural vacations.

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 con-

sistent 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 pro-

cedures.

- 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.

The Audit Committee met twice in fiscal 2007, with an aver-

age attendance rate of 86%. During these two meetings, which

were dedicated to reviewing 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 reduc-

ing the number of separate companies; (iii) hedging opera-

tions; (iv) the Group’s real-estate portfolio; and (v) refinancing

operations.

In addition the Audit Committee was presented with a report

of the work performed by the internal auditors in fiscal 2007

and their internal control assessments, and gave its opinion

on the internal audit plan.

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 prac-

tice, 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 Executive Vice-President.

- 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

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1.3 RESTRICTIONS ON THE POWERS

OF THE CHIEF EXECUTIVE OFFICER IMPOSED

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 reflect-

ed the Board’s view that combining these two positions would

be the best manner of ensuring the success of the Group’s

upscale 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 pow-

ers 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, sales and exchanges of property, plant and equip-

ment, 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 represent-

ing 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 AMF,

internal control is a system developed and implemented by

a company that provides assurance concerning:

- The company’s compliance with the applicable laws and reg-

ulations.

- Application of senior management instructions and strate-

gic 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 organ-

ization, strategies, procedures and practices aimed at control-

ling 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 gener-

al strategic guidelines established by the Company’s corpo-

rate 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 man-

agement 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.

2007 ANNUAL REPORT 105

CHAIRMAN’S REPORT

Page 47: Case Study - Club Med

2.2 MEETING INTERNAL CONTROL OBJECTIVES

2.2.1 INTERNAL CONTROL PROCEDURES RELATING TO

OPERATING CONTROLS AND REGULATORY COMPLIANCE

OPERATING CONTROLS

Effective operating controls consist of gauging customer

satisfaction 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”).

GM Feedback

GM Feedback is a satisfaction survey sent to all GMs around

the globe. Over 367,000 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 43%,

with highs of 48% in France and 50% in Switzerland. The

response rate is also very high for non-European customer

bases, such as the United States (36%).

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

department, 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.

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 poten-

tial conflicts of interest, Group policy concerning gifts, bene-

fits, invitations and payments to employees, as well as the use

of confidential information, compliance with applicable laws

in the Group’s host countries and adherence to Group strat-

egy. 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 pro-

cedures relating to each of the Group’s main businesses are

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

tralized within the Internal Audit Department.

The procedures concerning the Group’s Villages can be

viewed on the Group’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’ facilities or in its host countries, includ-

ing outbreaks of diseases, hostilities and natural disasters.

The manual is also used in all internal training sessions on cri-

sis management and communication.

106

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Practical guidelines have been drawn up for each Club

Méditerranée profession in order to deliver the service qual-

ity 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 without

delay. Less sensitive applications – including resource man-

agement 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 hack-

ing into the network and/or a centralized application 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 – which reports to

the Corporate Secretary – 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 regulations 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 also reports to

the Corporate Secretary – is to ensure that the Group has ade-

quate insurance coverage in relation to the nature and extent

of its risks. Risk management and insurance policies are organ-

ized on a consolidated basis. The Group has set up risk man-

agement tools and global insurance programs with pools of

top-ranking insurers, and specific insurance coverage is taken

out at a local level.

• 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, sales or exchanges of property, plant and

equipment, intangible assets, rights or securities, and the cre-

ation 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 concern-

ing the running of the Group.

- Any transactions between the Company and any one of its

subsidiaries or between 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.

2007 ANNUAL REPORT 107

CHAIRMAN’S REPORT

Page 49: Case Study - Club Med

trol 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.

• 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 general

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 rev-

enue 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-gener-

ated 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 bal-

ance 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.

2.2.2 INTERNAL CONTROL PROCEDURES COVERING

THE PREPARATION AND PROCESSING OF ACCOUNTING

AND FINANCIAL INFORMATION

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 inter-

nal reporting format. Accounting and financial information 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 Financial/

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 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 rev-

enue 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 consolidat-

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

the use of a Group chart of accounts.

The Management Controller/Finance Manager of each Village

is responsible for accounting, management and internal con-

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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

have been applied since then by all local entities for consoli-

dated 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 Mana-

gement 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 ensur-

ing the security, transparency and effectiveness of treasury and

financing operations. Its main roles are to:

- Manage investments and financing transactions to ensure

that the Group has sufficient liquidity.

- Control the level of finance costs.

- Perform cash management tasks.

- Quantify and hedge financial risks – notably currency and

interest-rate risks.

- Monitor banking relations.

- Help subsidiaries with cash management processes and

assist the Development Department in arranging financing for

new projects.

• Procedures

The Treasury & Financing Department has drawn up a set of

Group rules and procedures. Examples include a procedure

on authorized bank account signatures in order to limit the

risk of fraud, as well as a procedure on signing and sending

files containing batches of supplier payments.

2007 ANNUAL REPORT 109

CHAIRMAN’S REPORT

Page 51: Case Study - Club Med

• 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 Representative

Office 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 new Cost

Controllers and Management Controllers/Finance Managers

as well as more experienced Management Controllers/Finance

Managers, with a view to relaying a control culture through-

out 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).

Weekly and monthly reporting systems have also been set

up in order to provide senior management with information

on matters such as (i) the Group’s actual and forecast levels

of debt and liquidity; (ii) risk monitoring and hedging trans-

actions; and (iii) the Group’s dealings with its banks, includ-

ing details of cash flows and commitments, account move-

ments and banking terms and conditions.

The Treasury team uses a treasury management system that

enables it to track key liquidity indicators as well as all of the

financial instruments used on a centralized basis.

Tasks relating to financial market transactions are segregated,

with orders, execution and controls carried out by three dif-

ferent 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 Tax Department monitors tax issues, in coordination with

the person responsible for tax matters in each country or

region. It reports to the Audit Committee on a six-monthly

basis, giving a detailed account of any tax audits and/or dis-

putes in process.

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 senior manage-

ment team in its decision-making process. To this end it pres-

ents a report on its work once a year to the members of the

Senior Management Committee.

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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 by teams 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 as well as to the

audited units and support functions.

- Follow-ups to check that the internal auditors’ recommen-

dations have been implemented and, if necessary, to assist

the audited units with their risk management action plans.

Since 2005, the frequency of the audits carried out on the

Group’s Villages by the Internal Audit team has been stepped

up substantially, to support Club Méditerranée’s upscale strat-

egy and the implementation of a leaner management organ-

ization in certain Villages. The aim behind these more frequent

audits was to ensure that new processes were being applied

correctly. In 2007, 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. The

remainder of the hours worked breaks down more or less

equally between audit engagements in national representa-

tive offices (26%) and engagements at headquarters (28%).

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

control procedures, 2007 was dedicated to fine-tuning a self-

assessment internal control matrix for the Villages in order to

help enhance each department’s internal control process. The

matrix is based on:

- Regularly assessing risk control.

- Carrying out an objective and realistic evaluation of the qual-

ity of the internal controls in place, using consistent method-

ology resulting in a mathematical score.

- Setting up action plans and monitoring that these plans are

properly implemented.

This matrix has been successfully tested with a pilot group and

will be rolled out to all the Villages during 2008.

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

tive office, the entity is rated on a scale of 10. This enables the

Group to assess the internal controls in place, compare per-

formance between the audited entities and measure their

progress. The two follow-up audits carried out in fiscal 2007

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, are reg-

ularly informed of the work carried out by the Internal Audit

team, and receive a copy of the yearly Internal Audit report.

2.3 RAISING AWARENESS OF INTERNAL CONTROL

2.3.1 ROLLING OUT THE NEW VILLAGE ORGANIZATION

TO STRENGTHEN INTERNAL CONTROL

As part of the Group’s overall upscale strategy, the new organ-

ization structure trialed at ten Villages in 2005 and put in place

in thirteen Villages in 2006 was rolled out on a permanent basis

in 2007. Under the new leaner and more coherent 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 cre-

ation 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 decreasing sharply.

2007 ANNUAL REPORT 111

CHAIRMAN’S REPORT

Page 53: Case Study - Club Med

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 purchas-

ing 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. These procedures will be

once again updated in 2008 in order to apply the recommen-

dations issued by the AMF on 31 October 2006 as part of its

internal control reference framework.

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

of Cost Controller reporting to the Village Management

Controller/Finance Manager. The Cost Controller is responsi-

ble 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/Finance Managers fulfill their duty

of ensuring compliance with internal control processes.

2.3.2 OTHER MEASURES IMPLEMENTED TO 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

alcohols) as well as for additional services (such as spa treat-

ments).

112

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2007 ANNUAL REPORT 113

STATUTORY AUDITORS’ REPORT ON INTERNALCONTROL

Statutory 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 2007

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 2007.

In his report, the Chairman is required to comment on the con-

ditions applicable for the preparation and organization of

the work carried out by the Board of Directors and the inter-

nal 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 pro-

cessing of accounting and financial information.

We performed our procedures in accordance with profession-

al standards applicable in France. Those standards 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 internal control procedures related to prepa-

ration and processing of accounting and financial data under-

lying the information presented in the Chairman’s report, as

well as existing documentation.

- Acquiring an understanding of the work performed in order

to prepare this information and existing documentation.

- Determining whether the major internal control weakness-

es concerning the preparation and processing of accounting

and financial information that we may have identified as part

of our audit are appropriately disclosed in the Chairman’s

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 Article L. 225-37 of the French

Commercial Code.

Neuilly-sur-Seine and Paris-La Défense, 12 February 2008

The Statutory Auditors

Deloitte & Associés Ernst & Young Audit

Dominique Jumaucourt Pascal Macioce

Page 55: Case Study - Club Med

(in € thousands)

Ernst & Young network Deloitte network

2007 2006 2007 2006

Amount % Montant % Amount % Amount %excl. VAT excl. VAT excl. VAT excl. VAT

Statutory and contractual audits- Issuer 472 42.58% 412 41.41% 328 47.81% 307 40.13%- Fully consolidated

subsidiaries 521 47.08% 471 47.34% 348 50.73% 298 38.95%

Audit-related services- Issuer 100 10.05% 160 20.92%- Fully consolidated

subsidiaries 3 0.27%

Sub-total 996 89,93% 983 98.80% 676 98.54% 765 100.00%

Other services provided to fully consolidated subsidiaries- Legal and tax advice 112 10.07% 5 0.50% 10 1.46%- Other 7 0.70%

Sub-total 112 10.07% 12 1.20% 10 1.46%

Total fees 1,108 100.00% 995 100.00% 686 100.00% 765 100.00%

114

FEES PAID TO THE STATUTORY AUDITORS

Page 56: Case Study - Club Med

CONSOLIDATED FINANCIAL STATEMENTS

139 – Note 14 - Pensions and other long-term benefits141 – Note 15 - Provisions141 – Note 16 - Income taxes 143 – Note 17 - Borrowings and other interest-bearing

liabilities145 – Note 18 - Financial instruments148 – Note 19 - Other liabilities148 – Note 20 - Employee benefits expense

and number of employees149 – Note 21 - Operating income - Management

of assets149 – Note 22 - Other operating income and expense149 – Note 23 - Finance cost, net149 – Note 24 - Share of income of associates150 – Note 25 - Earnings per share 150 – Note 26 - Notes to the consolidated cash flow

statement 151 – Note 27 - Related party transactions152 – Note 28 - Commitments and contingencies153 – Note 29 - Scope of consolidation

at 31 October 2007

157 – AUDITORS’ REPORT ON THE CONSOLIDATEDFINANCIAL STATEMENTS

158 – GROUP STRUCTURE AT 31 OCTOBER 2007

116 – CONSOLIDATED STATEMENTS OF INCOME

117 – CONSOLIDATED BALANCE SHEETS

118 – CONSOLIDATED CASH FLOW STATEMENT

118 – CHANGE IN CONSOLIDATED NET DEBT

119 – CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

120 – NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

120 – Note 1 - General information 120 – Note 2 - Summary of significant accounting

policies, scope of consolidation 128 – Note 3 - Changes in scope of consolidation128 – Note 4 - Segment information131 – Note 5 - Goodwill and business combinations 132 – Note 6 - Intangible assets133 – Note 7 - Property, plant and equipment134 – Note 8 - Non-current financial assets135 – Note 9 - Assets held for sale136 – Note 10 - Other receivables136 – Note 11 - Cash and cash equivalents136 – Note 12 - Share capital and reserves137 – Note 13 - Share-based payments

Club Méditerranée Group

2007 ANNUAL REPORT 115

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116

(in € millions)

Years ended 31 October Notes 2006 2007

Revenue 4.2 & 4.3 1,679 1,727

Other income 41 8

Total income from ordinary activities 1,720 1,735

Purchases (751) (765)External services (379) (360)Employee benefits expense 20 (329) (332)Taxes other than on income (32) (34)

EBITDAR - Leisure 2.1.4 229 244

Rent (142) (148)Depreciation and amortization expense (63) (64)Provision expense, net - 1

Operating income - Leisure 4.2 24 33Operating income - Management of assets 21 40 2Other operating income and expense 22 (29) (21)Operating income 4.2 35 14

Finance cost, net 23 (32) (26)

Income/(loss) before tax 3 (12)

Income tax 16.1 (1) 3Share of income of associates 8.1 & 24 3 1

Net income/(loss) 5 (8)

- Attributable to equity holders of the parent 5 (10)- Minority interests - 2

(in €)

Basic earnings/(loss) per share 25 0.24 (0.55) Diluted earnings/(loss) per share 25 0.24 (0.55)

CONSOLIDATED STATEMENTS OF INCOME

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 117

Assets(in € millions)

Note 31 October 2006 31 October 2007

Goodwill 5 103 108Intangible assets 6 79 83Property, plant and equipment 7 859 841Non-current financial assets 8 80 86

Total fixed assets 1,121 1,118

Deferred tax assets 16.2 35 30

Non-current assets 1,156 1,148

Inventories 21 22Trade receivables 81 86Other receivables 10 108 142Cash and cash equivalents 11 165 108

Current assets 375 358

Assets held for sale 9 92 87

Total assets 1,623 1,593

Equity and liabilities(in € millions)

Note 31 October 2006 31 October 2007

Share capital 77 77Additional paid-in capital 562 563Retained earnings/(deficit) (185) (201)Net income/(loss) for the year 5 (10)

Equity attributable to shareholders 12.1 459 429

Minority interests 12.2 55 61

Total equity 514 490

Pensions and other long-term benefits 14 28 27Long-term borrowing and other interest-bearing liabilities 17 346 408Other non-current liabilities 19 36 43Deferred tax liabilities 16.2 86 64

Non-current liabilities 496 542

Provisions 15 41 24Short-term borrowings and other interest-bearing liabilities 17 109 36Trade payables 170 184Other current liabilities 19 177 186Customer prepayments 112 131

Current liabilities 609 561

Liabilities related to assets held for sale 9 4

Total equity and liabilities 1,623 1,593

CONSOLIDATED BALANCE SHEETS

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118

CONSOLIDATED CASH FLOW STATEMENT

(in € millions)

Years ended 31 October Note 2006 2007

Cash flows from operating activities

Net income/(loss) 5 (8)Adjustments for:Depreciation, amortization and provisions 26.1 70 56Share of income of associates (4) (1)Disposal (gains) and losses, net (49) (11)Finance cost, net 32 26Income tax 1 (3)Other (4) (2)Change in working capital(1) 24 (20)

Cash generated from operations 75 37

Interest paid (22) (16)Income taxes paid (6) (6)

Net cash from operating activities 47 15

Cash flows from investing activities

Acquisitions of non-current assets(2) 26.2 (151) (104)Acquisitions of equity interests, net of cash acquired (3) (4)Proceeds from disposals of non-current assets 26.3 143 65Net cash used in investing activities (8) (43)

Free cash flow 39 (28)

Cash flows from financing activities

Proceeds from long-term borrowings 102 94Repayments of long-term borrowings (118) (127)Increase (decrease) in short-term bank loans (12) 5Dividends paid and other (4) 2

Net cash used in financing activities (32) (26)

Effect of changes in exchange rates on cash and cash equivalents and other (2) (3)

Net increase/(decrease) in cash and cash equivalents 5 (57)

Cash and cash equivalents at beginning of period 11 168 165Effect of a change of method (adoption of IAS 32 and IAS 39 at 1 November 2005) (8)Cash and cash equivalents at end of period 11 165 108

(1) Including charges to/(releases from) short-term provisions considered as accrued expenses.(2) Net of government grants.(3) Including €4 million in cash acquired.

CHANGE IN CONSOLIDATED NET DEBT

(in € millions)

Years ended 31 October Note 2006 2007

Net debt at beginning of period 17.1 (335) (294)Impact on net debt of the adoption of IAS 32 and IAS 39 at 1 November 2005 12Decrease/(increase) in net debt 29 (42)

Net debt at end of period 17.1 (294) (336)

Page 60: Case Study - Club Med

CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 119

(in € millions)

Shares Share Additional Treasury Retained Equity Minority Totaloutstanding capital paid-in shares earnings attributable interests equity

capital and net to share-income/(loss) holdersfor the year

At 31 October 2005 Excluding IAS 32/39 19,358,005 77 562 - (185) 454 54 508Effect of a change of method (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 to equity (1) (1) (1)

Exchange differences on translating foreign operations (15) (15) (15)

Income and expenses recognized directly in equity (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 2

Dividends (1) (1)

Effect of changes in scope of consolidation 2 2

At 31 October 2006 19,358,005 77 562 (10) (170) 459 55 514Gains/(losses) on cash flow hedges taken to equity (4) (4) (4)

Revaluation of available-for-sale financial assets 10 10 10

Exchange differences on translating foreign operations (31) (31) 2 (29)

Income and expenses recognized directly in equity (25) (25) 2 (23)

Net loss for the year (10) (10) 2 (8)

Total recognized income and expense for the period (35) (35) 4 (31)

Share-based payments 2 2 2

(Purchases) and sales of treasury shares (1) (1) (1)

Exercise of stock options 3 3 3

Capital increase 12,700 1 1 3 4

Dividends (1) (1)

At 31 October 2007 19,370,705 77 563 (8) (203) 429 61 490

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Note 12)

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- IFRIC Interpretation 4: Determining whether an Arrangement

Contains a Lease.

- IFRIC Interpretation 8: Scope of IFRS 2.

- IFRIC Interpretation 10: Interim Financial Reporting and

Impairment.

The amendment to IAS 19 provides the option of recognizing

actuarial gains and losses in equity in the period in which they

occur. However, the Group has elected to continue using the

corridor method to recognize actuarial gains and losses.

These standards, revised standards and interpretations did

not have a material impact on the consolidated financial state-

ments.

The Group decided not to early adopt any standards, revised

standards or interpretations applicable in accounting peri-

ods commencing after 31 October 2007. These include:

Standards, revised standards and interpretations applicable

as from 1 November 2007:

- Amendment to IAS 1: Capital Disclosures.

- IFRS 7 - Financial Instruments: Disclosures.

- IFRIC Interpretation 11: Group and Treasury Share Transactions.

Standards, revised standards and interpretations applicable

as from 1 November 2009:

- IFRS 8: Operating Segments.

The practical implications of applying these standards, revised

standards and interpretations and their effect on the consol-

idated financial statements are currently being assessed.

2.1.1. MEASUREMENT METHODS APPLIED

FOR THE PREPARATION OF THE CONSOLIDATED

FINANCIAL STATEMENTS

The consolidated financial statements have been prepared on

a historical cost basis, except for derivative financial instru-

ments and available-for-sale financial assets, which have been

measured at fair value. The Group opted to measure certain

land 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. Estimates and assumptions are

used in particular:

Note 1. General informationClub Méditerranée SA is a société anonyme (joint stock cor-

poration) 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 ending 31 October. The sub-

sidiaries’ financial statements cover the same period and are

prepared using the same 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 leisure and entertainment

complexes).

The consolidated financial statements for the year ended

31 October 2007 were approved by the Board of Directors

on 12 December 2007. All amounts are presented in millions

of euros, unless otherwise specified.

Note 2. Summary of significantaccounting policies, scope of consolidation2.1. 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 2007 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.

The Group has applied IAS 32 – Financial Instruments:

Disclosure and Presentation and IAS 39 – Financial Instruments:

Recognition and Measurement since 1 November 2005, as

permitted under IFRS 1.

The following standards, revised standards and interpretations

adopted by the European Union were applicable 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.

NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS AT 31 OCTOBER 2007

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 121

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

estimated future cash flows and assumptions concerning future

growth rates and discount rates.

- For the determination of provisions for claims and litigation.

- For the calculation of pensions 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.

2.1.2. FINANCIAL STATEMENT PRESENTATION

The consolidated statement of income is presented in accor-

dance with the “nature of expense” method.

A) INCOME FROM ORDINARY ACTIVITIES

Income from ordinary activities is recognized when it is prob-

able that the economic benefits associated with the transac-

tion will flow to the Group and the amount of income can be meas-

ured reliably. Total income from ordinary activities includes:

Revenue

Revenue corresponds to amounts received on the sale of

goods and services by fully consolidated companies in the

normal course of business, and 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 goods are delivered and the significant risks and

rewards of ownership are transferred to the buyer.

Other income

Other income mainly includes insurance settlements for

business interruption losses as well as government grants

recognized in accordance with the accounting methods

described in Note 2.18.

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.

The performance of the Villages (owned or leased) is tracked

internally based on the Leisure activities’ EBITDAR. As from

2007, reversals of utilized provisions, which were previously set

off against the corresponding expense, have been reclassified

under provisions to make the EBITDAR indicator more mean-

ingful. Comparative data for 2006 has been restated to reflect

this change although the amounts involved were not material.

- 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 and expense, corresponding main-

ly to restructuring costs, claims and litigation, the impact of

natural disasters and credit card costs.

C) FINANCE COST, NET

This item includes:

- Interest expense and income on net debt.

- Bank charges.

- Discounting adjustments to provisions for pensions and

other long-term benefit obligations.

- Gains and losses on derivative instruments.

- Exchange gains and losses, net.

- Dividends received from non-consolidated companies.

- Impairment charges on financial assets.

2.2. BASIS OF CONSOLIDATION

All companies that are controlled by Club Méditerranée,

directly or indirectly, are fully consolidated. Control is the direct

or indirect power to govern the financial and operating poli-

cies 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 the

associated risks are assumed by the Group.

Subsidiaries are consolidated from the acquisition date, cor-

responding to the date on which control is transferred to the

Group, until the date on which 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 expens-

es are eliminated in full in consolidation, together with the

profits included in the carrying amount of assets acquired in

intra-group transactions.

The list of consolidated companies and the consolidation

methods applied are presented in Note 29.

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122

2.4. BUSINESS COMBINATIONS, GOODWILL AND INTANGIBLE ASSETS

2.4.1. BUSINESS COMBINATIONS AND GOODWILL

Business 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 by the purchase method, by measuring the

assets acquired and liabilities and contingent liabilities

assumed at their fair value at the date of the combination.

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

interests in the identifiable assets and liabilities of the acquired

entity are also measured at fair value.

2.4.2. CHANGES IN MINORITY INTERESTS

As there is currently no specific accounting treatment pre-

scribed in IFRS for changes in minority interests, the Group

has chosen to apply the following method:

- Purchases of additional minority interests result in goodwill,

being the difference between the consideration paid and the

relevant share acquired of the carrying amount of non-reval-

ued net assets of the subsidiary.

- Transactions that reduce the Group’s interest in an entity

(without loss of control) are treated as a sale of interests to

minority shareholders, and the resulting impact is recorded in

the statement of income.

The revised version of IFRS 3 – Business Combinations, rep-

resenting the second phase of the business combinations

project, should describe how to account for this type of

transaction. The method adopted by the IASB may differ from

that described above.

2.4.3. INTANGIBLE ASSETS

Intangible assets consist mainly of brands, lease premiums

and software. Purchased intangible assets are carried at cost

less accumulated amortization and any accumulated impair-

ment 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 policy described in Note 2.7 “Impairment of assets”.

2.3. FOREIGN CURRENCY TRANSLATION

2.3.1. TRANSLATION OF THE FINANCIAL STATEMENTS

OF FOREIGN SUBSIDIARIES

The 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 trans-

lated at the average rate for the period.

The resulting exchange differences are recognized as a sep-

arate component of equity, under “Translation reserve”.

The financial statements of operating and real estate

companies that are not independent from the parent, Club

Méditerranée SA, are translated into euros using the histori-

cal rate method, as follows:

- Non-current assets and the corresponding amortization and

depreciation charges are translated at the historical rate, cor-

responding to the exchange rate on the transaction date.

- Monetary assets and liabilities are translated at the closing

rate.

- Income statement items (other than amortization and depre-

ciation 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 CURRENCIES OTHER THAN

THE FUNCTIONAL CURRENCY

Exchange differences on monetary assets and liabilities that

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

solidated foreign operation are accumulated in 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.

2.3.3. OPTION SELECTED BY THE GROUP ON FIRST-TIME

ADOPTION OF IFRS

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

cumulative translation adjustments arising on the translation

of the financial statements of foreign subsidiaries were reset

to zero at 1 November 2004 by adjusting opening retained

earnings. Any gains or losses on subsequent disposals of for-

eign subsidiaries will exclude translation differences that arose

before 1 November 2004.

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 123

All other intangible assets (software and licenses) are qualified

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 adjust-

ed 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 land

and buildings were measured at fair value in accordance 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 loca-

tion and condition necessary for it to be capable of operat-

ing in the manner intended. Production cost includes materi-

als and direct labor, as well as borrowing costs that are direct-

ly 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 depre-

ciation is therefore calculated without deducting any residual

value. Useful lives are reviewed at each year-end and adjust-

ed if necessary. The adjustments are treated as a change in

accounting 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.

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”).

Property, plant and equipment held under finance leases that

transfer substantially all the risks and rewards of ownership of

the assets to the lessee are recognized as assets.

2.6. LEASES

Leases are classified as either finance leases or operating

leases based on the substance of the transaction.

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 reduction of the outstanding liability.

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 statement of

income.

Assets under finance leases are depreciated over their esti-

mated useful life. However, if 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 operat-

ing leases. Lease payments under operating leases are recog-

nized as an expense on a straight-line basis over the lease term.

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124

2.7.2. PROPERTY, PLANT AND EQUIPMENT

AND DEPRECIABLE INTANGIBLE ASSETS

These 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

separate CGU. Impairment tests are therefore performed

Village by Village, whenever there is an indication that their

recoverable 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.

Future cash flows are based on cash flow projections contained

in management forecasts and the Group’s business plan

covering a period of three years. Cash flow projections for

subsequent periods are estimated by extrapolating the pro-

jections based on a growth rate to perpetuity and the present

value of the assets concerned at the end of their useful lives.

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. Impairment losses may be reversed in

subsequent periods if the conditions that led to their recog-

nition have changed.

2.8. AVAILABLE-FOR SALE FINANCIAL ASSETS AND 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, corresponding

to the fair value of the consideration paid plus directly attrib-

utable transaction costs. Their subsequent measurement

depends on their classification.

2.7. IMPAIRMENT OF ASSETS

2.7.1. GOODWILL AND INTANGIBLE ASSETS

WITH INDEFINITE USEFUL LIVES

In 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 (CGU) to which it relates. The cash-gen-

erating units used by the Group are based on the groups of

assets used to organize its businesses and analyze their results.

Goodwill related to the Village business is allocated and

analyzed by region (see Note 4 “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 estimat-

ed 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). Value in use is determined on

the basis of cash flow projections contained in management

forecasts and the Group’s business plan covering a period of

three years. Cash flow projections for subsequent periods

are estimated by extrapolating the projections based on a

growth rate to perpetuity and the present value of the assets

concerned at the end of their useful lives. The discount rate

used is determined based on weighted average cost of cap-

ital (WACC). This is a post-tax rate applied to post-tax cash

flow projections. The recoverable amounts obtained using this

method are the same as those that would be obtained by

applying a pre-tax discount rate to pre-tax cash flow projec-

tions as required by IAS 36.

When the CGU’s recoverable amount determined by the

above methods is less than the carrying amount of its assets,

an impairment loss is recognized to write down the CGU to

recoverable amount, defined as the higher of value in use and

fair value less costs to sell. Impairment losses are recorded in

priority against any goodwill allocated to the CGU.

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.

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 125

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

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

in fair value recognized in “Finance cost, net”. Derivative

instruments are included in this category, except for the por-

tion 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 inter-

est method, less any accumulated impairment losses. Gains

and losses are recognized in the statement of income. Held-

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

minable 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 finan-

cial assets and measured at fair value. Gains and losses aris-

ing on remeasurement at fair value are recognized directly in

equity until the asset is sold. The fair value of listed securities

corresponds to their market value. The fair value of unlisted

securities corresponds to their estimated value in use, deter-

mined using the most appropriate financial criteria for the

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

a prolonged decline in the fair value of an available-for-sale

financial asset, the cumulative loss that had been recognized

directly in equity is transferred from equity to the 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 dispos-

al group) is available for immediate sale in its present condi-

tion; (ii) management has initiated a plan to sell the asset (or

disposal group); and (iii) the 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 it is certain they will not be recovered.

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 money-market funds 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 vir-

tually certain that reimbursement will be received. The provi-

sion expense is recorded in the statement of income, net of

any expected reimbursement. 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 obligation. The increase in discounted provisions due

to the passage of time is recognized in “Finance cost, net”.

2.14. PENSIONS AND OTHER LONG-TERM BENEFITS

Group employees are covered by various plans providing for

the payment of supplementary pensions, length-of-service

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

practices in the Group’s host countries. A description of the

main plans is provided in Note 14.

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126

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 avail-

able 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 FINANCIAL LIABILITIES

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 CONVERTIBLE INTO NEW

OR EXISTING SHARES)

The Group’s debt includes two convertible bond issues

(OCEANEs). These financial instruments comprise both a lia-

bility component and a conversion option recognized as an

equity component.

The component classified as a financial liability is measured at

the present value of the future contractual cash flows (includ-

ing interest, redemption premiums and the settlement of the

obligation at maturity), discounted at the market interest rate

on the issue date for debt instruments with the same charac-

teristics in terms of maturity and cash flows but without a con-

version option. The value of the equity component represents

the difference between the nominal amount of the issue and

the fair value of the liability component.

Issue costs are allocated to each component pro rata to their

respective carrying amounts. The difference between interest

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 obli-

gation if the bonds are not converted.

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 by the

projected unit credit method. This method involves the use of

long-term actuarial assumptions concerning demographic vari-

ables (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 actu-

arial assumptions on the amount of the obligation – are rec-

ognized as explained below. The interest cost, corresponding

to the increase in the obligation due to the passage of time,

is recognized in “Finance cost, net”.

Treatment of actuarial gains and losses

Actuarial gains and losses arising on post-employment ben-

efits are recognized in income by the corridor method, applied

separately to each individual plan. Under this method, actu-

arial 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.

In accordance with the option provided under IFRS 1, non-

amortized actuarial gains and losses as of 1 November 2004

have been recognized in equity.

Past service cost

Past service cost is the increase in the present value of the

defined benefit obligation resulting from changes to post-

employment benefits or other long-term benefits. Past serv-

ice 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.

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 127

2.16.2. OTHER FINANCIAL LIABILITIES

Other financial liabilities are measured at amortized cost using

the effective interest method, including issue costs and issue

and redemption premiums.

2.17. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING INSTRUMENTS

2.17.1. MEASUREMENT OF DERIVATIVE FINANCIAL

INSTRUMENTS

Derivative 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 ACCOUNTING

The Group uses financial instruments to optimize its borrow-

ing costs and to hedge budgeted future net cash flows in

foreign currencies. 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 inter-

est 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 to a particular risk associated

with a recognized asset or liability, or a highly probable fore-

cast 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 reclassified into “Finance cost, net” in the peri-

od 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

instrument no longer meets the criteria for hedge accounting

and the forecast transaction is still expected to occur, the cumu-

lative 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 18.1.

2.18. GOVERNMENT GRANTS

Government grants are recognized when there is reasonable

assurance that the conditions attached to them will be met

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

to compensate costs are recognized as income over the peri-

ods necessary to match them with the related costs that

they are intended to compensate, on a systematic basis.

Government grants related to assets are initially recognized

as deferred income (other non-current liabilities) at fair value

and subsequently recognized under “Other income” over the

useful lives of the assets concerned.

2.19. SHARE-BASED PAYMENTS

The Group has set up stock option plans for members of sen-

ior 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 exer-

cise period). The cost of stock options – corresponding to

the fair value of the employee services rendered, determined

using the Black & Scholes option pricing model – is recog-

nized in employee benefits expense 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 period. 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 equi-

ty instruments issued by the Group.

2.21. EARNINGS PER SHARE

Basic earnings per share correspond to net income attributa-

ble to equity holders divided by the weighted average num-

ber of shares outstanding during the period, net of treasury

shares.

Diluted earnings per share take into account dilutive poten-

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

options and convertible bonds.

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128

One company was liquidated:

- CM Inc., liquidated on 31 March 2007.

Two companies were sold:

- SOMAVIVAC, sold on 31 October 2007.

- CIVAC, sold on 31 October 2007.

Two companies were deconsolidated:

- SNC Caravelle 2006, deconsolidated on 13 December 2006.

- Société Immobilière de la Mer. The Group sold a 7.28%

interest in this company, reducing its overall stake from 24.28%

to 17%.

Other changes in the scope of consolidation were as follows:

- On 28 November 2006, CM Asie acquired 1.56% of the out-

standing shares of SPVV, raising its stake to 99.94% from

98.38%.

- On 31 January 2007, Jet tours acquired 35% of the outstand-

ing shares of FST, raising its stake to 100% from 65%.

- On 9 March 2007, CMSA acquired 40% of the outstanding

shares of CM Viagens, raising its stake to 100% from 60%.

Note 4. Segment information4.1. 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 Village business segment comprises the Villages, the

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

Découverte tours. It 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 develop-

ment 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 average number of dilutive potential 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 lower than the

average Club Méditerranée share price for the period). The

exercise price takes into account the fair value of the servic-

es 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.

Note 3. Changes in scope of consolidation

Number of Full Equity Totalconsolidated consolidation methodcompanies

Scope of consolidation at31 October 2006 112 9 121

Newly consolidated companies 5 1 6Liquidations (1) (1)Disposals (2) (2)Change in consolidation method (1) (1) (2)

Scope of consolidation at 31 October 2007 115 7 122

Six companies were consolidated for the first time in fiscal

2007:

- Albion Development Ltd, set up on 27 April 2007.

- Club Med Villas et Chalets, set up on 19 September 2007.

- Club Med Villas et Chalets Holding, set up on 4 September

2007.

- Club Med Villas et Chalets Services, set up on 25 October

2007.

- Club Med Ferias, set up on 25 October 2007.

These changes in scope of consolidation did not have a mate-

rial impact on the consolidated financial statements.

- In addition, on 15 May 2007 Jet tours acquired the entire

capital of Quotidien Voyages (Austral Lagons). This company

is fully consolidated. The impact of this acquisition on the

consolidated financial statements is described in Note 5,

“Goodwill and Business Combinations”.

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 129

The Club Med World business segment corresponds to the

management of a leisure and entertainment complex, com-

prising conference facilities, restaurants, theaters and concert

halls, as well as a night club and areas used to organize activ-

ities for children.

Inter-segment transactions are not material. The main trans-

actions 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 market-

ing 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 cus-

tomers 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.

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 other interest-bearing liabilities, which are included

in net debt.

4.2. INFORMATION BY BUSINESS SEGMENT

(in € millions)

Fiscal 2006 Fiscal 2007

Revenue Inter-segment Revenue Revenue Inter-segment Revenue transactions contribution transactions contribution

Villages 1,358 (35) 1,323 1,400 (33) 1,367Tour operating (Jet tours) 311 (11) 300 314 (12) 302Club Med Gym 47 47 49 49Club Med World 9 9 9 9Eliminations (46) 46 (45) 45

Total 1,679 - 1,679 1,727 - 1,727

(in € millions)

Fiscal 2006

Operating Operating Depreciation, Share of income income - income amortization of associates

Leisure and impairment

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

Total 24 35 (67) 3

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130

(in € millions)

Fiscal 2007

Operating Operating Depreciation, Share of income income - income amortization of associates

Leisure and impairment

Villages 28 9 (52) 1Tour operating (Jet tours) 2 2 (1)Club Med Gym 5 5 (3)Club Med World (2) (2) (1)

Total 33 14 (57) 1

(in € millions)

31 October 2006 31 October 2007

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

Villages 1,180 473 141 1,198 493 94Tour operating (Jet tours) 87 48 2 94 55 1Club Med Gym 72 40 3 74 45 4Club Med World 4 3 3 2

Total 1,343 564 146 1,369 595 99

(1) Excluding government grants.

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

(in € millions)

31 October 2006 31 October 2007

Segment assets 1,343 1,369Non-current financial assets 80 86Deferred tax assets 35 30Cash and cash equivalents 165 108

Total assets 1,623 1,593

Segment liabilities 564 595Equity 514 490Borrowings and other interest-bearing liabilities 459 444Deferred tax liabilities 86 64

Total equity and liabilities 1,623 1,593

4.3. INFORMATION BY GEOGRAPHICAL SEGMENT

REVENUE (OUTBOUND ZONES)

(in € millions)

Fiscal 2006 Fiscal 2007

Europe-Africa 1,338 1,372Americas 196 188Asia 145 167

Total 1,679 1,727

Revenue in France amounted to €637 million in fiscal 2007 (€613 million in fiscal 2006).

Page 72: Case Study - Club Med

Changes in goodwill were as follows:

(in € millions)

At 1 November 2006 103

Changes in scope of consolidation(1) 6Translation adjustments and other (1)

At 31 October 2007 108

(1) Goodwill arising on the Quotidien Voyages acquisition.

There were no changes in goodwill in fiscal 2006.

5.2. BUSINESS COMBINATIONS

ACQUISITION OF QUOTIDIEN VOYAGES (AUSTRAL LAGONS)

On 15 May 2007 Jet tours acquired the entire capital of

Quotidien Voyages. Specialized in island vacations, this com-

pany operates under the name Austral Lagons.

The assets acquired and liabilities and contingent liabilities

assumed were as follows:

(in € millions)

Trade receivables 5Other receivables 1Cash and cash equivalents 4Trade payables and other current liabilities (8)

Fair value of acquired assets and assumed liabilities 2

Goodwill 6

Acquisition cost 8

Acquisition cost net of acquired cash 4

Quotidien Voyages contributed €22 million to consolidated

revenue in fiscal 2007. Its contribution to operating income

was not material. If the company had been consolidated over

the full year, it would have contributed €38 million to consol-

idated revenue and €1 million to consolidated operating

income.

CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 131

SEGMENT ASSETS AND CAPITAL EXPENDITURE (LOCATION OF ASSETS)

(in € millions)

31 October 2006 31 October 2007

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

Europe-Africa 869 60 871 70Americas 367 71 392 21Asia 107 15 106 8

Total 1,343 146 1,369 99

(1) Excluding government grants.

Note 5. Goodwill and business combinations5.1. ANALYSIS

(in € millions)

31 October 2006 31 October 2007Net Net

Villages – Europe-Africa 19 20Tour operating (Jet tours) 33 39Club Med Gym 43 43

Europe-Africa 95 102

Villages – Americas 3 2Villages – Asia 5 4

Total 103 108

Page 73: Case Study - Club Med

Intangible assets with indefinite useful lives amounted to

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

was acquired in a business combination. Based on the results of

the annual impairment tests performed no impairment losses

have been recognized in relation to these assets.

132

(in € millions and %)

Fiscal 2006 Fiscal 2007

CGU Net(1) Discount Perpetual Net(1) Discount Perpetual rate growth rate growth

rate rate

Villages – Europe-Africa 29 7.50% 1.50% 29 7.00% 2.20%Tour operating (Jet tours) 56 7.50% 1.50% 62 7.00% 2.20%Club Med Gym 43 7.50% 1.50% 43 7.00% 2.20%

(1) Goodwill and intangible assets with indefinite useful lives allocated to the CGU.

Based on the results of the impairment tests performed in fiscal 2006 and 2007, no impairment losses were recognized on good-

will or intangible assets with indefinite useful lives in either of these two years.

Note 6. Intangible assets(in € millions)

Brands Software Lease Other Intangible Totaland licenses premiums intangible assets

assets in progress

Cost at 1 November 2005 28 104 17 11 5 165

Accumulated amortization (3) (74) (4) (5) (86)

Net 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 5 (5) 0

Cost at 31 October 2006 28 112 18 6 4 168

Accumulated amortization (3) (80) (3) (3) (89)

Net at 31 October 2006 25 32 15 3 4 79

Acquisitions 5 4 9Amortization for the period (7) (7)Impairment 1 1Reclassifications and other 5 (4) 1

Cost at 31 October 2007 28 119 18 6 4 175

Accumulated amortization (3) (83) (3) (3) (92)

Net at 31 October 2007 25 36 15 3 4 83

5.3. IMPAIRMENT TESTS

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

correspond to the Villages in each geographical segment, the

tour operating 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 is calculated based on their value

in use. Value in use is determined by the discounted cash flows

method described in Note 2.7 “Impairment of assets”.

The assumptions used for impairment tests on the CGUs to

which material goodwill and non-depreciable intangible assets

have been allocated are as follows:

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 133

Note 7. Property, plant and equipment7.1. ANALYSIS

(in € millions)

Land Buildings Equipment Other Assets under Totaland fixtures construction

Cost at 1 November 2005 310 1,040 154 139 53 1,696Accumulated depreciation (1) (527) (103) (90) (721)

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 adjustments (7) (6) (2) (1) (16)Reclassifications 48 2 6 (56)

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

Accumulated depreciation (1) (377) (94) (79) - (551)

Net at 31 October 2006 223 481 56 51 48 859

Acquisitions 34 20 8 39 101Disposals (30) (12) (2) (1) (45)Depreciation for the period (33) (13) (9) (55)Impairment reversal 6 6Translation adjustments (6) (14) (2) (3) (25)Reclassifications 37 8 1 (46)

Cost at 31 October 2007 188 846 158 132 38 1,362

Accumulated depreciation (1) (347) (91) (82) - (521)

Net at 31 October 2007 187 499 67 50 38 841

FISCAL 2007

The year’s capital expenditure mainly concerned the Villages

of La Pointe au Canonniers (€16 million), Ixtapa Pacific (€11 mil-

lion), La Plagne 2100 (€6 million), Cancún Yucatan (€6 million),

La Caravelle (€5 million), Opio en Provence (€5 million), Villars-

sur-Ollon (€4 million), and Punta Cana (€4 million).

In addition, the Da Balaia Village was sold and leased back at

the end of April.

The improvement in Village indicators led the Group to remea-

sure the value of certain impaired Villages. These remeasure-

ments gave rise to a €6 million impairment reversal recognized

under Operating income – Management of assets.

The decrease in asset value related to translation adjustments

was primarily due to the US dollar and Mexican peso.

FISCAL 2006

Capital expenditure in fiscal 2006 mainly concerned the

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

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

(€10 million), Kanifinolhu (€10 million) and Cervinia (€3 million).

In addition, during the year the Group exercised the purchase

options under the finance leases on the Sandpiper, Ixtapa

Pacific and Cancún Yucatán Villages for a total of €14 million.

Disposals included the outright sale of the Crested Butte,

Flaine, Valbella and Cadaques Villages, and the sale-and-oper-

ating-leaseback of the Chamonix, Les Deux Alpes and Avoriaz

Villages.

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134

7.2. OTHER INFORMATION

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

(in € millions)

31 October 2006 31 October 2007

Cost Depreciation Net Cost Depreciation Netand provisions and provisions

Europe-Africa 679 (332) 347 633 (295) 338Americas 483 (110) 373 480 (110) 370Asia 182 (68) 114 182 (74) 108

Sub-total Villages 1,344 (510) 834 1,295 (479) 816

Tour operating (Jet tours) 5 (3) 2 5 (3) 2Club Med Gym 47 (27) 20 48 (28) 20Club Med World 14 (11) 3 14 (11) 3

Total 1,410 (551) 859 1,362 (521) 841

Assets held under finance leases amounted to €4 million at

31 October 2007 (€16 million at 31 October 2006).

Finance lease obligations at 31 October 2007 stood at €4 mil-

lion (€8 million at 31 October 2006).

At 31 October 2007, property, plant and equipment worth €113

million had been given as collateral for debts of €95 million,

versus €37 million worth of collateral for debts of €36 million

at 31 October 2006.

In 2007, loans were set up secured by mortgages on the assets

of the Club Med 2 cruise ship and the Cancún Yucatán Village,

as well as by a lien on shares in the company that owns the

Pointe aux Canonniers Village. The lien on the Da Balaïa

Village was released when the Village was sold (see Note

17.3.3, “Other long-term facilities”).

Note 8. Non-current financialassets(in € millions)

31 October 31 October 2006 2007

Investments in associates 31 27Available-for-sale financial assets 5 18Other non-current financial assets 44 41

Total 80 86

8.1. INVESTMENTS IN ASSOCIATES

(in € millions)

31 October 2006 Fiscal 2007 Changes in scope of 31 Octoberincome consolidation and other 2007

Sviluppo Turistico per Metaponto (Italy) 7 7Société Immobilière de la Mer (Morocco) 5 (5)SPFT - Carthago 10 1 11Club Med Albion Resorts 4 4Other 5 5

Total 31 1 (5) 27

In October 2007, the Group sold a 7.28% interest in Société

Immobilière de la Mer, decreasing its stake to 17%. The dispos-

al gain was recorded under Operating income – Management

of assets (see Note 21) and the remaining interest was reclas-

sified at fair value under available-for-sale financial assets.

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 135

8.2. AVAILABLE-FOR-SALE FINANCIAL ASSETS

(in € millions)

2006 2007

At 1 November 6 5

Changes in scope of consolidation (1) 3Revaluation of available-for-sale financial assets 10

At 31 October 5 18

At 31 October 2007, shares in Société Immobilière de la Mer

were reclassified under available-for-sale financial assets fol-

lowing the sale of part of the Group’s stake in the company.

The shares were measured at fair value and equity was adjust-

ed in a corresponding amount.

Available-for-sale financial assets consist exclusively of shares

in unlisted companies. Shares in unlisted companies carried

at cost amounted to €5 million at 31 October 2007.

No impairment losses were recorded in relation to available-

for-sale financial assets in fiscal 2007 or fiscal 2006.

8.3. OTHER NON-CURRENT FINANCIAL ASSETS (in € millions)

31 October 31 October2006 2007

Loans 1Deposits 33 31Loans to building organizations 6 8Other 4 2

Total 44 41

Note 9. Assets held for saleThe 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 said classification is considered highly prob-

able. However, this timeframe may be exceeded in some cases due to market constraints.

An impairment loss of €1 million was recorded on these disposal groups in 2007 (€3 million in 2006), 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 Equipment Other Assets under Totaland fixtures construction

Cost at 1 November 2006 53 112 11 5 181

Accumulated depreciation (77) (9) (3) (89)

Net at 1 November 2006 53 35 2 2 92

Acquisitions 1 1Disposals (1) (1)Translation adjustments (3) (2) (5)

Cost at 31 October 2007 50 106 11 5 1 173

Accumulated depreciation (74) (9) (3) (86)

Net at 31 October 2007 50 32 2 2 1 87

Liabilities related to assets held for sale at 1 November 2006 4Liabilities related to assets held for sale at 31 October 2007 -

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

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136

Note 10. Other receivables(in € millions)

31 October 2006 31 October 2007Cost Provisions Net Cost Provisions Net

Uncalled capital from minority shareholders 3 3Tax receivables 29 29 42 42Accrued income 3 3 1 1Prepayments to suppliers 11 11 9 9Receivables on sales of non-current assets 7 7 9 9Current account advances to associates 2 2 1 1Employee advances and prepaid payroll taxes 1 1 1 1Other receivables 14 (3) 11 31 (9) 22Prepaid expenses 44 44 54 54

Total 111 (3) 108 151 (9) 142

Note 12. Share capital and reserves12.1. CHANGES IN EQUITY

SHARE CAPITAL

Following the exercise of 12,700 options to purchase new

shares, the Company’s share capital at 31 October 2007 rep-

resented 19,370,705 shares with a par value of €4 each. At

31 October 2006, the total number of fully-paid shares issued

and outstanding came to 19,358,005.

TREASURY SHARES

During fiscal 2007, 81,500 options to purchase existing shares

were exercised for a total of €2.9 million. Treasury shares allo-

cated to the exercise of these options increased the Company’s

equity by €3 million.

Under the buyback programs approved by the Annual

Shareholders’ Meetings of 14 March 2006 and 8 March 2007,

during fiscal 2007 a total of 333,752 Club Méditerranée SA

shares were purchased at an average price of €47.58 and

327,969 shares were sold at an average price of €48.09. These

transactions were carried out under the liquidity contract.

Based on the exercise of these options and movements in the

liquidity contract during the period, a total of 201,588 shares

were held in treasury at 31 October 2007, versus 277,305 at

31 October 2006.

TRANSLATION RESERVE

The translation reserve amounted to a negative €19 million

at 31 October 2007, including a negative €25 million attribut-

able to shareholders. This compares with a positive amount

of €10 million at 31 October 2006, including €6 million attrib-

All receivables are due within one year.

During fiscal 2007, the Group advanced funds to settle the lia-

bilities of a company whose Village was closed. An €8 million

provision for risk had been set aside in 2006 to cover the site

closure costs relating to this Village. This provision was reclas-

sified as a provision for impairment of receivables in 2007

and was reversed in an amount of €3 million.

Prepaid expenses correspond mainly to services included in

vacation packages that are paid before travel (such as trans-

port and fee-based services), and prepaid rentals.

Note 11. Cash and cash equivalents(in € millions)

31 October 31 October 2006 2007

Marketable securities 9 31Derivative instruments - 1Cash 156 76

Total 165 108

Marketable securities consist of money market instruments

and short-term deposits with an original maturity of less than

three months.

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 137

utable to shareholders. The decrease in the translation reserve

in fiscal 2007 stems primarily from the depreciation of the US

dollar and Mexican peso against the euro. The decline in fis-

cal 2006 was mainly due to changes in the US dollar/euro

exchange rate.

REVALUATION RESERVES RELATING TO FINANCIALINSTRUMENTS(in € millions)

Cash flow Available-for-salehedges financial assets

1 November 2006 0 0

Fair value adjustments 4 10

31 October 2007 4 10

In fiscal 2007, shares in Société Immobilière de la Mer were

reclassified under available-for-sale financial assets (see

Note 8.2).

In fiscal 2006, the impact on equity of fair value adjustments

concerning cash flow hedges and available-for-sale financial

assets was not material.

Information about stock option plans is provided in Note 13.

12.2. MINORITY INTERESTS

(in € millions)

31 October 2006 Fiscal 2007 Dividends Capital Translation 31 Octoberincome increase adjustments 2007

Itaparica (Brazil) 18 1 (1) 2 20Holiday Villages Thailand 4 1 5Belladona Company for H&T (Egypt) 3 1 4Holiday Hotels AG (Switzerland) 7 7Taipe Trancoso (Brazil) 7 (1) 3 9Sté Villages Hôtels des Caraïbes (France) 11 11Covifra (Mauritius) 2 2Other 3 3

Total 55 2 (1) 3 2 61

Note 13. Share-based payments13.1. DESCRIPTION OF STOCK OPTION AND STOCK GRANT PLANS

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 conditions based on market conditions or perform-

ance targets.

All outstanding options have a ten-year life, except for those

granted under Plans J, K and L, which have an eight-year life.

Plan F expired during fiscal 2007 without any of the options

having been exercised.

On 8 March 2007, the Board of Directors used the authoriza-

tion given at the Annual Shareholders’ Meeting that day to

grant members of senior management and certain employ-

ees (i) 125,000 options to purchase new shares at an exercise

price of €43.07; and (ii) 46,600 shares without consideration

(Plan L). 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.

Vesting conditions for the 17,705 shares granted without con-

sideration to members of the Senior Management Committee

and the Executive Committee are based on the share’s per-

formance compared with the SBF 120 stock index.

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138

No options were exercised in fiscal 2006.

The main characteristics of the stock grant plan in progress at 31 October 2007 are as follows:

2007Plan L

Date of Shareholders’ Meeting 08.03.07

Date of Board Meeting 08.03.07

Number of shares granted 46,600

Shares granted to the Senior Management Committee (members as of 31 October 2007) 10,250

Number of senior managers concerned 10

Start date of vesting period 08.03.10 Lock-up until 07.03.12

Stock grants outstanding at 31 October 2007 44,490

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Plan 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 Plan L

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 29.03.02 17.03.03 17.03.03 16.03.05 08.03.07

Date of Boardmeeting 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 14.03.06 08.03.07

Number of options granted 73,500 9,000 21,000 46,000 258,400 21,815 212,530 37,400 127,000 283,000 272,000 300,000 250,000 125,000

Options granted to the Senior Management Committee (members as of 31 October 2007) 10,000 - 1,000 - 37,400 - 9,900 - 6,800 136,000 64,900 89,300 81,400 84,100

Number of executives concerned 1 - 1 - 7 - 4 - 4 4 9 10 10 10

Start date of exercise period 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 08.03.10

24.03.03 24.08.03 17.02.04 23.07.04 Lock-up Lock-up Lock-up Lock-up Lock-up

50%: 50%: 50%: 50%: until until until until until24.03.04 24.08.04 17.02.05 23.07.05 28.02.07 14.01.08 10.01.09 13.03.10 07.03.11

Expiry of exercise period 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 07.03.15

Exercise price (in €) 70.81 79.12 81.13 92.79 111.11 136.13 92.78 63.99 44.74 35 31.03 35 42.67 43.07

Options outstanding at 31 October 2007 13,500 3,000 7,000 2,000 86,042 5,700 82,615 11,400 72,700 154,000 188,450 240,950 213,800 116,050

Number of options exercised in 2007 5,000 81,500 7,700

Remaining life 0.4 0.8 1.3 1.8 2.3 2.8 3.3 3.8 4.3 5.3 6.3 5.3 6.5 7.4

The main characteristics of the plans in progress at 31 October 2007 are as follows:

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 139

13.2. OUTSTANDING OPTIONS

Fiscal 2006 Fiscal 2007

Number Average Number Average exercise exercise

price (in €) price (in €)

Options outstanding at 1 November 1,292,475 50.89 1,437,420 49.64

Options granted during the period 250,000 42.67 125,000 43.07Options exercised during the period - - (94,200) 35.19Options canceled during the period (105,055) 48.48 (271,013) 57.92

Options outstanding at 31 October 1,437,420 49.64 1,197,207 48.22Options exercisable at 31 October 695,020 63.84 626,404 56.14

13.3. RECOGNIZED COST

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.

Five plans were set up between 2003 and 2007 and were meas-

ured and recognized in “Employee benefits expense”.

FAIR VALUE OF OPTIONS GRANTED

Fair 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 2006 and 2007 plans were

as follows:

Plan K Plan L

Club Méditerranée SA share price at grant date (in €) 45.00 41.77Exercise price (in €) 42.70 43.07Expected volatility (in %) 23.5 22.7Estimated life of the options (in years) 5 5Risk-free interest rate (%) 3.80 3.97

Fair value per option 14.03 11.36

Expected volatility is determined on the basis of the share’s

historic volatility and the risk-free interest rate corresponds

to the yield to maturity on government bonds (OATs) over a

period equivalent to the life of the options.

The shares granted without consideration in Plan L were val-

ued on the basis of the share price at the date of grant. Vesting

conditions related to share performance were taken into

account in determining fair value.

The cost recognized in respect of share-based payment plans

in fiscal 2007 amounted to €2 million, unchanged from fiscal

2006.

Note 14. Pensions and otherlong-term benefits14.1. 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 that is responsible for paying the ben-

efits. 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 pension plans in

North America. Corporate officers are covered by defined

contribution supplementary pension plans.

Contributions to all of these plans are recognized as an

expense for the period in which they are due.

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

are covered by provisions recorded in the balance sheet.

The main defined benefit plans concern indemnities payable

to employees on retirement (France, Greece and Turkey) or

when they leave the Group (Italy and Japan).

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140

2006 2007Japan Europe Japan Europe

Discount rate 2% 3.70% 2.0% 5.04%Long-term salary increases 1.5% 3.60% 1.5% 3.60%

14.2. DEFINED BENEFIT PLANS

14.2.1. MAIN ACTUARIAL ASSUMPTIONS

The Group’s obligations under defined benefit plans are

measured 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 “Pensions and other long-term benefits”.

The assumptions used by the Group for the main plans are

as follows:

14.2.2. FUNDED STATUS OF DEFINED BENEFIT PLANS

(in € millions)

31 October 31 October2006 2007

Present value of the unfunded obligation 21 19Unrecognized actuarial gains and losses 7 8

Net liability recognized in the balance sheet 28 27

Actuarial (gains)/losses related to experience adjustments (1)Actuarial (gains)/losses related to changes in assumptions (1)

14.2.3. CHANGE IN DEFINED BENEFIT OBLIGATIONS

(in € millions)

2006 2007

Defined benefit obligation at 1 November 26 21Service cost 2 1Interest cost (discounting adjustment) 1 1Actuarial (gains) and losses for the period (7) (2)Curtailments/settlements (2)Paid benefits (1)

Defined benefit obligation at 31 October 21 19

14.2.4. ANALYSIS OF DEFINED BENEFIT PLAN COSTS

(in € millions)

Fiscal 2006 Fiscal 2006

Service cost (2) (1)Actuarial gains and losses recognized in the period 1Curtailments/settlements 2

Cost recognized in employee benefits expense (2) 2

Interest cost (1) (1)

Cost recognized in finance cost, net (1) (1)

Total recognized (expense)/income (3) 1

14.3. DEFINED CONTRIBUTION PLANS

Contributions under defined contribution plans amounted

to €15 million in fiscal 2007, unchanged from fiscal 2006.

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 141

Note 15. Provisions(en millions d’euros)

31 October 2006 Increases Utilizations Reversals Reclassi- 31 October (surplus fications 2007

provisions)

Provisions for liability claims and damages 6 2 (1) (1) 6Restructuring provisions 16 (4) (2) (9) 1Provisions for litigation 13 7 (3) (5) 2 14Tax provisions 2 (1) (1) 1 1Other provisions 4 1 (1) (1) (1) 2

Total 41 10 (10) (10) (7) 24

- o/w current 41 10 (10) (10) (7) 24

In fiscal 2006, restructuring provisions included €10 million in

provisions for site closure costs. In fiscal 2007, an €8 million

provision set aside for site closure costs was reclassified as a

provision for impairment of receivables (see Note 10).

Provisions for litigation cover commercial claims, employee

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”.

The nature of the Group’s business and the fact that its oper-

ations are conducted in a large number of countries with dif-

fering and sometimes contradictory regulations is a source

of operating difficulties and can lead to disputes with suppli-

ers, owners, employees or local authorities.

Note 16. Income taxes16.1. INCOME TAX ANALYSIS

Current and deferred taxes can be analyzed as follows:

(in € millions)

Fiscal 2006 Fiscal 2007

Current taxes (6) (14)Deferred taxes on temporary differences (3) 8Effect of changes in tax rates 3 3Reassessment of deferred tax assets 5 6Deferred taxes 5 17

Total (1) 3

Current taxes in fiscal 2007 included €8 million in tax payable

on the disposal of the Da Balaïa Village. Deferred taxes on

temporary differences included a €7 million benefit reflecting

the reversal of a deferred tax liability previously recognized

in relation to this same Village.

Based on forecasts of future profits, deferred tax assets were

recognized in relation to the North American tax group and

certain Asian companies.

In fiscal 2007, corporate income tax rates were reduced in

Greece and Mexico.

Club Méditerranée SA has set up a tax group comprising twen-

ty French subsidiaries. The North American tax group, head-

ed by Club Med Sales, comprises ten companies.

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142

EFFECTIVE TAX RATE

The following reconciliation is based on the current French income tax rate of 34.43% for fiscal 2007, unchanged from fiscal

2006.

Tax (in € millions) Tax rate

Fiscal Fiscal Fiscal Fiscal 2006 2007 2006 2007

Income before tax 3 (12)

Standard tax rate in France 34.43% 34.43%Tax at standard rate (1) 4

Effect of different foreign tax rates 5 9Effect of changes in tax rates 3 3Unrecognized deferred tax assets on tax losses for the year (55) (32)Deferred tax assets recognized on tax losses generated in prior years 5 6Tax loss carryforwards utilized during the year 37 13Permanent differences and other 5 0

Total 0 (1)

Effective tax rate (1) 3 33.30% 25.00%

16.2. DEFERRED TAX ASSETS AND LIABILITIES

(in € millions)

31 October 31 October 2006 2007

Deferred tax assets 35 30Deferred tax liabilities (86) (64)

Net deferred tax liability (51) (34)

Deferred taxes recognized directly in equity are not material.

Deferred tax assets break down as follows by balance sheet

item:

(in € millions)

31 October 31 October 2006 2007

Property, plant and equipment 3 3Tax loss carryforwards 53 50

Total assets 56 53

Intangible assets (8) (8)Property, plant and equipment (96) (77)Borrowings and other interest-bearing liabilities (3) (2)

Total liabilities (107) (87)

Net deferred tax liability (51) (34)

Deferred tax assets recognized on tax loss carryforwards con-

cern the tax losses of tax groups in France and the United

States and certain companies in Asia. Their recoverability was

assessed based on the entities’ earnings forecasts.

16.3. TAX LOSS CARRYFORWARDS BY EXPIRY DATE

Tax loss carryforwards at 31 October 2007 can be analyzed as

follows by expiry date:

(in € millions)

31 October 2007

2008 252009 to 2013 146Beyond 99Evergreen tax losses 303

Total tax loss carryforwards 573

Deferred tax assets corresponding to these loss carryforwards

break down as follows by geographical region:

(in € millions)

31 October 2007

Recognized Unrecognized Total

French tax group 28 45 73Other – Europe-Africa 68 68

Total – Europe-Africa 28 113 141

US tax group 15 5 20Other – Americas 2 21 23

Total – Americas 17 26 43

Asia 5 1 6

Total deferred tax assets on tax loss carryforwards 50 140 190

At 31 October 2006, deferred tax assets on tax loss carryfor-

wards totaled €170 million, of which €117 million were unrec-

ognized.

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 143

Note 17. Borrowings and other interest-bearing liabilities17.1. NET DEBT

(in € millions)

Balance sheet items 31 October 2006 31 October 2007

Cash and cash equivalents 165 108

Long-term borrowings and other interest-bearing liabilities 346 408 Short-term borrowings and other interest-bearing liabilities 109 36Liabilities related to assets held for sale 4 0

Total borrowings and other interest-bearing liabilities 459 444

Net debt 294 336

17.2. BORROWINGS AND OTHER INTEREST-BEARING LIABILITIES BY CATEGORY

(in € millions)

31 October 2006 31 October 2007

OCEANE convertible bonds 269 279Long-term bank borrowings 57 115Drawdowns on credit lines 16 10Finance lease obligations 4 4

Total long-term borrowings and other interest-bearing liabilities 346 408

OCEANE convertible bonds 10 10Current portion of long-term bank borrowings 10 8Drawdowns on credit lines 80Short-term bank loans and overdrafts 9 14Fair value of derivative instruments 4

Total short-term borrowings and other interest-bearing liabilities 109 36

Finance lease obligations 4

Liabilities related to assets held for sale 4

Total 459 444

17.3. CHARACTERISTICS OF DEBT

31 October 2007 Nominal Effective Dueinterest rate interest rate

OCEANEs due 2008 fixed rate 144 5.25% 8.40% Nov. 2008OCEANEs due 2010 fixed rate 145 4.38% 7.39% Oct. 2010

Total bonds 289

Drawdowns on €120 million syndicated credit line 10 Euribor + (a) 5.61% June 2010Mortgage loan securedby Club Med 2 assets 28 Euribor + (b) 5.44% April 2018Mortgage loan securedby the Cancún Yucatán Village’s assets 49 6.58% 6.90% May 2017La Pointe aux Cannoniers loan 18 6.15% 6.24% Jan. 2018Other 50

Total borrowings and other interest-bearingliabilities 444

Margins (a) and (b) depend on the Group’s net debt/Ebitda ratio. The ranges are as follows:(a) 1.2% to 0.8%.(b) 1.75% to 1.35%.

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144

17.3.1. OCEANE CONVERTIBLE BONDS

The 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 3,092,783Start date for interest accruals 30.04.02 03.11.04Maturity 01.11.08 01.11.10Nominal interest rate 3.00% 4.375%Conversion ratio at maturity 1 for 1 1 for 1Yield to maturity 5.25% 4.375%Effective interest rate 8.40% 7.39%

Any unconverted OCEANEs due 2008 will be redeemed at maturity at a premium to their face value, increasing the yield to

maturity to 5.25%. Bondholders had the option of redeeming 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)

OCEANEs due 2008 OCEANEs due 2010

Nominal amount of the issue 140 150Issuance costs (3) (3)Equity component (21) (18)

Initial amount recognized as a liability 116 129

Recognized interest 38 9Interest paid (10)

Liability at 1 November 2005 under IFRS 144 138

Interest recognized in fiscal 2006 10 10Interest paid in fiscal 2006 (4) (7)Bonds redeemed early in April 2006 (13)

Liability at 31 October 2006 137 141

Interest recognized in fiscal 2007 11 10Interest paid in fiscal 2007 (4) (7)

Liability at 31 October 2007 144 144

Of which accrued interest 4 7

17.3.2. SYNDICATED LINE OF CREDIT

During fiscal 2007, Club Méditerranée actively implemented

its refinancing strategy, which is designed to strengthen the

Group’s balance sheet and extend the maturity of debt.

A confirmed, €120-million medium-term line of credit due

in 2010 was arranged with a pool of nine banks on 31 May

2007. A previous €70 million line of credit obtained on

25 October 2004 was reimbursed.

At 31 October 2007, €10 million had been drawn down from

the new line.

17.3.3. OTHER LONG-TERM FACILITIES

In April 2007, the loan secured by a mortgage on the

Club Med 2 cruise ship was renegotiated. This resulted in

€13.5 million in additional financing, which raised the loan to

a total of €30 million, and extended the repayment period

until April 2018.

At the end of May, a €50 million loan facility was arranged.

Due in 2017, this facility is secured by the assets of the

Cancún Yucatán Village.

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 145

Work on La Pointe aux Canonniers Village was financed by

a dedicated €26 million loan taken out in June 2007. This

loan is secured by a lien on the shares of the company that

owns the Village.

Also during the year, the Group paid back the loan taken out

to finance the Da Balaïa Village, which was secured by liens

and mortgages on the Village’s assets, following the sale and

leaseback of the Village.

17.3.4. OTHER INFORMATION

Debt secured by collateral amounted to €95 million at

31 October 2007 (€36 million at 31 October 2006).

At 31 October 2007, Club Méditerranée had three loans

secured by mortgages on the assets of the Cancún Yucatán

Village and the Club Med 2 cruise ship, and by a lien

on the shares of the company that owns La Pointe aux

Canonniers Village.

At 31 October 2006, financing for the Da Balaïa Village and the

Club Med 2 cruise ship was secured by liens and mortgages

on the underlying assets.

Note 18. Financial instruments18.1. 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 liquidity risks.

The Group may use derivative financial instruments to hedge

currency risks arising in the course of its business and inter-

est rate risks on floating rate debt. In practice, these instru-

ments are used primarily to hedge currency risks on future

transactions. The Treasury and Financing unit identifies,

assesses, manages and hedges financial risks on a central-

ized basis in accordance with the policies approved by the

Audit Committee. Specific rules have been drawn up and

approved prohibiting the use of derivative instruments for

trading purposes.

18.1.1. 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.

Its exposure concerns three types of currency risk:

- Transaction currency risk arising from commercial activities

(in outbound zones) and operating activities.

- Currency risks on financing denominated in a currency other

than the borrower’s functional currency.

- Currency risks on net investments in foreign operations whose

impacts are recorded as a change in consolidated equity.

Transaction currency risk

The Group’s policy consists of protecting itself against the

effects of exchange rate changes on reported net income

compared with forecasts.

Based on forecasts, the Group hedges exposures for the

coming fiscal year in the principal billing currencies (mainly

pounds sterling, yen, Canadian and Australian dollars and

Korean won) as well as in US dollars, which is both a billing

and an operating currency.

Currency risks relating to the Group’s other functional cur-

rencies (mainly the Moroccan dirham, Turkish lira, Tunisian

dinar, Indonesian rupiah and Thai baht) are not systematical-

ly hedged.

Currency risks are hedged using derivative instruments, main-

ly currency swaps and options, forward contracts and non-

delivery forward contracts.

The notional amount of hedges is limited to the future cash

flows forecast in the budget. No derivative instruments are

acquired for trading purposes.

Balance sheet risk

The Group’s exposure to currency risks on external debt is lim-

ited and intra-group financing is generally denominated in the

subsidiary’s functional currency. Unrealized currency gains and

losses on hedges of net investments 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.

EQUITY RISK

The Group does not hold any listed equities, apart from treas-

ury shares, which are 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. As this type of risk is

not hedged, the carrying amount of financial assets and lia-

bilities is not adjusted for changes in interest rates. Fair value

risk therefore corresponds to opportunity cost in the event

of a fall in interest rates.

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146

Foreign exchange derivatives are forward contracts designat-

ed as cash flow hedges. The effective portion of these hedges

was deducted from equity in an amount of €4 million in fiscal

2007 (see Note 12.1). The ineffective portion, recorded under

“Finance costs, net”, was not material.

18.3. MATURITIES OF FINANCIAL LIABILITIES

AND DEBT COVENANTS

18.3.1. ANALYSIS OF FINANCIAL LIABILITIES BY MATURITY

(in € millions)

31 October 2006 31 October 2007

Due within one year(including short-termbank loans and overdrafts) 113 36

Due beyond one year2007-2008 202008-2009 158 1522009-2010 5 172010-2011 145 1452011-2012 6Beyond 18 88

Total duebeyond one year 346 408

The discounted present value of finance lease obligations,

including those related to assets held for sale, was as follows

at 31 October 2006 and 2007:

(in € millions)

31 October 2006 31 October 2007

Due within one year 4 0

Due beyond five years 4 4

Total due beyond one year 4 4

Total 8 4

18.3.2. CONFIRMED LINES OF CREDIT

Club Méditerranée has a €120 million line of credit obtained

on 31 May 2007 and expiring in June 2010. At 31 October

2007, the line was drawn down in the amount of €10 million.

The line is subject to various covenants (see Note 18.3.3

“Debt covenants”).

- 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 material interest-bearing assets.

18.1.2. CREDIT AND COUNTERPARTY RISK

Most customers pay for their vacations in advance and the

Group’s exposure to credit risk on commercial transactions is

therefore limited.

Derivative instruments and borrowings are set up with a wide

range of leading counterparties.

Cash surpluses are invested in certificates of deposit or

money-market funds from leading banks with a minimum

A2/A/A rating issued by Moody’s or Fitch.

18.1.3. LIQUIDITY RISK

Liquidity risk is managed by using diversified sources of

financing.

Some of the Group’s debt facilities include early redemption

clauses that are triggered if debt covenants are breached or

assets are sold.

18.2. FAIR VALUE

The following table shows the carrying amounts and fair val-

ues of financial instruments at 31 October 2007:

(in € millions)

Carrying Fairamount value

Foreign exchange derivatives 1 1Cash and cash equivalents 107 107

Financial assets 108 108

Bonds 289 312Other fixed rate long-term borrowings and interest-bearing liabilities 78 82Other floating rate long-term borrowings and interest-bearing liabilities 59 59Short-term bank loans and overdrafts 14 14Foreign exchange derivatives 4 4

Financial liabilities 444 471

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.

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 147

18.3.3. DEBT COVENANTS

The Group’s 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. If any of the ratios defined in the covenants

are breached, the outstanding debt may become immediate-

ly repayable.

Ratios applicable to the €120 million syndicated line of cred-

it and the secured loan used to finance the Club Med 2 cruise

ship are as follows:

- Off-balance sheet commitments: less than €200 million

- Gearing (net debt/equity): less than 1

- Leverage (net debt/EBITDA (as defined above)): less than

the following:

30 April 31 October

2007 4.02008 3.75 3.52009 and beyond 3.0 3.0

- Fixed charge cover (EBITDAR/(rents + net interest)):

greater than the following:

30 April 31 October

2007 1.252008 1.25 1.352009 and beyond 1.45 1.45

The covenants were complied with at 31 October 2007:

- Off-balance sheet commitments:

less than €200 million €118 million

- Gearing: less than 1 0.69

- Leverage (net debt/EBITDA as defined

above)): less than 4 3.50

- Fixed charge cover: greater than 1.25 1.42

18.4. MANAGEMENT OF INTEREST RATE RISK

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

In fiscal 2007, no interest rate hedges were set up as average

floating rate net debt only represented 16% of total debt.

At 31 October 2007, the Group’s exposure to interest rate

risk by maturity was as follows:

(in € millions)

Total Less One Morethan to thanone five fiveyear years years

Cashand cashequivalents (108) (108)Floatingrate debt* 72 20 30 22

Net floating rate debt (36) (88) 30 22

Fixed rate debt 368 12 290 66Derivative instruments 4 4

Net debt 336 (72) 320 88

* Including short-term bank loans and overdrafts.

A 1-point increase in short-term interest rates applied to the

Group’s average gross floating rate debt would lead to a

€0.8 million increase in interest expense.

18.5. CURRENCY RISK MANAGEMENT

18.5.1. BALANCE SHEET RISK

The Group’s exposure to currency risks on external debt is lim-

ited and intra-group financing is generally denominated in the

subsidiary’s functional currency. The impacts of changes in

exchange rates on hedges of net investments in foreign oper-

ations are recognized directly in equity (see Note 12.1).

ANALYSIS OF FINANCIAL LIABILITIES BY CURRENCY

(in € millions)

31 October 2006 31 October 2007

Euros 389 411US dollars 41 1Swiss francs 12 11Brazilian reals 17 17Derivative instruments 4

Total 459 444

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 (see Note 12.1).

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148

Note 19. Other liabilities(in € millions)

31 October 2006 31 October 2007

Government grants 28 37Accrued rentals 8 6

Total other non-current liabilities 36 43

Accrued expenses 13 9Accrued personnel costs 47 50Accrued taxes 20 35Payables due to suppliers of non-current assets 20 13Deferred income 67 71Other 10 8

Total other current liabilities 177 186

At 31 October 2007, accrued taxes included €8 million in current

taxes payable on the sale of the Da Balaïa Village.

Note 20. Employee benefitsexpense and number of employees(in € millions)

Fiscal 2006 Fiscal 2007

Wages and salaries (251) (247)Payroll taxes (49) (61)Pension contributions (15) (15)Share-based payment expense (2) (2)Other (12) (7)

Total employee benefits expense - Operating income - Leisure (329) (332)

Total employee benefits expense - Operating income - Management of assets (3) (8)

Total employee benefits expense -Operating income (332) (340)

18.5.2. EXPOSURE TO CURRENCY RISK ON OPERATING ACTIVITIES (TRANSACTION CURRENCY RISK)

Net exposure to currency risks on operating transactions (transaction currency risk) is presented in the following table.

EXPOSURE TO TRANSACTION CURRENCY RISK AT 31 OCTOBER 2007

(in millions of foreign currency units)

USD GBP AUD JPY CAD MXN MAD TND TRY KRW

Net exposure to currency risk on operating activities (1) (80) 15 10 1,700 29 (405) (350) (50) (18) 8,600

Cash flow hedges (derivative notional amount) 76 (3) (500) (25) 340

Net exposure of 2008 cash flows after hedging at 31 October 2007 (3) 15 8 1,200 4 (65) (350) (50) (18) 8,600

Net exposure after conversion into euros (in € millions) (2) 22 5 7 3 (4) (31) (28) (11) 7

(1) Amounts in parentheses correspond to net purchases of foreign currencies; amounts not in parentheses correspond to net sales of foreign currencies.USD: US dollar; GBP: British pound; AUD: Australian dollar; JPY: Japanese yen; CAD: Canadian dollar; MXN: Mexican peso; MAD: Moroccandirham; TND: Tunisian dinar; TRY: new Turkish lira; KRW: Korean won.

Net exposures correspond to the exposure of estimated operating cash flows for the following year. Hedges are set up

gradually over the year.

All hedging instruments outstanding at the year-end expire within eighteen months.

Derivative instruments designated as cash flow hedges are as follows:

(in € millions)

Fair value Notional amount Expiry dateLess than From 1

Assets Liabilities 1 year to 5 years

Forward currency contracts 1 4 98 98Options NM NM 6 2 4

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 149

NUMBER OF EMPLOYEES

Full-time Full-time O/w temporary O/w temporaryequivalents equivalents contracts* contracts*Fiscal 2006 Fiscal 2007 Fiscal 2006 Fiscal 2007

Villages 13,886 14,594 7,433 7,580Tour operating 339 335 49 29Club Med Gym 485 407 47 40Club Med World 135 129 24 25

Total number of employees 14,845 15,465 7,553 7,674

* Seasonal employees and employees under fixed-term contracts

At 31 October 2007, employees of Club Méditerranée SA had accumulated 93,850 hours in statutory employee training rights (DIF)

in France.

Note 21. Operating income -management of assets(in € millions)

Fiscal 2006 Fiscal 2007

Gains on disposals of Villages 49 10Gains and losses on Village and site closures 4 (4)Village opening costs (6) (7)Impairment losses (4) 6Gains on disposals of shares 1 5Other costs (4) (8)

Operating income - Management of assets 40 2

FISCAL 2007

The disposal of the Da Balaïa Village at the end of April 2007

and the sale of land in Mexico and Greece generated a gain of

€10 million.

Gains on disposals of shares stemmed primarily from the sale

of part of the Group’s stake in Société Immobilière de la Mer

(see Note 8.1). The sale agreement included an earn-out clause

that could increase the price by 50% of any net-of-tax difference

between the initial sale price and the share price set at the time

of SIM’s IPO, which is expected to take place by 31 October 2008.

FISCAL 2006

Disposals mainly included the outright sale of the Crested Butte,

Flaine, Valbella and Cadaques Villages, as well as the sale-and-

operating-leaseback of the Chamonix, Les Deux Alpes and

Avoriaz Villages. Details of the sale proceeds are provided in

Note 26.3.

Note 22. Other operating incomeand expense(in € millions)

Fiscal 2006 Fiscal 2007

Restructuring costs (14) (7)Tsunami and hurricane costs (1) (1)Costs of claims and litigation (5) (3)Credit card costs (9) (9)Other (1)

Other operating income and expense (29) (21)

Note 23. Finance cost, net(in € millions)

Fiscal 2006 Fiscal 2007

Interest income 2 3Interest on OCEANE convertible bonds (21) (21)Other interest expense (15) (13)

Interest expense, net (34) (31)

Exchange gains and losses, net 5 6Other (3) (1)

Finance cost, net (32) (26)

Note 24. Share of incomeof associates(in € millions)

Fiscal 2006 Fiscal 2007

Share of income of associates 3 1

Details of the contribution of associates to consolidated

income are provided in Note 8 “Non-current financial assets”.

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150

Note 25. Earnings per share25.1. BASIC EARNINGS PER SHARE

(in thousands of shares)

Fiscal 2006 Fiscal 2007

Number of shares at 1 November 19,358 19,358Number of treasury shares at 1 November (257) (277)Weighted average number oftreasury shares purchased/soldduring the period (23) 30Weighted average number of shares issued during the period - 4

Weighted average number of shares at 31 October 19,078 19,115

25.2. DILUTED EARNINGS PER SHARE

(in thousands of shares)

Fiscal 2006 Fiscal 2007

Weighted average numberof shares 19,078 19,115Dilutive potential ordinaryshares (stock options) 111 -

Diluted weighted averagenumber of shares 19,189 19,115

In fiscal 2007, 1,241,697 potential ordinary shares (stock options

and stock grants) were excluded from the calculation because

they were anti-dilutive (687,020 shares in fiscal 2006).

For the same reason, in both fiscal 2007 and 2006 the 5,287,000

potential ordinary shares corresponding to the conversion of

OCEANE bonds were also excluded.

(in €)

Fiscal 2006 Fiscal 2007

Basic earnings per share 0.24 (0.55)Diluted earnings per share 0.24 (0.55)

No events occurred after the balance sheet date that would

have a material impact on the calculation of diluted earnings

per share.

Note 26. Notes to the consolidated cash flow statement26.1. DEPRECIATION, AMORTIZATION AND PROVISIONS

(in € millions)

Fiscal 2006 Fiscal 2007

Amortization and impairment:intangible assets 7 7Depreciation and impairment:property, plant and equipment 60 50Other provisions 3 (1)

Depreciation, amortization and provisions 70 56

26.2. ACQUISITIONS OF NON-CURRENT ASSETS

(in € millions)

Fiscal 2006 Fiscal 2007

Acquisitions of intangible assets (8) (9)Acquisitions of property, plant and equipment (138) (102)Government grants andacquired cash 7 11Acquisitions of non-currentfinancial assets (12) (4)

Total acquisitions of non-current assets (151) (104)

26.3. PROCEEDS FROM DISPOSALS OF NON-CURRENTASSETS

FISCAL 2007

Proceeds from disposals of property, plant and equipment

amounted to €50 million, mainly reflecting the sales of the

Da Balaïa Village (€39 million) and land in Greece and Mexico

(€10 million).

Proceeds from disposals of non-current financial assets totaled

€17 million and primarily corresponded to (i) €10 million in

repayments of loans and deposits; and (ii) the sale of shares

accounted for by the equity method (including €5 million relat-

ing to the sale of Société Immobilière de la Mer).

FISCAL 2006

Proceeds from disposals of property, plant and equipment,

in the amount of €110 million, mainly corresponded 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-

sponded 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).

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 151

Note 27. Related party transactions27.1. TRANSACTIONS BETWEEN CLUB MÉDITERRANÉE SAAND ITS SUBSIDIARIES

The Group’s parent company, Club Méditerranée SA, performs

a general management role for its subsidiaries (which corre-

spond to related parties), and handles traditional support func-

tions such as administration and finance, legal affairs, commu-

nication, marketing, human resources, training, IT and sales.

Financing is raised by the parent company, with justified excep-

tions, and cash surpluses are centralized in cooperation with

the regional holding companies and subsidiaries.

The Group’s main subsidiaries are listed in Note 29.

Transactions between the parent company and its subsidiaries

are eliminated in the consolidated financial statements.

27.2. TRANSACTIONS WITH CLUB MÉDITERRANÉE’SMAIN SHAREHOLDERS AND COMPANIES THAT SHARESENIOR MANAGERS

The Group has signed lease contracts for certain Villages with

companies belonging to groups that could be considered

related parties as defined by IAS 24. These include Rolaco,

Caisse de Dépôt et de Gestion (Société Immobilière de la Mer)

and Carthago.

Rent relating to these contracts recognized as an expense in

the consolidated financial statements totaled €21 million in

fiscal 2007 and €20 million in fiscal 2006. The related future

minimum lease commitments amounted to €451 million at

31 October 2007.

27.3. TRANSACTIONS WITH ASSOCIATES

(in € millions)

31 October 2006 31 October 2007

Other receivables 2 3Other payables 4 1

Rental payments to associates for the operation of certain

Villages totaled €23 million in fiscal 2007 and €22 million in fis-

cal 2006. The future minimum lease commitments under the

related contracts amounted to €521 million at 31 October 2007.

27.4. SENIOR MANAGEMENT COMPENSATION

Disclosures of senior management compensation relate to the

members of the Senior Management Committee and the

Board of Directors.

SHORT-TERM BENEFITS

Gross compensation and related benefits paid (including

attendance fees paid to members of the Board of Directors)

came to €4.2 million in fiscal 2006 and €4.4 million in fiscal 2007.

POST-EMPLOYMENT BENEFITS

Members of senior management are covered by a defined con-

tribution pension plan managed by an external fund, with con-

tributions representing between 6.29% and 8% of their gross

compensation. Total contributions to this plan paid on behalf

of members of the Senior Management Committee amount-

ed to €0.3 million in fiscal 2007, unchanged from fiscal 2006.

SHARE-BASED PAYMENTS

During fiscal 2007, a stock option plan was set up for mem-

bers of senior management and certain employees of Club

Méditerranée, with an exercise price of €43.07. A total of

84,100 options were granted to members of senior manage-

ment under this plan. A stock grant plan conditional on the

achievement of performance targets was also set up during

the year. A total of 10,250 shares were granted to members of

senior management under this plan. The total fair value of

these options and stock grants, determined in accordance

with IFRS 2, was €0.9 million at 31 October 2007.

During fiscal 2006, a stock option plan was set up 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 senior manage-

ment under this plan (based on the composition of the Senior

Management Committee at 31 October 2006). The total fair

value of these options, determined in accordance with IFRS 2,

was €1.4 million at 31 October 2006.

The cost recognized in fiscal 2007 for the stock options and

stock grants awarded to members of senior management, as

determined in accordance with IFRS 2, was €0.8 million,

unchanged from fiscal 2006.

Members of senior management exercised 76,000 stock

options during fiscal 2007.

Corporate officers are required to hold a percentage of the

options and shares granted without consideration in 2007 in

registered form until they leave their post. This percentage

corresponds to 30% of the capital gain generated when the

options are exercised or the shares granted without consider-

ation are sold.

TERMINATION BENEFITS

Termination benefits paid to members of senior management

totaled €0.9 million in fiscal 2007.

Pension benefit obligations relating to members of senior man-

agement amounted to €0.4 million in both fiscal 2007 and 2006.

COMMITMENTS AND GUARANTEES

Executive directors are contractually entitled to a lump-sum

payment if their employment contract is terminated, except

in the event of gross or willful misconduct. This payment cor-

responds to two years of gross compensation, including vari-

able bonuses, or three years of gross compensation, including

variable bonuses, if the contract is terminated within six months

of the parent company being taken over by a third party.

No loans or guarantees have been granted to or on behalf of

executive directors.

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152

Note 28. Commitments and contingencies28.1. OFF BALANCE SHEET COMMITMENTS AT 31 OCTOBER

(in € millions)

31 October 2006 31 October 2007

Total Less than One to More than Totalone year five years 5 years

Commitments givenGuarantees given (1)

Europe-Africa 65 40 7 27 74Americas 20 6 20 8 34Asia 6 2 7 9

Total commitments given 91 48 34 35 117Commitments received (2) 13 3 2 5 10

Reciprocal commitmentsUnused lines of credit 15 118 118Rent guarantees 7 6 6

Total reciprocal commitments 22 124 124

(1) Guarantees given in connection with travel and transport agent licenses (€25 million), rent bonds (€17 million), sellers’ warranties relatingto asset disposals (€36 million), guarantees for credit card processors (€16 million) and performance bonds (€14 million).

(2) Commitments received by the Group relating to travel agencies amounted to €7.4 million. Guarantees received from contractors involvedin Village renovation projects under private contracts amounted to €1.4 million.

Loans have been secured by mortgages and liens on the Club Med 2 cruise ship, and the assets of the Cancún Yucatán and

La Pointe aux Canonniers Villages (see Notes 7.2 and 17.3).

28.2. 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. The amounts

have been translated at the exchange rate prevailing at the balance sheet date. These rates are not discounted and are indexed

to the last known rate.

(in € millions)

Total 2008 2009 2010 2011 2012 2013 2018 2028minimum future to to andlease payments 2017 2027 beyond

Europe-Africa 1,474 109 109 107 109 107 514 358 61Americas 52 4 4 4 3 3 16 17 1Asia 123 11 10 10 9 10 48 25

Sub-total Villages 1,649 124 123 121 121 120 578 400 62

Tour operating 7 2 2 2 1Club Med World 3 1 1 1Club Med Gym 29 5 5 4 4 4 6 1

Total minimum futurelease payments 1,688 132 131 128 126 124 584 401 62

Rental expense recognized in the statement of income for operating leases amounted to €148 million in fiscal 2007 (fiscal 2006:

€142 million).

Page 94: Case Study - Club Med

CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 153

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 •Club Med Villas et Chalets Holding 100.00% 100.00% FullClub Med Villas et Chalets 100.00% 100.00% FullClub Med Villas et Chalets Services 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% EquityAlbion Development ltd 25.00% 25.00% Equity

Note 29. Scope of consolidation at 31 October 2007

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154

GROUP Member of the tax

group

% voting rights % interest Method

IsraelClub Méditerranée Israel 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

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 100.00% 100.00% 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% 37.43% Equity

TurkeyAkdeniz Turistik Tesisler A.S. 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 •Club Med Ferias 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 •

French West IndiesSociété 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

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 155

GROUP Member of the tax

group

% voting rights % interest Method

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 •

MexicoCancún 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 (formerly 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

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156

GROUP Member of the tax

group

% voting rights % interest Method

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 Thaïland Ltd 49.21% 49.21% FullVacances Siam Club Med Ltd 100.00% 100.00% Full

Polynesia and New CaledoniaSociété Polynésienne des Villages de Vacances 99.94% 99.94% Full

TOUR OPERATING

France Jet 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% EquityLe Quotidien Voyages 100.00% 100.00% Full •

TunisiaJet Eldo Tunisie 100.00% 99.85% Full

MoroccoFST 100.00% 100.00% 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.

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CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 157

II. JUSTIFICATION OF OUR ASSESSMENTS

In 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 recoverabil-

ity 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 meth-

ods, 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 PROCEDURES

We 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.

YEAR ENDED 31 OCTOBER 2007

In accordance with the terms of our appointment by the

Annual Shareholders’ Meeting, we have examined the accom-

panying consolidated financial statements of Club Méditerranée

for the year ended 31 October 2007.

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.

I. OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS

We 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 view 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),

International Accounting Standards (IASs) and related inter-

pretations adopted by the European Union.

AUDITORS’ REPORT ON THE CONSOLIDATEDFINANCIAL STATEMENTS

Neuilly-sur-Seine and Paris-La Défense, 12 February 2008

The Statutory Auditors

Deloitte & Associés Ernst & Young Audit

Dominique Jumaucourt Pascal Macioce

Page 99: Case Study - Club Med

GROUP STRUCTURE AT 31 OCTOBER 2007

158

Marketing Service Real estate Service and Othercompanies companies companies real estate

companies

EUROPE-AFRICA

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 Villas et

CM Marine ChaletsSGHT CM villas et

SVV Chalets ServicesCM Villas et

Chalets HoldingBelgium 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 Israel

Italy CentrovacanzeKamarina

Ste AlberghieraPorto d’Ora

Sviluppo Turisticoper Metaponto

Mauritius HV Management Covifra CM Albion ResortsServices Albion Development

Ltd

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

Page 100: Case Study - Club Med

CONSOLIDATED FINANCIAL STATEMENTS

2007 ANNUAL REPORT 159

Marketing Service Real estate Service and Othercompanies companies companies real estate

companies

SOUTH AMERICA

France Vacation Resort CM Amérique CM Ferias 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 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

Mexico Villa PlayaOperadora de Blanca Vacation Properties

Aldeas Vacacionales Profotur de MexicoCancun SRL

Ixtapa SRL

Santa Lucia HV Ste Lucie

Turks & Caicos HV Providenciales

United States CM Sales CM Management Sandpiper Resort Holiday Villageservices Properties of Sandpiper

Sun PropertyCorporation

Vacation Sun Cancun I et IIWholesaler Inc Sun Ixtapa I et II

ASIA

Australia CM Australie CM Management Holiday VillageAustralia Australia

Beach Club

Hong Kong CM Hong Kong Maldivian HVCM Management

Asia

Indonesia PT Bali HV

Japan CM KK SCM LeisureDevelopment Co

Luxembourg CM Asie

Malaysia Vacances (Malaysia) HV Malaysia Recreational Villages

Sdn Bhd

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160

Marketing Service Real estate Service and Othercompanies companies companies real estate

companies

Polynesiaand New Caledonia SPVV

Singapore CM Services (Singapore) Vacances (Singapore)

South Korea CM Vacances Korea

Taiwan CM Vacances (Taiwan)

Thailand Vacances Siam CM HV (Thaïland)

TOUR OPERATING

France Jet tours SAJet Eldo

Jet LoisirsJet Marques

Jet StimLe Quotidien

Voyages

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

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2007 ANNUAL REPORT 161

ADDITIONAL INFORMATION

162 – STATUTORY AUDITORS’ SPECIAL REPORT ON REGULATED AGREEMENTS AND COMMITMENTS

165 – REPORT OF THE BOARD OF DIRECTORS ON THE PROPOSED RESOLUTIONS

169 – PROPOSED RESOLUTIONS

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with Caisse de Dépôt et de Gestion to house Club Méditerranée’sassets in Morocco:- Yasmina Club Med Village: construction and fitting out of G.O®

accommodation and locker rooms.- Marrakech la Palmeraie Club Med Village: construction andfitting out of the new Club Med headquarters (previously locatedin Casablanca).- Agadir Club Med Village: upgrading the testing and coldstorage areas in kitchens.

Construction costs will be paid for by Club Méditerranée in itscapacity as project manager and will be invoiced on a cost basisto SIM at the end of the construction work.

The Company will be required to pay an additional rent corre-sponding to 8.5% of the final amount of the works (excludingVAT), representing the same basis of payment as under the exist-ing leases.

For the year ended 31 October 2007, Club Méditerranée paid atotal of MAD 11,179,000 (excluding VAT) in rent for all of theVillages that it runs in Morocco.

b. Type of agreement, purpose and terms and conditionsOn 8 March 2007 the Board of Directors authorized the Companyto enter into two framework share transfer agreements underwhich Club Méditerranée would sell to CDG Développement – asubsidiary of Caisse de Dépôt et de Gestion – (i) its stake in a non-trading real-estate company called Somavivac for MAD 2,260,000;and (ii) its interest in the non-trading real estate company Civacfor MAD 7,592,813.

These framework agreements were signed on 31 October 2007.

c. Type of agreement, purpose and terms and conditions

On 23 October 2007 the Board of Directors authorized theCompany to enter into a share transfer agreement with Caisse deDépôt et de Gestion under which Club Méditerranée would sellto Caisse de Dépôt et de Gestion part of its stake in SIM corre-sponding to 33,492 shares and representing 7.3% of SIM’s capitaland voting rights. This transaction would reduce the Company’sinterest in SIM from 24.3% to 17%.

The sale price of the shares has been set at MAD 59,950,680 basedon valuations carried out by Club Méditerranée and Caisse deDépôt et de Gestion. However, this price will be increased by anamount equal to 50% of any net-of-tax difference between the ini-tial sale price and the share price set at the time of SIM’s IPO,which is expected to take place by 31 October 2008.

This share transfer agreement was signed on 23 October 2007.

d. Type of agreement, purpose and terms and conditionsOn 7 June 2007 the Board of Directors authorized the Companyto enter into an agreement with SIM under which Club Méditerranéewould be appointed as project manager for the renovation andextension of 150 rooms at the Smir Club Med Village. In accor-

YEAR ENDED 31 OCTOBER 2007

To the shareholders,

In our capacity as Statutory Auditors of Club Méditerranée (the“Company”), we present below our report on regulated agree-ments and commitments.

Agreements and commitments authorized during the yearIn application of Article L. 225-40 of the French Commercial Codewe have been informed of the agreements and commitmentsapproved in advance by the Board of Directors.

Our responsibility does not include identifying any undisclosedagreements or commitments. We are required to report to share-holders, based on the information provided, about the main termsand conditions of agreements and commitments that have beendisclosed to us, without commenting on their relevance or sub-stance. Under the provisions of Article R. 225-31 of the CommercialCode, it is the responsibility of shareholders to determine whetherthe agreements and commitments are appropriate and shouldbe approved.

We conducted our review in accordance with the professionalstandards generally accepted in France. Those standards requirethat we carry out the necessary procedures to verify the consis-tency of the information disclosed to us with the source docu-ments.

1. WITH JET TOURS

Persons concerned: Henri Giscard d’Estaing (Chairman and ChiefExecutive Officer) and Michel Wolfovski (Executive Vice-President).

Type of agreement, purpose and terms and conditionsOn 11 December 2006 the Board of Directors authorized theCompany to enter into a service agreement with Jet tours underwhich Club Méditerranée and Jet tours will pool their operationsteams in order to manage the flights of their respective customerswith a view to optimizing passenger load on the flights jointly char-tered by the two companies.

Under this agreement, each party shares the costs of the relatedjoint operations, comprising salaries, telephone expenses andrental payments for premises.

For the year ended 31 October 2007, the Company paid €449,687in relation to this agreement, corresponding to flight manage-ment costs. Jet tours paid €978,587 for transport-related costs and€780,714 for airport-related expenses.

2. WITH CAISSE DE DÉPÔT ET DE GESTION

Director concerned: Mustapha Bakkoury.

a. Type of agreement, purpose and terms and conditionsOn 11 December 2006 the Board of Directors authorized theCompany to undertake the following three projects with SociétéImmobilière de la Mer (“SIM”), a company set up in partnership

STATUTORY AUDITORS’ SPECIAL REPORT ON REGULATED AGREEMENTS AND COMMITMENTS

162

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ADDITIONAL INFORMATION

2007 ANNUAL REPORT 163

dance with this agreement, the Company will be paid a fee cor-responding to 3% of the amount of the works (excluding VAT) thatwill be financed by SIM and which have been set at a maximumof €20 million.

The addendum to the Smir Club Med Village rental agreementdrawn up specifically to cover the above program and providefor the new rental terms and conditions had not been signed at31 October 2007.

3. WITH THE ROLACO GROUP

Persons concerned: Saud Al Sulaiman and Paul Jeanbart (directors).

Following the Company’s decision to develop a new holidayvillage in Taba (Egypt) through Med Taba, a company governedby Egyptian law – which is 16.5% indirectly owned by ClubMéditerranée (the other shareholders being Orascom HotelsHolding SAE with 67% and Rolaco Holding S.A. which owns 16.5%)– it has been agreed that Med Taba will hold all of the assets ofthe new Village and will authorize the Company to manage andmarket the Village for a minimum period of fifteen years.

Consequently, on 11 December 2006 the Board of Directorsauthorized the Company to sign a memorandum of under-standing with Rolaco Holding S.A. aimed at: (i) describing thetransaction and the related terms and conditions; and (ii) settingthe terms of the main contracts related to the transaction, such asthe construction contract, the hotel management contractbetween Club Méditerranée and Med Taba, and the developmentand marketing contract.

This memorandum of understanding was signed on 17 December2006.

4. WITH FRANÇOIS SALAMON, EXECUTIVE VICE-PRESIDENT

a. Based on the recommendation of the Nominations andCompensation Committee, on 11 December 2006 the Board ofDirectors authorized the signature of an addendum to FrançoisSalamon’s employment contract, for the purpose of granting himentitlement to a contractual lump-sum severance payment for ter-mination of his contract, except if it is terminated due to gross orwillful misconduct. This severance payment corresponds to theremuneration paid to François Salamon under his employmentcontract during the twenty-four months preceding the end ofthe notice period and includes any and all bonuses. It is notpayable in the event of retirement giving rise to a statutory retire-ment bonus paid in accordance with the Company’s customaryprocedures.

b. The termination of François Salamon’s employment contracteffective 31 October 2007 resulted in payment of the above sev-erance indemnity, corresponding to a total amount of €882,316.

c. On 7 June 2007, based on the recommendation of theNominations and Compensation Committee, the Board ofDirectors authorized François Salamon to retain 60,000 stockoptions (including 35,000 exercisable options) granted between2002 and 2006.

5. WITH CARTHAGO

Person concerned: Henri Giscard d’Estaing (Chairman and ChiefExecutive Officer).

On 7 June 2007 the Board of Directors authorized the Companyto enter into two agreements with Société de Promotion et deFinancement Touristique Carthago (“Carthago”), under which inits capacity as owner Carthago has entrusted Club Méditerranéewith overseeing the renovation program for the Djerba la Douceand Djerba la Fidèle Villages in Tunisia. The fees to be paid to theCompany for its role as project manager have been set at 3% ofthe amount of the works (excluding VAT) carried out and paid forby Carthago in its capacity as owner of said Villages.

During the year ended 31 October 2007, the Company receivedTND 159,611 (including VAT) from these project managementagreements.

Agreements and commitments approved in prior years whichremained in force during the yearIn application of the French Commercial Code, we were advisedof the following agreements and commitments approved in prioryears and which remained in force during the year.

1. WITH FONDATION D’ENTREPRISE CLUB MÉDITERRANÉE

Type of agreement, purpose and terms and conditionsAt its 13 December 2004 meeting, the Supervisory Board author-ized the Company to provide Fondation d’Entreprise ClubMéditerranée with various contributions in order for it to be ableto conduct its operations. These contributions related to thefollowing: - Staff (payment of the salary of the head of the Foundation andher assistant, as well as amounts paid to interns and the propor-tion of the accountant’s salary corresponding to the time spenton the Foundation’s accounts).- Premises (rent and rental expenses on a pro rata basis).- Equipment and furniture.

These contributions represented the following amounts for theyear ended 31 October 2007:

(in € thousands)

Volunteered hours worked during working hours (sharing of job skills) 150Volunteered hours worked during free time 231Salaries and payroll taxes 156Rent 37Miscellaneous expenses 13

Total 587

2. WITH JET TOURS

a. Type of agreement, purpose and terms and conditionsOn 13 December 2004 the Supervisory Board authorized theCompany to enter into a service agreement with Jet tours, underwhich Jet tours agreed to develop tours for Club Med Découverteand carry out any related necessary purchases with third-partyservice providers. Jet tours is the sole signatory of the contractsand commitments entered into with said thirty-party serviceproviders, and consequently settles the corresponding payments.

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164

In accordance with the agreement, Club Méditerranée is free todefine the business and marketing strategy for the tours.

During the year ended 31 October 2007, Jet tours received€10,801,126 in fees from this agreement.

b. Type of agreement, purpose and terms and conditionsOn 29 March 2003 the Supervisory Board authorized the Companyto enter into a service agreement with its subsidiary Jet tours underwhich Jet tours would lead the two companies’ joint sales andmarketing teams and would promote the products developed bythe two brands in its indirect sales network. In return, ClubMéditerranée undertook to promote Jet tours’ products in its ownmarketing network.

In accordance with this agreement, the above reciprocal servicesare invoiced pro rata to (i) the revenue generated by the indirectnetworks of each of the two companies; and (ii) aggregate sell-ing costs, including such items as salaries and overheads.

The amount of costs rebilled by Jet tours to Club Méditerranéeduring the year ended 31 October 2007 totaled €1,850,674,corresponding to the costs of indirect sales teams.

c. Type of agreement, purpose and terms and conditionsOn 21 October 2005 the Board of Directors authorized theCompany to enter into an agreement with Jet tours under whichJet tours has entrusted Club Méditerranée with promoting, sell-ing and marketing Jet tours products to works councils through“Club Med Collectivités” (Club Med Institutions), based on theprices and terms in Jet tours brochures.

This agreement had not been signed at 31 October 2007 and wastherefore not applicable.

3. WITH THE ROLACO GROUP

a. Type of agreement, purpose and terms and conditions

Following the Company’s sale of the Villars-sur-Ollon Village inSwitzerland to Nouvelle Société Villars Palace, whose majorityshareholder is indirectly the Rolaco group, Club Méditerranéeentered into a lease agreement for the purpose of renting theentire property complex for a period of twenty years as from1 May 1999, based on an annual rent of CHF 1,500,000, indexedon the price of the vacations.

On 8 June 2006 the Board of Directors authorized the signatureof an addendum to the above lease agreement, providing for thefollowing amendments:- A large-scale renovation program for the Villars-sur-Ollon Villagewith a view to upgrading it to four-trident status, representing anestimated budget of CHF 13.2 million.- Payment by Nouvelle Société Villars Palace of CHF 10 millionworth of the related works, with the remainder being directlyfinanced by Club Méditerranée in its capacity as project manager.

- An increase in the rental payment corresponding to 7% of theamount of the investment financed by Nouvelle Société VillarsPalace.

Rental payments made during the year ended 31 October 2007totaled CHF 2,716,413 excluding VAT.

b. Type of agreement, purpose and terms and conditionsIn accordance with the authorization given by the SupervisoryBoard on 25 June 2001, the Company signed an agreement withthe Rolaco group on 28 September 2001 relating to the provi-sion of commercial support and assistance with developing newVillages in the Middle East. The term of the contract is four yearsand the related fees correspond to the following: - For commercial support: a commission representing 2% for thefirst two years and 3% for the following two years, determinedbased on sales of Club Med products in the Middle East.- For assistance with developing new Villages: a fee of €650 pernew bed marketed in the region.

This agreement was not applied during the year ended 31 October2007.

Guarantees given

Company concerned Currency Outstanding amount at 31 Oct. 2007

SPVV (finance lease) EUR 7,000,000

5. WITH HENRI GISCARD D’ESTAING

On 16 March 2005 the Board of Directors approved the suspen-sion of Henri Giscard d’Estaing’s employment contract as a resultof his appointment as Chairman and Chief Executive Officer, andauthorized the amendments to be made to the contract, includ-ing the conditions under which said contract would resume in theevent of termination of Henri Giscard d’Estaing’s duties asChairman and Chief Executive Officer. Henri Giscard d’Estaing’s employment contract continued to besuspended during the year ended 31 October 2007.

6. WITH THE COMPANY’S SENIOR MANAGERS AND ITS SUBSIDIARIES’ CORPORATE OFFICERS

At the Supervisory Board meeting of 11 December 1997, theCompany undertook to indemnify certain its senior managers andcorporate officers of subsidiaries and associates, or supplementtheir insurance payments, if they are held liable in a claim that: - is not covered by the relevant insurance policy due to exclusionclauses;- is only partially covered as the policy contains a deductible.

This agreement was not applied during the year ended31 October 2007.

Neuilly-sur-Seine and Paris-La Défense, 12 February 2008

The Statutory Auditors

Deloitte & Associés Ernst & Young Audit

Dominique Jumaucourt Pascal Macioce

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ADDITIONAL INFORMATION

2007 ANNUAL REPORT 165

3. APPROVAL OF DIRECTORS’ FEES

We are proposing the sum of €305,000 in Directors’ fees

for the year from 1 November 2007 to 31 October 2008,

unchanged from the amount voted in respect of previous

years. The Board of Directors will have full discretion to allo-

cate this sum among its members as it deems appropriate

(fifth resolution).

4. RE-ELECTION OF DIRECTORS

Ten Directors are due to retire by rotation at the Annual

General Meeting and are standing for re-election for a further

term of three years ending at the annual general meeting

held to approve the financial statements for the year ended

31 October 2010. You will therefore be asked to re-elect the

following Directors:

- Philippe Adam (sixth resolution);

- Saud Al Sulaiman (seventh resolution);

- Mustapha Bakkoury (eighth resolution);

- David Dautresme (ninth resolution);

- Thierry de La Tour d’Artaise (tenth resolution);

- Henri Giscard d’Estaing (eleventh resolution);

- Paul Jeanbart (twelfth resolution);

- Aimery Langlois-Meurinne (thirteenth resolution);

- Pascal Lebard (fourteenth resolution);

- Anne-Claire Taittinger (fifteenth resolution).

As required by law, information on the position held by all

Directors in office at 31 October 2007, together with a list of

all their other directorships or similar offices, is provided in the

Company’s shelf-registration document.

5. REPLACEMENT OF A SUBSTITUTE AUDITOR

François Carrega has resigned as substitute auditor and we

are therefore seeking to appoint the firm Auditex in his place

for the remainder of Mr Carrega’s term of office, that is until

the Annual General Meeting held to approve the financial

statements for the year ended 31 October 2012.

We have called this annual general meeting to submit twen-

ty-four resolutions for your approval, the purpose of which is

described below.

I - Ordinary resolutionsAs required by law, we are calling this Annual General

Meeting within six months of the financial year end to seek

your approval of the Company’s financial statements and the

transactions reflected therein. Various other matters, which are

described briefly below, also require your approval by ordi-

nary resolution.

1. APPROVAL OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 2007

The first three resolutions cover approval of Club Méditerranée’s

parent company and consolidated financial statements for

the year ended 31 October 2007, the proposed appropriation

of the year’s net income and granting the Board of Directors

discharge for the fulfillment of its duties. Accordingly, the

first resolution approves the financial statements of Club

Méditerranée SA for the year ended 31 October 2007 and

grants the Board of Directors discharge for the fulfillment of

its duties. The second resolution approves the Group’s con-

solidated financial statements and the third resolution

approves the appropriation of the year’s net loss amounting

to €38,020,554, which we propose to transfer to the retained

deficit. Including this loss and after the €260,341 effect of a

change in accounting method concerning the measurement

of assets, the retained deficit will amount to €296,245,806.

2. APPROVAL OF RELATED PARTY AGREEMENTS

You will then be asked to approve the related-party agree-

ments described in detail in the special report of the Auditors

(fourth resolution).

REPORT OF THE BOARD OF DIRECTORS ON THE PROPOSED RESOLUTIONS

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- to cancel the shares acquired, including any shares pur-

chased pursuant to earlier authorizations (provided that the

extraordinary resolution authorizing the Board to reduce the

Company’s capital is passed);

- 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

the extraordinary resolution authorizing the Board to reduce

the Company’s capital is passed.

The maximum buyback price is set at €70 per share and the

minimum resale price at €30. These prices do not apply to for-

ward transactions entered into pursuant to previous authori-

zations permitting the purchase or sale of shares after this date

of this meeting, nor do they apply to shares purchased to ful-

fill the exercise of stock options (or stock grants made to

employees). In these cases, the sale price or equivalent finan-

cial value will be determined in accordance with the specific

provisions that apply.

The maximum amount invested in the share buyback program

may not exceed €135,594,935.

The buybacks, sales and transfers may be carried out and set-

tled 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 pur-

chase.

6. AUTHORIZATION TO TRADE IN THE COMPANY’SSHARES

The seventeenth resolution authorizes 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 subsequently

replace them.

The authorization will be valid for a period of 18 months and

will cancel and supersede the authorization granted under the

15th resolution passed at the Annual General Meeting held on

8 March 2007.

In accordance with the law, you are required to set the terms

and conditions of the program and the maximum authorized

amounts.

The Board of Directors is seeking authorization, which may

be further delegated in accordance with the provisions of

the law, to buy back shares of the Company for the following

purposes:

- to carry out transactions under a liquidity contract comply-

ing with a code of ethics approved by the Autorité des

Marchés Financiers or any other applicable provision, entered

into with an investment service provider acting on an inde-

pendent basis without any influence from the Company;

- to allocate the shares to directors and/or employees of the

Company and/or the Group upon exercise of stock options

or under an employee stock ownership plan;

- to allocate the shares 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

19,370,705 shares;

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The Company may use this authorization to continue imple-

menting its share buyback program in connection with a

takeover bid for the Company or a public exchange offer ini-

tiated by the Company, in accordance with the provisions of

the law.

We are also seeking full powers for the Board of Directors to

use this authorization, to set the terms and conditions of the

program where necessary, to enter into any and all deeds and

agreements, to carry out any and all necessary formalities and

generally to do everything necessary to implement this author-

ization. The Board may delegate these powers in accordance

with the provisions of the law and the Company’s by-laws.

7. POWERS

The eighteenth resolution grants the powers required to carry

out all legal filing and other formalities with regard to the ordi-

nary resolutions passed by the meeting.

II - Extraordinary resolutionsSix extraordinary resolutions will also be put to you for approval

and are described below.

1. AMENDMENT OF ARTICLE 7.4 OF THE BY-LAWS ON DISCLOSURE THRESHOLDS

In the nineteenth resolution, we propose to amend the dis-

closure threshold set out in the first paragraph of article 7.4

of the by-laws (Form and Ownership of Shares).

We are proposing to raise the disclosure threshold from 0.5%

to 1% or any further multiple thereof, as we believe that

this is sufficient for us to monitor and control the Company’s

ownership structure.

The first paragraph of article 7.4 of the Company’s by-laws will

therefore be amended as follows:

“4. Apart from the statutory disclosures required by law, any

person or legal entity acting alone or in concert who comes

to own either directly or indirectly 1% of the Company’s cap-

ital, voting rights or share equivalents or any further multiple

thereof is required to advise the Company by recorded deliv-

ery mail of the number of voting rights and share equivalents

held, no later than five business days after occurrence.”

The rest of the article remains unchanged.

2. ALIGNMENT OF THE COMPANY’S BY-LAWS WITH THE PROVISIONS OF DECREE 2006-1566 OF 11 DECEMBER 2006 ON SHAREHOLDERS’ MEETINGS

Decree no. 2006-1566 of 11 December 2006 (the “Decree”)

has amended decree no. 67-236 of 23 March 1967 (French

Companies Act) by adopting various measures applicable to

companies limited by shares and more particularly the terms

and conditions under which shareholders are entitled to attend

and vote at general meetings. These provisions are a matter

of public policy.

The main amendments we are proposing are described below:

- The Decree has radically changed the procedure for evidenc-

ing ownership of registered or bearer shares, which is now

based on a system of record date as close as possible to the

date of the General Meeting.

- This is particularly important for companies that have issued

bearer shares, as is the case for Club Méditerranée. Under the

new law, shareholders are now entitled to attend and vote at

General Meetings provided they are shareholders of record,

either in the register of shares kept by the Company or in a

securities account held by an authorized financial intermedi-

ary, at midnight (Paris time) on the third business before the

date of the meeting.

- The custodian of the shares now issues a certificate of own-

ership rather than a share-blocking certificate.

Consequently, in the twentieth, twenty-first and twenty-

second resolutions, we are proposing to amend the by-laws

to take account of these new rules. The articles affected are

article 8.2 (Rights and Obligations Attached to the Shares),

article 28 (Attendance at General Meetings - Proxies) and

article 30 (Quorum).

ADDITIONAL INFORMATION

2007 ANNUAL REPORT 167

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- deduct the difference between the net book value of the

cancelled shares and their par value from any reserve or share

premium accounts;

- amend the by-laws accordingly and, more generally, do

everything necessary in accordance with the laws prevailing

at the time this authorization is used.

4. POWERS IN RESPECT OF EXTRAORDINARY RESOLUTIONS

Lastly, the twenty-fourth and final resolution is the usual

resolution granting the powers required to carry out any legal

filing or other formalities with respect to the extraordinary

resolutions passed at the meeting.

We trust that these resolutions will meet with your approval.

The Board of Directors

3. AUTHORIZATION TO THE BOARD OF DIRECTORS TO REDUCE THE CAPITAL BY CANCELING SHARES

The twenty-third resolution seeks authorization for the Board

of Directors, in accordance with the provisions of articles

L.225-209 et seq. of the French Commercial Code, to reduce

the capital on one or more occasions in the proportions and

at the times it deems appropriate by canceling all or part of

the shares held or purchased by the Company within the

limits permitted by law, which at present is 10% of the

Company’s capital, in any one twenty-four month period. This

limit applies to the amount of capital after any adjustments

for transactions made after the date of this meeting. The

authorization will be valid for a period of 18 months.

You will be asked to confer full powers on the Board of

Directors, which may be further delegated, to do the follow-

ing:

- cancel the shares and make the resulting capital reduction(s);

- determine the final amount of the capital reductions, set their

terms and conditions and duly record their completion;

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ADDITIONAL INFORMATION

2007 ANNUAL REPORT 169

As required by law, the Ordinary General Meeting notes that

dividends for the last three fiscal years were as follows:

2003/04 2004/05 2005/06

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

management 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 - DIRECTORS’ FEES

The Ordinary General Meeting, having considered the report

of the Board of Directors, sets the total amount of directors’

fees payable for the period from 1 November 2007 to

31 October 2008 at €305,000.

SIXTH RESOLUTION - RE-ELECTION OF PHILIPPE ADAM AS DIRECTOR

The Ordinary General Meeting, considering that Philippe

Adam is due to retire by rotation at this meeting, re-elects

Mr Adam as Director for a term of three years expiring at

the annual general meeting held to approve the financial

statements for the year ended 31 October 2010.

SEVENTH RESOLUTION - RE-ELECTION OF SAUD AL SULAIMAN AS DIRECTOR

The Ordinary General Meeting, considering that Saud Al

Sulaiman is due to retire by rotation at this meeting, re-elects

Mr Al Sulaiman as Director for a term of three years expiring

at the annual general meeting held to approve the financial

statements for the year ended 31 October 2010.

A. Ordinary resolutions FIRST RESOLUTION - APPROVAL OF THE FINANCIALSTATEMENTS OF THE COMPANY FOR THE YEAR ENDED31 OCTOBER 2007

The Ordinary General Meeting, having considered the report

of the Board of Directors, the Chairman’s report on the prac-

tices 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 2007 presented by the Board of Directors,

approves the financial statements as presented, which show

a net loss of €38,020,554, as well as the transactions reflect-

ed 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 2007.

SECOND RESOLUTION - APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARENDED 31 OCTOBER 2007

The Ordinary General Meeting, having considered the report

of the Board of Directors, the Chairman’s report on the prac-

tices 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 2007 presented by the Board of Directors,

approves the consolidated financial statements as present-

ed, which show a net loss of €10.468 million, as well as the

transactions reflected in these consolidated financial state-

ments and described in these reports.

THIRD RESOLUTION - APPROPRIATION OF PROFIT

The Ordinary General Meeting, considering the recommen-

dation of the Board of Directors, resolves to appropriate the

Company’s net loss for the year, in the amount of €38,020,554,

to the deficit. Including this loss and after the €260,341 effect

of a change in accounting method concerning the measure-

ment of assets, the deficit will amount to €296,245,806.

PROPOSED RESOLUTIONS

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FOURTEENTH RESOLUTION - RE-ELECTION OF PASCAL LEBARD AS DIRECTOR

The Ordinary General Meeting, considering that Pascal Lebard

is due to retire by rotation at this meeting, re-elects Mr Lebard

as Director for a term of three years expiring at the annual gen-

eral meeting held to approve the financial statements for the

year ended 31 October 2010.

FIFTEENTH RESOLUTION - RE-ELECTION OF ANNE-CLAIRE TAITTINGER AS DIRECTOR

The Ordinary General Meeting, considering that Anne-Claire

Taittinger is due to retire by rotation at this meeting, re-elects

Ms Taittinger as Director for a term of three years expiring at

the annual general meeting held to approve the financial state-

ments for the year ended 31 October 2010.

SIXTEENTH RESOLUTION - REPLACEMENT OF A SUBSTITUTE AUDITOR

The Ordinary General Meeting, considering the resignation

of François Carrega as substitute auditor as of the date of

this meeting, appoints in his place the firm Auditex of

Faubourg de l’Arche, 92037 Paris-La Défense Cedex, for the

remainder of Mr Carrega’s term of office, that is until the annu-

al general meeting held to approve the financial statements

for the year ended 31 October 2012.

SEVENTEENTH RESOLUTION - AUTHORIZATION TO TRADE IN THE COMPANY’S SHARES

The Ordinary General Meeting, having considered the report

of the Board of Directors, authorizes 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 subsequent-

ly replace them. The number of Club Méditerranée SA shares

held under this authorization at any given time shall not rep-

resent more than 10% of the Company’s capital, currently

19,370,705 shares, or 5% of the Company’s capital if the shares

are purchased for the purpose of tendering them in consid-

eration for a future merger, demerger or asset transfer.

Authority to act on this resolution may be delegated by the

Board, subject to compliance with the law and the Company’s

by-laws.

EIGHTH RESOLUTION - RE-ELECTION OF MUSTAPHABAKKOURY AS DIRECTOR

The Ordinary General Meeting, considering that Mustapha

Bakkoury is due to retire by rotation at this meeting, re-elects

Mr Bakkoury as Director for a term of three years expiring at

the annual general meeting held to approve the financial

statements for the year ended 31 October 2010.

NINTH RESOLUTION - RE-ELECTION OF DAVID DAUTRESME AS DIRECTOR

The Ordinary General Meeting, considering that David

Dautresme is due to retire by rotation at this meeting, re-elects

Mr Dautresme as Director for a term of three years expiring

at the annual general meeting held to approve the financial

statements for the year ended 31 October 2010.

TENTH RESOLUTION - RE-ELECTION OF THIERRY DE LA TOUR D’ARTAISE AS DIRECTOR

The Ordinary General Meeting, considering that Thierry de

La Tour d’Artaise is due to retire by rotation at this meeting,

re-elects Mr de La Tour d’Artaise as Director for a term of three

years expiring at the annual general meeting held to approve

the financial statements for the year ended 31 October 2010.

ELEVENTH RESOLUTION - RE-ELECTION OF HENRI GISCARD D’ESTAING AS DIRECTOR

The Ordinary General Meeting, considering that Henri

Giscard d’Estaing is due to retire by rotation at this meeting,

re-elects Mr Giscard d’Estaing as Director for a term of three

years expiring at the annual general meeting held to approve

the financial statements for the year ended 31 October 2010.

TWELFTH RESOLUTION - RE-ELECTION OF PAUL JEANBART AS DIRECTOR

The Ordinary General Meeting, considering that Paul

Jeanbart is due to retire by rotation at this meeting, re-elects

Mr Jeanbart as Director for a term of three years expiring at

the annual general meeting held to approve the financial

statements for the year ended 31 October 2010.

THIRTEENTH RESOLUTION - RE-ELECTION OF AIMERY LANGLOIS-MEURINNE AS DIRECTOR

The Ordinary General Meeting, considering that Aimery

Langlois-Meurinne is due to retire by rotation at this meet-

ing, re-elects Mr Langlois-Meurinne as Director for a term of

three years expiring at the annual general meeting held to

approve the financial statements for the year ended 31

October 2010.

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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 or other applicable provisions, 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, or for tender in consideration

for future business acquisitions, mergers, demergers or acqui-

sitions of assets;

- For cancellation of the acquired shares, including any shares

bought back pursuant to earlier authorizations (provided that

the extraordinary 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

the extraordinary resolution authorizing the Board to reduce

the Company’s capital is voted.

The maximum buyback price is set at €70 per share and the

minimum resale price at €30. These prices do not apply to for-

ward transactions entered into pursuant to previous authori-

zations permitting the purchase or sale of shares after the date

of this meeting, nor do they apply to shares purchased to ful-

fill the exercise of stock options (or stock grants made to

employees). In these cases, the sale price or equivalent finan-

cial value shall be determined in accordance with the specif-

ic provisions that apply.

The maximum amount invested in the share buyback program

may not exceed €135,594,935.

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, particularly a

change in the par value of the shares, 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, distribution of reserves or any other asset, capital

redemptions or any other transaction affecting the Company’s

capital.

The buybacks, sales and transfers may be carried out and set-

tled 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 in connection with a

takeover bid for the Company or a public exchange offer ini-

tiated by the Company in accordance with the provisions of

article 232-17 of the Autorité des Marchés Financiers’ gener-

al regulations (or any other legal, regulatory or other provi-

sions that may subsequently replace them).

The Ordinary General Meeting gives full powers to the Board

of Directors to use this authorization, to set the terms and con-

ditions of the program, where necessary, to enter into any and

all deeds and agreements, to carry out any and all necessary

formalities and generally to do everything necessary to imple-

ment this authorization. The Board of Directors may dele-

gate these powers in accordance with the provisions of the

law and the Company’s by-laws.

This authorization will expire at the end of a period of eight-

een months from the date of this meeting. It supersedes the

existing authorization given in the fifteenth resolution of the

Ordinary General Meeting of 8 March 2007.

EIGHTEENTH RESOLUTION - POWERS

The Ordinary General Meeting, having considered the 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 filing and other formalities.

ADDITIONAL INFORMATION

2007 ANNUAL REPORT 171

Page 113: Case Study - Club Med

New wording:

“However, double voting rights are conferred on all fully-paid

shares which have been registered in the name of the same

shareholder for at least two years.”

The rest of article 8 of the by-laws remains unchanged.

TWENTY-FIRST RESOLUTION - AMENDMENT TO ARTICLE 28 OF THE BY-LAWS (ATTENDANCE AT GENERAL MEETINGS - PROXIES)

The Extraordinary General Meeting, having considered the

report of the Board of Directors, resolves to amend article 28

of the by-laws to simplify it and bring it into line with the pro-

visions of decree no. 2006-1566 of 11 December 2006. Article

28 is accordingly amended as follows:

Old wording:

“1. All shareholders are entitled to attend and vote at gener-

al meetings in person or by proxy regardless of the number

of shares held, simply upon presentation of evidence of their

identity, provided that they have settled all capital calls with-

in thirty days of receiving notification of the amount called and

that their shares are booked in an account opened in their

name at least five days prior to the date of the meeting.

2. Shareholders may vote by mail in accordance with the terms

and conditions set out by law. The Board of Directors may

reduce the legal time period required for receiving postal

voting forms. Shareholders may, in accordance with the pro-

visions of the law, send their proxy form or postal voting

form for any general meeting either by ordinary mail or by

electronic means if permitted by the Board of Directors as

published in one of the notices of meeting.

3. Shareholders may only appoint their spouse or another

shareholder as their proxy. Owners of shares referred to in the

seventh paragraph of article L.228-1 of the French Commercial

Code may appoint an authorized intermediary as their nomi-

nee under the terms and conditions set out by law.

B - Extraordinary resolutionsNINETEENTH RESOLUTION - AMENDMENT TO ARTICLE 7OF THE BY-LAWS (FORM AND OWNERSHIP OF SHARES)

The Extraordinary General Meeting, having considered the

report of the Board of Directors, resolves to amend article 7

(Form and Ownership of Shares) to raise the threshold for dis-

closing holdings of shares and voting rights from 0.5% to 1%.

The first paragraph of article 7.4 (Form and Ownership of

Shares) is therefore amended as follows and the rest of the

article remains unchanged.

Old wording:

“4. Apart from the statutory disclosures required by law, any

person or legal entity acting alone or in concert who comes

to own either directly or indirectly 0.5% of the Company’s share

capital, voting rights or share equivalents or any further mul-

tiple thereof is required to advise the Company by recorded

delivery mail of the number of voting rights and share equiv-

alents held, no later than five business days after occurrence.”

New wording:

“4. Apart from the statutory disclosures required by law, any

person or legal entity acting alone or in concert who comes

to own either directly or indirectly 1% of the Company’s share

capital, voting rights or share equivalents or any further mul-

tiple thereof is required to advise the Company by recorded

delivery mail of the number of voting rights and share equiv-

alents held, no later than five business days after occurrence.”

TWENTIETH RESOLUTION - AMENDMENT TO ARTICLE 8.2OF THE BY-LAWS (RIGHTS AND OBLIGATIONS ATTACHEDTO THE SHARES)

The Extraordinary General Meeting, having considered the

report of the Board of Directors, resolves to amend article 8.2

of the by-laws (Rights and Obligations Attached to the Shares)

to bring it into line with the provisions of decree no. 2006-

1566 of 11 December 2006. The second paragraph of article

8.2 of the by-laws (Rights and Obligations attached to the

Shares) is accordingly amended as follows:

Old wording:

“However, double voting rights are conferred on all fully-paid

shares which, no later than five days before the date of the

meeting, have been registered with the issuer or registrar in

the name of the same shareholder for at least two years.”

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4. Holders of registered shares may attend and vote at gen-

eral meetings or vote by mail provided that their shares are

registered on the share register kept by the Company at least

forty-eight hours before the date of the meeting. Holders of

bearer shares may attend and vote at general meetings or

vote by mail provided that their stockbroker, bank or other

intermediary has lodged a certificate at the Company’s head

office or at any other address specified in the notice of meet-

ing, at least forty-eight hours before the date of the meeting,

attesting to the holder’s ownership of the shares and certify-

ing that they are being held in a blocked account until after

the date of the meeting.

5. Holders of registered shares will be admitted to the meet-

ing on presentation of evidence of their identity. Holders of

bearer shares will be admitted on presentation of the certifi-

cate 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.

6. The Company may ask the intermediaries acting as nomi-

nee for the shareholders referred to in the seventh paragraph

of article L 228-1 of the French Commercial Code to provide

a list of all shareholders whose shares they are voting at the

meeting.

Proxies given to or votes cast by any intermediary who fails

to do so or who fails to disclose its capacity as nominee in

accordance with the law or these by-laws will not be counted.”

New wording:

“1. All shareholders may attend general meetings in accor-

dance with the provisions of the law.

2. Shareholders may vote by mail in accordance with the pro-

visions of the law. Shareholders may, in accordance with the

provisions of the law, send their proxy form or postal voting

form for any general meeting either by ordinary mail or by

electronic means if permitted by the Board of Directors as

published in one of the notices of meeting.

3. Shareholders may appoint a proxy to represent them in

accordance with the provisions of the law. Owners of shares

referred to in the seventh paragraph of article L.228-1 of the

French Commercial Code may appoint an authorized inter-

mediary as their nominee under the terms and conditions set

out by law.

4. The Company may ask the intermediaries acting as nomi-

nee for the shareholders referred to in the seventh paragraph

of article L 228-1 of the French Commercial Code to provide

a list of all shareholders whose shares they are voting at the

meeting.

Proxies given to or votes cast by any intermediary who fails

to do so or who fails to disclose its capacity as nominee in

accordance with the law or these by-laws will not be counted.”

TWENTY SECOND RESOLUTION - AMENDMENT OF ARTICLE 30 OF THE BY-LAWS (QUORUM)

The Extraordinary General Meeting, having considered the

report of the Board of Directors, resolves to amend article

30 of the by-laws (Quorum) to bring it into line with the pro-

visions of decree no. 2006-1566 of 11 December 2006.

The second paragraph of article 30 of the by-laws (Quorum)

is therefore amended as follows and the rest of the article

remains unchanged.

Old wording:

“The quorum is calculated on the basis of all shares compris-

ing the share capital, less any shares deprived of their voting

rights by virtue of the law. In the case of postal votes, only

those forms duly completed and received by the Company

at least three days before the date of the meeting will be

counted for the purpose of calculating the quorum.”

New wording:

“The quorum is calculated on the basis of all shares compris-

ing the share capital, less any shares deprived of their voting

rights by virtue of the law.”

ADDITIONAL INFORMATION

2007 ANNUAL REPORT 173

Page 115: Case Study - Club Med

The Extraordinary General Meeting confers full powers on

the Board of Directors, which may be further delegated, to

do the following:

- cancel the shares and make the resulting capital reduction(s);

- determine the final amount of the capital reductions, set

their terms and conditions and duly record their completion;

- deduct the difference between the net book value of the

cancelled shares and their par value from any reserve or share

premium accounts;

- amend the by-laws accordingly and, more generally, do

everything necessary in accordance with the laws prevailing

at the time this authorization is used.

TWENTY-FOURTH RESOLUTION - POWERS

The Extraordinary General Meeting, having considered the

report of the Board of Directors, gives full powers to the bear-

er of a copy or extract of the minutes of this meeting to carry

out all legal registration, filing, announcement and other

formalities.

TWENTY-THIRD RESOLUTION - AUTHORIZATION GRANT-ED TO THE BOARD OF DIRECTORS TO REDUCE THESHARE CAPITAL BY CANCELING SHARES

The Extraordinary General Meeting, having considered the

report of the Board of Directors and the special report of

the Auditors, authorizes the Board of Directors, in accordance

with the provisions of articles L.225-209 et seq. of the French

Commercial Code, to reduce the share capital on one or more

occasions in the proportions and at the times it deems appro-

priate, by canceling all or part of the shares held or purchased

by the Company within the limit permitted by law, which at

present is 10% of the capital in any one twenty-four month

period. This limit applies to the amount of capital after any

adjustments for transactions made after the date of this

meeting.

The authorization is valid for eighteen months with effect from

the date of this meeting. It supersedes and replaces the

unused portion of any previous authorization granted for

the same purpose and particularly that granted under the

twenty-eighth resolution passed at the annual general meet-

ing of 8 March 2007.

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2007 ANNUAL REPORT 175

The following information is incorporated by reference in the

Registration Document:

• The business report, the consolidated financial statements

of Club Méditerranée and the Auditors’ report on the con-

solidated financial statements for fiscal 2005, as presented

on pages 60 to 78, 91 to 126 and 123 of the Registration

Document filed with the Autorité des Marchés Financiers on

23 February 2006.• The business report, the consolidated financial statements

of Club Méditerranée and the Auditors’ report on the con-solidated financial statements for fiscal 2006, as presentedon pages 66 to 78, 91 to 143 and 140 of the RegistrationDocument filed with the Autorité des Marchés Financiers on14 February 2007.

STATUTORY AUDITORS

• Ernst & Young Audit SAS, Faubourg de l’Arche 92037 Paris-

La Défense Cedex, represented by Pascal Macioce.

Ernst & Young Audit was appointed for the first time at the

Annual General Meeting of 30 April 1981. Its appointment was

renewed at the Annual General Meeting of 8 March 2007 for

a period of six years expiring at the Annual General Meeting

to be called to approve the fiscal 2012 financial statements.

• Deloitte & Associés, 185, avenue Charles de Gaulle

92524 Neuilly-sur-Seine Cedex, represented by Dominique

Jumaucourt.

Deloitte & Associés was appointed for the first time at the

Annual General Meeting of 17 March 2003. Its appointment

was renewed at the Annual General Meeting of 8 March 2007

for a period of six years expiring at the Annual General

Meeting to be called to approve the fiscal 2012 financial state-

ments.

SUBSTITUTE AUDITORS

• François Carrega, 13, boulevard des Invalides 75007 Paris.

Mr. Carrega was appointed for the first time at the Annual

General Meeting of 13 March 2001. His appointment was

renewed at the Annual General Meeting of 8 March 2007 for

a period of six years expiring at the Annual General Meeting

to be called to approve the fiscal 2012 financial statements.

Mr. Carrega having resigned, shareholders at the Annual

General Meeting of 11 March 2008 will be asked to appoint

Auditex as his successor for the remainder of his term.

• Beas, 185, avenue Charles de Gaulle 92524 Neuilly-sur-Seine

Cedex.

Beas was appointed for the first time at the Annual General

Meeting of 17 March 2003. Its appointment was renewed at

the Annual General Meeting of 8 March 2007 for a period of

six years expiring at the Annual General Meeting to be called

to approve the fiscal 2012 financial statements.

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 73

E-mail: [email protected]

PERSON RESPONSIBLE FOR THE REGISTRATIONDOCUMENT

“I hereby declare that, having taken all reasonable care to

ensure that such is the case, the information contained in this

Registration Document is, to the best of my knowledge, in

accordance with the facts and contains no omission likely to

affect its import.

I further declare that, to the best of my knowledge, i) the finan-

cial statements have been prepared in accordance with the

applicable accounting standards and give a true and fair view

of the assets and liabilities, financial position and results of

Club Méditerranée and the consolidated companies, and ii)

the management report on page 62 presents a fair view of the

business, results and financial position of Club Méditerranée

and the consolidated companies, as well as a description of

the main risks and uncertainties they face.

I have obtained a statement from the Statutory Auditors at the

end of their engagement affirming that they had examined

the information about the financial position and the accounts

contained in this reference document and had read the entire

reference document.”

The Chairman and Chief Executive OfficerHenri Giscard d’Estaing

This registration document was filed with the Autorité des Marchés Financiers (AMF) on 12 February 2008 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.

Page 117: Case Study - Club Med

176

The English language version of this Registration Document is a free translation from the original, which was preparedin French. All possible care has been taken to ensure that the translation is an accurate representation of the original.However in all matters of interpretation of information, views or opinion expressed therein the original language version ofthe document in French takes precedence over the translation.

Page 118: Case Study - Club Med

CLUB MÉDITERRANÉE SA11, rue de Cambrai - 75957 Paris Cedex 19 - France

Tel: +33 (0)1 53 35 35 53 – Fax: +33 1 53 35 36 16 – www.clubmed.comSociété anonyme (joint stock corporation) with share capital of €77,482,820 – 572 185 684 RCS Paris –

License: LI 075 95 0333RCP No. AA 992 497 GENERALI ASSURANCES IARD - 7, boulevards Haussmann - F - 75456 Paris Cedex 9

Garantie Financière APS - 15, avenue Carnot - F - 75017 Paris


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