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					Financial Report

    66 // MANAGEMENT REPORT

    74 // RISK FACTORS

    78 // 2007 FINANCIAL CALENDAR

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

    90 // AUDITORS’ REPORT ON INTERNAL CONTROL




                                           2006 Annual Report //   65
     Management Report
     The consolidated financial statements for fiscal 2006 represent          Operating income - Management of assets, corresponding
     the Group’s first financial statements prepared in accordance            to the revenues and expenses generated by the management
     with IFRS. Comparative financial information for 2005 has been           of property assets, amounted to €40 million versus €89 million
     prepared on the same basis.                                              in fiscal 2005, when an unusually high volume of asset refi-
                                                                              nancing transactions was carried out.
     The IFRS transition options selected by the Group are present-
     ed in Note 2 to the consolidated financial statements. The               Other operating income and expense, corresponding to
     Group elected to adopt IAS 32 and IAS 39 as from 1 November              restructuring, litigation and credit card costs, represented a net
     2005. Pro forma financial information for fiscal 2005 is provided        expense of €29 million, more or less unchanged from fiscal 2005.
     to facilitate year-on-year comparisons.
                                                                              The Group’s bottom line was positive for the second year
     FINANCIAL HIGHLIGHTS                                                     running, with net income rising to €5 million from €3 million.

     (in € millions)
                                                                              CONSOLIDATED FINANCIAL RESULTS
                                          2005 pro forma     2006
                                               (including                     BUSINESS REVIEW
                                               IAS 32/39)
      Consolidated revenue                                                    Customers
      Reported                                     1,590 1,679       + 5.6%
                                                                              In fiscal 2006, the Group welcomed over 1.6 million customers.
      Like-for-like                                1,601 1,679       + 4.9%
                                                                              The 3.1% decline compared with fiscal 2005 was largely due
      EBITDAR - Leisure (1)                          222      232
                                                                              to the 3.4% reduction in capacity over the year, including 6%
      Operating income - Leisure                      25       24
      Operating income -                                                      in the summer season with the closure of five entry-level
      Management of assets                             89      40             Villages in Europe and the temporary closure of certain Villages
      Other operating income & expense                (33)    (29)            for renovation, notably Cancún and La Caravelle. The number
      Operating income                                81       35             of Jet tours and Club Med Gym customers was up slightly
      Net income attributable                                                 compared with fiscal 2005.
      to shareholders                                   3       5
      Net borrowings                                 (323)   (294)
                                                                              Number of customers in France
     (1) EBITDAR - Leisure: Earnings before interest, taxes, depreciation,    (in thousands)
         amortization and rents.
                                                                                                                                     Change vs.
                                                                                                       2004        2005       2006       2004
     Consolidated revenue amounted to €1,679 million, an                       Individual customers     443        451         443            -
     increase of 5.6% on a reported basis. This was the first year of          Business customers        66          58         66            -
     growth after four straight years of decline.
                                                                               Groups                    72          73         59    - 18.0%
     Like-for-like revenue was up 4.9%, reflecting 7.7% growth in
                                                                               Total                    581        582         568     - 2.4%
     the first half and 2.3% in the second.

     Operating income - Leisure was stable at €24 million, reflect-
                                                                              In fiscal 2006, Club Med France customers represented 43%
     ing the impact of asset refinancing transactions currently in
                                                                              of total customers. The number of individual and business
     progress under the Group’s property management strategy.
                                                                              customers remained stable over the last three years, while
     Although these transactions have an accretive impact on net
                                                                              groups declined. The decline mainly concerned vacations
     income, their effect on operating income is dilutive because
                                                                              organized by certain companies’ works councils, generally at
     the rents paid to the buyers of the Villages exceed the depre-
                                                                              hut and 2-Trident Villages.
     ciation charges recorded when Club Méditerranée was the
     owner.

     EBITDAR - Leisure rose to €232 million in fiscal 2006 from
     €222 million the previous year.
     EBITDAR represents the best indicator of operating per-
     formance, because it excludes the impact of depreciation,
     amortization, rents and changes in provisions.




66
                                                                                                              Management Report

Hotel days - Villages                                                                 In the five years since 2001, year-round capacity has risen
                                                                                      from 64% of the total to 74%, and it is expected to reach
HOTEL DAYS BY ISSUING ZONE
                                                                                      80% in 2008.
(in thousands of hotel days sold)

                            2005                   2006                Change
                                                                                      Average prices
 Europe                     6,846                 6,511                  - 4.9%
                                                                                      (like-for-like)
 Americas                   1,475                 1,290                - 12.6%        (€/hotel day)
 Asia                         627                   759               + 21.0%
                                                                                                                           Winter    Summer      Full year
 Total                     8,948                  8,560                - 4.3%
                                                                                       Club Med average price - 2005       115.8        88.5       100.2
HOTEL DAYS BY RECEIVING ZONE                                                           Price effect                           2.5        1.6          2.1
(in thousands of hotel days sold)                                                      Implementation of the strategy(1)      6.9        8.6          7.8
                                                                                       Other effects(2)                       1.9        1.2          1.9
                            2005                   2006                Change
                                                                                       Club Med average price - 2006       127.1        99.9       112.0
 Europe                     6,272                 5,885                 - 6.2%
                                                                                       Change                               9.8%      12.9%        11.8%
 Americas                   1,901                 1,733                 - 8.8%
 Asia                         775                   942               + 21.6%         (1) Bar & Snacking Included, resegmentation, Comfort à la carte.
                                                                                      (2) Changes in mix (issuer zones, Villages).
 Total                     8,948                  8,560                - 4.3%


Capacity and occupancy rates                                                          It is important to note that the increase in average price was
                                                                                      not due to higher catalog rates, but rather to the implemen-
                   2005                           2006                 Change
                                                                                      tation of the Group’s upmarket strategy, with the introduction
                             Occupancy                   Occupancy       Occupancy
                Capacity           rate     Capacity           rate            rate   of Bar & Snacking Included, Village resegmentation and the

 Europe         8,494         73.8%          8,142        72.3% - 1.5 pts
                                                                                      rollout of Comfort à la carte boosting the average price per
 Americas       2,855         66.6%          2,621        66.1% - 0.5 pts             hotel day by €7.80.
 Asia           1,639         47.3%          1,787        52.7% + 5.4 pts
                                                                                      Rates were increased in line with or by slightly less than
 Total         12,988         68.9%        12,550         68.2%        - 0.7 pts
                                                                                      inflation, adding €2.10 to the average price per hotel day.

Occupancy rate by category                                                            RevPAB (Revenue per available bed)
                 Thousands of hotel days                                              (€/hotel day)
                         by destination                    Occupancy rate
                                                                                                                       Year ended 31 October
                           2005            2006           2005               2006
                                                                                                                                     Change      Change
 Huts and                                                                                                 2004      2005      2006   2006 vs.    2005 vs.
 2 Tridents                  747            418          71.9%            71.1%                                                         2005        2004
 3 Tridents                5,882          5,435          71.2%            70.7%        Europe              73.8     77.7      84.6      + 9%      + 15%
 4 Tridents                2,206          2,626          64.2%            65.0%        Americas            69.6     73.5      80.7     + 10%      + 16%
 Other                       113             81                                        Asia                72.9     61.0      69.7     + 14%        - 4%
 Total                 8,947              8,560        68.9%              68.2%        Total Villages     72.7      74.7      81.7      + 9%      + 12%

                                                                                      RevPAB: Total Village revenue excluding tax and transportation/
A total of 8.56 million hotel days were sold during the                               Available beds.
year, representing a 4.3% decline. Hotel days at 3 and
4-Trident Villages were stable, with the 7.6% fall at                                 RevPAB (revenue per available bed) is an important business
3-Trident Villages offset by 19% growth at 4-Trident units.                           indicator, reflecting the effect of changes both in price mix
Although the occupancy rate was down 0.7 points                                       and in occupancy rates. For this reason, it is a key measure
overall, it improved in the 4-Trident category.                                       of how well customers are embracing the Group’s strategy.
The overall occupancy rate reflects major changes in the
                                                                                      In fiscal 2006, RevPAB increased by €7 per hotel day (9%),
Village base, particularly the shift upmarket. These
                                                                                      reflecting advances across all zones.
changes also affected the breakdown between Villages
open throughout the year (year-round capacity) and those
open during part of the year only (seasonal capacity).
Year-round capacity is generally more profitable, but it
tends to bring down the Group’s average occupancy rate.




                                                                                                                                     2006 Annual Report //   67
             STATEMENT OF INCOME                                                    2. Income by region and business
                                                                                    (in € millions)
             1. Revenue
                                                                                                                   EBITDAR             Operating income
             1.1 FISCAL 2006 VS. FISCAL 2005                                                                                               - Leisure
                                                                                                                2005      2006          2005         2006
                                             Winter         Summer      Full year    Europe                      151         164           18.0       21.4
     Reported revenue                       + 10.5%          + 1.2%      + 5.6%      Asia                         27          21            5.3        (1.6)
     Like-for-like revenue                   + 7.7%          + 2.3%      + 4.9%      Americas                     22          23           (2.2)       (1.6)
                                                                                     Sub-total Villages         200        208          21.1         18.2
             (in € millions)
                                                                                     Jet tours                     9          9               4.3      3.1
                                                                                     Other businesses             13         15              (0.7)     2.4
                                                                        1,679
                                                                                     Total                      222        232          24.8         23.7
                                                          - 37                       % of like-for-like revenue 13.8%   13.8%
         1,590                                + 115
                               + 11
                                                                                    2.1 VILLAGE EBITDAR
                                                                                    (in € millions)

                                Currency effect                                                                                    2005              2006
                                                      Volume effect
                                Price mix                                            Revenue     (1)
                                                                                                                                   1,288             1,346
      Fiscal 2005                                                     Fiscal 2006
                                                                                     Margin on variable costs                        791               823
                                                                                                         (2)
                                                                                     as a % of revenue                             60.2%             60.4%
             At constant exchange rates, fiscal 2006 revenue rose 4.9%,              Fixed selling costs                            (162)             (171)
             including €115 million from an improved price mix. The differ-          Fixed operating costs                          (395)             (405)
                                                                                     Other                                            (34)             (39)
             ence compared with the 5.6% growth on a reported basis was
             due to the €11 million currency effect, primarily related to the        EBITDAR - Leisure*                             200               208

             US dollar, Brazilian real and Mexican peso.
                                                                                     EBITDAR - Leisure (fiscal 2005)                                  200
                                                                                     Currency effect                                                     9
             1.2 LIKE-FOR-LIKE REVENUE BY REGION                                     Volume effect                                                     (34)
             AND BUSINESS (ISSUING ZONES)                                            Change in price mix                                                76
                                                                                     Impact of operating loss                                          (19)
             (in € millions)
                                                                                     Change in margin on variable costs                                 32
                                              2005           2006           2006
                                                                        vs. 2005     Currency effect                                                    (6)
                                                                                     Fixed selling costs                                                (7)
               Europe                          936            982       + 4.9%
                                                                                     Fixed operating costs                                              (7)
               Asia                            116            145      + 24.9%
                                                                                     Other                                                              (4)
               Americas                        206            196        - 5.2%
                                                                                     EBITDAR - Leisure (fiscal 2006)                                  208
               Villages                      1,258         1,323        + 5.1%
               Jet tours                       289            300        + 3.8%     (1) Revenue plus insurance settlements.
                                                                                    (2) Adjusted to exclude insurance settlements.
               Other businesses                 54             56        + 5.2%
                                                                                    *EBITDAR - Leisure: Earnings before interest, taxes, depreciation and
               Total                         1,601         1,679        + 4.9%
                                                                                    amortization and rents.


                                                                                    The favorable change in price mix contributed to a €32 million
                                                                                    increase in margin on variable costs.

                                                                                    Fixed selling costs rose €7 million, primarily reflecting higher
                                                                                    marketing and advertising costs in the Europe-Africa region.

                                                                                    Fixed operating costs increased by €7 million (1.8%). Adjusted
                                                                                    for changes in capacity, fixed costs per hotel day were 5.9%
                                                                                    higher, or just 2.6% higher based on a comparable number
                                                                                    of Villages.




68
                                                                                            Management Report

The increase was primarily due to:                                   EBITDAR - Leisure (fiscal 2005)                              27
• The rapid shift in the Village base, with the closure of entry-
                                                                     Currency effect                                                0
  level Villages.                                                    Volume effect                                                 18
• Service enhancements to support the upmarket strategy.             Change in price mix                                            0
• Exceptional increases in energy and insurance costs, as well       Impact of operating loss                                     (24)
  as certain other costs.                                            Change in margin on variable costs                            (6)
                                                                     Currency effect                                                0
                                                                     Fixed selling costs                                            0
2.2 VILLAGE EBITDAR BY REGION                                        Fixed operating costs                                         (1)
                                                                     Other                                                          1
2.2.1 EBITDAR - Leisure: Europe                                      EBITDAR - Leisure (fiscal 2006)                              21
(in € millions)
                                                                    (1) Revenue plus insurance settlements.
                                             2005         2006      (2) Adjusted to exclude insurance settlements.

 Revenue (1)                                 946           986
 Margin on variable costs                    543           568      In fiscal 2006, EBITDAR in the Asia region continued to be
 as a % of revenue (2)                      57.1%        57.5%      adversely affected by the previous year’s natural disasters; for
 Fixed selling costs                         (108)         (115)    example, the Kani Village did not fully open until the begin-
 Fixed operating costs                       (266)         (270)
                                                                    ning of the summer. This loss of income, more than twelve
 Other                                         (19)          (20)
                                                                    months after the tsunami, was not covered by insurance.
 EBITDAR - Leisure                           151           164
                                                                    Summer EBITDAR in Asia was stable compared with summer
                                                                    2005, when it included insurance settlements, and has
 EBITDAR - Leisure (fiscal 2005)                           151
                                                                    returned to summer 2004 levels.
 Currency effect                                              0
 Volume effect                                              (39)    2.2.3 EBITDAR - Leisure: Americas
 Change in price mix                                         69
                                                                    (in € millions)
 Impact of operating loss                                    (6)
 Change in margin on variable costs                          24                                              2005               2006
 Currency effect                                              1      Revenue (1)                              200                213
 Fixed selling costs                                         (7)     Margin on variable costs                 152                166
 Fixed operating costs                                       (4)     as a % of revenue(2)                   75.6%              76.0%
 Other                                                       (1)     Fixed selling costs                       (32)               (35)
 EBITDAR - Leisure (fiscal 2006)                           164       Fixed operating costs                     (89)               (95)
                                                                     Other                                      (9)               (13)
(1) Revenue plus insurance settlements.
(2) Adjusted to exclude insurance settlements.                       EBITDAR - Leisure                         22                 23


EBITDAR in the Europe region rose €13 million and EBITDAR            EBITDAR - Leisure (fiscal 2005)                              22
margin was 0.6 points higher. Growth was led by the upmarket         Currency effect                                                9
strategy and a favorable change in price mix.                        Volume effect                                                (13)
                                                                     Change in price mix                                            7
2.2.2 EBITDAR - Leisure: Asia                                        Impact of operating loss                                      11

(in € millions)                                                      Change in margin on variable costs                            14
                                                                     Currency effect                                               (7)
                                             2005         2006       Fixed selling costs                                            0
 Revenue (1)                                 142           146       Fixed operating costs                                         (2)
 Margin on variable costs                     94            89       Other                                                         (4)
 as a % of revenue (2)                      61.1%        60.6%
                                                                     EBITDAR - Leisure (fiscal 2006)                              23
 Fixed selling costs                             (22)       (22)
 Fixed operating costs                           (40)       (41)    (1) Revenue plus insurance settlements.
 Other                                             (6)        (5)   (2) Adjusted to exclude insurance settlements.

 EBITDAR - Leisure                               27          21
                                                                    EBITDAR in the Americas region rose slightly, despite the
                                                                    closure of the Cancún Village for reconstruction following
                                                                    hurricane Wilma, and the closure of La Caravelle during the
                                                                    summer for renovation.




                                                                                                                 2006 Annual Report //   69
     2.3 OTHER BUSINESSES                                                   3. Income statement
     2.3.1 Operating income - Leisure:                                      (in € millions)
     Jet tours and other businesses                                                                                2005          2005        2006
                                                                                                                             Pro forma
     (in € millions)
                                                                                                              Reported       incl. IAS    incl. IAS
                                             2005                 2006                                                         32/39        32/39

      Operating income - Leisure                                             Revenue                             1,590         1,590       1,679

      Jet tours                                4.3                  3.1      Operating income - Leisure              25            25           24
      Club Med Gym                             2.5                  4.4      Operating income -
                                                                             Management of assets                    89            89           40
      Club Med World                          (3.2)                (2.0)
                                                                             Other operating
      Total                                    3.6                 5.5       income & expense                        (33)         (33)         (29)
                                                                             Operating income                        81            81           35
     2.3.2 Jet tours income                                                  Finance costs and other
                                                                             financial income & expense              (38)         (45)         (32)
     (in € millions)
                                                                             Share of income of associates             3             3           3
                                             2005                 2006       Income tax expense                      (36)         (35)          (1)
                                                                             Minority interests                       (1)           (1)          0
      Revenue                                 295                  303
                                                                             Net income                                9            3            5
      Semi-net margin*                        38.7                36.9
      as a % of revenue                       13%                  12%
      Other costs                            (34.4)               (33.8)    Consolidated operating income, comprising operating income
      Operating income - Jet tours             4.3                 3.1      from leisure businesses and the management of assets and
     (*) Semi-net margin = gross margin (revenue less purchases) after      other operating income & expense, amounted to €35 million
         agency commissions.                                                in fiscal 2006. Operating income from the management of
                                                                            assets amounted to €40 million, which was lower than in
     • Jet tours ended fiscal 2006 with operating income of                 fiscal 2005 when an unusually high volume of asset refinanc-
       €3.1 million, down €1.2 million from the previous year. Winter       ing transactions was carried out.
       season operating income declined €3 million, due to a fall-
                                                                            3.1 FINANCE COSTS AND OTHER FINANCIAL
       off in business in Egypt and an unfavorable currency effect.
                                                                            INCOME & EXPENSE
       The company’s summer season operating income improved,
       however, to €4.5 million from €3 million in summer 2005.             (in € millions)

     • Club Med Gym’s operating income climbed to €4.4 million                                                     2005          2005        2006
       in fiscal 2006 from €2.5 million the previous year, reflecting                                                        Pro forma
                                                                                                               excl. IAS     incl. IAS    incl. IAS
       the success of marketing efforts to support the upmarket                                                  32/39         32/39        32/39
       strategy.                                                             OCEANE convertible/
                                                                             exchangeable bonds                      (16)         (22)         (21)
     2.4 REVENUE TO EBITDAR CONVERSION RATE
                                                                             Finance costs                           (17)         (18)         (12)
     (in € millions)                                                         Other                                     (1)         (2)          (4)
                                                                             Finance costs and other financial
                                                 2005      2006
                                                                             income & expense before
      Club Med EBITDAR                                                       exchange gains and losses               (34)         (41)         (37)
      Excluding operating loss                    162      187    + €25 m    Realized and unrealized
                                                                             exchange gains and losses                (4)          (4)           5
      Business interruption insurance
      settlements                                     38    21               Finance cost, net                       (38)         (45)         (32)
      Club Med EBITDAR                           200       208               Average debt                          (625)        (594)        (481)
      Other (Jet tours, Club Med Gym, etc.)       22        24               Reported cost of debt (1)           5.72%        7.12%        7.02%
      Consolidated EBITDAR                       222       232               Effective cost of debt (2)          5.72%        5.72%        5.76%

                                                                            (1) Reported cost of debt is calculated based on finance costs and other
     • Like-for-like consolidated revenue grew €78 million over the             financial income & expense adjusted for the effect of applying
                                                                                IAS 32 and IAS 39.
       fiscal year, including a €46 million increase in Village revenue
                                                                            (2) The effective cost is based on interest payments, as reported in
       excluding transportation.                                                the cash flow statement.
     • Club Med EBITDAR before insurance settlements was
       €25 million higher, or €22 million excluding transportation.         Finance costs and other financial income & expense
     • With EBITDAR up €22 million on revenue up €46 million, the           including the effect of applying IAS 32 and IAS 39 (financial
       conversion rate was 48%.                                             instruments) amounted to €32 million in fiscal 2006 compared
                                                                            with €45 million the previous year.



70
                                                                                        Management Report

The improvement can be explained as follows:                     INVESTMENTS AND DISPOSALS
- Finance costs declined in tandem with the reduction in
                                                                 (in € millions)
  average debt. However, application of IAS 32 and IAS 39
  to the OCEANE convertible/exchangeable bonds had a                                                         2005            2006
  significant impact. At 5.76%, the effective cost of debt was    Total Club Med investments                 (114)           (151)
  stable year-on-year.                                            Net of government grants
                                                                  and tax relief
- Realized and unrealized exchange gains and losses repre-
                                                                  Disposals and asset
  sented a net gain of €5 million. This was mainly attributa-     refinancing transactions                    245             143
  ble to the US dollar, for which the hedging rate was more       Investments net of disposals                131               (8)
  favorable than the average exchange rate for the year and
  whose year-end rate was more favorable than the rate at
                                                                 In fiscal 2006, the Group invested €151 million, net of govern-
  1 November 2005.
                                                                 ment grants of €7 million. A further €30 million was invested
Income tax expense declined in 2006 compared with 2005           by third parties, such as Gecina, owner of the La Plagne
when deferred tax assets were set off against tax on the         Village. The total included €20 million at La Caravelle, €15 mil-
exceptionally high disposal gains realized during the year.      lion at Cancún, €15 million at Les Boucaniers, €10 million at
                                                                 Kani, €3 million at Cervinia and €3 million at Trancoso, as well
Net income for fiscal 2006 came in at €5 million, up from
                                                                 as €14 million for the buyout of minority interests in the
€3 million the previous year.
                                                                 Cancún/Ixtapa/Sandpiper Villages and €6 million on informa-
                                                                 tion systems.
BALANCE SHEET
                                                                 In fiscal 2007, the main investments will concern the La Pointe
(in € millions)
                                                                 aux Canonniers, Ixtapa and Kos Villages.
 Assets                          1 Nov. 2005     31 Oct. 2006
                                    incl. IAS        incl. IAS   The Village upgrade program will be completed by the end
                                       32/39            32/39
                                                                 of fiscal 2008.
 Non-current assets:
 - Property, plant and equipment         986              951    Disposals in fiscal 2006 concerned:
 - Intangible assets                     182              182    • Villages that did not fit in with the upmarket strategy - such
 - Non-current financial assets           66               80      as Crested Butte, Flaine, Valbella and Cadaques - which
 Total non-current assets              1,234            1,213      were sold as going concerns.
 Government grants                       (22)             (28)   • Sale and operating leaseback transactions involving the
 Total assets                         1,212            1,185       Chamonix, Avoriaz and Les Deux Alpes Villages, under the
                                                                   Group’s asset refinancing strategy.
 Equity and liabilities          1 Nov. 2005     31 Oct. 2006
                                    incl. IAS        incl. IAS   PROPERTY PORTFOLIO (NET BOOK VALUE)
                                       32/39            32/39
 Equity                                  523              514    (in € millions)

 Provisions                               64               69                                                        December 2006
                                                                                                                       assumptions
 Deferred taxes, net                      60               51
 Working capital                         242              257     Assets available for sale                                     92
                                                                  Assets refinancable over the short
 Net debt                                323              294     and medium-term                                            310*
 Total equity and liabilities         1,212            1,185      Other assets
                                                                  (including assets refinancable
 Gearing                             61.8%            57.2%       over the longer term)                                       549
                                                                  Total property, plant and equipment                         951
- Equity contracted slightly to €514 million at 31 October       * Including around €100 million in secured debt.
  2006, including negative translation adjustments of around
  €15 million.                                                   Property, plant and equipment are divided into three categories:
- Net debt continued to decline, to €294 million, leading to
                                                                 1. Assets that do not fit in with the upmarket strategy, repre-
  an improvement in gearing to 57%.
                                                                 senting a carrying amount of €92 million at 31 October 2006.
- Working capital, which represents a net source of funds at
  Club Méditerranée, amounted to €257 million or 15% of          2. Assets that can be refinanced in the near term, with a
  revenue, roughly unchanged from 31 October 2005.               carrying amount of €310 million at 31 October 2006.
- Non-current assets amounted to €1,213 million at 31 October
  2006, an amount close to the year-earlier figure.



                                                                                                              2006 Annual Report //   71
     3. Other assets with a carrying amount of €549 million at                Investments were almost entirely self-financed by the increase
     31 October 2006, corresponding mainly to Villages that can-              in net cash from operations and the proceeds from asset
     not be refinanced in the near term. They include Villages                disposals, generating free cash flow of €39 million and a
     owned jointly with partners, Villages built on leasehold land,           €29 million reduction in net debt.
     restricted assets that cannot be sold in the near term and other
     items of property, plant and equipment.                                  SIGNIFICANT EVENTS OF THE YEAR

     VALUATION OF THE CLUB MED BRAND                                          A FASTER SHIFT IN THE VILLAGE BASE
     (in € millions)                                                          Club Med is vigorously pursuing its upmarket strategy. More
                                                                              than 50 Villages have been renovated over the past five years
                                          2002        2004           2006
                                                                              and around 15 more will be upgraded in the two years to
      Value of the Club Med brand          302            362         438
                                                                              come. This systematic move up the quality scale will be com-
                                                                              pleted at the end of 2008, when all of the Villages will be rated
     Club Méditerranée’s main asset - its brand - is not recognized           either 3 or 4-Tridents.
     in the consolidated balance sheet.
                                                                              In fiscal 2006, the Group decided to close five entry-level
     The brand was valued in fiscal 2006, 2004 and 2002 by UK-                Villages and prepared to upgrade seven Villages to 4-Trident
     based Brand Finance.                                                     status.
     The results of the latest valuation show that the brand has              Nearly €200 million has been committed to renovating exist-
     grown steadily in value, to €438 million or around €22-23 per            ing Villages and opening new ones, including La Caravelle
     share in fiscal 2006 from €20 per share in 2004.                         (€20 million), Cancún Yucatán (€15 million), Villars (€10 million),
     Brand Finance’s valuation does not take into account certain             La Plagne (€14 million) and Opio (27 million) that were tem-
     aspects of Club Méditerranée’s strategy that can be expect-              porarily closed during fiscal 2006.
     ed to add value to the brand, such as development opportu-               In fiscal 2006, €158 million was invested directly by Club
     nities in the vacation villa market and the Group’s strong               Méditerranée and more than €30 million indirectly by
     growth potential in Asia. As a result, the valuation may be con-         the Group’s real estate partners. In 2007, investments will
     sidered as conservative.                                                 total around €100 million by Club Méditerranée and some
                                                                              €100 million by partners.
     CASH FLOW STATEMENT
     (in € millions)                                                          Major product innovations
                                                                              In 2006, Bar & Snacking Included was rolled out to all the sea
                                            Fiscal 2005         Fiscal 2006
                                                                 (including   and sun Villages, giving Club Med a significant competitive
                                                                 IAS 32/39)
                                                                              advantage.
      Cash flow                                     15                 22
      Change in working capital                       9                22     Comfort à la carte has delivered the expected response to
                                                                              customers looking for quality and who want to choose their
      Change in provisions                           (2)                 3
                                                                              room comfort.
      Net cash from operations                      22                 47
      Investments                                 (114)               (151)   And lastly, the creation of Club Med Baby Welcome and Club
      Proceeds from disposals                      246                143     Med Passworld has effectively met the needs of families.
      Free cash flow                               154                 39
      Effect of changes in exchange                                           Major shift in the customer base and
      rates and other                                (4)               (10)   record satisfaction ratings
      Decrease in net debt                         150                  29*   The percentage of Club Med’s core target customers in
     *After taking into account the impact on net debt of applying IAS 32     France (the Top 12*) rose significantly in fiscal 2006, to 69%
     and IAS 39.                                                              of all French customers from 35% in fiscal 2003.

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




72
                                                                                           Management Report

4-Trident Villages, for example, gained 44,000 customers over      WINTER 2007
the year, an increase of 11%.

These gains in the core target segment helped to partially         CAPACITY BY CATEGORY AND REGION
offset the reduction in the number of entry-level beds. In         (in % and thousands of hotel days)
addition, average customer spend improved by nearly 12%.
                                                                                        Winter       Winter       Winter          2007
Lastly, measured customer satisfaction has hit record levels,                            2005         2006         2007       vs. 2006

especially in the 4-Trident Villages. The figures for "intend to    2 Tridents             6%            4%          3%
return" and "good value for the money" are also trending            3 Tridents            57%           53%         46%
                                                                    4 Tridents            35%           41%         50%
upwards.
                                                                    Other                  2%            2%          1%
                                                                    Total               100%         100%         100%
Two high-potential and fast
                                                                    Europe              2,984         3,011        2,919         - 3%
changing regions                                                    Asia                  786           844          927         9.8%
The Americas region has been repositioned in the upmarket           Americas            1,461         1,414        1,523         7.7%
family segment. Based on IPSOS surveys, the number of               Total worldwide 5,231            5,269        5,370         1.9%
potential Club Med customers in the United States has been
estimated at around 28 million people. Club Med enjoys high        The resegmentation process is continuing, with 3 and 4-Trident
local brand awareness, since nearly 90% of high-income             Villages now representing 96% of capacity. More importantly,
Americans have heard of the Club, far more than for the            for the first time this year, 4-Trident units represent half of total
Group’s major competitors. In 2008, the Club will offer 12 ren-    capacity.
ovated Villages in the region, including eight 4-Trident units.    Forecast capacity for the 2007 winter season is up 1.9% compared
Club Med is making significant inroads in Asia, gaining            with last winter, with variations from one region to another:
20,000 customers in China, Singapore, Hong Kong and Taiwan.        • In Europe, the 3% decline is mainly due to the closure of the
The move upmarket corresponds perfectly to the new demand            Opio Village for renovation.
from these customers, who want to vacation in exceptional          • In Asia, capacity will increase 10% this winter, with the full
locations and very comfortable accommodation. Club Med’s             reopening of the Kani Village and the conversion of the
objective is to welcome more than 100,000 GMs from these             Cherating Village in Malaysia to a year-round unit.
countries in 2008.                                                 • In the Americas, capacity will expand 8% despite the
                                                                     closure of Crested Butte, thanks to the reopening of the
In both the Americas and Asia, teams have been renewed and
                                                                     Cancún Village and the availability of total capacity at Les
strengthened, to ensure the strategy’s successful implemen-
                                                                     Boucaniers.
tation.

                                                                   The closure of year-round Villages for renovation leads to a
MAIN CHANGES IN THE VILLAGE BASE                                   loss of contribution while they are closed. The effect mainly
IN FISCAL 2006                                                     concerns fiscal 2006 and 2007, with:
The following Villages were sold or permanently closed             • In fiscal 2006, Les Boucaniers, Louxor, the first phase in the
in fiscal 2006:                                                      renovation of La Caravelle and Cancún, for the costs not
- Flaine (France)                                                    covered by insurance.
- Valbella (Switzerland)                                           • In fiscal 2007, the closure during the summer of La Pointe
- Cadaqués (Spain)                                                   aux Canonniers, Opio and Ixtapa for renovation, and the
- Crested Butte (USA)                                                final phase in the renovation of La Caravelle.
- Pakostane (Croatia)

The following Villages were refinanced through sale-and-
leaseback transactions:
- Chamonix (France)
- Avoriaz (France)
- Les Deux Alpes (France)
- Les Almadies (Senegal)




                                                                                                                 2006 Annual Report //   73
     BOOKINGS FOR WINTER 2007 COMPARED                                  ACQUISITIONS OF CONTROLLING AND
     WITH WINTER 2006, AS OF 9 DECEMBER 2006                            OTHER INTERESTS IN FRENCH COMPANIES
     (like-for-like revenue)                                            None.

                                                         Total as of
                                                   9 December 2006      DEPENDENCE ON PATENTS OR SUPPLY
      Europe                                                  + 8.9%    CONTRACTS
      Americas                                                + 0.6%
                                                                        None.
      Asia                                                   + 47.4%
      Total Club Med                                      + 10.2%
                                                                        EXCEPTIONAL EVENTS, CLAIMS
      Jet tours                                               + 2.0%
                                                                        AND LITIGATION
     Bookings are expressed as revenue at constant exchange             To the best of the Company’s knowledge, there are no claims,

     rates. As of 9 December 2006, winter 2007 bookings were up         litigation or exceptional events that could have a material adverse

     10.2% on the prior-year date.                                      effect on the results of operations, assets and liabilities or finan-
                                                                        cial position of the Company or the Group.
     In Asia, bookings are up by a strong 47.4%.

                                                                        MAIN COMPETITORS
     DIVIDEND
                                                                        Because Club Med is not a pure tour operator or a pure hotel
     No dividend will be paid in respect of fiscal 2006 (see "General
                                                                        group, unlike most companies in the tourism industry, it does not
     Information").
                                                                        have any direct competitors operating on a worldwide scale.

     OTHER INFORMATION                                                  The only companies offering anything close to a competing
                                                                        product are local in scope.
     DIRECTORS’ COMPENSATION
     (see "General Information").                                       SUBSEQUENT EVENTS
                                                                        None.
     OWNERSHIP STRUCTURE
     Based on the disclosures received pursuant to Articles L.233-7     RISK FACTORS
     and L.233-11 of the French Commercial Code, Richelieu              Club Méditerranée’s corporate risk management policy is
     Finance held more than 20% of the Company’s capital as of          designed to effectively protect both the interests of share-
     October 31, 2006 (information provided in accordance with          holders and customers and the environment. It is based on a
     Article L.233-12 of the Code).                                     map of critical operational risks (see Chairman’s report on
     At October 31, 2006, 277,305 shares were held in treasury,         internal control procedures) which serves to prioritize risks
     representing 1.4% of the capital.                                  based on their frequency and their financial and business
                                                                        impact.
     A shareholders’ pact was signed on 9 June 2006 between
     Accor (with 6% of the capital), Caisse de Dépôt et de Gestion
                                                                        1. Economic and geopolitical risks
     du Maroc through its subsidiary Fipar Holding (10% of the
                                                                        The Group’s vacation village operations are particularly sen-
     capital), Air France Finance (2% of the capital) and Icade
                                                                        sitive to economic cycles and weather conditions. Economic
     (4% of the capital). The total shares held by the members of
                                                                        slowdowns in the regions where the Group does business
     the pact represented 22% of the capital at the time of signa-
                                                                        adversely affect demand for leisure activities generally and for
     ture. On 1 October 2006, the percentage was reduced to 18%,
                                                                        vacation travel in particular. Economic-driven fluctuations in
     following the withdrawal of Icade whose participation was
                                                                        demand can cause significant changes in revenue. The relat-
     linked to the execution of a real estate transaction.
                                                                        ed risk is reduced by our business model which focuses on
     (See "General Information").                                       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.


74
                                                                                            Management Report

2. Environmental risks                                             3.2 LEGAL PROCEEDINGS AND EXCEPTIONAL EVENTS
                                                                   Information about legal proceedings and exceptional events
2.1 PREVENTION AND COMPLIANCE
                                                                   that may have, or have had in the recent past, significant effects
Environmental risk prevention and management
                                                                   on the group’s results of operations is provided in Appendix 10.
Our businesses do not give rise to any specific environmen-
                                                                   To the best of the Company’s knowledge, there are no other
tal risks. The risk of environmental damage caused by the
                                                                   legal proceedings pending or in progress that could have
technical installations at vacation villages is managed by
                                                                   a material impact on its business or results of operations.
performing regular inspections.
                                                                   Accounting policies for the recognition of provisions and
Due to the absence of material risks, no environmental pro-        liabilities are described in Appendix 10.
visions or warranties have been recognized in the fiscal 2006
accounts.                                                          4. Insurance - Risk coverage
More information about the Group’s sustainable development         Insurable risks are managed by taking out insurance cover
practices is provided in the Sustainable Development report,       at Group level. Risk management tools and global insurance
pages 38 to 64.                                                    programs have been set up in partnership with pools of
                                                                   leading insurers. Where necessary, separate cover is purchased
Compliance
                                                                   locally or for specific activities.
No provisions for environmental liabilities arising from court
decisions have been recorded in the fiscal 2006 financial state-   After the natural disasters of 2005, in fiscal 2006 we followed
ments of Club Méditerranée SA.                                     a policy of transferring risks to the insurance market whenev-
                                                                   er possible, without using a captive insurance or reinsurance
Objectives assigned to subsidiaries
                                                                   company.
Our subsidiaries outside France are required to apply our
general environmental policy. They are also encouraged to          The main global insurance programs are as follows:
share experience and best practices in the areas of business,      - Global Third-Party Liability Program, covering the Group’s
the environment and labor relations. We also obtain assur-          liability towards customers and other third parties. The max-
ance that our subsidiaries comply with local regulations.           imum insured value of €110 million has been maintained,
                                                                    based on the nature of our business, an overall assessment
3. Legal risks                                                      of the risks associated with Club Med sites and case law. The
                                                                    program provides worldwide cover. To reduce our exposure
3.1 LEGAL RISKS ARISING FROM THE GEOGRAPHIC
DIVERSIFICATION OF THE BUSINESS                                     to risks, in the interests of our customers, we have set up
                                                                    reporting systems providing detailed and summary informa-
The nature of our business and the fact that our operations are
                                                                    tion by Village, country and region, on the number and
conducted in a large number of countries with differing and
                                                                    circumstances of claims, as well as the related cost. This
sometimes contradictory regulations is a source of operating
                                                                    information ensures that immediate action is taken to
difficulties and can lead to disputes with suppliers, owners or
                                                                    implement preventive and safety measures.
local authorities.
Provisions are booked for the cost of identified risks, taking     - Property Damage and Business Interruption Program. This
into account the nature of the business and its international       program covers all risks affecting our assets, such as fire and
nature, as soon as the amounts involved can be reasonably           natural disasters. Coverage is capped at €100 million per
estimated.                                                          claim, based on the insurance values of assets at the Club
                                                                    Med sites, with lower caps applying in some specific cases
                                                                    depending on the type of risk.

                                                                   In 2006, we purchased insurance cover primarily through the
                                                                   Marsh global insurance brokerage network. The insurance
                                                                   pool for our property damage and business interruption pro-
                                                                   gram was lead-managed by Zurich Assurances and the
                                                                   London insurance market, and included ACE Europe, AIG
                                                                   and Swiss Ré International. The new property damage and
                                                                   business interruption program set up in January 2007 offers
                                                                   better cover at a more attractive price. The new program is
                                                                   lead-managed by ACE Europe.




                                                                                                               2006 Annual Report //   75
     The insurance pool for the 2006 third-party liability program            The financial ratios to be complied with under the bank
     is lead-managed by Generali and includes GAN, AWAC and                   covenants are as follows:
     ACE. In addition to insuring our own risks, we offer all of our
     customers throughout the world extensive assistance cover                - Off-balance sheet commitments           Less than €200 million
     purchased from Europ Assistance.                                         - Gearing                                           Less than 1
                                                                              - Leverage (net debt/Ebitda (as defined above))      See below
     5. Market risks
     In the normal course of business, we are exposed to various              Ratios applicable to the €70 million syndicated line of credit
     financial risks, including liquidity risks, market risks (particularly   and loan secured by the Club Med 2 cruise ship and the
     currency and interest rate risks) and credit risks. The Treasury         Da Balaïa Village*:
     and Financing unit of the Corporate Finance department is                                                       30 April     31 October
     responsible for managing liquidity, interest rate, currency and           2007                                     4.17             4.17
     counterparty risks at Group level.
                                                                               2008                                     3.88             3.88
     From time to time, we may use derivative financial instruments            2009 and beyond                          3.58             3.58
     to hedge currency risks arising in the course of our business            * Until 30 April 2008 for Da Balaïa.
     and interest rate risks on floating rate debt. In practice, these
     instruments are used primarily to hedge currency risks on                The covenants were complied with at 31 October 2006:
     future transactions. The Treasury and Financing unit identifies,
     assesses, manages and hedges financial risks in accordance               - Off-balance sheet commitments
     with the policies approved by the Audit Committee. Specific               (less than €200 million):                            €91 million
     rules have been drawn up and approved banning the use of                 - Gearing (less than 1):                                     0.57
     derivative instruments for trading purposes.                             - Leverage (net debt/Ebitda (as defined above))
                                                                               (less than 4.47):                                           3.26
     5.1 LIQUIDITY RISK
     Liquidity risk is managed by the Treasury and Finance unit with
                                                                              In addition the Group’s confirmed lines of credit and other
     the aim of ensuring that the Group will be able to replace its
                                                                              facilities include acceleration clauses that would apply in the
     sources of financing when they mature, while at the same time
                                                                              case of any breach of its covenants or significant asset sales
     optimizing annual borrowing costs.
                                                                              (see Note 19 to the consolidated financial statements).
     Diversified sources of financing are used, according to the
                                                                              5.2 INTEREST RATE RISK
     Group’s needs.
                                                                              A weekly debt reporting system has been set up, using Finance
     The categories and characteristics of debt and other interest-           Active software.
     bearing liabilities are described in Note 18 to the consolidated
     financial statements. The breakdown of financial liabilities by          The Group does not hold any material interest-bearing assets.
     maturity is presented in Note 19.3.                                      It is exposed to two types of interest rate risk:
     Loan agreements include covenants which, if breached,                    - Fair value risk on fixed rate net debt. This type of risk is not
     could result in the outstanding loan becoming immediately                 hedged. The carrying amount of financial assets and liabili-
     repayable.                                                                ties is not adjusted for changes in interest rate risk and fair
                                                                               value risk therefore corresponds to the opportunity cost of
     These covenants have been redefined, effective from                       a fall in rates.
     30 April 2006, to take into account the transition to                    - Cash flow risk on floating rate net debt, corresponding to
     International Financial Reporting Standards (IFRS). The                   the impact on finance costs of an increase in interest rates.
     covenants define EBITDA as Operating income - Leisure
     before depreciation, amortization and provisions.                        The Group has a combination of fixed and floating rate debt.




76
                                                                                            Management Report

In fiscal 2006, no interest rate hedges were set up as average        5.5 EQUITY RISK
floating rate net debt represented less than €50 million. Our         We do not hold any listed equities, apart from treasury stock
exposure to the risk of an increase in interest rates therefore       which is recorded as a deduction from equity. As a result, we
corresponded to this amount. A 100-basis point increase or            are not exposed to any risk of fluctuations in stock prices.
decrease in short-term interest rates would have the effect of
raising or lowering finance costs by €500,000.                        PARENT COMPANY
5.3 CURRENCY RISK                                                     The parent company of the Club Méditerranée Group is Club
The geographic diversification of our Villages and sales offices      Méditerranée SA. As well as acting as the Group holding
exposes us to the risk of fluctuations in the exchange rates          company, Club Méditerranée SA operates Villages under the
of our transaction currencies compared to our functional              Club Med brand in France and abroad.
currency.                                                             Consequently, its financial results and their year-on-year
To reduce this risk, we use derivative financial instruments to       change only partially express the Group’s performance and
hedge budgeted cash flows for the coming year. The policy             do not reflect the same trends as the consolidated financial
consists of:                                                          statements.
• Hedging the main currencies in which sales are denominated          Club Méditerranée SA ended the year with a net loss of €14
 (British pound, Japanese yen, Canadian dollar, Australian            million compared with net income of €94 million for the year
 dollar, Korean won, etc.).                                           ended 31 October 2005.
• Hedging our exposure to the US dollar, which is both a billing
 currency and a functional currency.                                  The loss was primarily due to the swing to net financial
• Not systematically hedging other functional currencies              expense of €9 million from net financial income of €94 million
 (Moroccan dirham, Turkish pound, Tunisian dinar, Indonesian          in fiscal 2005, following a change in the method of calculating
 rupee, Thai bath, etc.), which are purchased as and when             provisions on subsidiaries.
 required.

Hedging instruments consist of forward purchases and sales
of foreign currencies and non-deliverable forwards.
Our net exposure to currency risks on operating transactions
is presented in Note 19.5.2 to the consolidated financial
statements.

Our exposure to currency risks on external debt is limited and
intra-group financing is generally denominated in the sub-
sidiary’s functional currency. Changes in the value of hedges
of the net investment in foreign operations are recognized
directly in equity.

The Group’s net investment in foreign operations is exposed
to the risk of fluctuations in foreign currencies against the euro.
The impact of these fluctuations on net investments in inde-
pendent subsidiaries is recognized as a separate component
of equity. This risk is not hedged using derivative instruments.


5.4 CREDIT AND COUNTERPARTY RISK
Most customers pay for their vacation before they leave and
our exposure to credit risk on commercial transactions is
therefore limited.

Transactions involving derivative instruments and borrowings
are entered into with a wide range of leading counterparties.

Temporary cash surpluses, representing limited amounts,
are invested in certificates of deposit or Sicav mutual funds
purchased from leading banks.




                                                                                                                2006 Annual Report //   77
     2007 financial reporting calendar
     8 March 2007: Annual Shareholders’ Meeting and first-quarter revenue announcement

     8 June 2007: Interim results announcement

     September 2007: Third-quarter revenue announcement

     13 December 2007: Fiscal 2007 results announcement




78
                                                                                                               Chairman’s
                                                                                                                   report

Chairman’s Report
on the practices and procedures of the Board of
Directors and internal control procedures
This report has been drawn up in accordance with para-              - has not been a director of the Company for more than
graph 6 of Article L.225-37 of the French Commercial                 twelve years;
Code, as amended by Act 2005-842 of 26 July 2005.                   - is not an employee or corporate officer of the Company,
Its purpose is to report to shareholders on the condi-               nor an employee or director of its parent or one of its
tions underlying the preparation and organization of                 consolidated subsidiaries, and has not been one during the
the work of the Board of Directors ("the Board") and                 previous five years;
the internal control procedures set up by Club                      - is not a corporate officer of a company in which the
Méditerranée SA ("the Company").                                     Company is a corporate director, either directly or indirectly,
                                                                     or in which an employee appointed in that role, or a
I. PRACTICES AND PROCEDURES                                          corporate officer of the Company (currently in office or
                                                                     having held such office in the past five years), is a director;
The Board’s practices and procedures are governed by French
                                                                    - is not a customer, supplier, investment banker or commercial
law, the Company’s by-laws, and the internal rules of the Board
                                                                     banker (i) that is material for the Company or Group, or (ii)
and the Board Committees.
                                                                     for which the Company or Group represents a significant
                                                                     portion of the business of the director concerned;
1.1 MEMBERSHIP, PRACTICES AND
                                                                    - does not have close family ties with a corporate officer;
PROCEDURES                                                          - has not been an auditor of the Company within the previous
1.1.1 Members of the Board                                           five years;
Article 14 of the Company’s by-laws states that "The Company        - does not, in whole or in part, control the Company; for direc-
shall be administered by a Board of Directors comprising             tors holding in excess of 10% of the Company’s capital
between three and eighteen members".                                 and/or voting rights, the classification as independent takes
                                                                     into account the Company’s ownership structure and any
At 31 October 2006, the Board was composed of eleven
                                                                     potential conflict of interests.
voting directors and two non-voting directors. The directors’
biographies and details of their other directorships and func-      Based on these criteria, at its meeting on 28 September 2006
tions are provided on page 158.                                     the Board classified eight of the eleven directors as independent.

In compliance with its internal rules, the Board regularly checks
                                                                    1.1.2 Board practices and procedures
that its members include the requisite number of independent
directors, based on the independence criteria defined               INTERNAL RULES

in France’s Bouton report on corporate governance. In               At its meeting on 16 March 2005 the Board adopted a set of
accordance with these criteria, a director is deemed to be          internal rules governing its organization, practices and proce-
independent when he or she:                                         dures. These are based on French law, the Company’s by-laws
                                                                    and the recommendations set out in the France’s AFEP-
                                                                    MEDEF Corporate Governance Code for listed companies
                                                                    published in October 2003.




                                                                                                                2006 Annual Report //   79
     The internal rules stipulate that the Board should meet as          During fiscal 2006 the Board met four times with an average
     often as required in the Company’s interests. They describe         attendance rate of 85%. Each meeting lasted an average of
     the terms of reference and powers of the Board, define the          two hours.
     practices and procedures of the Board Committees, and
                                                                         The Company’s Chief Financial Officer and the Senior
     impose a duty on directors to treat as strictly confidential all
                                                                         Executive Vice-President - Europe-Africa & North America
     information obtained in their capacity as Board members, as
                                                                         attended all of the Board meetings.
     well as the duty to comply with the fundamental principles of
     independence, ethical conduct and integrity. The internal
                                                                         1.2 ROLE AND RESPONSIBILITIES OF THE
     rules also require each director to disclose to the Board any
     actual or potential conflict of interest in which he or she may
                                                                         BOARD AND BOARD COMMITTEES
     be directly or indirectly involved, and in such a case to abstain
     from taking part in any discussion and/or vote on the matters
                                                                         1.2.1 Role of the Board
     in question. In addition, they set out the rules applicable         In accordance with Article L.225-35 of the French Commercial
     to trading in the Company’s shares, as set out in Article           Code, the Board determines the Company’s strategy and
     L.621-18-2 of the French Monetary and Financial Code and            oversees its implementation. Except for the powers directly
     Articles 222-14 and 222-15 of the AMF’s General Regulations.        vested in shareholders, the Board considers all matters
                                                                         concerning the efficient management of the Company and
     The internal rules state that directors may participate in Board    makes all related decisions within the limits set by the
     meetings by videoconference or using other forms of                 Company’s corporate purpose.
     telecommunication technology (including conference calls
     and any other interactive means of electronic communication)        In fiscal 2006, the Board examined the financial statements
     that enable them to be identified and to effectively participate    of the Company and the Group for the year ended 31 October
     in the discussion and vote, subject to compliance with the          2005, approved the reports and resolutions to be presented
     applicable regulations. Accordingly, directors who take part        at the Annual Shareholders’ Meeting of 14 March 2006,
     in Board meetings through such means are deemed to be               reviewed the Group’s quarterly performance and results,
     present for the purposes of calculating the quorum and              reviewed the budget and the business plan, examined the
     voting majority, except for Board meetings held to approve          impact on the consolidated accounts of the transition to
     the financial statements of the Company and the Group and           International Financial Reporting Standards (IFRS), analyzed
     the related management report.                                      the financial statements of the Company and the Group for
                                                                         the first half of fiscal 2006, set up stock option plans for
     BOARD MEETINGS                                                      members of senior management and certain employees, and
     • Average period of notice for calling Board meetings               reviewed the plan drawn up with the aim of leveraging syner-
     The provisional schedule of meetings of the Board and Board         gies with the Accor group. The Board also examined and
     Committees is sent to each director at the beginning of the         approved capital expenditure requests (including for asset
     fiscal year. The average period of notice for calling these         acquisitions and hotel renovation projects) and planned
     meetings is approximately two weeks.                                disposals for amounts requiring the Board’s prior approval
                                                                         pursuant to its internal rules.
     • Chairman
     Board meetings are chaired by the Chairman of the Board or,         During the year the Board also reviewed the reports of the
     in his or her absence, by the Vice-Chairman or by a director        various Board Committees.
     designated as acting Chairman or by another director desig-
     nated by the Board. All of the meetings in fiscal 2006 were         1.2.2 Roles of the Board Committees
     chaired by the Chairman of the Board.                               At its meeting on 16 March 2005, the Board set up three stand-
     • Directors’ right to information                                   ing Committees whose role is to facilitate the work of the
     The Chairman of the Board is required to provide directors          Board and efficiently contribute to preparing Board decisions
     on a timely basis with any and all documents and information        – the Audit Committee, the Nominations and Compensation
     they may need to fulfill their duties.                              Committee and the Strategy Committee.

                                                                         The Board of Directors appoints the members of these
                                                                         Committees (including the Chairman) from among its members.




80
                                                                                                             Chairman’s
                                                                                                                 report
THE AUDIT COMMITTEE                                                 In addition the Audit Committee reviewed the work of the
The Audit Committee has four members – including three              internal auditors and their internal control assessments, and
independent members – who are appointed for their term of           gave its opinion on the internal audit plan.
office as director.                                                 Lastly, the Committee was informed of the work performed by
The current Audit Committee members are David Dautresme             the Internal Audit Department to update the Chairman of
(Chairman), Véronique Morali, Philippe Adam and Pascal              the Board’s report to shareholders on internal control.
Lebard. In accordance with best corporate governance prac-          THE NOMINATIONS AND COMPENSATION COMMITTEE
tice, no executive directors sit on the Audit Committee.
                                                                    The Nominations and Compensation Committee has three
The rules governing the Audit Committee’s organization,             members, all of whom are independent: Thierry de La Tour
modus operandi, tasks and duties are described in a specific        d’Artaise (Chairman), Anne-Claire Taittinger and Saud
Charter that was unanimously approved by the Committee’s            Al Sulaiman. In accordance with best corporate governance
members during its meeting of 8 June 2005. The Audit                practice, no executive directors sit on the Committee.
Committee is one of the key components of the corporate
                                                                    The roles and responsibilities of the Nominations and
governance structure set up by the Company. It is responsible
                                                                    Compensation Committee are to:
for assisting the Board with reviewing and approving the interim
                                                                    - Review candidates for election to the Board – either at its
and annual financial statements, as well as for advising on
                                                                     own initiative or on the request of the Board – based on
transactions or events that could have a material impact on
                                                                     the candidates’ skills, business experience, and economic,
the financial position of the Group or its subsidiaries in terms
                                                                     social and cultural background.
of commitments and/or risk.
                                                                    - Review candidates for the position of Chief Executive Officer
The roles and responsibilities of the Audit Committee are to:        and, where appropriate, Chief Operating Officer.
- Review the annual and interim financial statements of the         - Review the membership structure of Board Committees and
 Company and the Group, together with the related reports.           make related recommendations.
- Ensure that the data in these financial statements are consis-    - Recommend methods for determining the compensation
 tent with other information available to the Committee.             payable to the Chairman of the Board, the Vice-Chairman
- Ensure that the accounting policies used to prepare the            and the Chief Executive Officer and, at the Chairman’s
 financial statements are appropriate and have been applied          request, compensation payable to the Group’s Executive
 consistently from one period to the next.                           Vice-Presidents and senior executives.
- Check the effectiveness of internal reporting and control         - Review proposed stock option plans and stock grants for the
 procedures.                                                         management and employees of the Group (including exec-
- Analyze recent regulatory developments and assess their            utive directors).
 impact on the financial statements.                                - Obtain all the required information concerning the compen-
The Committee reviews the work performed by the Statutory            sation and status of Group executives.
Auditors. In addition, it examines audit service proposals and      - Make proposals and recommendations concerning atten-
makes recommendations concerning the appointment or                  dance fees and any other compensation and benefits for
re-appointment of the Statutory Auditors. At its meeting             members of the Board (including non-voting directors).
on 5 December 2006, the Audit Committee recommended                 The Nominations and Compensation Committee met twice
renewing the appointment of the current Auditors and their          in fiscal 2006, with a 100% attendance rate. During these
substitutes.                                                        meetings the Committee recommended that the Board grant
The Audit Committee met twice in fiscal 2006, with an average       250,000 stock options to executive directors and selected
attendance rate of 75%.                                             members of management. This recommendation was adopted
                                                                    by the Board at its meeting of 14 March 2006.
During these two meetings, which were dedicated to review-
ing the annual and interim financial statements, the Committee
checked that the closing process had gone smoothly and was
presented with a report on the work of the Statutory Auditors.
The Committee also examined (i) the tax audits in progress
within the Group, (ii) ongoing measures to rationalize the
Group’s legal structure by reducing the number of separate
companies, (iii) hedging operations, (iv) the Group’s real-estate
portfolio, and (v) refinancing operations.




                                                                                                              2006 Annual Report //   81
     THE STRATEGY COMMITTEE                                           • Any capital projects or asset disposals not included in the
     The Strategy Committee has eight members, five of whom            annual budget representing an aggregate amount of more
     are independent. The current Committee members are                than €9.2 million.
     Henri Giscard d’Estaing (Chairman), Véronique Morali,             - Purchases and sales – for cash or stock – of property, plant
     Philippe Adam, Mustapha Bakkoury, Paul Jeanbart, Aimery             and equipment, intangible assets, rights or securities, and
     Langlois-Meurinne, Pascal Lebard and Tetsuya Miyagawa               the creation of any and all companies, partnerships and
     (non-voting director).                                              business ventures, representing an investment or disposal
                                                                         proceeds in excess of €15.3 million. This restriction does
     The role of the Strategy Committee is to review:
                                                                         not apply, however, to related party transactions not
     - The main growth strategies of the Company and its
                                                                         governed by Article L.225-38 of the French Commercial
      subsidiaries, from both a financial and commercial perspec-
                                                                         Code.
      tive – focusing particularly on ensuring that changes to the
                                                                       - New loans and borrowings (including bond issues and
      product offering appropriately reflect the Company’s image
                                                                         short-term advances) in excess of €45.8 million.
      and corporate culture.
                                                                       - Transactions in settlement of claims or litigation repre-
     - The three-year business plan presented annually by the Chief
                                                                         senting over €6.1 million.
      Executive Officer.
                                                                      REPORTING RULES
     The Strategy Committee receives input from all of the Group’s
     corporate departments.                                           The Chief Executive Officer is required to report regularly to
                                                                      the Board on the use of his powers, particularly in relation to
     The Strategy Committee met once in fiscal 2006, with an          share buyback programs and the issuance of guarantees, as
     attendance rate of 89%. The purpose of the meeting – which       well as regularly updating the Board on specific matters such
     was held on 27 October 2006 – was to review and approve the      as changes in the Company’s ownership structure and strate-
     2007-2009 business plan.                                         gic partnerships.

     1.3 RESTRICTIONS ON THE POWERS                                   II. INTERNAL CONTROL PROCEDURES
     OF THE CHIEF EXECUTIVE OFFICER
     IMPOSED BY THE BOARD OF DIRECTORS                                2.1 DEFINING INTERNAL CONTROL
     RESTRICTIONS RESULTING FROM INTERNAL RULES                       OBJECTIVES
     At its first meeting, which was held on 16 March 2005, the       DESCRIPTION OF INTERNAL CONTROL OBJECTIVES
     Board decided to combine the functions of Chairman of the        According to the internal control reference framework pub-
     Board and Chief Executive Officer, and appointed Henri           lished on 31 October 2006 by the working group of the
     Giscard d’Estaing as Chairman and CEO. This decision             Autorité des Marchés Financiers, internal control is a system
     reflected the Board’s view that combining these two positions    developed and implemented by a company that provides
     would be the best way of ensuring the success of the Group’s     assurance concerning:
     upmarket strategy.                                               - The company’s compliance with the applicable laws and

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

     Code the Chief Executive Officer has the broadest powers to      - Application of senior management instructions and

     act on behalf of the Company under all circumstances within       strategic guidelines.

     the scope of the corporate purpose, except for those powers      - The effectiveness of internal processes, particularly those

     directly vested by law in shareholders and the Board of           contributing to the protection of assets.

     Directors. The Chief Executive Officer represents the Company    - The reliability of financial information.

     in its dealings with third parties.                              The system contributes to the overall control of the business,

     For internal purposes, the Board decided that certain trans-     the effectiveness of its operations and the efficient utilization

     actions and decisions require its prior approval due to their    of resources.

     nature and/or the amounts involved. These include:
     • The annual budget.
     • The 3-year business plan.




82
                                                                                                              Chairman’s
                                                                                                                  report
By helping to limit and manage the risk of the Company fail-       Internal Audit Charter
ing to meet its objectives, the internal control system plays a    The aim of the Internal Audit Charter is to define the role,
key role in the conduct and management of the business.            objectives and responsibilities of the Group’s Internal Audit
However, no system of internal control can provide an absolute     team and ensure that this team can perform its duties appro-
guarantee that the company’s objectives will be met.               priately.

Club Méditerranée’s internal control system is organized
                                                                   Procedures
on a decentralized basis, underpinned by rules relating to
                                                                   Accounting and financial procedures, as well as general
organization, strategies, procedures and practices aimed at
                                                                   procedures relating to each of the Group’s main businesses
controlling risks that may have a material impact on the
                                                                   are sent out to the various managers and their teams and are
Group’s assets or on its ability to achieve its objectives.
                                                                   centralized within the Internal Audit Department.
The purposes of the procedures in place within the Company
                                                                   The procedures concerning the Group’s Villages can be
and its subsidiaries are to:
                                                                   viewed on Club Med’s intranet and are regularly updated.
- Ensure that all acts of management, all transactions, and
 the behavior of all Company employees comply with the             Crisis management manual
 general strategic guidelines established by the Company’s         The purpose of this manual is to set out the procedures to
 corporate governance bodies, the applicable laws and              be applied in the event of a sensitive or emergency situation.
 regulations, and the Company’s corporate values, standards        Compiled by the Health, Safety and Security Department with
 and internal rules.                                               a view to both preventing and dealing with such events, the
- Protect the Group’s assets.                                      manual contains numerous examples of typical situations that
- Provide assurance that the accounting, financial and             may occur at the Group’s facilities or in its host countries,
 management information submitted to the Company’s                 including outbreaks of diseases, hostilities and natural disasters.
 corporate governance bodies gives a true and fair view of
                                                                   The manual is also used in all internal training sessions on
 the Company’s operations and financial position.
                                                                   crisis management and communication.
In order to meet these goals, internal control procedures in
each Business Unit extend to every level of the organization       2.2 MEETING INTERNAL CONTROL
and are the responsibility of the operating and corporate
                                                                   OBJECTIVES
departments.

THE CONTROL ENVIRONMENT                                            2.2.1 Internal control procedures
• Internal standards
                                                                   relating to operating controls and
                                                                   regulatory compliance
Code of Ethics and best practices
                                                                   OPERATING CONTROLS
Following a decision by the Executive Board on 23 June 1997,
the Group drew up a Code of Ethics in order to raise employ-       Effective operating controls consist of gauging client satisfac-
ee awareness about the fact that certain types of activities       tion and monitoring quality, as well as ensuring that the
and relationships are heavily restricted, and in some cases        Group’s global information systems are sustainable and
must be avoided at all costs. This Code covers topics such as      adequately backed up.
potential conflicts of interest, Group policy concerning gifts,    • Quality
benefits, invitations and payments to employees, as well as        Improving quality has always been an essential part of Club
the use of confidential information, compliance with applica-      Méditerranée’s corporate culture. For this reason, in recent
ble laws in the Group’s host countries and adherence to Group      years the Quality Department has taken steps to set up a struc-
strategy. A questionnaire is sent to all Group employees, in       tured process in line with developments concerning the
which they are required to answer yes or no to questions about     Company as well as its products and markets. This process
whether they (i) may have direct or indirect conflicts of inter-   hinges on tracking products and carefully assessing feedback
est with the Group, (ii) are prepared to comply with all aspects   from the Group’s customers (“GMs”).
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.




                                                                                                                2006 Annual Report //   83
     GM Feedback                                                         • Information systems
     GM Feedback is a satisfaction survey sent to all GMs around         The reservation system and related data, as well as Club
     the globe. Over 390,000 questionnaires are sent out, in nine        Méditerranée’s accounting system, are major assets for the
     different languages, and GMs can respond either by post or          Group. The Information Systems Department has set up the
     online via “e-Feedback”. The average response rate is 40%,          following procedures in order to minimize the risks of system
     with highs of 44% in France and 47% in Switzerland. The             downtime due to major failures, fire or site damage or other
     response rate is also very high for non-European customer           incidents:
     bases, such as the United States (31%).                             - All hardware and software components are split between
                                                                          two distinct but interconnected sites.
     GM Feedback is a valuable tool for monitoring progress made
                                                                         - Data is replicated in real time between the two sites and can
     by the Group and serves as an internal benchmark. The results
                                                                          be accessed indifferently by either of the two sites.
     are analyzed and taken into account in the day-to-day man-
                                                                         - A recovery plan has been drawn up so that key applications
     agement of the Villages and also in selecting long-term strate-
                                                                          such as reservations and accounting can be restarted with-
     gic options. The results are sent to a wide range of people
                                                                          out delay. Less important applications – including resource
     within the Group, from the Village Manager to the Senior
                                                                          management and decision-making tools – also form part of
     Management Committee, as well as to the operating depart-
                                                                          this plan wherever possible.
     ments concerned.
                                                                         Each information system user can store important data on a
     Quality standards
                                                                         secure server.
     Club Méditerranée required a set of quality standards that
     would be sufficiently rigorous to ensure consistent levels of       The Group’s information systems are accessed via an interna-
     service over time and from one Village to another, while also       tional telecommunications network that operates around
     being flexible enough to let the Group’s teams give free rein       the globe. Strict access controls prevent unauthorized
     to spontaneous and creative ideas. These standards – called         access to the Group’s systems from the computer terminals
     “Quali Signs” – were drafted by over 600 GOs throughout the         and work stations linked up to this network. The risk of an
     world. A manual was then compiled for each Village depart-          intruder hacking into the network and/or a centralized appli-
     ment, which can be viewed on the Group’s intranet. Quali            cation is assessed and tested on a periodic basis.
     Signs have also been put in place for Club Med Agencies and
                                                                         User profiles and access rights are managed jointly with the
     for visitor reception areas at the Company’s headquarters.
                                                                         Human Resources Department in order to ensure that only
     Practical guidelines have been drawn up for each Club               people within the Group can access its systems.
     Méditerranée profession in order to deliver the service quality
                                                                         REGULATORY COMPLIANCE – THE LEGAL AFFAIRS
     that customers expect and that complies with the Quali              AND INSURANCE DEPARTMENTS
     Signs standards. Procedures and best practices for more than
                                                                         • Structure
     110 of the Group’s professions were developed by experts in
                                                                         The role of the Legal Affairs Department is to protect and
     each field and grouped together as standards called “Pro
                                                                         safeguard the assets and operations of the Group as a whole,
     Signs”. The Human Resources, Purchasing and Safety depart-
                                                                         as well as to defend the interests of the Group, its officers and
     ments all contributed towards creating the Pro Signs, which
                                                                         employees in the performance of their duties, and to ensure
     define the duties of members of each hotel profession and
                                                                         that Club Méditerranée complies with local laws and regula-
     set out rules relating to attitudes, behavior and safety, as well
                                                                         tions in its host countries.
     as the procedures to be implemented before, during and after
     the season. A list of the available tools is also provided, with    The Americas and Asia regions each have their own Regional
     a view to continually enhancing the professional approach of        Legal Director who is responsible for protecting and defend-
     the Group’s GOs and GEs.                                            ing Club Méditerranée’s interests. The Group Legal Affairs
                                                                         Department performs this role for Europe and Africa.
     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.




84
                                                                                                               Chairman’s
                                                                                                                   report
The role of the Insurance Department – which reports to the          Villages and representative offices at country or regional level.
Group General Counsel – is to ensure that the Group has              Data is automatically transferred to the Group’s management
adequate insurance coverage in relation to the nature and            and consolidation system on a monthly basis.
extent of its risks. Risk management and insurance policies are
                                                                     The Group publishes financial information based on its
organized on a consolidated basis. The Group has set up risk
                                                                     internal reporting format. Accounting and financial informa-
management tools and global insurance programs with pools
                                                                     tion is prepared by the Finance Department which oversees
of top-ranking insurers, and specific insurance coverage is
                                                                     the work of the Accounting, Management Control, Treasury
taken out at a local level.
                                                                     & Financing, Tax and Internal Audit Departments. The Internal
In light of the specific nature of the US market, particularly in    Audit Department performs cross-business controls for all of
terms of liability and litigation, Club Méditerranée has set up      the Group’s operations and cash flows.
a local Risk Management department in that country which
                                                                     Each Business Unit has a Managing Director and a Finan-
works closely with the Group Insurance Department.
                                                                     cial/Management Control Department whose manager
• Procedures                                                         reports to the Executive Vice-President, Chief Financial Officer.
The Regional Legal Directors are required to notify the Group
                                                                     One of the main objectives of an internal control system is to
Legal Affairs Department of issues which are deemed to be
                                                                     contribute to ensuring that the financial statements of the
sensitive. A list of these sensitive issues is provided at the
                                                                     Company and the Group provide a true and fair view of the
beginning of each fiscal year and generally includes:
                                                                     Group’s assets, liabilities and results of operations as well as
- Significant arbitration or legal proceedings.
                                                                     a reasonable assessment of any potential risks to which the
- Any criminal proceedings taken against Club Méditerranée
                                                                     Group may be exposed.
 or any of its executives or employees.
- Growth projects requiring the authorization of the Board of        Club Méditerranée has set up a series of controls at each
 Directors or that involve a particular risk for the Group (e.g.     Business Unit in order to monitor the principal risks inherent
 legal or financial risks).                                          in their operations and the related financial consequences.
- Guarantees issued in the name of the Company and/or its            These controls include checks on the input of monthly
 subsidiaries and any liens or charges on the Group’s assets.        revenue figures, the tracking of capital expenditure and debt
- Material purchases or sales of property, plant and equip-          recovery data, as well as the monitoring of local tax regula-
 ment, intangible assets, rights or securities, and the creation     tions, purchases, and financial information reported by all of
 of companies, partnerships or other business ventures.              the Group’s host countries. They are performed regularly by
- Projects involving the creation of an entity in which the share-   members of the Finance Department at country, regional and
 holders have unlimited liability.                                   Group level.
- Any matters that could have a future impact on the Group’s         THE ACCOUNTING DEPARTMENT
 day-to-day operations or that raise issues of principle con-
                                                                     • Structure
 cerning the running of the Group.
                                                                     The Accounting Department organizes and plans all of the
- Any transactions between Club Méditerranée SA and any
                                                                     Group’s accounting tasks in order to ensure that consolidated
 one of its subsidiaries or between Group subsidiaries or
                                                                     data is consistent and reliable. This task is facilitated by the
 between companies with common directors.
                                                                     use of a Group chart of accounts.
- Any matter that is considered as needing to be brought to
 the attention of senior management as it could damage the           The Management Controller of each Village is responsible
 image of the Group or be contrary to its corporate ethics.          for accounting, management and internal control issues at
                                                                     his or her site, while the representative office in each country
2.2.2 Internal control procedures                                    deals with specific local issues and performs an accounting
covering the preparation and                                         oversight role.

processing of accounting and financial                               The Group produces monthly accounts.
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




                                                                                                                 2006 Annual Report //   85
     • Procedures                                                       The following controls are also performed on a monthly basis
     The main monthly accounting controls are as follows:               in coordination with the Management Control and Treasury
     - Suppliers: a check is carried out to ensure that the different   & Financing Departments:
      systems are correctly interfaced (trade payables balance in       - Reconciliation of revenue to sales data.
      the aged payables system and the trade payables balance           - Reconciliation of Operating profit – Leisure to profit reported
      in the general ledger system). A control is also performed         in the management accounts.
      on amounts due from suppliers.                                    - Capital expenditure analyses.
     - Trade receivables: the Sales Departments analyze and             - Analyses of finance costs and other financial income and
      explain any differences compared with the Group’s gen-             expense, including foreign exchange gains and losses.
      eral terms of sales, such as extended payment terms. The          - Net debt analyses.
      Receivables Accounting Department at the Head Office
                                                                        The Group’s transition to International Financial Reporting
      and the Finance Managers then check these explanations
                                                                        Standards was completed in fiscal 2006 and these standards
      based on the receivables ledgers.
                                                                        are now applied by all local entities for consolidated reporting
     - Checks performed by the Headquarters Accounting
                                                                        purposes.
      Department on current account balances between Club
      Méditerranée SA and other Group entities.                         THE MANAGEMENT CONTROL DEPARTMENT
     - Bank reconciliations.                                            • Structure
     - Revenue by country: the various entities validate that           The Management Control Department is responsible for
      revenue and receivables figures have been correctly               coordinating this function worldwide. Each region also has a
      entered by type of structure (Reseller or Agent) and that         management control department staffed by locally based
      data from the reservation system is properly fed into the         controllers.
      accounting system.
                                                                        • Procedures
     - A system has been set up to control the automatic interfaces
      with fixed asset management systems. Automatically gen-           Three-year business plan
      erated depreciation and amortization charges are checked          The rolling three-year business plan reflects the main changes
      on a monthly basis.                                               expected to affect the Group during the period as well as their
                                                                        financial impacts. The narrative section of the plan includes
     The Consolidation Department also performs the following
                                                                        data from market research carried out in the Group’s strategic
     key controls:
                                                                        countries and the related action plans. The business plan
     - Reconciliation of intra-group current accounts at Group level.
                                                                        schedules simulate the financial impacts of the Group’s strat-
     - Monthly analysis of the components of consolidated profit:
                                                                        egy and the macro-economic environment, including such
      Operating profit – Leisure, Operating profit – Management
                                                                        variables as growth in the tourism sector and changes in
      of assets, Other operating income & expense, Finance costs
                                                                        exchange rates.
      and other financial income & expense.
     - Reconciliation between the asset management system and           Rolled forward annually, the plan forms the basis for income
      the accounting system in order to ensure data consistency.        statement, balance sheet and cash flow projections.
      The consolidation system includes programmed controls to
                                                                        Budgetary process
      ensure that accounting flows such as increases, decreases
                                                                        The budgetary process – which is coordinated by the
      and reclassifications have been correctly recorded by the
                                                                        Management Control Department - begins at Village and sales
      various entities.
                                                                        office level. Local budgets are consolidated first by Business
     - Extensive balance sheet analyses, performed in March and
                                                                        Unit and then at Group level.
      September. At the interim and annual balance sheet dates
      in April and October an in-depth analysis is performed of all     The budgetary process is an effective internal control tool that
      balance sheet, off-balance sheet and cash flow statement          enables the Group to analyze all of its financial flows.
      items, and is subsequently published in the notes to the
                                                                        The budget is presented to the Board of Directors for approval
      financial statements.
                                                                        in October of each year.
     - Analyses of foreign exchange gains and losses, by currency
      pair.




86
                                                                                                               Chairman’s
                                                                                                                   report
A detailed monthly reporting process                                The Treasury & Financing Department has set up procedures
All entities submit monthly reporting packages. Each Business       aimed at limiting the risk of fraud and error concerning trans-
Unit presents its results for the month at a Senior Management      fers of funds. These procedures include strict rules applica-
Committee meeting. Monthly consolidated income state-               ble on an international scale for bank transfers to third parties,
ments are also produced, based on the management accounts           authorized signatories (including a double signature process)
which comprise the same underlying transaction data as the          and payments by bank card.
statutory accounts.
                                                                    The Group regularly checks that its cash pool is operating
Forecasts                                                           efficiently and tracks and analyzes bank charges.
The Management Control Department draws up forecasts for
                                                                    Tasks relating to financial market transactions are segregated
the remainder of the season based on actual figures for the
                                                                    with orders, execution and controls carried out by three
first two months and updated forecasts for the remaining
                                                                    different people.
months. This process enables the Group to assess the impact
of any changes in operations. The forecasts are revised after       All currency hedges are systematically presented to the Audit
each monthly close until the end of the season.                     Committee.

The main controls performed by the Management Control               THE TAX DEPARTMENT
Department are as follows:                                          • Structure
- Detailed analyses of revenue by outbound and inbound zone.        The Tax Department is responsible for coordinating interna-
- Detailed profitability analyses covering, in particular, trans-   tional tax issues, ensuring that taxation policies are applied
  port margins, operating margins, Village and Headquarters         consistently by each Business Unit and monitoring all tax audits
  cost controls.                                                    carried out on Group companies. At the level of the parent
- Reviews of employee numbers.                                      company, the Department ensures that the company complies
                                                                    with all its tax reporting obligations as head of the French tax
THE TREASURY & FINANCING DEPARTMENT
                                                                    group, monitors tax audits carried out on the companies in
• Structure
                                                                    the tax group and manages tax disputes. The American and
The Treasury & Financing Department is responsible for man-
                                                                    Asian regions have their own Tax Director who is responsible
aging the Group’s capital and liquid resources. As part of
                                                                    for these issues on a regional basis, while the Group Tax
this role it is responsible for relations with the banks, and for
                                                                    Department covers Europe and Africa.
managing cash flows, currency and interest rate risks, as well
as debt. It is also in charge of asset management and assists       • Procedures
the Development Department in arranging financing for new           - The Finance Directors in the national representative offices
projects.                                                            for the Europe-Africa region and the Tax Directors for the
                                                                     other regions have a duty to report any emerging tax issues.
• Procedures
                                                                    - Bi-monthly reporting to the Executive Vice-President, Chief
A monthly reporting system has been set up, covering funds
                                                                     Financial Officer.
generated by operations, debt and finance costs, cash fore-
                                                                    - Six-monthly reporting to the Finance Department, including
casts and currency and interest rate hedges.
                                                                     the following data for each country in the Europe-Africa
A summary of the Group’s dealings with its banks is drawn up         region – legal organization chart, taxable profit for each com-
– including details of fund flows and commitments, account           pany and intra-group current accounts, summary data sheets
movements and banking terms and conditions – to enable the           showing key figures for the previous period, an analysis of
Group to decide whether any changes are required, such as            exceptional transactions that could have a tax impact, and
adjusting currency and interest rate hedges or cash forecasts.       other events that may affect the Group’s accounts.
This reporting process is also used to closely monitor liquidity
risk.




                                                                                                                2006 Annual Report //   87
     - Six-monthly reporting to the Audit Committee on any tax         The audit program is presented twice a year to the Audit
      audits and/or disputes that could impact the Group’s             Committee along with a progress report and a summary of
      accounts.                                                        the audits performed since the start of the year.

     THE INTERNAL AUDIT DEPARTMENT                                     Internal audits are conducted in four phases:
     The Internal Audit Department ensures that internal control       - Collecting information on the entity or domain concerned.
     procedures are effectively conveyed and respected across the      - On-site checks to ensure that appropriate controls have been
     Group and verifies that they are properly applied throughout       set up to address the risk areas identified in the mapping
     the various departments. It also helps to enhance the Group’s      process and to assess the quality of internal controls.
     performance and operations by assisting the Executive             - Drawing up reports on the main identified weaknesses,
     Management team in its decision-making process.                    updating the risk map and proposing action plans. These
                                                                        reports are then sent to senior management and to the
     • Structure                                                        audited unit, and the internal auditors’ findings and recom-
     The Internal Audit Department is a centralized structure based     mendations are presented to two members of the Senior
     at the Company’s headquarters. It comprises six people who         Management Committee.
     carry out cross-functional audits of all of the Group’s opera-    - Follow-up to check that the internal auditors’ recommenda-
     tions and transaction flows.                                       tions have been implemented and, if necessary, to assist the
     The Internal Audit Department reports directly to the Executive    audited units with their risk management action plans.
     Vice-President, Chief Financial Officer.                          In 2005, the frequency of the audits carried out on the Group’s
     • Role and responsibilities                                       Villages by the Internal Audit team was stepped up, to sup-
     The internal auditors perform audits of specific functions or     port Club Méditerranée’s upmarket strategy and the imple-
     businesses at Group, Headquarters, country and Village level.     mentation of a leaner management organization in certain
     They coordinate their work with that of the Statutory Auditors.   Villages. The aim behind these more frequent audits was to
                                                                       ensure that new processes were being applied correctly. In
     The internal auditors’ activities cover:
                                                                       2006, the Internal Audit team continued to focus on auditing
     - Financial audits, which consist of reviewing the financial
                                                                       the Villages, which accounted for an average of 46% of the
      statements and examining the systems and rules set up to
                                                                       total time spent by the internal auditors.
      ensure the reliability of financial information.
                                                                       As part of the Group’s phased project to asses its internal
     - Operational audits, which include reviewing the various
                                                                       control procedures, two processes have been set up:
      cycles (such as sales, purchasing and human resources) and
                                                                       - In early 2006, questionnaires were developed summarizing
      assessing internal control procedures in order to obtain
                                                                        the main control areas in the Villages.
      assurance that the organization in place contributes to man-
      aging Group risks and meeting Group objectives.                  These questionnaires are filled in each month by the
                                                                       Management Controllers at each Village with input from
     - Specific engagements, corresponding to various one-off
                                                                       department managers, and are submitted to the country-level
      projects such as providing support for operations staff, or
                                                                       Finance manager. The questionnaires help to ensure that key
      organizational and diagnostic work.
                                                                       controls are carried out on a regular basis and that timely
     The Internal Audit Department also takes part in events such      corrective action is taken when necessary.
     as financial seminars and training sessions for both new and
                                                                       - After each internal audit of a Village or a national represen-
     experienced managers, with a view to relaying a control culture
                                                                        tative office, the entity is given marks out of 10. This enables
     throughout the Group and driving changes to improve the
                                                                        the Group to assess the internal controls in place, compare
     internal control and risk management environment.
                                                                        performance between the audited entities and measure their
     • Operational structure and procedures                             progress. The three follow-up audits carried out in fiscal 2006
     The Internal Audit Department draws up an annual audit pro-        showed that internal control processes are continuing to
     gram and an audit plan covering all of the Group’s operations.     improve and that the Department managers are much more
     The audit program is based on maps of the main risks at            aware of the importance of strictly implementing procedures.
     Group level and by country and domain (Human Resources,
     Purchasing, Legal/Tax/Asset Management, Sales, Accounting,
     Treasury, Information Systems, Geopolitical Risks/Quality/
     Security).




88
                                                                                                              Chairman’s
                                                                                                                  report
STATUTORY AUDITORS                                                   2.3.2 Other measures implemented
The Statutory Auditors certify the annual financial statements       to strengthen internal control
of Club Méditerranée SA and its subsidiaries and the annual
                                                                     PRODUCT INNOVATIONS
consolidated financial statements of the Group. They also per-
                                                                     As part of its continued drive to tighten control over revenue
form a limited review of the interim consolidated financial
                                                                     and in order to reduce the circulation of cash within the
statements and verify the information given in the interim
                                                                     Villages, the Group extended the “Bar & Snacking Included”
report. They attend meetings of the Audit Committee and are
                                                                     and “Club Med Pass” formulas to all of its Villages as from the
regularly informed of the work carried out by the Internal Audit
                                                                     summer of 2006. After paying a deposit, customers can use
team.
                                                                     the Club Med Pass to pay for drinks that are not included in
                                                                     the Bar & Snacking formula (such as champagne and VSOP)
2.3 RAISING AWARENESS OF INTERNAL
                                                                     as well as for additional services (such as spa treatments).
CONTROL
                                                                     NEW PURCHASING STRUCTURE
2.3.1 Rolling out the new Village                                    In line with its aim to enhance cost controls, the Group has set
organization to strengthen internal                                  up a Global Purchasing Department reporting to the Executive
control                                                              Vice-President, Chief Financial Officer. This new department
As part of its overall upmarket strategy, the new organization       uses a central purchasing system to monitor purchases in real
structure trialed at ten Villages in 2005 was rolled out on a per-   time and provide users with lists of products for which prices
manent basis to thirteen Villages in 2006. Under the new leaner      have been negotiated by product family purchasers. It also
organization structure, each Village Manager has just five direct    tracks implementation of action plans and savings on pur-
reports compared with an average of fifteen previously. The          chasing costs. The information system enables the Global
aim of this approach is to enhance the management of each            Purchasing Department to verify that negotiated contracts are
Village’s P&L by fully leveraging the available products and         being properly used in order to optimize purchases.
resources.
                                                                     CONCLUSION
The new organization is also more customer-focused, enabling         During the year, the Group continued to focus on raising
the Group to build the skill-sets of its GOs by providing train-     awareness of the risks inherent in its operations and of the
ing in specific skills and creating new professions.                 related internal control procedures. In 2007, Club Méditerranée
Introduction of the new Village organization led to the creation     plans to analyze its internal control procedures based on the
of a new recruitment/placement unit whose first season began         internal control reference framework published by the Working
in February 2006. The unit was tasked with improving the GO          Group of the French securities regulator (AMF) on 31 October
placement process and reducing turnover – an aim that was            2006.
achieved in the first season with the GO turnover rate decreas-
ing by 16%.

At the same time, the Group has created a new position of Cost
Controller reporting to the Village Management Controller.
The Cost Controller is responsible for closely monitoring the
Village’s P&L and ensuring that purchasing procedures are
correctly applied. The creation of this position as part of the
new Village structure will help the Management Controllers
fulfill their duty of ensuring compliance with internal control
processes.

The Group plans to roll out the new structure to 25 Villages
in 2007 and to all of the Villages by the end of 2009.




                                                                                                                2006 Annual Report //   89
     Statutory Auditors’ report
     on internal control
     Statutory Auditors’ report prepared in accordance with              We performed our procedures in accordance with profession-
     Article L. 225-235 of the French Commercial Code, on the            al guidelines applicable in France. Those guidelines require us
     report of the Chairman of the Board of Directors of Club            to perform procedures to assess the fairness of the informa-
     Méditerranée on internal control procedures related to the          tion set out in the Chairman’s report concerning the internal
     preparation and processing of accounting and financial              control procedures related to the preparation and processing
     information                                                         of financial and accounting information. These procedures
                                                                         included:

     YEAR ENDED 31 OCTOBER 2006                                          - Examining the objectives and general organization of the
                                                                          Company’s internal control environment and the internal con-
     To the shareholders,                                                 trol procedures related to the preparation and processing
     In our capacity as Statutory Auditors of Club Méditerranée and       of accounting and financial information, as described in the
     in accordance with the requirements of Article L. 225-235            Chairman’s report.
     of the French Commercial Code, we present below our                 - Acquiring an understanding of the work performed to
     report on the report prepared by the Chairman of the Board           support the information given in the report.
     of Directors of Club Méditerranée in application of Article
     L. 225-37 of the French Commercial Code for the year ended          Based on the procedures performed, we have no matters to

     31 October 2006.                                                    report concerning the information provided on the Company’s
                                                                         internal control procedures related to the preparation and
     In his report, the Chairman of the Board of Directors is required   processing of accounting and financial information, as con-
     to comment on the conditions applicable for the preparation         tained in the report of the Chairman of the Board of Directors
     and organization of the work carried out by the Board of            prepared in accordance with the final paragraph of Article
     Directors and the internal control procedures implemented           L. 225-37 of the French Commercial Code.
     within the Company.

     Our responsibility is to report to you our comments on the
     information contained in the Chairman’s report concerning the
     internal control procedures related to the preparation and
     processing of accounting and financial information.




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

                                                           The Statutory Auditors

                          Deloitte & Associés                                              Ernst & Young Audit
                Alain Pons    Dominique Jumaucourt                                             Pascal Macioce




90
Club Méditerranée Group
          Consolidated Financial
          Statements
           92 // CONSOLIDATED STATEMENTS OF INCOME
           93 // CONSOLIDATED BALANCE SHEETS
           94 // CONSOLIDATED CASH FLOW STATEMENT
           94 // CHANGE IN CONSOLIDATED NET DEBT
           95 // CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
           96 // NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           96 // Note 1 - General information
           96 // Note 2 - Summary of significant accounting policies,
                              scope of consolidation
          104   //   Note 3 - First-time adoption of IAS 32 and IAS 39
          104   //   Note 4 - Changes in scope of consolidation
          105   //   Note 5 - Segment information
          108   //   Note 6 - Goodwill
          109   //   Note 7 - Intangible assets
          110   //   Note 8 - Property, plant and equipment
          111   //   Note 9 - Non-current financial assets
          112   //   Note 10 - Assets held for sale
          113   //   Note 11 - Other receivables
          113   //   Note 12 - Cash and cash equivalents
          113   //   Note 13 - Equity
          114   //   Note 14 - Share-based payments
          115   //   Note 15 - Pension and other long-term benefits
          117   //   Note 16 - Provisions
          117   //   Note 17 - Income taxes
          119   //   Note 18 - Borrowings and other interest-bearing liabilities
          122   //   Note 19 - Financial instruments
          125   //   Note 20 - Other liabilities
          125   //   Note 21 - Employee benefits expense
          125   //   Note 22 - Operating income - Management of assets
          125   //   Note 23 - Other operating income & expense
          126   //   Note 24 - Finance cost, net
          126   //   Note 25 - Share of income of associates
          126   //   Note 26 - Earnings per share
          126   //   Note 27 - Notes to the consolidated cash flow statement
          127   //   Note 28 - Related party transactions
          127   //   Note 29 - Commitments and contingencies
          128   //   Note 30 - Transition to IFRS
          136   //   Note 31 - Scope of consolidation at 31 October 2006

          140 // AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL
                 STATEMENTS

          141 // GROUP STRUCTURE AS OF 31 OCTOBER 2006

                                                                       2006 Annual Report //   91
     Consolidated Statements
     of Income
     (in € millions)

                                                                             Notes                 2005              2006
                                                                                               excl. IAS
                                                                                                  32/39
       Revenue                                                            5.2 & 5.3              1,590              1,679
       Other income                                                                                  40                41
       Total income from ordinary activities                                                     1,630              1,720
       Purchases                                                                                   (721)             (751)
       External services                                                                           (350)             (377)
       Employee benefits expense                                                21                 (306)             (328)
       Taxes other than on income                                                                    (31)              (32)
       EBITDAR - Leisure                                                       2.1                 222               232
       Rent                                                                   29.2                 (125)             (142)
       Depreciation and amortization expense                                                         (70)              (63)
       Provision expense, net                                                                         (2)                (3)
       Operating income - Leisure                                              5.2                   25                24
       Operating income - Management of assets                                  22                   89                40
       Other operating income & expense                                        23                   (33)              (29)
       Operating income                                                        5.2                   81                35
       Finance cost, net                                                        24                  (38)              (32)
       Income before tax                                                                             43                  3
       Income tax expense                                                      17.1                 (36)                (1)
       Share of income of associates                                       9.1 & 25                   3                  3
       Net income                                                                                    10                  5
       Attributable: Equity holders of the parent                                                     9                  5
       Minority interest                                                      13.2                    1                  -


     (in €)

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


     If IAS 32 and IAS 39 had been applied from 1 November 2004, net income for fiscal 2005 would have amounted to €4 million,
     including €3 million attributable to equity holders of the parent.




92
                                                                    Consolidated Financial
                                                                               Statements

Consolidated Balance Sheets
ASSETS
(in € millions)

                                               Notes   31 October 2005     1 November 2005               31 October
                                                         excl. IAS 32/39      incl. IAS 32/39                  2006
 Goodwill                                         6                 103                  103                    103
 Intangible assets                                7                  79                   79                     79
 Property, plant and equipment                    8                 975                  975                    859
 Non-current financial assets                     9                  66                   66                     80
 Total fixed assets                                              1,223                1,223                   1,121
 Deferred tax assets                            17.2                 44                   42                      35
 Non-current assets                                              1,267                1,265                   1,156
 Inventories                                                         21                   21                     21
 Trade receivables                                                   66                   66                     81
 Other receivables                               11                  99                   96                    108
 Cash and cash equivalents                       12                 168                  160                    165
 Current assets                                                    365                  354                     467
 Assets held for sale                            10                  11                   11                      92
 Total assets                                                    1,632                1,619                   1,623



EQUITY AND LIABILITIES
(in € millions)

                                               Notes   31 October 2005     1 November 2005               31 October
                                                         excl. IAS 32/39      incl. IAS 32/39                  2006
 Share capital                                                       77                   77                      77
 Additional paid-in capital                                         562                  562                     562
 Retained earnings                                                 (194)                (179)                   (185)
 Net income for the year                                              9                    9                       5
 Equity attributable to shareholders           13.1                454                  469                     459
 Minority interest                             13.2                  54                   54                     55
 Total equity                                                      508                  523                     514
 Pensions and other long-term benefits           15                  26                   26                      28
 Long-term borrowings and other
 interest-bearing liabilities                    18                 455                  435                    346
 Other non-current liabilities                   20                  30                   30                     36
 Deferred tax liabilities                       17.2                 98                  102                     86
 Non-current liabilities                                           609                  593                     496
 Provisions                                      16                  50                   38                      41
 Borrowings and other
 interest-bearing liabilities                    18                  48                   48                    109
 Trade payables                                                     160                  160                    170
 Other current liabilities                       20                 164                  164                    177
 Customer prepayments                            20                  93                   93                    112
 Current liabilities                                               515                  503                     609
 Liabilities related to assets held for sale     10                                                                4
 Total equity and liabilities                                    1,632                1,619                   1,623




                                                                                                2006 Annual Report //   93
     Consolidated Cash Flow
     Statement
     (in € millions)

                                                                                        Notes                    2005    2006
                                                                                                      excl. IAS 32/39

      Cash flows from operating activities
      Net income                                                                                                  10        5
      Adjustments for:
      Depreciation, amortization and provisions                                           27.1                    83       70
      Share of income of associates                                                                                (3)      (4)
      Disposal (gains) and losses, net                                                                          (107)     (49)
      Finance costs and other financial income & expense                                                          38       32
      Income tax expense                                                                                          36         1
      Other                                                                                                         1       (4)
      Change in working capital (1)                                                                               12       24
      Cash generated from operations                                                                              70       75
      Interest paid                                                                                              (38)     (22)
      Income taxes paid                                                                                            (3)      (6)
      Net cash from operating activities                                                                          29       47

      Cash flows from investing activities
      Acquisitions of non-current assets (2)                                              27.2                  (114)    (151)
      Proceeds from disposals of non-current assets                                       27.3                   246      143
      Net cash from (used in) investing activities                                                              132        (8)
      Free cash flow                                                                                            161        39

      Cash flows from financing activities
      Proceeds from long-term borrowings                                                                         169      102
      Repayments of long-term borrowings                                                                        (320)    (118)
      Increase (decrease) in short-term bank loans                                                                 (5)     (12)
      Dividends paid and other                                                                                     (2)      (4)
      Net cash used in financing activities                                                                     (158)     (32)
      Effect of changes in exchange rates on cash and cash
      equivalents and other                                                                                        5       (2)

      Net increase in cash and cash equivalents                                                                    8        5
      Cash and cash equivalents at the beginning of period                                  12                   160     168
      Effect of a change in method (adoption of IAS 32 and IAS 39)
      on the opening balance sheet at 1 November 2005                                                              -       (8)
      Cash and cash equivalents at the end of period                                        12                   168     165

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




     Change in Consolidated Net Debt
     (in € millions)

                                                                                          18.1                   2005    2006
                                                                                                      excl. IAS 32/39
      Net debt at beginning of period                                                                           (485)    (335)
      Impact of the adoption of IAS 32 and IAS 39 on net debt
      at 1 November 2005                                                                                                   12
      Decrease in net debt                                                                                       150       29
      Net debt at end of period                                                                                 (335)    (294)




94
                                                                                   Consolidated Financial
                                                                                              Statements

Consolidated Statement
of Changes in Equity
(in € millions)

                                   Shares    Share    Additional   Treasury      Retained          Equity   Minority       Total
                              outstanding   capital     paid-in       stock      earnings    attributable   interest      equity
                                                         capital                   and net      to share-
                                                                               income for         holders
                                                                                  the year

 At 1 November 2004
 Excluding IAS 32/39         19,358,005        77          562            -         (217)           422         50         472
 Exchange differences
 on translating foreign
 operations                                                                            21             21          4           25
 Income and expenses
 recognized directly in
 equity                                                                                21             21          4           25
 Net income for the year                                                                9              9          1           10
 Total recognized
 income and expense
 for the period                                                                        30             30          5          35
 Share-based payments                                                                   2              2                       2
 Dividends                                                                                                        (1)         (1)
 At 31 October 2005
 Excluding IAS 32/39         19,358,005        77          562            -         (185)           454         54         508
 Effect of a change of
 method (adoption of
 IAS 32 & 39)                                                            (9)           24             15                      15
 At 1 November 2005
 Including IAS 32/39         19,358,005        77          562          (9)         (161)           469         54         523
 Gains (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         514




                                                                                                            2006 Annual Report //   95
     Notes to the Consolidated
     Financial Statements
     NOTE 1. GENERAL INFORMATION                                      The IFRSs applied to prepare the consolidated financial
                                                                      statements for the year ended 31 October 2006 correspond
     Club Méditerranée SA is a société anonyme (joint stock
                                                                      to the standards and interpretations whose application by
     corporation) governed by the laws of France. Its registered
                                                                      European Union companies at that date was mandatory.
     office is at 11, rue de Cambrai, 75957 Paris Cedex 19, France.
     Club Méditerranée shares are traded on the Euronext Paris        The Group decided not to early adopt any standard, revised
     First Market and are included in the SBF 120 index.              standard or interpretations applicable in accounting periods
                                                                      commencing after 31 October 2006. These include:
     The consolidated financial statements include the financial
     statements of Club Méditerranée SA and its subsidiaries          Standards, revised standards and interpretations applicable
     (“the Group”), and associated companies. The Company’s           by the Group as from 1 November 2006:
     fiscal year covers the twelve-month period ended 31 October.     - Amendment to IAS 19: Actuarial Gains and Losses, Group
     The subsidiaries’ financial statements cover the same period      Plans and Disclosures.
     and are prepared using consistent accounting policies.           - Amendment to IAS 39: Fair Value Option.
                                                                      - Amendment to IAS 39: Cash Flow Hedge Accounting of
     The Group is one of the world’s leading providers of
                                                                       Forecast Intragroup Transactions.
     all-inclusive vacation packages and also operates in related
                                                                      - IFRIC Interpretation 4: Determining Whether an Arrangement
     businesses (tour operating, fitness clubs and Club Med World).
                                                                       Contains a Lease.
     The consolidated financial statements for the year ended         - IFRIC Interpretation 8: Scope of IFRS 2.
     31 October 2006 were approved by the Board of Directors
                                                                      Standards, revised standards and interpretations applicable
     on 11 December 2006. All amounts are presented in millions
                                                                      by the Group as from 1 November 2007:
     of euros, unless otherwise specified.
                                                                      - Amendment to IAS 1: Capital Disclosures.
                                                                      - IFRS 7 – Financial Instruments: Disclosures.
     NOTE 2. SUMMARY OF SIGNIFICANT
                                                                      The practical implications of applying these standards, revised
             ACCOUNTING POLICIES,
                                                                      standards and interpretations and their effect on the consol-
             SCOPE OF CONSOLIDATION                                   idated financial statements are currently being assessed.

                                                                      In accordance with IFRS 1 – First-Time Adoption of IFRS, the
     2.1 SUMMARY OF SIGNIFICANT
                                                                      transition effects were recognized in the opening IFRS balance
     ACCOUNTING POLICIES
                                                                      sheet at 1 November 2004. Details of the transition effects
     In accordance with European Council Regulation 1606/2002/EC      on the opening and closing balance sheets and the income
     dated 19 July 2002, the consolidated financial statements        statement for fiscal 2005 are disclosed in Note 30.
     for the year ended 31 October 2006 have been prepared in
     accordance with the International Financial Reporting            2.1.1 Options chosen by the Group
     Standards (IFRSs), adopted by the European Union at that date.
                                                                      for the preparation of the opening
     Comparative financial information has been restated on the       balance sheet at 1 November 2004
     same basis for the year ended 31 October 2005, with the          Under IFRS 1 – First-Time Adoption of IFRS, certain optional
     exception of IAS 32 – Financial Instruments: Disclosure and      exemptions from full retrospective application of IFRSs are
     Presentation and IAS 39 – Financial Instruments:                 available to first-time adopters. In line with these exemptions,
     Recognition and Measurement, which have been applied as          the Group has elected to prepare its IFRS transition balance
     from 1 November 2005, as allowed under IFRS 1. Information       sheet at 1 November 2004 as follows:
     about the effects of applying these two standards as from
                                                                      - Business combinations carried out prior to 1 November 2004
     1 November 2005 is disclosed in Note 3.
                                                                       have not been restated.
                                                                      - Cumulative translation differences at the transition date have
                                                                       been reset to zero at the IFRS transition date by adjusting
                                                                       retained earnings.




96
                                                                                     Consolidated Financial
                                                                                                Statements
- Unrecognized actuarial gains and losses on pension and             - For non-current asset impairment tests, which are based on
 other long-term benefit obligations at the transition date           estimated future cash flows and assumptions concerning
 have been recognized directly in equity.                             growth rates and discount rates.
- Certain items of property, plant and equipment (land and           - For the determination of provisions for claims and litigation.
 buildings) have been measured at fair value at the transition       - For the calculation of pension and other long-term employee
 date.                                                                benefit obligations, which is based on actuarial assumptions.
- IFRS 2 has been applied only to stock options granted              - For the determination of deferred taxes, particularly in
 after 7 November 2002 that had not fully vested as of                assessing the recoverability of deferred tax assets.
 1 November 2005.
                                                                     2.1.4 Financial statement presentation
2.1.2 Accounting treatment chosen                                    In the consolidated income statement, is presented by nature
when IFRS permits alternative                                        of expense.
accounting treatment                                                 a - Income from ordinary activities
Certain standards offer a choice between applying a bench-           Revenue is recognized when it is probable that the economic
mark treatment and an allowed alternative treatment for              benefits associated with the transaction will flow to the Group
the recognition and measurement of assets and liabilities.           and the amount of revenue can be measured reliably.
The main treatments selected by the Group are as follows:
                                                                     Revenue from the sale of goods and services by fully consoli-
- Property, plant and equipment and intangible assets are            dated companies in the normal course of business is recognized
 measured using the cost model and not the fair value model          as follows:
 (IAS 16).                                                           • Service revenues: land package revenues are recognized
- The cost of inventories is determined using the weighted            over the period of service provision. Transport revenues are
 average cost formula (IAS 2).                                        recognized on the travel date. Other operating revenues are
- Actuarial gains and losses are recognized using the corridor        recognized in the period in which the transaction takes place.
 method, which consists of recognizing the portion that              • Sales of goods: revenue from the sale of goods is recognized
 exceeds the greater of 10% of the present value of the               when the significant risks and rewards of ownership of the
 benefit obligation and 10% of the fair value of the related          goods are transferred to the buyer.
 plan assets over the average remaining service lives of plan
                                                                     Other income includes mainly insurance settlements compen-
 participants (IAS 19).
                                                                     sating for business interruption losses.
- Borrowing costs that are directly attributable to the acqui-
 sition, construction or production of qualifying assets are         b - Operating income
 capitalized as part of the cost of those assets (IAS 23).           Operating income is broken down in the statement of income
                                                                     between:
2.1.3 Measurement methods applied                                    - Operating income – Leisure, corresponding to all the
for the preparation of the consolidated                               income and expenses directly related to the Group’s
financial statements                                                  operations. In order to analyse the Village’s performance
                                                                      (wherever owned or leased), the Group monitors is using
The consolidated financial statements have been prepared
                                                                      the EBIDAR – Leisure.
according to a historical cost basis, except for derivative finan-
                                                                     - Operating income – Asset Management, corresponding
cial instruments which have been measured at fair value. As
                                                                      to all the costs related to changes in the scope of consoli-
explained above, the Group opted to measure certain laws
                                                                      dation, including gains and losses on disposals of assets,
and buildings at the IFRS transition date at their fair value.
                                                                      the costs of temporary and permanent Village closing, all
The preparation of financial statements in accordance with            the costs related to new Village opening, and impairment
IFRS requires management to make certain estimates and                losses (operating and marketing units).
assumptions. These assumptions are determined on a going             - Other operating income & expense, corresponding mainly
concern basis according to the information available at the           to restructuring costs, claims and litigation, the impact of
time. At each period-end, assumptions and estimates may be            natural disasters and credit card costs.
revised to take into account any changes in circumstances or
any new information that has come to light. Actual results may
differ from these estimates and assumptions. Estimates and
assumptions are used in particular:




                                                                                                                 2006 Annual Report //   97
     c - Finance cost, net                                              Société Martiniquaise des Villages de Vacances, which is
     This item includes:                                                10%-owned, is also fully consolidated because the majority of
     - Interest costs, net, corresponding to interest expense and       associated risks are assumed by the Group.
      income on net debt.
                                                                        New subsidiaries are consolidated from the acquisition date,
     - Bank charges.
                                                                        being the date on which the Group obtains and continue to
     - Discounting adjustments to provisions for pensions and
                                                                        be consolidated until the date that such control ceases. The
      other long-term employee benefit obligations.
                                                                        results of consolidated subsidiaries acquired or divested
     - Gains and losses on derivative instruments.
                                                                        during the year are included in consolidated income from
     - Exchange gains and losses.
                                                                        the acquisition date or up to the divestment date.
     - Dividends received from non-consolidated companies.
     - Impairment charges on financial assets.                          All intra-group balances and transactions, income and
                                                                        expenses are eliminated in full, together with the results from
     d - Earnings per share
                                                                        intra-group transactions recognized in assets.
     Basic earnings per share corresponds to net income attrib-
     utable to equity holders divided by the weighted average           The list of consolidated companies and the consolidation
     number of shares outstanding during the period, net of             methods applied are presented in Note 31.
     treasury shares.
                                                                        2.3 FOREIGN CURRENCY TRANSLATION
     Diluted earnings per share takes into account dilutive poten-
     tial ordinary shares, corresponding in the Group’s case to stock   2.3.1 Translation of the financial
     options exercisable for existing shares and convertible bonds.
                                                                        statements of foreign subsidiaries
     The average number of potential dilutive shares correspon-         The consolidated financial statements are presented in euros.
     ding to stock options is determined by the treasury stock          The financial statements of independent subsidiaries whose
     method. The calculation only includes options that are in          functional currency is not the euro are translated into euros by
     the money (i.e. options whose exercise price is higher than        the closing rate method, as follows:
     the average Club Méditerranée share price for the period).         - Balance sheet items are translated at the closing exchange
     The exercise price takes into account the fair value of the         rate at the balance sheet date.
     services remaining to be received, determined in accordance        - Income statement and cash flow statement items are
     with IFRS 2.                                                        translated at the average rate for the period.
     For convertible bonds, income attributable to shareholders         The resulting exchange differences are recognized as a
     is adjusted for the interest paid on the bonds, net of tax. This   separate component of equity, under “Translation reserve”.
     adjusted income is then divided by the average number of
                                                                        The financial statements of operating and real estate com-
     shares that would be issued assuming conversion of all the
                                                                        panies that are not independent from the parent, Club
     outstanding bonds. Potential ordinary shares corresponding
                                                                        Méditerranée SA, are translated using the historical rate
     to bond conversions are included in the calculation only if they
                                                                        method, as follows:
     are dilutive.
                                                                        - Non-current assets and the corresponding amortization and
                                                                         depreciation charges are translated at the historical rate,
     2.2 BASIS OF CONSOLIDATION
                                                                         being the exchange rate at the transaction date.
     All companies that are controlled by Club Méditerranée,            - Monetary assets and liabilities are translated at the closing
     directly or indirectly, are fully consolidated. Control is the      exchange rate.
     power to govern the financial and operating policies of an         - Income statement items (other than amortization and
     entity so as to obtain benefits from its activities.                depreciation charges) and cash flow statement items are
     Companies over which the Group exercises significant influ-         translated at the average rate for the period.
     ence (“associates”) are accounted for by the equity method.        The resulting exchange differences are recorded in finance
     Holiday Villages of Thailand, which is 49.21%-owned, and           cost, net.
     Recreational Villages, 21%-owned, are fully consolidated
     because Club Méditerranée exercises de facto control.




98
                                                                                        Consolidated Financial
                                                                                                   Statements
2.3.2 Transactions in currencies                                       All other intangible assets (software and licenses) are assessed
                                                                       as having a finite life and are amortized over their estimated
other than the functional currency
                                                                       useful life. The main useful lives are as follows:
Exchange differences on monetary assets and liabilities
that are an integral part of the Group’s net investment in a            Financial information system                        3 to 15 years
consolidated foreign operation are taken directly to equity             Marketing system                                    3 to 24 years
until the foreign operation is sold or liquidated.                      Other software                                       3 to 8 years
                                                                        Other intangible assets                             3 to 10 years
The same accounting treatment applies to monetary items
that are receivable from or payable to a foreign operation for
                                                                       These useful lives are reviewed at each year-end and adjusted
which settlement is neither planned nor likely to occur in the
                                                                       if necessary. The adjustments are treated as a change in
foreseeable future, as these items are considered as repre-
                                                                       accounting estimates and are made prospectively.
senting, in substance, part of the Group’s net investment in
the foreign operation.                                                 Intangible assets with a finite life are tested for impairment
                                                                       whenever there is an indication that their recoverable amount
2.4 BUSINESS COMBINATIONS, GOODWILL                                    may be less than their carrying amount (see Note 2.7
                                                                       “Impairment of assets”).
AND INTANGIBLE ASSETS

2.4.1 Business combinations                                            2.5 PROPERTY, PLANT AND EQUIPMENT
and goodwill                                                           At the IFRS transition date (1 November 2004), certain items
Business combinations recorded prior to 1 November 2004                of land and buildings were measured at fair value, in accor-
have not been retrospectively restated in accordance with              dance with the option available under IFRS 1.
IFRS. Business combinations carried out since that date are            Property, plant and equipment are measured using the cost
accounted for using the acquisition accounting method, by              model, and are therefore stated at cost less accumulated
measuring the assets acquired and liabilities and contingent           depreciation and any accumulated impairment losses. Cost
liabilities assumed at their fair value at the date of the combi-      corresponds to the asset’s purchase or production cost
nation.                                                                plus the directly attributable costs of bringing the asset to
The excess of the cost of the business combination over the            the location and condition necessary for it to be capable of
Group’s interest in the net fair value of the identifiable assets,     operating in the manner intended. Production cost includes
liabilities and contingent liabilities of the acquired entity at the   materials and direct labor, as well as borrowing costs that
date of the combination is recognized as goodwill.                     are directly attributable to the construction or production of
                                                                       the asset.
For business combinations not achieved in stages, minority
interest in the identifiable assets and liabilities of the acquired    Property, plant and equipment are depreciated on a straight-
entity are also measured at fair value.                                line basis over their estimated useful lives. Villages are expected
                                                                       to be used throughout their useful life and depreciation is
2.4.2 Intangible assets                                                therefore calculated without deducting any residual value.
                                                                       Useful lives are reviewed at each year-end and adjusted if
Intangible assets consist mainly of brands, lease premiums and
                                                                       necessary. The adjustments are treated as a change in account-
software. Purchased intangible assets are carried at cost less
                                                                       ing estimates and are made prospectively.
accumulated amortization and any accumulated impairment
losses.                                                                The individual parts of each item of property, plant and equip-
                                                                       ment are recognized separately when their estimated useful
Intangible assets are analyzed to determine whether they have
                                                                       life is different from that of the asset as a whole.
a finite or indefinite life. Based on this analysis, the Jet tours
brand and lease premiums in France have been qualified as
having an indefinite life. Consequently, they are not amortized
but are tested for impairment at least once a year and when-
ever events or circumstances indicate that their recoverable
amount may be less than their carrying amount, in accordance
with the principle described in Note 2.7 “Impairment of assets”.




                                                                                                                    2006 Annual Report //   99
      The main useful lives are as follows:                                 2.7 IMPAIRMENT OF ASSETS

       Groundworks, foundations and structures                50 years      2.7.1 Goodwill and intangible assets
       Roof structures and coverings                          30 years
       External and internal walls                            25 years
                                                                            with indefinite life
       Utility installations                                                In accordance with IAS 36 – Impairment of Assets, goodwill
       (plumbing, electricity, heating, etc.)                 20 years      and intangible assets with an indefinite life are tested for
       Fixed hotel equipment                                  15 years
                                                                            impairment annually and whenever there is an indication that
       Fixtures and fittings (joinery, wall and
       floor coverings, windows, etc.)                        10 years      their recoverable amount may be less than their carrying
       Other                                             3 to 10 years      amount.

                                                                            For impairment testing purposes, goodwill is allocated to
      Property, plant and equipment are tested for impairment
                                                                            the cash-generating unit to which it relates. A cash-generating
      whenever there is an indication that their recoverable amount
                                                                            unit (CGU) is the smallest identifiable group of assets at
      may be less than their carrying amount (see Note 2.7
                                                                            the level at which the Group organizes its businesses and
      “Impairment of assets”).
                                                                            analyzes their results. Goodwill related to the Village business
      Finance leases that transfer substantially all the risks and          is allocated and analyzed by region (see Note 5 “Segment
      rewards of ownership of the assets to the lessee are recog-           information”). Goodwill related to the other businesses (tour
      nized as assets.                                                      operating, Club Med Gym, etc.) is tested for impairment at the
                                                                            level of these businesses.
      2.6 LEASES                                                            Impairment tests are based on recoverable amounts estimated
      Leases are classified as either finance leases or operating           by reference to market multiples (to determine estimated
      leases based on the substance of the transaction. Leases are          fair value less costs to sell) and discounted cash flows (to deter-
      classified as finance leases if they transfer substantially all the   mine estimated value in use) (see Note 2.7.2).
      risks and rewards of ownership to the lessee. All other leases
                                                                            When the CGU’s recoverable amount determined by the above
      are classified as operating leases.
                                                                            methods is less than its carrying amount, an impairment loss is
                                                                            recognized to write down the CGU carrying amount to recover-
      Finance leases                                                        able amount, defined as the higher of value in use and fair value
      Finance leases that transfer substantially all the risks and          less costs to sell. Impairment losses are allocated first to the
      rewards of ownership of the assets to the Group are initially         goodwill.
      recognized in the balance sheet at amounts equal to the fair
                                                                            Estimates of recoverable amounts are based on assumptions
      value of the leased asset or, if lower, the present value of the
                                                                            concerning Village occupancy rates, growth rates for the region
      minimum lease payments, each determined at the inception
                                                                            or the business, perpetual growth rates and discount rates.
      of the lease. Lease payments are apportioned between
      the finance charge and the redemption of the finance lease
      obligation. The finance charge is allocated to each period
                                                                            2.7.2 Property, plant and equipment
      during the lease term so as to produce a constant periodic
                                                                            and depreciable intangible assets
      rate of interest. Finance charges are recorded directly in the        These assets are tested for impairment whenever there is an
      income statement. Assets under finance leases are depre-              indication that their recoverable amount may be less than their
      ciated over their estimated useful life or the lease tenue, if        carrying amount. Indications of impairment include:
      shorten and there is no reasonable certainty that the Group           - Evidence that an asset’s physical condition has deteriorated
      will obtain ownership by the end of the lease term, they are           beyond the effects of normal wear and tear.
      fully depreciated over the shorter of the lease term and their        - Plans to discontinue or restructure the operation to which the
      useful life.                                                           asset belongs.
                                                                            - Evidence that the asset’s economic performance is worse than
      Operating leases                                                       expected.
                                                                            - Changes in the economic or legal environment, leading to a
      Leases that do not transfer substantially all the risks and
                                                                             significant decline in the asset’s market value.
      rewards of ownership to the lessee are classified as oper-
      ating leases. Lease payments under operating leases are
      recognized as an expense on a straight-line basis over the
      lease term.




100
                                                                                     Consolidated Financial
                                                                                                Statements
The Group has determined that each Village represents               Other financial assets are classified as available-for-sale
a CGU. Impairment tests are therefore performed Village             financial assets and measured at fair value. Gains and losses
by Village, whenever there is an indication that their recov-       arising on remeasurement at fair value are recognized directly
erable amount may be less than their carrying amount.               in equity until the asset is sold. The fair value of listed securi-
Recoverable amount corresponds to the higher of the Village’s       ties corresponds to their market value. The fair value of unlist-
fair value less costs to sell and its value in use.                 ed securities corresponds to their estimated value in use,
                                                                    determined using the most appropriate financial criteria for
Fair value is estimated based on independent valuations or
                                                                    the issuer’s specific situation. When there is objective evidence
earnings multiples. Value in use is determined by estimating
                                                                    that available-for-sale financial assets have to be impaired, the
the future cash flows expected to be derived from the asset.
                                                                    cumulative loss that had been recognized directly in equity
Estimates of future cash flows are based on the budget and
                                                                    is transfered from equity to statement of income. Investments
three-year business plan, and on a growth rate beyond that
                                                                    in non-consolidated companies are classified as available-
period equal to inflation, taking into account the discounted
                                                                    for-sale financial assets.
present value of the asset’s residual value at the end of its
estimated use.
                                                                    2.9 NON-CURRENT ASSETS HELD FOR SALE
If the carrying amount of a Village’s assets is greater than the
                                                                    In accordance with IFRS 5, non-current assets and groups of
Village’s recoverable amount, an impairment loss is recorded
                                                                    non-current assets (disposal groups) are classified as held for
for the difference. In subsequent periods, if there is indication
                                                                    sale when their carrying amount will be recovered principally
that condition that lead to impairement have changed, the
                                                                    through a sale transaction rather than through continuing use.
impairment may be reversed. Impairement losses are also
                                                                    This is considered to be the case when (i) the asset (or disposal
recorded on assets that are considered as being permanently
                                                                    group) is available for immediate sale in its present condition,
impaired.
                                                                    (ii) (or disposal group) and a plan to sell the asset has been
                                                                    initiated by management, and (iii) its sale is highly probable.
2.8 AVAILABLE-FOR-SALE FINANCIAL ASSETS
                                                                    Non-current assets (and disposal groups) classified as held for
AND OTHER FINANCIAL ASSETS
                                                                    sale are measured at the lower of their carrying amount prior
Financial assets are classified in four categories in accordance
                                                                    to reclassification and fair value less costs to sell. They are
with IAS 39, as follows:
                                                                    not depreciated.
- Financial assets at fair value through profit or loss.
- Held-to-maturity investments.                                     Non-current assets held for sale and the related liabilities are
- Loans and receivables.                                            presented on separate lines of the balance sheet.
- Available-for-sale financial assets.
                                                                    2.10 INVENTORIES
Financial assets are initially recognized at cost, being the
fair value of the consideration paid plus directly attributable     Inventories are measured at the lower of cost, calculated by
transaction costs. Their subsequent measurement depends             the weighted average cost method, and net realizable value.
on their classification.                                            Net realizable value is the estimated selling price in the
                                                                    ordinary course of business less the estimated costs of com-
Financial assets at fair value through profit or loss are classi-
                                                                    pletion and the estimated costs necessary to make the sale.
fied in current assets and measured at fair value, with changes
in fair value recognized in finance cost, net. Derivative instru-
                                                                    2.11 TRADE AND OTHER RECEIVABLES
ments are included in this category, except for the portion
representing an effective hedge in a designated hedging             Trade receivables are recognized and measured based on the

relationship.                                                       initial invoice amount. A provision is recorded when there is
                                                                    objective evidence of impairment. Bad debts are written off
Held-to-maturity investments and loans and receivables              when they are certain of not being recovered.
are measured at amortized cost, determined by the effective
interest method, less any accumulated impairment losses.
Gains and losses are recognized the statement of income.

Held-to-maturity investments are financial assets with fixed or
determinable payments and a fixed maturity. At each period-
end, the recoverability of loans is assessed and an impairment
loss is recognized if their recoverable amount is less than their
carrying amount.




                                                                                                               2006 Annual Report //   101
      2.12 CASH AND CASH EQUIVALENTS                                      gation – are recognized as explained below. The interest cost,
                                                                          corresponding to the increase in the obligation due to the
      Cash and cash equivalents are held to meet the Group’s
                                                                          passage of time, is recognized in financial expense.
      short-term cash needs. They include cash at bank and in hand,
      short-term deposits with an original maturity of less than          Treatment of actuarial gains and losses
      three months and marketable securities that are readily             Actuarial gains and losses are recognized in income by the
      convertible into cash. Cash equivalents are defined as short-       corridor method, applied separately to each individual plan.
      term, highly liquid investments that are readily convertible        Under this method, actuarial gains and losses are recognized
      into known amounts of cash and which are subject to an              in the statement of income when cumulative unrecognized
      insignificant risk of changes in value.                             gains and losses exceed the greater of 10% of the present
                                                                          value of the defined benefit obligation and 10% of the fair
      2.13 PROVISIONS                                                     value of plan assets. The portion of actuarial gains and
      Provisions are recognized when the Group has a present obli-        losses that exceeds the 10% corridor is recognized in income
      gation (legal or constructive) as a result of a past event, it is   over the average remaining service lives of plan participants.
      probable that an outflow of resources embodying economic            Past service cost
      benefits will be required to settle the obligation and a reliable   Past service cost is the increase in the present value of
      estimate can be made of the amount of the obligation. Where         the defined benefit obligation, resulting from the changes
      some or all of the expenditure required to settle a provision       to, post-employment benefits or other long-term benefits.
      is expected to be reimbursed by another party, for example          Past service cost is recognized as an expense over the average
      under an insurance policy, the reimbursement is recognized          period until the benefits become vested. If the benefits are
      as a separate asset when, and only when, it is virtually certain    already vested, past service cost is recognized immediately.
      that reimbursement will be received. The provision expense
                                                                          Curtailments and settlements
      is shown in the income statement, net of any expected reim-
                                                                          Gains or losses on the curtailment or settlement of defined
      bursement. Where the effect of the time value of money is
                                                                          benefit plans are recognized when the curtailment or settle-
      material, provisions are discounted using a pre-tax discount
                                                                          ment occurs. The gain or loss on a curtailment or settlement
      rate that reflects any specific risks associated with the obli-
                                                                          comprises any resulting change in the present value of the
      gation. The increase in discounted provisions due to the
                                                                          defined benefit obligation and any related actuarial gains
      passage of time is recognized in financial cost, net.
                                                                          and losses and past service cost that had not previously been
                                                                          recognized.
      2.14 PENSION AND OTHER LONG-TERM
      BENEFITS                                                            2.14.2 Other long-term benefits
      Group employees are covered by various plans providing for          Actuarial gains and losses and past service cost on other
      the payment of supplementary pensions, justice awards and           long-term benefit plans are recognized immediately in the
      other long-term benefits in line with the laws and practices in     statement of income.
      force in the Group’s host countries. A description of the main
      plans is provided in Note 15.
                                                                          2.15 DEFERRED TAX
                                                                          In accordance with IAS 12 – Income Taxes, deferred taxes are
      2.14.1 Post-employment benefits
                                                                          recognized for temporary differences between the carrying
      Defined contribution plans                                          amounts of assets and liabilities and their tax bases, as well
      Contributions to government plans and other defined contri-         as on tax loss carryforwards, by the liability method. Deferred
      bution plans are recognized as an expense for the period in         tax assets are recognized for deductible temporary differences
      which they are due. No provision is recorded as the Group’s         to the extent that it is probable that taxable income will be
      obligation is limited to its contributions to the plan.             available against which the deductible temporary difference
                                                                          can be utilized. The carrying amount of deferred tax assets is
      Defined benefit plans
                                                                          reviewed at each period-end.
      Obligations under defined benefit plans are measured using
      the projected unit credit method. This method involves the          Tax assets and tax liabilities are offset when the Group has a
      use of long-term actuarial assumptions concerning demo-             legally enforceable right to set off the recognized amounts,
      graphic variables (such as employee turnover and mortality)         they relate to income taxes levied by the same taxation author-
      and financial variables (such as future increases in salaries       ity and the Group intends to settle on a net basis.
      and discount rates). These variables are reviewed each year.
      Actuarial gains and losses – corresponding to the effect of
      changes in actuarial assumptions on the amount of the obli-


102
                                                                                        Consolidated Financial
                                                                                                   Statements
Income tax expense is recognized in the statement of income,          2.17.2 Hedge accounting
except when it relates to items recognized directly in equity
                                                                      The Group uses financial instruments to optimize its borrow-
in which case it is also recognized in equity.
                                                                      ing costs and to hedge budgeted future net cash flows in
                                                                      foreign currencies over periods not exceeding 18 months.
2.16 BORROWINGS AND OTHER FINANCIAL                                   Derivative instruments are used by the Group as part of its
LIABILITIES                                                           cash flow hedging strategy, to hedge the Group’s exposure
Borrowings and other financial liabilities are initially recognized   to fluctuations in exchange rates. No interest rate hedges have
at fair value, adjusted for directly attributable transaction         been set up and the Group does not implement any fair value
costs. They are subsequently measured at amortized cost,              hedging strategy.
using the effective interest method.
                                                                      Cash flow hedges are hedges of the exposure to variability in
                                                                      cash flows that is attributable either to a particular risk asso-
2.16.1 OCEANEs (Bonds convertible                                     ciated with a recognized asset or liability, or a highly probable
into new or existing shares)                                          forecast transaction or a firm commitment.
The Group debt includes two convertible bond issues
                                                                      The effective portion of changes in the fair value of cash flow
(OCEANEs). These financial instrument comprise both a
                                                                      hedges eligible for hedge accounting is recognized directly
liability component and conversion option recognized as an
                                                                      in equity and subsiquently reclassified into finance cost, net in
equity component.
                                                                      the period when the firm commitment or future transaction
The component classified as a financial liability is valued at the    affects profit or loss. The ineffective portion is recognized in
present value of the future contractual cash flows (including         finance cost, net.
interest, redemption premiums and the settlement of the obli-
                                                                      If the forecast transaction is no longer expected to occur, the
gation at maturity), discounted at the market interest rate on the
                                                                      cumulative gain or loss recognized directly in equity is reclas-
issue date for debt instruments with the same characteristics
                                                                      sified immediately into finance cost, net. If the hedging instru-
in terms of maturity and cash flows but without a conversion
                                                                      ment no longer meets the criteria for hedge accounting and
option. The equity component is obtained by deducting, from
                                                                      the forecast transaction is still expected to occur, the cumula-
the instrument as a whole, the liability component’s fair value.
                                                                      tive gain or loss recognized directly in equity remains recog-
Issue costs are allocated to each compnents pro rata to their         nized in equity until the forecast transaction occurs. In both
respective carrying amounts. The difference between inter-            cases, the derivative instrument is classified as a financial instru-
est expense determined by the effective interest method and           ment at fair value through profit or loss and subsequent
the interest actually paid is added to the carrying amount of         changes in fair value are recognized in finance cost, net.
the liability, so as to increase the carrying amount over the
                                                                      The Group’s risk management policy is presented in Note 19.
life of the debt to the amount payable at maturity to settle the
obligation if the bonds are not converted.
                                                                      2.18 GOVERNMENT GRANTS
2.16.2 Other financial liabilities                                    Government grants are recognized when there is reasonable
                                                                      assurance that the conditions attached to them will be met
Other financial liabilities are measured at amortized cost using
                                                                      and the grants will be received. Grants that are intended to
the effective interest method, including issue costs and issue
                                                                      compensate costs are recognized as income over the periods
and redemption premiums.
                                                                      necessary to match the related costs which they are intended
                                                                      to compensate, on a systematic basis. Government grants
2.17 DERIVATIVE FINANCIAL INSTRUMENTS
                                                                      related to assets are initially recognized as deferred income
AND HEDGING INSTRUMENTS                                               (other liabilities) at fair value and subsequently recognized as
                                                                      income over the useful life of the asset components.
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.




                                                                                                                  2006 Annual Report //   103
      2.19 SHARE-BASED PAYMENTS                                             Accounting treatment of treasury
      The Group has set up stock option plans for members of                shares
      senior management and certain employees. In accordance                Equity instruments purchased by the Group, which were
      with IFRS 2, the benefit granted to employees in the form of          recognized in marketable securities in the French GAAP
      stock options is recognized as an expense over the vesting            accounts, are now recorded as a deduction from equity.
      period (corresponding to the period up to the start date of
      the exercise period). The cost of stock options – correspon-          Accounting treatment of foreign
      ding to the fair value of the employee services rendered,             currency derivatives
      determined using the Black & Scholes option pricing model             Foreign currency derivatives and the underlyings form part
      – is recognized in personal cost with a corresponding increase        of documented cash flow hedging relationships. The effective
      in equity. This cost is adjusted based on the actual number of        portion of cumulative gains and losses on hedging instruments
      options that will be exercisable at the start of the exercise peri-   at 1 November 2005 was recognized in equity in the amount
      od. In accordance with the transitional provisions of IFRS 2,         of €2 million. The hedge accounting policies applied by the
      only options granted after 7 November 2002 that had not yet           Group are described in Note 2.17 “Derivative financial instru-
      vested at 1 November 2005 were recognized and measured                ments and hedging instruments”.
      at the IFRS transition date.
                                                                            NOTE 4. CHANGES IN SCOPE
      2.20 TREASURY SHARES                                                          OF CONSOLIDATION
      All Club Méditerranée shares held by the Group, for what-
      ever purpose, are recorded as a deduction from consolidated            Number of consolidated            Full    Equity       Total
                                                                             companies                consolidation   method
      equity at cost. No gain or loss is recognized in the statement
                                                                             Scope of
      of income on the purchase, sale, issue or cancellation of              consolidation at
      equity instruments issued by the Group.                                31 October 2005                  115          10       125
                                                                             Newly consolidated
                                                                             companies                          11          1         12
      NOTE 3. FIRST-TIME ADOPTION                                            Liquidations                       (6)                   (6)
              OF IAS 32 AND IAS 39                                           Disposals                          (3)                   (3)
                                                                             Mergers                            (7)                   (7)
      IAS 32 and IAS 39 have been applied as from 1 November                 Change in
      2005, without restating comparative financial information.             consolidation method                2         (2)
                                                                             Scope of
      The following table shows the effect, net of deferred taxes,
                                                                             consolidation at
      on consolidated equity at 1 November 2005 of applying                  31 October 2006                  112           9       121
      IAS 32 and IAS 39.

      (in € millions)                                                       Twelve companies were consolidated for the first time in
                                                                            fiscal 2006:
       Equity at 31 October 2005                                   508
       excluding IAS 32 and IAS 39                                          • Carthago, following an increase in the Group’s interest from
       OCEANEs                                                      22       12.43% to 37.43% on 13 December 2005 (accounted for by
       Treasury shares                                              (9)      the equity method).
       Foreign currency derivatives                                   2     • Club Med Ukraine, created on 22 December 2005 and
       Equity at 1 November 2005                                   523       wholly-owned.
       including IAS 32 and IAS 39
                                                                            • Sunport Property Corporation, acquired on 23 March 2006
                                                                             and wholly-owned.
                                                                            • SNC Caravelle 2006, created on 23 March 2006 and
      Accounting treatment of OCEANE
                                                                             wholly-owned.
      bonds                                                                 • Sun Mexico Holding Inc. and its subsidiaries, Sun Cancun I,
      OCEANEs, which were recognized in full in borrowings in the            Sun Cancun II, Ixtapa I, Ixtapa II, Cancun Property SRL and
      French GAAP accounts, have been restated based on the                  Ixtapa Property SRL, acquired on 1 May 2006 and wholly-
      accounting policy described in Note 2.16 “Borrowings and               owned.
      other financial liabilities”.                                         • Société Immobilière et de Gestion Hôtelière de Cap Skirring,
                                                                             created on 1 September 2006.




104
                                                                                    Consolidated Financial
                                                                                               Statements
These acquisitions and company creations had no material          NOTE 5. SEGMENT INFORMATION
effects on the consolidated financial statements.
                                                                  5.1 BUSINESS SEGMENTS
In line with the ongoing rationalization of the Group’s legal
                                                                  The Group is organized around four business segments:
structure, the following operations were carried out during the
                                                                  - Villages
year:
                                                                  - Tour operating
Six companies were liquidated:                                    - Club Med Gym
• Club Med Resorts BV on 3 January 2006.                          - Club Med World
• Holiday Village Paradise Island on 15 May 2006.
                                                                  The Group’s operating activities are organized and managed
• Club Med Haiti on 17 July 2006.
                                                                  separately, based on the type of products and services sold.
• Société Hôtelière d’Oyster Pond on 20 July 2006.
                                                                  Each segment offers different products and serves different
• Club Mepe Ltd on 31 July 2006.
                                                                  markets.
• CM Crested Butte LLC on 31 August 2006.
                                                                  The business segment therefore represents the Group’s
Three companies were sold:
                                                                  primary reportable segment.
• Club Med Gym Belgique on 26 July 2006.
• Vacances Cap Skirring on 30 October 2006.                       The Villages business segment comprises the Villages, the
• Club Del Mar on 31 October 2006.                                cruise business (Club Med 2) and marketing of Club Med
                                                                  Découverte tours. The Villages activity corresponds to all-
Seven companies were merged:
                                                                  inclusive vacation packages and covers the marketing and
• Condominios Med de San Carlo was merged into Opera-
                                                                  organization of the vacation, transport and related services.
 dora de Aldeas Vacacionales SA de CV on 1 November 2005.
                                                                  It also includes the management of Village property assets.
• Jet Hôtel Tunisie was merged into Jet Eldo Tunisie on
 14 November 2005.                                                The Tour Operating business segment includes the devel-
• Grand Hotel Parisien was wound up without being liquidated      opment and marketing of tours and vacations by Jet tours,
 on 19 April 2006.                                                as well as the development of tours marketed by Club Med
• Jet Hotel was wound up without being liquidated on              Découverte.
 26 August 2006.
                                                                  The Club Med Gym business segment corresponds to the
• Société Civile de la Tour d’Opio was wound up without being
                                                                  marketing and management of fitness clubs.
 liquidated on 28 September 2006.
• Sun Mexico Holdings was merged into CM Sales Inc. on            The Club Med World business segment corresponds to the
 10 October 2006.                                                 management of a leisure and entertainment complex,
• Instituts des Métiers de la Forme was wound up without          comprising conference facilities, restaurants, theaters or
 being liquidated on 12 October 2006.                             concert halls, a night club and areas used to organize activi-
                                                                  ties for children.
The consolidation method applied to four companies has
changed:                                                          Inter-segment transactions are limited. The main transactions
• CM Middle East, previously accounted for by the equity          concern the organization by the Tour Operating segment
 method, was fully consolidated as from 1 November 2005.          of tours sold by the Villages’ marketing network (Club Med
• Club Méditerranée Albion Resorts Ltd, previously fully          Découverte) and the sale by the Jet tours marketing network
 consolidated, was accounted for by the equity method as          of vacations in the Villages.
 from 25 April 2006.                                              The Group’s secondary reportable format is the geographi-
• Columbus Isle Casino, previously accounted for by the equity    cal segment. Operations are organized around three geo-
 method, was fully consolidated as from 30 April 2006.            graphical segments:
• Société Immobilière des Résidences Touristiques, previously     - Europe-Africa
 accounted for by the equity method, was fully consolidated       - Americas
 as from 30 April 2006.                                           - Asia
In addition, the Group sold 22% of the shares of Taipe            Geographical segments can correspond to the location of
Trancoso.                                                         customers and, therefore, to the region where the vacations
The impact of these changes in scope of consolidation on the      are sold. These segments are qualified as outbound zones.
consolidated financial statements was not material.               Alternatively, geographical segments may correspond to the
                                                                  location of assets, in which case they are qualified as inbound
                                                                  zones.




                                                                                                           2006 Annual Report //   105
      The Europe-Africa segment comprises the countries of                Segment assets include goodwill, intangible assets and prop-
      Europe, the Middle East and Africa.                                 erty, plant and equipment, non-current assets held for sale,
                                                                          and current assets other than cash and cash equivalents and
      The Americas segment comprises the countries of North and
                                                                          tax receivables.
      South America and the West Indies.
                                                                          Segment liabilities include provisions – other than provisions
      The Asia segment comprises the countries of Asia and
                                                                          for taxes – and other liabilities, with the exception of borrow-
      Oceania.
                                                                          ings and financial liabilities which are included in net debt.

      5.2 INFORMATION BY BUSINESS SEGMENT
      (in € millions)

                                                        2005                                                     2006
                                        Gross      Inter-segment           Revenue              Gross        Inter-segment            Revenue
                                      Revenue        transactions                             Revenue          transactions
       Villages                          1,250                 (3)           1,247               1,326                   (3)             1,323
       Tour operating                      319               (30)              289                 335                 (35)                300
       Club Med Gym                          46                                 46                  47                                      47
       Club Med World                         8                                  8                   9                                       9
       Eliminations                         (33)              33                                   (38)                 38
       Total                            1,590                   -            1,590               1,679                    -             1,679



      (in € millions)

                                                                                     2005
                                    Operating                        Operating               Depreciation and                  Share of income
                               income - Leisure                        income                    amortization                     of associates
                                                                                              and impairment
       Villages                             21                             85                             (71)                               3
       Tour operating                        4                               3                              (2)
       Club Med Gym                          3                              (1)                             (4)
       Club Med World                       (3)                            (6)                             (4)
       Total                                25                             81                             (81)                               3



      (in € millions)

                                                                                     2006
                                    Operating                        Operating               Depreciation and                  Share of income
                               income - Leisure                        income                    amortization                     of associates
                                                                                              and impairment
       Villages                             19                             31                             (61)                               3
       Tour operating                        3                              3                               (1)
       Club Med Gym                          4                              3                               (4)
       Club Med World                       (2)                            (2)                             (1)
       Total                                24                             35                             (67)                               3




106
                                                                                           Consolidated Financial
                                                                                                      Statements
(in € millions)

                                         31 October 2005                                               31 October 2006
                                  Segment       Segment                    Capital          Segment           Segment                     Capital
                                    assets      liabilities          expenditure (1)          assets          liabilities           expenditure (1)
 Villages                            1,190             417                       (128)         1,180                473                       (141)
 Tour operating                         83              52                         (1)            87                 48                         (2)
 Club Med Gym                           74              39                         (3)            72                 40                         (3)
 Club Med World                          4               3                                         4                  3
 Total                              1,351              511                       (132)         1,343                564                      (146)

(1) Excluding government grants


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

(in € millions)

                                                                                        31 October 2005                          31 October 2006
                                                                                     Including IAS 32/39
 Segment assets                                                                                   1,351                                     1,343
 Non-current financial assets                                                                        66                                        80
 Deferred tax assets                                                                                 42                                        35
 Cash and cash equivalents                                                                          160                                       165
 Total assets                                                                                    1,619                                      1,623
 Segment liabilities                                                                                511                                       564
 Equity                                                                                             523                                       514
 Borrowings and other interest-bearing liabilities                                                  483                                       459
 Deferred tax liabilities                                                                           102                                        86
 Total equity and liabilities                                                                    1,619                                      1,623


5.3 INFORMATION BY GEOGRAPHICAL SEGMENT

Revenue (issuing zones)
(in € millions)

                                                                                                   2005                                      2006
 Europe-Africa                                                                                    1,278                                     1,338
 Americas                                                                                           194                                       196
 Asia                                                                                               118                                       145
 Total                                                                                           1,590                                      1,679


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

Segment assets and capital expenditure (location of assets)
(in € millions)

                                             31 October 2005                                                 31 October 2006
                                  Segment                            Capital                         Segment                       Capital
                                    assets                     expenditure (1)                         assets                expenditure (1)
 Europe-Africa                        694                                 (68)                             869                                 (60)
 Americas                             558                                 (52)                             367                                 (71)
 Asia                                  99                                 (12)                             107                                 (15)
 Total                              1,351                               (132)                            1,343                               (146)

(1) Excluding government grants




                                                                                                                            2006 Annual Report //   107
      NOTE 6. GOODWILL
      6.1 ANALYSIS
      There were no changes in goodwill during 2006.

      (in € millions)

                                                                                      31 October 2005                   31 October 2006
                                                                                                  Net                               Net
       Villages – Europe-Africa                                                                      19                             19
       Tour operating                                                                                33                             33
       Club Med Gym                                                                                  43                             43
       Europe-Africa                                                                                95                              95
       Villages – Americas                                                                            3                              3
       Villages – Asia                                                                                5                              5
       Total                                                                                       103                             103



      6.2 IMPAIRMENT TESTS
      Goodwill is allocated to cash-generating units (CGUs), which       discounted cash flows method. Future cash flows are estimated
      are the Villages by geographical segment, the tour operat-         on the basis of the budget and the three-year business plan,
      ing business and Club Med Gym. Goodwill was tested for             with a perpetual growth rate applied beyond this period. They
      impairment at the IFRS transition date and since then has been     are discounted by applying a discount rate corresponding to
      tested once a year. The principles underlying these tests are      the weighted average cost of capital (WACC). Both estimated
      described in Note 2.7 “Impairment of assets”.                      future cash flows and the discount rate are determined on an
                                                                         after-tax basis.
      The recoverable amount of the main CGUs to which material
      goodwill has been allocated, has been determined by the            The assumptions used for impairment tests on the CGUs to
      value in use approach. Value in use is determined by the           which material goodwill has been allocated are as follows:


      (in € millions)

                                                              2005                                                  2006
       CGU                            Net allocated       After-tax      Perpetual          Net allocated       After-tax     Perpetual
                                          goodwill    discount rate    growth rate              goodwill    discount rate   growth rate
       Villages – Europe-Africa                 19          7.5%             1.5%                   19           7.5%             1.5%
       Tour operating                           33          7.5%             1.5%                   33           7.5%             1.5%
       Club Med Gym                             43          7.5%             1.5%                   43           7.5%             1.5%

      Based on the results of the impairment tests performed in 2005 and 2006, no impairment losses were recognized on goodwill
      in either of these two years.




108
                                                                                        Consolidated Financial
                                                                                                   Statements
NOTE 7. INTANGIBLE ASSETS
(in € millions)

                                     Brands and        Software               Lease             Other         Intangible        Total
                                        licenses                           premiums         intangible            assets
                                                                                                assets       in progress
 Cost at 1 November 2004                     28            103                   16                10                 3          160
 Accumulated amortization                     (3)              (68)               (5)               (3)                           (79)
 Net carrying amount
 at 1 November 2004                          25                35                11                 7                 3           81
 Acquisitions                                                    3                 1                1                 4              9
 Disposals                                                      (1)                                                                 (1)
 Amortization for the period                                    (9)                                 (2)                           (11)
 Reclassifications and
 translation adjustments                                         2                 1                                  (2)              1
 Cost at 1 November 2005                     28            104                   17                11                 5          165
 Accumulated amortization                     (3)              (74)               (4)               (5)                           (86)
 Net carrying amount
 at 1 November 2005                          25                30                13                 6                 5           79
 Acquisitions                                                    3                 1                                  4             8
 Disposals                                                                         1                (2)                            (1)
 Amortization for the period                                    (6)                                 (1)                            (7)
 Reclassifications and
 translation adjustments                                         5                                                    (5)
 Cost at 31 October 2006                     28            112                   18                 6                 4          168
 Accumulated amortization                     (3)              (80)               (3)               (3)                           (89)
 Net carrying amount
 at 31 October 2006                          25                32                15                 3                 4           79


Following extensive development work on the Group’s                   Intangible assets with an indefinite useful life amount to
reservation and accounting systems, the estimated useful              €32 million, including €23 million for the Jet tours brand which
lives of these systems were adjusted in 2006. The adjustment          was acquired in a business combination. Based on the results
was treated as a change in estimates and made prospec-                of the impairment tests performed in 2005 and 2006, no
tively. The impact on annual amortization expense was                 impairment losses were recognized on these assets in either
€2.6 million.                                                         of these two years.




                                                                                                               2006 Annual Report //   109
      NOTE 8. PROPERTY, PLANT AND EQUIPMENT
      8.1 ANALYSIS
      (in € millions)

                                                Land       Buildings and       Equipment                 Other      Assets under        Total
                                                                  fixtures                                          construction


       Cost at 1 November 2004                   314              1,200              168                   138               41       1,861
       Accumulated depreciation                    (1)              (599)            (114)                  (85)                        (799)
       Net carrying amount
       at 1 November 2004                        313                 601              54                    53               41       1,062
       Acquisitions                                 7                  37              12                     6               61         123
       Disposals                                   (7)                (84)              (1)                                  (34)       (126)
       Changes in scope of consolidation           (3)                (15)              (2)                                    1          (21)
       Depreciation for the period                                    (38)            (12)                   (9)                         (59)
       Impairment losses                                                (7)            (1)                   (3)                         (11)
       Transfers to assets held for sale           (3)                  (8)                                                               (11)
       Translation adjustment                       2                  15                 (1)                1                 1           18
       Reclassifications                                               12                  2                 1               (15)
       Cost at 1 November 2005                   310              1,040              154                   139               53       1,696
       Accumulated depreciation                    (1)              (527)            (103)                  (90)                        (721)
       Net at 1 November 2005                    309                 513              51                    49               53         975
       Acquisitions                                                    48              25                     7              58         138
       Disposals                                   (9)                (50)              (4)                                   (2)        (65)
       Changes in scope of consolidation          (20)                  (7)             (1)                                  (4)        (32)
       Depreciation for the period                                    (34)            (13)                   (9)                        (56)
       Impairment losses                                                (4)                                                                (4)
       Transfers to assets held for sale          (50)                (27)                (2)                (2)                        (81)
       Translation adjustment                      (7)                  (6)               (2)                                  (1)       (16)
       Reclassifications                                               48                  2                  6              (56)
       Cost at 31 October 2006                   224                 858             150                   130               48       1,410
       Accumulated depreciation                    (1)              (377)             (94)                  (79)                        (551)
       Net at 31 October 2006                    223                 481              56                    51               48         859



      Capital expenditure in fiscal 2006 mainly concerned the                 Disposals mainly included the sale of the Crested Butte, Flaine,
      Villages of La Caravelle (€19 million), Cancún (€15 million),           Valbella and Cadaques Villages, and the sale-and-operating-
      Les Boucaniers (€15 million), Peisey-Vallandry (€10 million),           leaseback of the Chamonix, Les Deux Alpes and Avoriaz
      Kanifinolhu (€10 million) and Cervinia (€3 million). As well as         Villages.
      the acquisition of Sandpiper, Ixtapa and Cancún buildings and
      fixtures previously held under finance leases for a total of
      €14 million.




110
                                                                                                   Consolidated Financial
                                                                                                              Statements
8.2 OTHER INFORMATION
Property, plant and equipment break down as follows by business and geographical segment:

(in € millions)

                                                   31 October 2005                                              31 October 2006
                                        Cost       Depreciation and                Net               Cost       Depreciation and              Net
                                                         provisions            carrying                               provisions
                                                                               amount
 Europe-Africa                           807                    (393)               414              679                       (332)          347
 Americas                                566                    (169)               397              483                       (110)          373
 Asia                                    248                    (114)               134              182                         (68)         114
 Sub-total Villages                   1,621                    (676)               945              1,344                      (510)          834
 Tour operating                           14                       (7)                 7                5                         (3)           2
 Club Med Gym                             48                     (28)                 20               47                       (27)           20
 Club Med World                           13                     (10)                  3               14                       (11)            3
 Total                                1,696                    (721)               975              1,410                      (551)          859




Asset under finance leases amounted to €16 million at                        NOTE 9. NON-CURRENT FINANCIAL
31 October 2006 (€85 million at 31 October 2005). During
                                                                                     ASSETS
the year, the Group purchased the ownership of the assets
of the Sandpiper Village in the United States and the Ixtapa                 (in € millions)
and Cancún Villages in Mexico.                                                                                      31 October          31 October
                                                                                                                          2005                2006
Finance lease obligations at 31 October 2006 stood at                         Investments in associates                        12              31
€8 million at 31 October 2006 (€103 million at 31 October 2005).              Available-for-sale financial assets               6               5
                                                                              Deposits                                         36              33
At 31 October 2006, property, plant and equipment worth
                                                                              Other non-current financial assets               12              11
€37 million had been given as collateral (montgage and
                                                                              Total                                            66              80
pledge) for debts of €36 million (€39 million and €41 million
respectively at 31 October 2005).



9.1 INVESTMENTS IN ASSOCIATES
(in € millions)
                                                      31 October 2005                      2006         Changes in scope of             31 October
                                                                                        income       consolidation and other                  2006
 Sviluppo Turistico per Metaponto (Italy)                                5                     2                                                7
 Société Immobilière de la Mer (Morocco)                                 5                                                                      5
 SPFT - Carthago (Tunisia) (1)                                                                                           10                    10
 Club Med Albion Resorts (Mauritius) (2)                                                                                  4                     4
 Other                                                                   2                     1                          2                     5
 Total                                                              12                         3                         16                    31

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




                                                                                                                         2006 Annual Report //   111
      9.2 AVAILABLE-FOR-SALE FINANCIAL ASSETS                              Since the beginning of fiscal 2006, Carthago has been
                                                                           accounted for by the equity method following an increase in
      Investments in non-consolidated companies are classified as
                                                                           the Group’s stake to 37.43%.
      available-for-sale financial assets, in accordance with IAS 39.

      The following table shows movements for the last two fiscal
                                                                           9.3 OTHER NON-CURRENT FINANCIAL ASSETS
      years:
                                                                           (in € millions)
      (in € millions)
                                                                                                                31 October       31 October
                                                 2005           2006                                                  2005             2006

       At 1 November                                8              6        Loans                                       2                   1
                                                                            Deposits                                   36                  33
       Changes in scope of consolidation            (2)            (1)
                                                                            Loans to building
       At 31 October                                6              5        organizations                               6                   6
                                                                            Other                                       4                   4

      Available-for-sale financial assets consist exclusively of shares     Total                                      48                 44

      in unlisted companies. The amount held at cost was €5 mil-
      lion. No impairment losses were recorded on these assets in
      fiscal 2006 or fiscal 2005.

      NOTE 10. ASSETS HELD FOR SALE
      The assets and liabilities attributable to certain Villages have been classified as disposal groups held for sale and reported on
      a separate line of the balance sheet, as their sale within 12 months from the date of their classification is considered highly
      probable.

      An impairment loss of €3 million has been recorded on these disposal groups, to write down the assets to their estimated fair
      value less costs to sell. The impairment loss is included in “Operating income – Management of assets”.

      (in € millions)

                                                                  Land         Buildings and        Equipment         Other       Total assets
                                                                                      fixtures                                   held for sale
       Cost at 1 November 2005                                         3                     18            2             1                24
       Accumulated depreciation                                                              (10)          (2)           (1)              (13)
       Net carrying amount at 1 November 2005                          3                      8                                           11
       Acquisitions                                                 51                       31            2                 2             86
       Disposals or reclassification                                 (1)                     (4)                                           (5)
       Net at 31 October 2006                                       53                       35            2             2                92
       Cost at 31 October 2006                                      53                   112              11              5              181
       Accumulated depreciation                                                          (77)             (9)            (3)             (89)


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


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




112
                                                                                          Consolidated Financial
                                                                                                     Statements
NOTE 11. OTHER RECEIVABLES
(in € millions)

                                                  31 October 2005     1 November 2005                      31 October 2006
                                                       Excluding              Including             Cost         Provisions           Net
                                                       IAS 32/39             IAS 32/39
                                                             Net                    Net
 Tax receivables                                              23                    23                29                                29
 Accrued income                                                3                     3                 3                                 3
 Prepayments to suppliers                                     14                    14                11                                11
 Receivables on sales of non-current assets                    7                     7                 7                                 7
 Current account advances to associates                        3                     3                 2                                 2
 Employee advances and prepaid payroll taxes                   1                     1                 1                                 1
 Other receivables                                            11                    11                14                 (3)            11
 Prepaid expenses                                             37                    34                44                                44
 Total                                                        99                    96              111                  (3)          108


All receivables are due within one year.
Prepaid expenses correspond mainly to services paid before travel (such as transport and fee-based services), and prepaid leases.

NOTE 12. CASH AND CASH EQUIVALENTS
(in € millions)

                                                      31 October 2005                      1 November 2005               31 October 2006
                                                   Excluding IAS 32/39                   Including IAS 32/39
 Marketable securities                                               21                                  21                             9
 Treasury shares                                                      9                                   -                             -
 Derivative instruments                                               -                                   1                             -
 Cash                                                               138                                 138                           156
 Total                                                              168                                160                            165



Marketable securities consist of money market instruments             2005 and 14 March 2006, during fiscal 2006 a total of 156,709
subject to an insignificant risk of changes in value.                 Club Méditerranée SA shares were purchased at an average
                                                                      price of €41.53 and 136,569 shares were sold at an average
NOTE 13. EQUITY                                                       price of €43.42.

13.1 CHANGES IN EQUITY                                                The translation reserve amounted to €10 million at 31 October
                                                                      2006, including €6 million attributable to shareholders
At 31 October 2006, a total of 19,358,005 fully-paid €4 par
                                                                      (€25 million, including €21 million attributable to sharehold-
value ordinary shares were issued and outstanding, unchanged
                                                                      ers, at 31 October 2005). The decrease in fiscal 2006 was
from the previous fiscal year-end.
                                                                      primarily due to changes in the dollar/euro exchange rate.
The 277,305 shares held in treasury at 31 October 2006 (257,165
                                                                      The impact on equity of cash flow hedges was not material.
shares at 31 October 2005) are stripped of dividend rights.
Under a liquidity agreement as part of the buyback programs           Information about stock option plans is provided in Note 14.
approved by the Annual Shareholders’ Meetings of 16 March




                                                                                                                    2006 Annual Report //   113
      13.2. MINORITY INTEREST
      (in € millions)

                                                                31 October                  2006             Dividends             Capital            Changes in                 31 October
                                                                      2005               income                                   decrease              scope of                       2006
                                                                                                                                                    consolidation
       Itaparica (Brazil)                                                  19                   1                      (1)                (1)                                                18
       Holiday Villages Thailand                                            5                  (1)                                                                                            4
       Belladona Company for H&T (Egypt)                                    3                                                                                                                 3
       Holiday Hotels AG (Switzerland)                                      7                                                                                                                 7
       Taipe Trancoso (Brazil)                                              4                                                                                      3                          7
       Sté Villages Hôtels des Caraïbes (France)                           11                                                                                                                11
       Covifra (Mauritius)                                                  2                                                                                                                 2
       Other                                                                3                                                                                                                 3
       Total                                                               54                                          (1)                (1)                      3                        55



      NOTE 14. SHARE-BASED PAYMENTS                                                                  options to be cash-settled and do not include any vesting con-
                                                                                                     ditions based on market conditions or performance targets.
      14.1. DESCRIPTION OF STOCK OPTION
                                                                                                     All outstanding options have a ten-year life, with the exception
      PLANS                                                                                          of those granted under Plans J and K, which have an eight-year
      The stock options granted to members of senior management                                      life.
      and certain permanent employees of the Group are exercis-
                                                                                                     The main characteristics of the plans outstanding at 31 October
      able for new shares, with the exception of Plan H options, which
                                                                                                     2006 are as follows:
      are exercisable for existing shares. The plans do not allow for


                                 1997            1998                   1999                    2000                      2001              2002       2003        2004         2005        2006
                                Plan F    Plan F2 Plan F3        Plan F4 Plan F5           Plan G Plan G2          Plan G3 Plan G4       Plan G5      Plan H       Plan I      Plan J      Plan K
       Date of Shareholders’
       Meeting                 23.04.97   23.04.97   23.04.97   23.04.97    23.04.97      23.04.97   23.04.97      23.04.97   23.04.97   23.04.97    29.03.02    17.03.03    17.03.03    16.03.05
       Date of Board           18.08.97   24.03.98   24.08.98   17.02.99    29.07.99      07.02.00   26.07.00      06.02.01   24.07.01   05.02.02    28.02.03    15.01.04    11.01.05    14.03.06
       meeting
       Number of options
       granted                 663,370     73,500      9,000      21,000        46,000    258,400     21,815       212,530     37,400    127,000     283,000     272,000     300,000     250,000
       Options granted
       to the Senior
       Management
       Committee
       (members as of
       31 October 2006)         63,159     10,000           -      1,000             -     34,800              -    18,900           -    13,800     229,000      95,000     111,000     103,000
       Starting date of
       exercise period            50%:       50%:       50%:       50%:        50%:       07.02.05   26.07.04      06.02.05   24.07.05   05.02.06    01.03.06    15.01.07    11.01.08    14.03.09
                               18.08.02   24.03.03   24.08.03   17.02.04    23.07.04                                                                 Lock-up     Lock-up     Lock-up     Lock-up
                                  50%:       50%:       50%:       50%:        50%:                                                                      until       until       until       until
                               18.08.03   24.03.04   24.08.04   17.02.05    23.07.05                                                                 28.02.07    14.01.08    10.01.09    13.03.10

       Exercise period ends    17.08.07   23.03.08   23.08.08   16.02.09    22.07.09      06.02.10   25.07.10      05.02.11   23.07.11   04.02.12    27.02.13    14.02.14    10.01.13    13.03.14
       Exercise price (in €)       68.8     70.81      79.12       81.13         92.79     111.11     136.13         92.78      63.99      44.74           35       31.03          35       42.67
       Options outstanding
       at 31 October 2006      119,063     13,500      3,000      10,000         3,000     89,542       6,200      105,315     13,900     86,500     245,000     226,800     268,600     247,000
       Remaining life               0.8        1.4        1.8        2.3           2.8         3.3           3.8        4.3        4.8        5.3         6,3          7.3        6.3         7.5



      On 14 March 2006, the Board used the authorization given at the Annual Shareholders’ Meeting of 16 March 2005 to grant
      250,000 stock options at an exercise price of €42.67 (Plan K).
      The exercise price corresponds to the average of the closing prices quoted for Club Méditerranée shares over the twenty
      trading days preceding the grant date. No options were exercised during the year.




114
                                                                                        Consolidated Financial
                                                                                                   Statements
14.2 OUTSTANDING OPTIONS

                                                                      2005                                            2006
                                                          Number               Average                     Number            Average
                                                                          exercise price                                exercise price
                                                                                    (in €)                                       (in €)
 Options outstanding at 1 November                      1,056,497                 56.54                  1,292,475              50.89
 Options granted during the period                       300,000                  35.00                    250,000               42.67
 Options exercised during the period                            -                     -                          -                   -
 Options canceled during the period                       (64,022)               (69.66)                  (105,055)            (48.48)
 Options outstanding at 31 October                      1,292,475                 50.89                  1,437,420              49.64
 Options exercisable at 31 October                        387,125                 88.10                    695,020              63.84



14.3 SHARE BASED PAYMENTS                                            NOTE 15. PENSION AND OTHER
In accordance with the transitional provisions of IFRS 2, only                LONG-TERM BENEFITS
options granted after 7 November 2002 that had not yet
vested at 1 November 2005 were recognized and measured
                                                                     15.1 DESCRIPTION OF THE MAIN PLANS
at the IFRS transition date.                                         Group employees receive certain short-term benefits, such as
                                                                     vacation pay, “13th month” bonuses, compensated absences,
The plans concerned were the four plans set up between 2003
                                                                     health insurance and unemployment insurance in France.
and 2006.
                                                                     The Group’s post-employment benefit plans are based on
Fair value of options granted                                        legal obligations in each host country and on the subsidiaries’
                                                                     compensation policies. Long-term benefit plans include both
Fair values were calculated at the grant dates of the various
                                                                     defined contribution and defined benefit plans.
plans using the Black & Scholes option pricing model.

The main data and assumptions used to determine the fair             Defined contribution plans
values of options granted under the 2005 and 2006 plans were
                                                                     Under defined contribution plans, the Group pays contribu-
as follows:
                                                                     tions to an external fund which is responsible for paying the
                                            Plan J    Plan K         benefits. The Group’s legal or constructive obligation under
 Club Méditerranée SA share price                                    these plans is limited to the amount that it agrees to contribute
 at grant date (in €)                       35.18        45          to the fund. The main defined contribution plans consist of
 Exercise price (in €)                         35      42.7
                                                                     government-sponsored basic and supplementary pension
 Expected volatility (in %)                  23.5      23.5
                                                                     plans in Europe and defined contribution plans in North
 Expected life of the options (in years)        5         5
 Risk free interest rate (%)                 3.00      3.80          America. Senior management benefits for defined contribu-
 Fair value per option                       9.58     14.03          tion supplementary pension plans.

                                                                     Contributions to all of these plans are recognized as an
The weighted average fair value of options granted during            expense for the period in which they are incurved.
fiscal 2006 was €14.03 per option.

The cost recognized in respect of share-based payment plans
amounted to €2 million in 2006 and in 2005.




                                                                                                               2006 Annual Report //   115
      Defined benefit plans                                             15.2.2 Funded status of defined
      Under defined benefit plans, the Group has an obligation to       benefit plans
      pay benefits to employees upon retirement or after they have      (in € millions)
      retired. The Group’s defined benefit plans are unfunded and                                            31 October       31 October
      provisions are recorded in the balance sheet.                                                                2005             2006
                                                                         Present value of the unfunded
      The main defined benefit plans related to retirement indem-        obligation                                     26            21
      nity payable to employees on retirement (France, Greece and        Unrecognized actuarial gains
      Turkey) or when they leave the Group (Italy, Japan and Mexico).    and losses                                      -             7
                                                                         Net liability recognized
                                                                         in the balance sheet                           26            28
      15.2 DEFINED BENEFIT PLANS
                                                                        15.2.3. Change in defined benefit
      15.2.1 Main actuarial assumptions                                 obligations
      The Group’s obligations under defined benefit plans are meas-
                                                                        (in € millions)
      ured by the projected unit credit method. This method
                                                                                                                   2005             2006
      involves the use of long-term actuarial assumptions concern-
      ing demographic variables (such as employee turnover and           Defined benefit obligation
                                                                         at 1 November                                  25            26
      mortality) and financial variables (such as future increases in
                                                                         Service cost                                    2             2
      salaries and discount rates). These variables are reviewed each    Interest cost (discounting
      year. Actuarial gains and losses – corresponding to the effect     adjustment)                                     -             1
      of changes in actuarial assumptions on the amount of the           Actuarial gains and losses
                                                                         for the period                                  -             (7)
      obligation – are recognized by the corridor method described       Paid benefits                                  (1)            (1)
      in Note 2.14 “Pension and other long-term employee benefit         Defined benefit obligation
      obligations”.                                                      at 31 October                                  26            21

      The main discount rates applied by the Group are as follows:
                                                                        15.2.4 Analysis of defined benefit
                                  Europe    Turkey   Japan   Mexico     plan costs
       Discount rate               3.7%     18.6%     2.0%    8.4%      (in € millions)
                                                                                                             Fiscal 2005      Fiscal 2006
                                                                         Service cost                                   (2)            (2)
                                                                         Actuarial gains and losses
                                                                         recognized in the period                        -              -
                                                                         Cost recognized in employee
                                                                         benefits expense                               (2)           (2)
                                                                         Interest cost                                                 (1)
                                                                         Cost recognized in
                                                                         financial cost, net                                          (1)
                                                                         Total cost                                     (2)           (3)


                                                                        15.3 DEFINED CONTRIBUTION PLANS
                                                                        Contributions under defined contribution plans amounted
                                                                        to €15 million in 2006 (€14 million in 2005).




116
                                                                                   Consolidated Financial
                                                                                              Statements
NOTE 16. PROVISIONS
(in € millions)

                                           31 October    1 November         Increases     Utilizations    Reversals    31 October
                                                  2005           2005                                      (surplus          2006
                                            Excluding       Including                                    provisions)
                                             IAS 32/39      IAS 32/39
 Provisions for liability claims
 and damages                                        7              7               3               (2)           (2)            6
 Restructuring provisions                          10             10              13               (7)                         16
 Provisions for litigation                         12             12               6               (3)           (2)           13
 Provision for OCEANE convertible
 bond redemption premiums                          13              1                               (1)
 Tax provisions                                     3              3               1               (1)           (1)               2
 Other provisions                                   5              5               2               (2)           (1)               4
 Total                                             50             38              25              (16)           (6)          41
 - o/w current                                     50             38              25              (16)           (6)          41



Restructuring provisions include €10 million in provisions for    The nature of the Group’s business and the fact that its
site closure costs.                                               operations are conducted in a large number of countries with
                                                                  differing and sometimes contradictory regulations is a source
Provisions for litigation cover commercial claims, employees
                                                                  of operating difficulties and can lead to disputes with suppli-
claims and disputes with government agencies. Provisions
                                                                  ers, owners or local authorities.
are booked for the estimated cost of identified risks on the
basis described in Note 2.13 “Provisions”.



NOTE 17. INCOME TAXES
17.1. INCOME TAX ANALYSIS
Current and deferred taxes can be analyzed as follows:

(in € millions)

                                                                                         2005                               2006
 Current income tax                                                                         (3)                                (6)
 Deferred taxes on temporary differences                                                  (33)                                 (3)
 Effect of changes in tax rates                                                              -                                  3
 Reassessment of deferred tax assets                                                         -                                  5
 Deferred income tax                                                                      (33)                                  5
 Total                                                                                    (36)                                 (1)


In 2006, corporate income tax rates were reduced in Greece and Turkey. The impact of these reductions on the net deferred
tax liabilities of the companies concerned was €3 million.

Club Méditerranée SA has set up a tax group comprising twenty French subsidiaries.




                                                                                                           2006 Annual Report //   117
      Effective tax rate
      The following reconciliation is based on the current French income tax rate of 34.43% for fiscal 2006 (34.93% for fiscal 2005).


                                                                                             Tax (in € millions)                  Tax rate
                                                                             2005                  2006                    2005               2006
       Income before tax                                                       43                      3
       Current tax rate                                                                                              34.93%              34.43%
       Tax at current rate                                                    (15)                    (1)
       Effect of different foreign tax rates                                    2                      (1)
       Effect of changes in tax rates                                           -                       3
       Unrecognized deferred tax assets on tax losses for the year            (37)                   (49)
       Deferred tax assets recognized on tax losses generated
       in prior years                                                                                 5
       Tax loss carryforwards utilized during the year                         13                    37
       Permanent differences and other                                          1                     5
       Total                                                                  (21)                     0
       Effective tax rate                                                     (36)                    (1)             83.7%                  33.3%



      17.2. DEFERRED TAX ASSETS AND LIABILITIES
      (in € millions)

                                                                        31 October 2005            1 November 2005                31 October 2006
                                                                     Excluding IAS 32/39         Including IAS 32/39
       Deferred tax assets                                                             44                            42                         35
       Deferred tax liabilities                                                       (98)                         (102)                       (86)
       Net deferred tax liability                                                     (54)                          (60)                       (51)



      Deferred taxes recognized directly in equity are not material.

      Deferred tax analysed by balance sheet captions:

      (in € millions)

                                                                        31 October 2005            1 November 2005                31 October 2006
                                                                     Excluding IAS 32/39         Including IAS 32/39
       Property, plant and equipment                                                 (103)                         (103)                       (94)
       Tax loss carryforwards                                                          55                            53                         53
       Total assets                                                                   (48)                          (50)                       (41)
       Intangible assets                                                               (8)                           (8)                        (8)
       Property, plant and equipment                                                    2                             2                          1
       Borrowings and other interest-bearing liabilities                                                             (4)                        (3)
       Total liabilities                                                               (6)                          (10)                       (10)
       Net deferred tax liability                                                     (54)                          (60)                       (51)


      Deferred tax assets recognized on tax loss carryforwards concern the tax losses of tax groups in France and the United States.
      Their recoverability was assessed based on the two tax groups’ earnings forecasts, particularly in France where the tax losses
      were viewed as non-recurrent based on business plan outlook.




118
                                                                                      Consolidated Financial
                                                                                                 Statements
17.3. TAX LOSS CARRYFORWARDS BY EXPIRATION DATE
Tax loss carryforwards at 31 October 2006 can be analyzed as follows by expiration date:

(in € millions)

                                                                                                                    31 October 2006
 2007                                                                                                                             23
 2008 to 2012                                                                                                                    176
 Beyond                                                                                                                          107
 Evergreen tax losses                                                                                                            271
 Total tax loss carryforwards                                                                                                    576


Deferred tax assets corresponding to these loss carryforwards break down as follows by geographical region:
(in € millions)

                                                                               Recognized        Unrecognized                   Total
 French tax group                                                                      35                     33                   68
 Other – Europe-Africa                                                                                        64                   64
 Total – Europe-Africa                                                                35                      97                 132
 US tax group                                                                          13                      4                   17
 Other – Americas                                                                       2                      7                    9
 Total – Americas                                                                     15                      11                  26
 Asia                                                                                  3                       9                   12
 Total deferred tax assets on tax loss carryforwards                                  53                  117                    170



NOTE 18. BORROWINGS AND OTHER INTEREST-BEARING LIABILITIES
18.1 NET DEBT
(in € millions)

 Balance sheet items                                               31 October 2005        1 November 2005           31 October 2006
                                                                Excluding IAS 32/39     Including IAS 32/39
 Cash and cash equivalents                                                     168                    160                        165
 Long-term borrowings and other interest-bearing liabilities                   455                     435                       346
 Short-term borrowings and other interest-bearing liabilities                   48                      48                       109
 Liabilities related to assets held for sale                                                                                       4
 Total borrowings and other interest-bearing liabilities                       503                    483                        459
 Net debt                                                                      335                    323                        294




                                                                                                               2006 Annual Report //   119
      18.2. BORROWINGS AND OTHER INTEREST-BEARING LIABILITIES BY CATEGORY
      (in € millions)

                                                                            31 October 2005                1 November 2005              31 October 2006
                                                                         Excluding IAS 32/39             Including IAS 32/39
       OCEANE convertible bonds                                                          290                            270                        269
       Long-term bank borrowings                                                          70                             70                         57
       Drawdowns on credit lines                                                           -                              -                         16
       Finance lease obligation                                                           95                             95                          4
       Total borrowings and other interest-bearing liabilities, non current              455                            435                        346
       OCEANE convertible bonds                                                           10                             10                         10
       Current portion of long-term bank borrowings                                        8                              8                         10
       Current portion of lease liabilities                                                8                              8                          -
       Drawdowns on credit lines                                                                                                                    80
       Short-term bank loans and overdrafts                                               22                             22                          9
       Total borrowings and other interest-bearing liabilities, current                   48                             48                        109
       Finance lease obligation                                                              -                             -                         4
       Liabilities related to assets held for sale                                                                                                   4
       Total                                                                             503                           483                         459


      Debt secured by collateral amounted to €36 million at 31 October 2006 (€41 million at 31 October 2005).

      During 2006, Club Méditerranée purchased the ownership of the Sandpiper, Ixtapa and Cancún Villages previously held on
      finance lease.


      18.3 CHARACTERISTICS OF DEBT

                                                            31 October 2006         Nominal interest             Effective interest            Maturity
                                                                                                rate                           rate               date
       OCEANE due 2008 fixed rate                                       137                (1)
                                                                                                 5.25%                     8.40%             Nov-2008
       OCEANE due 2010 fixed rate                                       141                      4.38%                     7.39%             Oct-2010
       Total bonds                                                      278
       Drawdowns on €70 million credit line                              55           Euribor + (a)                        3.60% (2)          Oct-2009
       Mortgage loan on Da Balaïa Village                                18           Euribor + (b)                        5.16% (2)          Oct-2008
       Mortgage loan on Club Med 2                                       18           Euribor + (c)                        4.55% (2)         Dec- 2010
       Drawdown on confirmed short-term
       credit line                                                       41       USD Libor + 1.2                           7.20% (2)       April-2007
       Other (including short-term bank loans
       and overdrafts)                                                   49
       Total borrowings and other
       interest-bearing liabilities                                    459

      (1) Yield to maturity including redemption premium.
      (2) Average rate in 2006 including fees.
      Margins (a), (b) and (c) depend on the Group’s net debt/Ebitda ratio. The ranges are as follows:
      (a) 1.10% to 0.7%
      (b) 1.60% to 1.20%
      (c) 1.75% to 1.35%




120
                                                                                   Consolidated Financial
                                                                                              Statements
18.3.1 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                  149,999,976
 Number of bonds issued                                                                   2,404,733                    3,092,783
 Starting date for interest accruals                                                       30.04.02                     03.11.04
 Maturity                                                                                  01.11.08                     01.11.10
 Nominal interest rate                                                                       3.00%                       4.375%
 Yield to maturity                                                                           5.25%                       4.375%
 Effective interest rate                                                                     8.40%                        7.39%


Any unconverted OCEANE due 2008 will be redeemed at               A total of 211,002 bonds were redeemed early on 30 April 2006,
maturity at a premium to their face value. Increasing the yield   for a total of €13.6 million including accrued interest.
to maturity to 5.25%. Bond holders had the option of redeem-
ing the bonds early, on 30 April 2006, at a price representing
a yield of 5.25%.


(in € millions)

                                                                                  OCEANE due 2008              OCEANE due 2010
 Nominal amount of the issue                                                                    140                           150
 Issuance costs                                                                                   (3)                          (3)
 Equity components                                                                              (21)                          (18)
 Initial amount recognized in liability                                                         116                           129
 Recognized interest                                                                              38                                9
 Interest paid                                                                                   (10)
 Liability at 1 November 2005 under IFRS                                                        144                           138
 Interest recognized in 2006                                                                      10                            10
 Interest paid in 2006                                                                            (4)                           (7)
 Bonds redeemed early in April 2006                                                              (13)
 Liability at 31 October 2006                                                                   137                           141
 Of which accrued interest                                                                         4                                6


18.3.2. Syndicated line of credit                                 18.3.3 Other long-term facilities
Club Méditerranée has a €70 million line of credit obtained       The Da Balaïa Village and the Club Med 2 cruise ship are
on 25 October 2004 and expiring in 2009. At 31 October 2006,      financed by two loans due in October 2008 and October 2010
the line was drawn down in the amount of €55 million.             respectively. The loans are secured by mortgages and pledges
                                                                  on the Village’s assets and the cruise ship. The balance
                                                                  outstanding on the two loans at 31 October 2006 totaled
                                                                  €36 million.




                                                                                                            2006 Annual Report //   121
      NOTE 19. FINANCIAL INSTRUMENTS                                        The Group’s net investment in foreign operations is exposed
                                                                            to the risk of fluctuations in foreign currencies against the euro.
      19.1 FINANCIAL RISK MANAGEMENT                                        The impact of these fluctuations on net investments in inde-
      POLICY                                                                pendent subsidiaries is recognized as a separate component
      In the normal course of business, the Group is exposed to             of equity. This risk is not hedged using derivative instruments.
      various financial risks, including, market risks (particularly cur-   Equity risk
      rency and interest rate risks), credit risks and liquiduty risks.     The Group does not hold any listed securities, apart from treas-
      The Group may use derivative financial instruments to hedge           ury shares which is recorded as a deduction from equity. As a
      currency risks arising in the course of its business and interest     result, it is not exposed to any risk of fluctuations in stock
      rate risks on floating rate debt. In practice, these instruments      prices.
      are used primarily to hedge currency risks on future transac-         Interest rate risk
      tions. The Treasury and Financing unit identifies, assesses,          There are two types of interest rate risk:
      monitors and hedges financial risks on a centrally basis in           - Fair value risk on fixed rate net debt. This type of risk being
      accordance with the policies approved by the Audit                     not hedged, the carrying amount of financial assets and lia-
      Committee. Specific rules have been drawn up and approved              bilities is not adjusted for changes in interest rate. Fair value
      banning the use of derivative instruments for trading purposes.        risk therefore corresponds to the opportunity cost in case of
                                                                             a fall in rates.
      19.1.1 Market risks                                                   - Cash flow risk on floating rate net debt, corresponding to
      Currency risk                                                          the impact on finance costs of an increase or decrease in
      Club Méditerranée’s international operations expose the                interest rates.
      Group to the risk of fluctuations in foreign exchange rates           No cash flow hedges of interest rate risks have been put in
      affecting its income and equity.                                      place as the Group’s net floating rate debt is not material.
      Three types of risk may be identified:                                The Group does not hold any interest-bearing assets.
      - Currency risks on billing currencies and operating cash flows.
      - Currency risks on financing denominated in a currency other         19.1.2 Credit and counterparty risk
       than the borrower’s functional currency.                             Most customers pay in advance for their vacations and the
      - Risks of a change in consolidated equity arising from the           Group’s exposure to credit risk on commercial transactions is
       Group’s net investment in foreign operations.                        therefore limited.

      The Group’s policy based on budgeted cash flows for the               Derivative instruments and borrowings are entered into with
      coming year consists of:                                              a wide range of leading counterparties.
      - Hedging the main currencies in which sales are denomi-
                                                                            In case of cash surpluses, first rank, they are invested in certifi-
       nated (British pound, Japanese yen, Canadian dollar,
                                                                            cates of deposit or Sicav mutual funds of leading banks.
       Australian dollar, Korean won, etc.), using options, forward
       sales, non-deliverable forwards.
                                                                            19.1.3 Liquidity risk
      - Hedging the Group’s exposure to the US dollar, correspon-
                                                                            Liquidity risk is monitored by using diversified sources of
       ding to both a billing currency and an operating currency,
                                                                            financing.
       using instruments such as options and forward purchases.
      - Not systematically hedging other functional currencies              Some of the Group’s debt facilities include early redemption
       (Moroccan dirham, Turkish pound, Tunisian dinar, Indonesian          clauses that are triggered in the event of a breach of the debt
       rupee, Thai bath, etc.), which are purchased as and when             covenants or of asset disposal.
       required.

      The Group’s exposure to currency risks on external debt is
      not significant. Intra-group financing is generally denominat-
      ed in the subsidiary’s functional currency. When identifical
      as hedges of the net investment in foreign operations, their
      unrealized change in value is recognized directly in equity.




122
                                                                                       Consolidated Financial
                                                                                                  Statements
19.2 FAIR VALUE OF FINANCIAL                                         The discounted present value of finance lease obligations,
INSTRUMENTS                                                          including those related to assets held for sale, is as follows:

The following table shows the carrying amounts and fair values       (in € millions)
of financial instruments at 31 October 2006:
                                                                                                          31 October      31 October
                                                                                                                2005            2006
(in € millions)
                                                                      Due within one year                           8                  4
                                         Carrying      Fair value
                                          amount
                                                                      Due in one to five years                      49
                                                                      Due beyond five years                         46                 4
 Cash and cash equivalents                   165            165       Total due beyond one year                    95                  4
 Financial assets                           165             165       Total                                        103                 8
 Bonds                                       278            302
 Other fixed rate long-term
 borrowings and interest-bearing
 liabilities                                  15              14     19.3.2 Confirmed lines of credit
 Other floating rate long-term                                       Club Méditerranée has a €70 million line of credit obtained
 borrowings and interest-bearing
 liabilities                                 157            157      on 25 October 2004 and expiring in 2009. At 31 October 2006,
 Short-term bank loans and overdrafts          9              9      the line was drawn down in the amount of €55 million. Following
 Financial liabilities                      459             483      the asset disposals carried out at the end of the year, the
                                                                     Group repaid €18 million in November 2006. Under the terms
The above table does not include trade receivables or trade          of the facility agreement, the amount of the line will be
payables. In light of their short-term nature, there is no differ-   reduced to €16 million in October 2007. The line is subject to
ence between the carrying amount of trade receivables and            various covenants (see 19.3.3 “Debt covenants”).
trade payables and their fair value.

The fair value of derivative instruments is not material.
                                                                     19.3.3 Debt covenants
                                                                     The debt covenants have been redefined, effective from

19.3 MATURITIES OF FINANCIAL LIABILITIES                             30 April 2006, to take into account the transition to IFRS. Under
                                                                     the redefined covenants, EBITDA is defined as Operating
AND DEBT COVENANTS
                                                                     income - Leisure before depreciation, amortization and

19.3.1 Analysis of financial liabilities                             provisions. Any breach of the ratios defined in the covenants
                                                                     the outstanding debt may become immediately repayable.
by maturity
                                                                     Ratios applicable to the €70 million syndicated line of credit
(in € millions)
                                                                     and the occured loans financing the Club Med 2 cruise ship
                                       31 October    31 October      and the Da Balaïa Village are as follows:
                                             2005          2006
                                                                     - Off-balance sheet commitments: less than €200 million
 Due within one year
 (including short-term bank loans                                    - Gearing: less than 1
 and overdrafts)                              49            113      - Leverage (net debt/Ebitda (as defined above): less than the
 2006-2007                                    27                       following:
 2007-2008                                    31             20
 2008-2009                                   153            158                                         30 April          31 October
 2009-2010                                    15              5       2006                                 4.47                  4.47
 2010-2011                                   167            145       2007                                 4.17                  4.17
 Beyond                                       61             18       2008 *                               3.88                  3.88
 Total due beyond one year                   454            346       2009 and beyond                      3.58                 3.58
 Total                                       503            459      * Da Balaïa until 2008.


                                                                     The covenants were complied with at 31 October 2006:
                                                                     - Off-balance sheet commitments
                                                                       (less than €200 million):                          €91 million
                                                                     - Gearing (less than 1):                                     0.57
                                                                     - Leverage (net debt/Ebitda (as defined above))
                                                                       (less than 4.47):                                          3.26




                                                                                                               2006 Annual Report //   123
      19.4 MANAGEMENT OF INTEREST RATE RISK                                                    19.5 CURRENCY RISK MANAGEMENT
      The Group has a combination of fixed and floating rate debt.
      In fiscal 2006, no interest rate hedges were set up as average
                                                                                               19.5.1 Analysis of financial liabilities
      floating rate net debt represented less than €50 million.                                by currency
      At 31 October 2006, the Group’s exposure to interest rate                                (in € millions)

      risk by maturity was as follows:                                                                                     31 October 2005           31 October 2006
                                                                                                                        Excluding IAS 32/39
      (in € millions)                                                                              Euros                               378                      389
                                                                                                   US dollars                           96                       41
                                          Total          Less         One       More
                                                         than       to five      than              Swiss francs                         13                       12
                                                          one        years        five             Brazilian reals                      10                       17
                                                         year                   years
                                                                                                   Other                                 6
       Cash and cash equivalents (165)                   (165)
                                                                                                   Total                               503                      459
       Floating rate debt *       166                     100             56          10
       Net floating rate debt       1                      (65)           56          10
       Fixed rate debt            293                       14           272           7       Most external financing is in the borrower’s functional currency
       Net debt                           294             (51)           328          17       and the Group’s exposure to currency risk on external borrow-
                                                                                               ings is therefore limited.
      * Including short-term bank loans and overdrafts.


      19.5.2 Exposure to currency risk on operating activities
      At 31 October 2006
      (in millions of foreign currency)

                                                  USD             GBP          AUD          JPY         CAD          MXN      KRW        TND           MAD       TRY
       Net exposure to currency
       risk on operating activities               (62)             15            7         1,000           27        (327)   10,200           (41)     (155)      (16)
       Cash flow hedges
       (derivative notional amount)                20             (10)          (5)                        (19)      105     (4,000)
       Net exposure of 2007
       cash flows after hedges
       at 31 October 2006                         (42)              5            2         1,000            8        (222)    6,200           (41)     (155)      (16)
       Net exposure after
       converted into euros
       (in € millions)                            (33)              7            1            7              6        (16)        5           (24)       (14)      (9)

      NOTE: Amounts in parentheses correspond to purchases of foreign currencies; amounts not in parentheses correspond to sales of foreign
      currencies.
      GBP: British pound; AUD: Australian dollar; JPY: Japanese yen; CAD: Canadian dollar; MXN: Mexican peso; KRW: South Korean won;
      USD: US dollar; TND: Tunisian dinar; MAD: Moroccan dirham; TRY: Turkish pound.

      Net exposures correspond to the exposure of estimated operating cash flows for the following year. Hedges are set up grad-
      ually over the year.
      All hedging instruments outstanding the year-end expire within one year.
      Currency hedges consist of forward contracts, including non-delivery forwards on the South Korean won, qualifying for cash
      flow hedge accounting.




124
                                                                                                   Consolidated Financial
                                                                                                              Statements
NOTE 20. OTHER LIABILITIES                                                       NOTE 21. EMPLOYEE BENEFITS
                                                                                          EXPENSE
(in € millions)

                                          31 October       31 October            (in € millions)
                                                2005             2006
                                                                                                                        2005                2006
 Customer prepayments                                93            112
 Accrued expenses                                    16             13            Wages and salaries                    (234)               (250)
 Accrued payroll                                                                  Payroll taxes                           (43)                (49)
 expense                                             44             47            Pension contributions                   (14)                (15)
 Taxes payables                                      22             20            Share based payment expense              (2)                 (2)
 Payables to suppliers                                                            Other                                   (13)                (12)
 of non-current assets (1)                           18             20            Total                                 (306)               (328)
 Accrued rentals                                      8              8
 Deferred income                                     63             67
 Government grants                                   22             28
 Other liabilities                                    1             10
 Total                                             287             325
 - Of which non-current (2)                         30              36
 - Of which current                                257             289

(1) At 31 October 2006, these liabilities mainly concerned three Villages,
    Peisey-Vallandry (€4 million), La Caravelle (€7 million) and Les
    Boucaniers (€2 million).
(2) Non-current liabilities consist of government grants and accruals
    arising from the recognition of rental expenses on a straight-line
    basis.


Number of employees
                                              Full-time                        Full-time               O/w temporary             O/w temporary
                                            equivalents                      equivalents                   contracts*                contracts*
                                                  2005                             2006                         2005                      2006
 Villages                                       14,257                          13,886                         7,452                      7,433
 Tour operating                                    280                             339                            70                         49
 Club Med Gym                                      471                             485                            48                         47
 Club Med World                                    166                             135                            17                         24
 Total number of employees                      15,244                          14,845                         7,587                      7,553

* Seasonal employees and employees under fixed-term contracts.



NOTE 22. OPERATING INCOME –                                                      NOTE 23. OTHER OPERATING
         MANAGEMENT OF ASSETS                                                             INCOME & EXPENSE
(in € millions)                                                                  (in € millions)

                                            2005                  2006                                                  2005                2006
 Gains on disposals of Villages              108                    50            Restructuring costs                    (12)                (14)
 Gains and losses on Village                                                      Tsunami and hurricane costs             (5)                 (1)
 and site closures                             (7)                    4           Costs of claims and litigation          (7)                 (5)
 Village opening costs                         (4)                   (6)          Credit card costs                        (8)                (9)
 Impairment losses                             (4)                   (4)          Other                                    (1)
 Other                                         (4)                   (4)
                                                                                  Other operating income
 Operating income –                                                               & expense                              (33)                (29)
 Management of assets                         89                    40


Disposals included the sale of the Crested Butte, Flaine,
Valbella and Cadaques Villages, and the sale-and-operating-
leaseback of the Chamonix, Les Deux Alpes and Avoriaz
Villages. Details of the sale proceeds are provided in Note
27.3.




                                                                                                                           2006 Annual Report //   125
      NOTE 24. FINANCE COST, NET                                         26.2 DILUTED EARNINGS PER SHARE
                                                                         (in thousands of shares)
      (in € millions)
                                                                                                                 2005              2006
                                       2005          2005        2006
                                               (pro forma)                 Weighted average
                                 Excluding      Including                  number of shares                    19,101            19,078
                                 IAS 32/39     IAS 32/39                   Dilutive potential
       Interest income                    2             2           2      ordinary shares
       Interest on OCEANE                                                  (stock options)                           38             111
       convertible bonds                (15)          (22)        (21)     Diluted weighted
       Other interest costs             (23)          (23)        (15)     average number of shares            19,139            19,189

       Interest costs, net              (36)          (43)        (34)
       Exchange gains and                                                In fiscal 2006, 687,020 potential ordinary shares (stock options)
       losses, net                       (4)            (4)         5    were excluded from the calculation because they were anti-
       Autres                             2             2           2    dilutive (786,475 shares in fiscal 2005).
       Finance cost, net                (38)          (45)        (32)
                                                                         In fiscal 2006, 5,287 thousand anti-dilutive potential ordinary
                                                                         shares corresponding to OCEANE convertible bonds were
      IAS 32 and IAS 39 have been applied prospectively as from          also excluded (5,498 thousand shares in fiscal 2005).
      1 November 2005 and interest costs for 2006 and 2005 are
      therefore not directly comparable. The main change in              (in €)

      accounting method concerned interest on OCEANE convert-                                                         2005         2006
      ible bonds, leading to an increase in finance costs without any      Basic earnings per share                    0.48        0.24
      corresponding increase in cash payments. Pro forma informa-          Diluted earnings per share                  0.48        0.24
      tion is provided to facilitate year-on-year comparisons.
                                                                         No events occurred after the balance sheet date that would
      NOTE 25. SHARE OF INCOME                                           have a material impact on the calculation of diluted earnings
               OF ASSOCIATES                                             per share

      (in € millions)
                                                                         NOTE 27. NOTES TO THE
                                               2005             2006              CONSOLIDATED CASH
       Share of income of associates              3                 3
                                                                                  FLOW STATEMENT

      Details of the contribution of associates to consolidated          27.1 DEPRECIATION, AMORTIZATION
      income are provided in Note 9 “Non-current financial assets”.
                                                                         AND PROVISIONS
      NOTE 26. EARNINGS PER SHARE                                        (in € millions)

                                                                                                                 2005              2006
      26.1 BASIC EARNINGS PER SHARE
                                                                           Amortization and impairment:
      (in thousands of shares)                                             intangible assets                         11               7
                                                                           Depreciation and impairment:
                                                      2005      2006       property, plant and equipment             70              60
       Number of shares at 1 November             19,358      19,358       Other provisions                           2               3
       Number of treasury shares                                           Depreciation, amortization
       at 1 November                                  (257)      (257)     and provisions                            83              70
       Weighted average number
       of treasury shares purchased/sold
       during the period                                 -        (23)
       Weighted average number                                           27.2 ACQUISITIONS OF NON-CURRENT ASSETS
       of shares issued during the period                -          -
                                                                         (in € millions)
       Weighted average number
       of shares at 31 October                    19,101      19,078
                                                                                                                      2005         2006
                                                                           Acquisitions of intangible assets              (9)         (8)
                                                                           Acquisitions of property,
                                                                           plant and equipment                        (123)        (138)
                                                                           Government grants                            22            7
                                                                           Acquisitions of non-current
                                                                           financial assets                               (4)       (12)
                                                                           Total acquisitions
                                                                           of non-current assets                      (114)        (151)
126
                                                                                                Consolidated Financial
                                                                                                           Statements
27.3 PROCEEDS FROM DISPOSALS                                                 Senior management compensation
OF NON-CURRENT ASSETS                                                        Disclosures of senior management compensation relates the
Proceeds from disposals of property, plant and equipment,                    members of the Senior Management Committee. Total gross
in the amount of €110 million, mainly correspond to sales of                 compensation and benefits paid in fiscal 2006 amounted to
the following Village properties: Chamonix (€27 million),                    €3,928 thousand (€3,624 thousand in fiscal 2005).
Crested Butte (€25 million), Les Deux Alpes (€23 million),
                                                                             Members of senior management are covered by a defined
Avoriaz (€13 million), Flaine (€7 million), Valbella (€5 million)
                                                                             contribution pension plan managed by an external fund with
and Cadaques (€4 million).
                                                                             a contribution between 6.29% and 8% of their gross compen-
Proceeds from disposals of non-current financial assets corre-               sation. Contributions to this plan paid on behalf of members
spond to repayments of loans and deposits for €4 million and                 of the Senior Management Committee amounted to
the €29 million in proceeds from the sale of shares in Vacances              €285 thousand in fiscal 2006.
Cap Skirring (€21 million), Club del Mar (€5 million) and Taipe
                                                                             During fiscal 2006, a stock option plan was granted for mem-
Trancoso (€2 million).
                                                                             bers of senior management and certain employees of Club
                                                                             Méditerranée, with an exercise price of €42.67. A total of
NOTE 28. RELATED PARTY                                                       103,000 options were granted to members of the Senior
         TRANSACTIONS                                                        Management Committee under this plan. The total fair value
Related party transactions were as follows:                                  of these options, determined in accordance with IFRS 2, is
                                                                             €1,445 thousand.
Transactions with associates                                                 The cost recognized in fiscal 2006 for stock options granted
(in € millions)                                                              to members of the Senior Management Committee, as

                             31 October 2005        31 October 2006
                                                                             determined in accordance with IFRS 2, was €756 thousand
                                                                             (€642 thousand in fiscal 2005).
 Other receivables                            3                      2
 Other current liabilities                    1                      4       No loans or guarantees have been granted to or on behalf of
                                                                             executive directors.
Transactions with associates in fiscal 2006 were not material.
                                                                             No stock options were exercised by members of the Senior
                                                                             Management Committee during the year.


NOTE 29. COMMITMENTS AND CONTINGENCIES
29.1 AT 31 OCTOBER
(in € millions)

                                                              31 October 2005                               31 October 2006
                                                                           Total       Less than       One to five       More than           Total
                                                                                        one year            years          5 years
 Commitments given
 Guarantees given (1)
 Europe                                                                      55               17                25               23            65
 Americas                                                                    29               20                                               20
 Asia                                                                         5                3                  1               2             6
 Total commitments given                                                     89               40                26              25             91
 Commitments received         (2)
                                                                             16                6                 3                4            13
 Reciprocal commitments
 Unused lines of credit                                                      70                                 15                             15
 Rent guarantees                                                              7                                                   7             7
 Total reciprocal commitments                                                77                                 15                7            22

(1) Guarantees given in connection with travel and transport agent licenses (€23 million), rent bonds (€6 million), guarantees for liabilities related
    to disposals (€31 million), guarantees for credit cards processors (€12 million) and tax and customs bonds (€3 million).
(2) Guarantees received by the Group in regard to travel agencies amounted to €7 million.

Financing for the Da Balaïa Village and the Club Med 2 cruise ship is secured by liens and mortgages on the underlying assets
(see Notes 8.2 and 18.3).



                                                                                                                            2006 Annual Report //    127
      29.2 COMMITMENTS UNDER NON-CANCELABLE OPERATING LEASES
      The Group leases offices and sales agencies under non-cancelable leases. Some office equipment and Village telephone and
      video equipment is also leased.

      Under its asset financing policy, certain Villages as well as other assets are also leased under non-cancelable operating leases.

      The following table shows the minimum future lease payments due under these non-cancelable operating leases:

      (in € millions)

                                         Total     2006       2007        2008       2009      2010       2011       2016       2026
                                    minimum                                                                 to         to        and
                                 future lease                                                             2015       2025     beyond
                                   payments
       Europe                          1,657        113        114        115         112       113        543        481         66
       Americas                           43          4          4          4           3         3         14         11
       Asia                              144         12         11         11          11        10         52         37
       Sub-total Villages             1,844        129         129        130         126      126        609         529         66
       Tour operating                      10         3           3         2             2
       Club Med World                      12         1           1         1             1       1          4          3
       Club Med Gym                        29         5           5         3             3       3          9          1
       Total minimum future
       lease payments                 1,895        138         138        136         132      130        622         533         66


      Rental expense recognized in the income statement for operating leases amounted to €142 million in fiscal 2006 (fiscal 2005:
      €125 million). The year-on-year increase resulted from Group’s asset financing policy.



      NOTE 30. TRANSITION TO IFRS                                         Preliminary information about the transition to IFRS was
                                                                          published in the fiscal 2005 Annual Report. The quantified
      30.1 BACKGROUND TO THE TRANSITION                                   impact of the transition, effective 1 November 2004, on the
      In accordance with European Council Regulation 1606/2002/EC         fiscal 2005 income statement and the balance sheet at
      dated 19 July 2002, the consolidated financial statements for       31 October 2005 was reviewed during the preparation of
      the year ended 31 October 2006 have been prepared in accor-         the consolidated financial statements for the year ended
      dance with the International Financial Reporting Standards          31 October 2006. The adjustments and reclassifications made
      (IFRSs), International Accounting Standards (IASs) and related      compared with the preliminary information are presented in
      interpretations adopted by the European Union at that date.         Note 30.2 below.
      This note presents the effect of the IFRS transition on opening
      equity at 1 November 2004, fiscal 2005 income and the closing       30.2 DESCRIPTION OF THE MAIN IFRS
      balance sheet at 31 October 2005. It also includes a descrip-       ADJUSTMENTS
      tion of the main differences between IFRS and the French
      generally accepted accounting principles (French GAAP)              A. IFRS 1 & IAS 16: Property,
      applied by the Group to prepare its published consolidated          Plant and Equipment
      financial statements for the year ended 31 October 2005.
                                                                          French GAAP
      Comparative financial information for fiscal 2005 has been          Property, plant and equipment were stated at purchase or
      prepared in accordance with IFRS 1 - First-Time Adoption of IFRS,   production cost, and were depreciated over their estimated
      and the IFRSs, IASs and related interpretations adopted by          useful lives.
      the European Union as of 31 October 2006.

      The Group has elected not to early adopt any standards,             IFRS
      amendments to standards or interpretations.                         As allowed under IFRS 1, the Group opted to measure certain
                                                                          items of property, plant and equipment at the IFRS transition
      Certain IFRSs and IASs propose both a benchmark treatment           date at their fair value and to use that fair value as their
      and an allowed alternative treatment for the recognition and        deemed cost at that date. Club Méditerranée has frequently
      measurement of assets and liabilities, and various options          been one of the first companies to develop new vacation
      are also available to first-time adopters under IFRS 1. The         destinations and some of its assets, particularly land, were
      options selected by the Group are presented in Note 2.1 -           significantly undervalued in the French GAAP accounts. The
      Summary of significant accounting policies.                         Group therefore decided to measure assets at fair value at the

128
                                                                                     Consolidated Financial
                                                                                                Statements
IFRS transition date. The process consisted of measuring either     Goodwill is no longer amortized, effective from 1 November
the land only or the entire Village, as appropriate, based on       2004.
independent valuations.
                                                                     Impact on opening equity at 1 November 2004: - €54m
In addition, for the application of IAS 16, the tracking of prop-    Impact on fiscal 2005 net income: + €8m
erty, plant and equipment according to a components-based
approach was fine-tuned.
                                                                    C. IAS 18 & 17: Sale-and-Leaseback
The individual parts of each item of property, plant and equip-     Transactions/Leases
ment are recognized separately when their estimated useful
                                                                    A. FINANCE LEASES
life - and consequently their depreciation period - is different
from that of the asset as a whole. Villages are expected to be      French GAAP
used throughout their useful life and depreciation is therefore     The Group applied the recommended method under stan-
calculated without deducting any residual value.                    dard CRC 99-02, which consists of recognizing finance leases
                                                                    in the balance sheet. Sale-and-leaseback transactions were
 Impact on opening equity at 1 November 2004: + €158m
                                                                    accounted for by recording a sale and either an operating
 Impact on fiscal 2005 net income: + €13m
                                                                    lease or a finance lease.

                                                                    IFRS
B. IAS 36 & IFRS 3: Impairment                                      All of the Group’s operating leases and sale-and-leaseback
of Assets and Business Combinations                                 transactions were reviewed at 1 November 2004 based on the
A. IAS 36: IMPAIRMENT OF ASSETS                                     criteria in IAS 17 and IAS 18. This review led to the identifica-
                                                                    tion of five finance leases, which were recognized as assets
French GAAP
                                                                    and liabilities in the opening IFRS balance sheet.
The Group tested assets for impairment based on the higher
of fair value and the discounted present value of future cash        Impact on opening equity at 1 November 2004: - €41m
flows. The impairment tests were performed at the level of           Impact on fiscal 2005 net income: - €3m
cash-generating units (CGUs), with each CGU corresponding
to all the Villages in a given region.                              B. RECOGNITION OF RENTS ON A STRAIGHT-LINE BASIS

IFRS                                                                IFRS
For the application of IAS 36, the Group reviewed the defini-       Following a review of all of the Group’s leases based on the
tion of its CGUs, which now correspond to individual Villages.      criteria in IAS 17, rent on all operating leases is now recog-
                                                                    nized on a straight-line basis.
Impairment tests are performed, Village by Village, whenever
there is an indication that their recoverable amount might be        Impact on opening equity at 1 November 2004: - €6m
less than their carrying amount.                                     Impact on fiscal 2005 net income: - €2m

Recoverable amount is defined as the higher of fair value and
the discounted present value of future cash flows.                  D. IAS 38: Intangible Assets
B. IFRS 3: BUSINESS COMBINATIONS                                    French GAAP
French GAAP                                                         Village pre-opening costs were recognized in intangible assets
Goodwill was amortized over a maximum of 20 years. Goodwill         and amortized on a straight-line basis over five years.
representing small amounts was amortized over the year in           IFRS
which it was recognized.                                            Pre-opening costs do not qualify as intangible assets under
IFRS                                                                IAS 38 or as a component of property, plant and equipment
In accordance with IFRS 3, goodwill is no longer amortized          under IAS 36, and they are therefore recognized as an expense
but is tested annually for impairment at the level of the CGU       for the period in which they are incurred.
to which it is allocated. Any impairment losses recognized in
                                                                     Impact on opening equity at 1 November 2004: - €2m
the income statement are irreversible.                               Impact on fiscal 2005 net income: €0m
The Group has elected not to restate business combinations
recorded prior to the IFRS transition date and accumulated
amortization at 1 November 2004 has therefore been main-
tained in the opening IFRS balance sheet.




                                                                                                              2006 Annual Report //   129
      E. IFRS 2: Share-Based Payments                                          IFRS
                                                                               The IFRS Framework states that application of the accrual basis
      IFRS                                                                     of accounting should not lead to the recognition of items that
      In application of IFRS 2, the benefit granted to employees in            do not satisfy the definition of an asset or a liability.
      the form of stock options is recognized as an expense over
                                                                               IAS 38 states that prepayments may be recognized as an asset
      the option vesting period.
                                                                               when payment for the delivery of goods or services has been
      The Group has not elected for full retrospective application of          made in advance of the delivery of goods or the rendering of
      IFRS 2. Consequently, as allowed under IFRS 1, IFRS 2 has                services.
      been applied only to options granted after 7 November 2002
                                                                               The prepaid expenses listed above do not satisfy the defini-
      that have not yet vested.
                                                                               tion of an asset under IFRS and are therefore recognized as
       Impact on opening equity at 1 November 2004: €0m                        an expense when the service is rendered.
       Impact on fiscal 2005 net income: - €2m
                                                                                Impact on opening equity at 1 November 2004: - €20m
                                                                                Impact on fiscal 2005 net income: + €1m
      F. IAS 19: Employee Benefits
      French GAAP                                                              H. Income Statement Presentation
      The Group elected to apply the recommended method under                  The transition to IFRS has led to material changes in the
      standard CRC 99-02, which consists of recording provisions               presentation of the income statement. In order to clearly
      for pension obligations and for post-employment obligations              identify the different sources of income, operating income
      towards permanent employees.                                             has been analyzed between:

      IFRS                                                                     • Operating income - Leisure, corresponding to all the income

      Provisions are recorded for length-of-service awards payable             and expenses directly related to our operations.

      to employees on retirement when the Group has a legal or                 • Operating income - Management of assets, corresponding
      contractual obligation under the plan or a constructive obli-            to all the costs related to changes in the scope of consolida-
      gation based on its informal practices.                                  tion, including gains and losses on disposals of assets, the

      All cumulative actuarial gains and losses were recognized at             costs of temporary and permanent Village closures, all the

      the IFRS transition date, in accordance with the option avail-           costs related to new Village projects, and impairment charges

      able to first-time adopters under IFRS 1.                                on operating and marketing units.

                                                                               • Other operating income & expense, corresponding mainly
       Impact on opening equity at 1 November 2004: - €6m
                                                                               to restructuring costs, claims and litigation, the impact of
       Impact on fiscal 2005 net income: €0m
                                                                               natural disasters and credit card costs. Under French GAAP,
      (1) Including actuarial gains and losses recognized in accordance with   credit card costs - corresponding to the cost of deferred
      IFRS 1 for - €2m.
                                                                               payments - were recorded in interest expense. Under IFRS,
                                                                               these costs are charged against operating income.
      G. IAS 38: IFRS Framework -
         Intangible Assets/Prepaid Expenses
      French GAAP
      Advertising and marketing services - including the design and
      production of sales brochures -, services rendered in the Villages
      before the fiscal year-end that relate to the next season and
      pre-season employee travel expenses were recognized under
      “Prepaid expenses”.




130
                                                                    Consolidated Financial
                                                                               Statements
I. Opening equity at 1 November 2004
ANALYSIS BY STANDARD

(in € millions)

                                                                   Reported     Additional        Equity after
                                                                     equity    adjustments          additional
                                                                                                  adjustments
 Equity under French GAAP (including minority interests)               444                               444
 IFRS 1 & IAS 16: Property, Plant and Equipment                        159              (1)               158
 IAS 36 & IFRS 3: Impairment of Assets and Business Combinations       (49)             (5)               (54)
 IAS 17 & IAS 18: Sale-and-Leaseback Transactions and Leases           (40)             (7)               (47)
 IAS 19: Employee Benefits                                               (5)            (1)                  (6)
 IFRS Framework & IAS 38: Intangible Assets/Prepaid Expenses           (22)                                (22)
 Other                                                                                  (1)                  (1)

 Total IFRS adjustments net of deferred taxes                           43            (15)                 28
 Equity under IFRS                                                     487            (15)               472



ANALYSIS OF ADDITIONAL ADJUSTMENTS BY TYPE

(in € millions)

                                                                                              Impact on equity
 Reported equity under IFRS                                                                               487
 IAS 16: Property, Plant and Equipment                                                                       (2)
 Deferred tax adjustment                                                                                   (12)
 Other adjustments                                                                                           (1)
 Total additional IFRS adjustments net of deferred taxes                                                  (15)
 Equity under IFRS after additional adjustments                                                          472




                                                                                        2006 Annual Report //    131
      J. Closing IFRS Balance Sheet at 31 October 2005 (in millions)
       Assets                                      French GAAP               IAS 38:            IFRS 1    IAS 17 & 18:            IAS 17:           IAS 36:
                                                        balance           Intangible        & IAS 16:          Sale-and-    Recognition          Impairment
                                                          sheet               assets      Revaluation/        leaseback     of rents on a          of assets
                                                     31 October                           Components       transactions      straight-line           IFRS 3:
                                                           2005                               method         and leases             basis          Business
                                                                                                                                                combination
       Intangible assets                                    103                  (23)                                                                    (1)
       Goodwill                                              72                   28                                                                      3
       Property, plant and equipment                        685                                   234              100                                  (48)
       Available-for-sale financial assets                   15                   (7)
       Investments in associates                             12
       Loans                                                 10
       Deposits                                              52                                                     (20)
       Non-current financial assets                          89                   (7)                               (20)
       Total fixed assets                                   949                   (2)             234               80                                  (46)
       Deferred tax assets                                                                                            1
       Total non-current assets                             949                   (2)             234               81                                  (46)


       Assets held for sale
       Inventories                                           21
       Trade receivables                                     65
       Other receivables                                    138                                                     (17)
       Deferred tax assets                                   60
       Cash and cash equivalents                            168
       Total current assets                                 452                                                     (17)
       Total assets                                       1,401                   (2)             234               64                                  (46)



        Equity and liabilities                     French GAAP               IAS 38:            IFRS 1    IAS 17 & 18:            IAS 17:           IAS 36:
                                                        balance           Intangible        & IAS 16:          Sale-and-    Recognition          Impairment
                                                          sheet               assets      Revaluation/        leaseback     of rents on a          of assets
                                                     31 October                           Components       transactions      straight-line           IFRS 3:
                                                           2005                               method         and leases             basis          Business
                                                                                                                                                combination
       Share capital and additional paid-in capital          640
       Deficit                                             (204)                  (2)             132               (41)               (6)              (55)
       Net income for the year                                 4                                   13                 (3)              (2)                8
       Equity attributable to shareholders                  440                   (2)             145               (44)               (8)              (47)
       Minority interests                                     27                                   26                                                     1
       Total equity                                         467                   (2)             171               (44)               (8)              (46)


       Long-term provisions                                  92
       Long-term borrowings and other
       interest-bearing liabilities                         408                                                      88
       Other non-current liabilities                                                                                                    8
       Deferred tax                                                                                 63               15
       Total non-current liabilities                        500                                    63              103                  8

       Short-term provisions
       Trade payables                                       150
       Other current liabilities                            191
       Customer prepayments                                  93
       Short-term borrowings and other
       interest-bearing liabilities                                                                                   5
       Total current liabilities                            434                                                       5
       Total equity and liabilities                       1,401                   (2)             234               64                                  (46)
      Reclassifications:
      (1) Deferred tax assets classified as non-current for €60 million and deferred tax assets and liabilities set off by entity for €17 million.
      (2) Provisions classified as current (provisions other than for length-of-service awards payable to employees on retirement) for €49 million
          and deferred tax liabilities for €23 million on an identified line.
      (3) Interest-bearing liabilities classified as current for €42 million.
      (4) Assets intended to be sold within 12 months.
      (5) Including government grants classified as non-current for €22 million.
132
                                                                   Consolidated Financial
                                                                              Statements


  IAS 19:         IFRS 2:          IFRS    Other    Reclassifications           Total IFRS         IFRS balance
Employee     Share-based     Framework:                                       adjustments                 sheet
 benefits      payments         Prepaid                                                              31 October
                               expenses                                                                    2005



                                                                                     (24)                   79
                                                                                      31                   103
                                             15                  (11)   (4)
                                                                                     290                   975
                                                                                       (7)                   8
                                                                                                            12
                                                                   4                    4                   14
                                                                                      (20)                  32
                                                                   4                  (23)                  66
                                             15                   (7)                274                 1,223
                                                                  43    (1)
                                                                                       44                    44
                                             15                   36                 318                 1,267


                                                                  11    (4)
                                                                                       11                    11
                                                                                                             21
                                                                   1                    1                    66
                                    (13)     ( 5)                 (4)                 (39)                   99
                                                                 (60)   (1)
                                                                                      (60)
                                                                                                           168
                                    (13)      (5)                (52)                 (87)                 365
                                    (13)     10                  (16)                231                 1,632



  IAS 19:         IFRS 2:          IFRS    Other    Reclassifications           Total IFRS         IFRS balance
Employee     Share-based     Framework:                                       adjustments                 sheet
 benefits      payments         Prepaid                                                              31 October
                               expenses                                                                    2005



                                                                                                            640
       (6)              2           (20)       5                                        9                  (195)
                       (2)            1      (10)                                       5                     9
       (6)                          (19)      (2)                                      14                   454
                                                                                       27                    54
       (6)                          (19)      (5)                                      41                  508


       6                                                         (72)   (2)
                                                                                      (66)                   26

                                              1                  (41)   (3)
                                                                                       48                  456
                                                                  22    (5)
                                                                                       30                   30
                                             13                    7    (2)
                                                                                       98                   98
       6                                     14                  (84)                110                   610

                                                                  49    (2)
                                                                                       49                   49
                                      6                            4                   10                  160
                                                                 (27)   (5)
                                                                                      (27)                 164
                                                                                       93

                                              1                   42    (3)
                                                                                       48                    48
                                      6                           68                   80                  514
                                    (13)     10                  (16)                231                 1,632




                                                                                             2006 Annual Report //   133
      K. Fiscal 2005 income statement (in millions)
                                                                                  French GAAP             IFRS 1 &      IAS 17 & 18:             IAS 17:
                                                                                    net income              IAS 16:           leases        Recognition
                                                                                                       Revaluation/                         of rent on a
                                                                                                       Components                           straight-line
                                                                                                           method                                  basis


       Revenue                                                                           1,590
       Other income                                                                         59
       Total revenue                                                                     1,649
       Purchases                                                                           (721)
       External services                                                                   (476)                                   7                  (2)
       Taxes other than on income                                                            (31)
       Employee benefits expense                                                           (325)
       Other expenses                                                                         (9)
       Depreciation and amortization expense                                                 (70)                (2)              (2)
       Provision expense, net                                                                  5
       Total operating expense - Leisure                                                (1,627)                  (2)               5                  (2)
       Operating income - Leisure                                                            22                 (2)                5                  (2)
       Operating income - Management of assets                                                                  22                                    (1)
       Other operating income & expense
       Operating income                                                                      22                 20                 5                  (2)
       Exchange gains and losses, net                                                         (4)
       Other financial income & expense                                                     (34)
       Interest income
       Finance costs                                                                                                              (8)
       Finance costs and other financial income & expense, net                              (38)                                  (8)
       Loss before exceptional items and tax                                                (16)                20                (3)                 (2)
       Exceptional items                                                                     43
       Income before tax                                                                     27                 20                (3)                 (2)
       Income tax expense                                                                   (17)                (7)
       Net income of fully consolidated companies                                            10                 13                (3)                 (2)
       Share of income of associates                                                          3
       Net income                                                                            13                 13                (3)                 (2)
       Minority interests                                                                     (1)
       Income attributable to shareholders before
       amortization of goodwill                                                              12                 13                (3)                 (2)
       Amortization of goodwill                                                               (8)
       Income attributable to shareholders                                                    4                 13                (3)                 (2)

      Reclassifications:
      (1) Expense transfers (€7 million) and own work capitalized (€11 million), corresponding to payroll costs deducted from “Employee benefits expense”.
      (2) Provision reversals set off against the corresponding expense (€7 million).
      (3) Exceptional items reclassified as operating items.
      (4) Reclassifications to comply with the IFRS presentation of finance costs and other financial expense.




134
                                                                              Consolidated Financial
                                                                                         Statements


     IAS 36:          IFRS 2:          IFRS   Other    Reclassifications:              Total IFRS          IFRS net
  Impairment     Share-based     Framework:                                          adjustments            income
    of assets      payments         Prepaid
      IFRS 3:                      expenses
    Business
combinations
                                                                                                              1,590
                                                                     (19) (1)                (19)                40
                                                                     (19)                    (19)            1,630
                                                                                                               (721)
                                         1        1                    2     (2)
                                                                                               9               (467)
                                                                                                                 (31)
                           (2)                    1                   20     (1&2)
                                                                                              19               (306)
                                                                       1     (2)
                                                                                               1                   (8)
           3                                      1                                                             (70)
                                                                       (7) (2&3)               (7)                 (2)
           3              (2)            1        3                  16                       22             (1,605)
           3              (2)            1        3                    (3)                     3                 25
                                                 (1)                  69                      89                 89
                                                 (2)                 (31) (3)                (33)               (33)
           2              (2)            1                           35                       59                 81
                                                                                                                 (4)
                                                                      36 (3&4)                36                  2
                                                                       2 (4)                   2                  2
                                                                     (30) (4)                (38)               (38)
                                                                       8                                        (38)
           2              (2)            1                           43                       59                 43
           (1)                                                       (42)                    (43)
           1               (2)           1                             1                      16                 43
           (1)                                  (10)                   (1)                   (19)               (36)
                           (2)           1      (10)                                           (3)                7
                                                                                                                  3
                           (2)           1      (10)                                           (3)               10
                                                                                                                  (1)

                           (2)           1      (10)                                           (3)                 9
           8                                                                                    8
           8              (2)            1      (10)                                           5                   9




                                                                                                     2006 Annual Report //   135
      NOTE 31. SCOPE OF CONSOLIDATION AT 31 OCTOBER 2006
      GROUP                                                                                                         Member
                                                                                                                   of the tax
                                                                                                                       group
      Club Méditerranée SA                                                                                Parent
                                                                                                        company            •
                                                                         % voting rights   % interest    Method

      Europe region
      France
      Club 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%         Full
      Société de Gestion Hôtelière et de Tourisme SA - SGHT                    100.00%      100.00%         Full           •
      Sté Immobilière des Résidences Touristiques - S.I.R.T.                   100.00%      100.00%         Full           •
      Sté des Villages de Vacances                                             100.00%      100.00%         Full           •

      South Africa
      Vacances (Pty) ltd                                                       100.00%      100.00%         Full

      Germany
      Club Méditerranée Deutschland                                            100.00%      100.00%         Full

      Belgium
      Club Méditerranée SA Belge                                               100.00%      100.00%         Full

      Côte d’Ivoire
      Club Méditerranée Côte d’Ivoire                                          100.00%      100.00%         Full

      Croatia
      Club Méditerranée Odmaralista                                            100.00%      100.00%         Full

      Egypt
      Belladona Hotels & Tourisme                                                50.00%      50.00%         Full

      Spain
      Club Méditerranée SA Espagne                                             100.00%      100.00%         Full
      Hoteles y Campamentos - HOCASA                                           100.00%      100.00%         Full
      Servicios Auxiliares del Club Mediterraneo - SACM                        100.00%      100.00%         Full

      United Kingdom
      Club Méditerranée UK Ltd                                                 100.00%      100.00%         Full
      Club Méditerranée Services Europe Ltd                                    100.00%      100.00%         Full

      Greece
      Club Méditerranée Hellas                                                 100.00%      100.00%         Full
      Funhotel ltd (Ermioni)                                                   100.00%      100.00%         Full

      Mauritius
      Holiday Villages Management Services Ltd                                 100.00%      100.00%         Full
      Compagnie des Villages de Vacances de l’Isle de France - COVIFRA          84.43%       84.43%         Full
      Club Méditerranée Albion Resorts Ltd                                      22.50%       22.50%       Equity

      Israel
      Club Méditerranée Israël Ltd                                             100.00%      100.00%         Full

      Italy
      Centrovacanze Kamarina Sole e sabbia di Sicilia spa                      100.00%      100.00%         Full
      Sta Alberghiera Porto d’Ora - S.A.P.O. spa                                40.52%       40.52%       Equity
      Sviluppo Turistico per Metaponto                                          38.00%       38.00%       Equity



136
                                                                          Consolidated Financial
                                                                                     Statements

GROUP                                                                                                     Member
                                                                                                         of the tax
                                                                                                             group
Club Méditerranée SA                                                                           Parent
                                                                                             company                  •
                                                              % voting rights   % interest    Method

Morocco
Société Immobilière de la Mer - S.I.M.                                24.28%      24.28%       Equity
Société Civile Immobilière des Villages de Vacances CIVAC             47.47%      47.47%       Equity
Société Marocaine des Villages de Vacances SOMAVIVAC                  40.00%      40.00%       Equity

Netherlands
Club Méditerranée Holland bv                                        100.00%      100.00%          Full
CM Middle East bv                                                    60.00%       60.00%          Full

Portugal
Sociedade Hoteleira Da Balaïa SA                                    100.00%      100.00%          Full
Club Med Viagens lda                                                 60.00%       60.00%          Full

Senegal
Société Immobilière et de Gestion Hôtelière de Cap Skirring         100.00%      100.00%          Full

Switzerland
Club Méditerranée Suisse                                            100.00%      100.00%          Full
Holiday Hotels AG                                                    50.00%       50.00%          Full
Nouvelle Société Victoria                                           100.00%      100.00%          Full

Tunisia
Club Méditerranée Voyages                                            49.00%       49.00%       Equity
Club Med Basic Tunisie                                              100.00%      100.00%         Full
SPFT Carthago                                                        37.43%       37.40%       Equity

Turkey
Akdeniz Turistik Tesisler AS                                        100.00%      100.00%          Full

Ukraine
Club Méditerranée Ukraine                                           100.00%      100.00%          Full

South America region
France
Club Med Amérique du Sud                                            100.00%      100.00%          Full                •
Vacation Resort                                                     100.00%      100.00%          Full                •

Argentina
Club Med Argentina SRL                                              100.00%      100.00%          Full

Brazil
Club Med Brasil SA                                                  100.00%      100.00%          Full
Club Méditerranée do Brasil Turismo Ltda                            100.00%      100.00%          Full
Itaparica SA Empreendimentos Turisticos                              50.10%       50.10%          Full
Taipe Trancoso Empreendimentos SA                                    50.00%       50.00%          Full
Club Med Brasil Boutiques Ltda                                      100.00%      100.00%          Full

North America region
France
Club Med Amérique du Nord                                           100.00%      100.00%          Full                •

Grand Cayman
Club Med Inc.                                                       100.00%      100.00%          Full

French West Indies
SNC Caravelle 2006                                                  100.00%      100.00%          Full
Société Villages Hôtels des Caraïbes - SVHC                          53.91%       53.91%          Full
Société Hôtelière du Chablais                                       100.00%      100.00%          Full                •
Société Martiniquaise des Villages de Vacances                      100.00%       10.00%          Full



                                                                                              2006 Annual Report //   137
      GROUP                                                                                           Member
                                                                                                     of the tax
                                                                                                         group
      Club Méditerranée SA                                                                  Parent
                                                                                          company            •
                                                           % voting rights   % interest    Method

      Bahamas
      Club Méditerranée (Bahamas) Ltd                            100.00%      100.00%         Full
      Columbus Isle Casino                                       100.00%      100.00%         Full
      Holiday Village (Columbus Island)                          100.00%      100.00%         Full
      Shipping Cruise Services Ltd                               100.00%      100.00%         Full

      Canada
      Club Med Sales Canada Inc.                                 100.00%      100.00%         Full

      United States
      Club 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           •

      Mexico
      Cancun Property SRL                                        100.00%      100.00%         Full
      Ixtapa Property SRL                                        100.00%      100.00%         Full
      Operadora de Aldeas Vacacionales SA de cv                  100.00%      100.00%         Full
      Profotur SA de cv                                          100.00%      100.00%         Full
      Vacation Properties de Mexico SA de cv                     100.00%      100.00%         Full
      Villa Playa Blanca SA                                      100.00%      100.00%         Full

      Dominican Republic
      Holiday Village of Punta Cana (ex Newco)                   100.00%      100.00%         Full

      Turks & Caïcos
      Holiday Villages Providenciales Turks & Caicos Ltd         100.00%      100.00%         Full

      Asia region
      Luxembourg
      Club Med Asie                                              100.00%      100.00%         Full

      Australia
      Club Med Management (Australia) Pty Ltd                    100.00%      100.00%         Full
      Club Med Australia Pty Ltd                                 100.00%      100.00%         Full
      Holiday Village (Australia) Pty Ltd                        100.00%      100.00%         Full

      South Korea
      Club Med Vacances (Korea) Ltd                              100.00%      100.00%         Full

      Hong Kong
      Club Méditerranée Hong Kong Ltd                            100.00%      100.00%         Full
      Club Méditerranée Management Asia Ltd                      100.00%      100.00%         Full
      Maldivian Holiday Villages Ltd                             100.00%      100.00%         Full

      Indonesia
      PT Bali Holiday Village                                    100.00%      100.00%         Full

      Japan
      Club Méditerranée KK                                       100.00%      100.00%         Full
      SCM Leisure Development Co Ltd                             100.00%      100.00%         Full




138
                                                             Consolidated Financial
                                                                        Statements

 GROUP                                                                                       Member
                                                                                            of the tax
                                                                                                group
 Club Méditerranée SA                                                             Parent
                                                                                company                  •
                                                 % voting rights   % interest    Method

 Malaysia
 Holiday Villages of Malaysia sdn bhd                  100.00%      100.00%          Full
 Recreational Villages sdn bhd                         100.00%       21.00%          Full
 Vacances (Malaysia) sdn bhd                           100.00%      100.00%          Full

 Singapore
 Club Med Services Singapore pte Ltd                   100.00%      100.00%          Full
 Vacances (Singapore) pte Ltd                          100.00%      100.00%          Full

 Taiwan
 Club Med Vacances (Taiwan) Ltd                        100.00%      100.00%          Full

 Thailand
 Holiday Villages Thailand Ltd                          49.21%       49.21%          Full
 Vacances Siam Club Med Ltd                            100.00%      100.00%          Full

 Polynesia and New Caledonia
 Société Polynésienne des Villages de Vacances           98.45%      98.45%          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%         Full
 Jet Stim                                               49.00%       49.00%       Equity

 Tunisia
 Jet Eldo Tunisie                                      100.00%       99.85%          Full

 Morocco
 FST                                                    65.00%       65.00%          Full
 Jet Eldo Maroc                                        100.00%       99.85%          Full

 Club Med World
 France
 Club Med World Holding                                100.00%      100.00%          Full                •
 Club Med World France                                 100.00%      100.00%          Full                •

 Canada
 CM World Montréal Inc                                 100.00%      100.00%          Full
 CM World Montréal Holding Inc                         100.00%      100.00%          Full

 Club Med Gym
 France
 Club Med Gym SA                                       100.00%      100.00%          Full
 Edifit                                                100.00%      100.00%          Full
 Club Med Gym Corporate                                100.00%      100.00%          Full


Full: fully consolidated
Equity: accounted for by the equity method




                                                                                 2006 Annual Report //   139
      Auditors’ report on the
      consolidated financial statements
      YEAR ENDED 31 OCTOBER 2006                                        In our opinion, the consolidated financial statements have
                                                                        been properly prepared and give a true and fair vies of the
      In accordance with the terms of our appointment by the            assets and liabilities, financial position and results of opera-
      Annual Shareholders’ Meeting, we have examined the                tions of the consolidated companies, in accordance with the
      accompanying consolidated financial statements of Club            International Financial Reporting Standards (IFRSs), Interna-
      Méditerranée for the year ended 31 October 2006.                  tional Accounting Standards (IASs) and related interpretations
                                                                        adopted by the European Union.
      The consolidated financial statements have been approved
      by the Board of Directors. Our role is to express an opinion
                                                                        II. Justification of our assessments
      on these financial statements based on our audit. These con-
                                                                        In accordance with the requirements of article L.823-9 of the
      solidated financial statements have been prepared for the first
                                                                        French Commercial Code (Code de Commerce) relating to
      time in accordance with the International Financial Reporting
                                                                        the justification of our assessments, we draw to your attention
      Standards (IFRSs), International Accounting Standards (IASs)
                                                                        the following matters:
      and related interpretations adopted by the European Union.
                                                                        • Notes 2.7 (Impairment of assets) and 2.15 (Deferred taxes)
      They include comparative financial information for the year
                                                                         describe the accounting policies and methods used to
      ended 31 October 2006, prepared according to the same stan-
                                                                         determine asset impairments and to assess the recover-
      dards, except for IAS 32, IAS 39 and IFRS 4, which have been
                                                                         ability of deferred tax assets. As part of our assessment of
      adopted as from 1 November 2005 as allowed under IFRS 1.
                                                                         the reasonableness of the underlying estimates, we assessed
                                                                         the appropriateness of these accounting policies and
      I. Opinion on the consolidated
                                                                         methods, as well as of the disclosures made in the notes.
      financial statements
                                                                         We also reviewed the consistency of the underlying data and
      We conducted our audit in accordance with the professional
                                                                         assumptions, and the documents provided.
      standards applicable in France. Those standards require that
      we plan and perform the audit to obtain reasonable assurance      The assessments were made in the context of our audit of the
      about whether the consolidated financial statements are free      consolidated financial statements, taken as a whole, and
      from material misstatement. An audit includes examining, on       therefore contributed to the formation of the unqualified
      a test basis, evidence supporting the amounts and disclosures     opinion expressed in the first part of this report.
      in the financial statements. An audit also includes assessing
      the accounting principles used and significant estimates made     III. Specific procedures
      by management, as well as evaluating the overall financial        We also examined the information about the Group given in
      statement presentation. We believe that our audit provides a      the Management Report, in accordance with the professional
      reasonable basis for our opinion.                                 standards applicable in France. We have no matters to report
                                                                        concerning the fairness of this information and its consistency
                                                                        with the consolidated financial statements.




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

                                                           The Statutory Auditors

                          Deloitte & Associés                                              Ernst & Young Audit
                 Alain Pons    Dominique Jumaucourt                                          Pascal Macioce




140
                                                                           Consolidated Financial
                                                                                      Statements

Group Structure
as of 31 October 2006
                     Marketing             Service                  Real estate             Service and                     Other
                    companies           companies                   companies                real estate
                                                                                             companies

EUROPE
France                               CM Centre
                                       d’Appels                 SAS Domaine                                               CMSA
                                      Européen                    de Dieulefit                                     Club Aquarius
                                  CM Croisières                                                                        Hoteltour
                                    et Tourisme                          SIRT                                           Loin SAS
                                 CM Evénements              Sté Civile Edomic
                                     CM Marine
                                          SGHT
                                            SVV
Belgium          CM Belgique
Côte d’Ivoire                    CM Côte d’Ivoire
Croatia                                                                               CM Odmaralista
Egypt                                                       Belladona Hotels
                                                                  & tourisme
                         CM
Germany          Deutschland
Greece                                                                                      CM Hellas                   Funhotel
Israel              CM Israël
Italy                                                          Centrovacanze
                                                                    Kamarina
                                                              Ste Alberghiera
                                                                  Porto d’Ora
                                                            Sviluppo Turistico
                                                              per Metaponto
Mauritius                        HV Management                         Covifra      CM Albion Resorts
                                        Services
Morocco                                                                CIVAC
                                                                 SOMAVIVAC
                                                              Ste Immobilière
                                                                    de la Mer
Netherlands      CM Holland                                                                                      CM Middle East
Portugal         CM Viagens                              Sociedade Hoteleira
                                                                   de Balaia
Senegal                                                                            Société Immobilière
                                                                                                     et
                                                                                  de Gestion Hôtelière
                                                                                       de Cap skirring
South Africa     Vacances Pty
Spain            CM Espagne                                                                     SACM
                                                                                               Hocasa
Switzerland        CM Suisse                                   Holiday Hotels
                                                     Nouvelle Société Victoria
Tunisia                                                       SPT - Carthago                                  Club Med Voyages
                                                                                                                CM Bazic Tunisie
Turkey                                                                                 Akdeniz Turistik
                                                                                              Tesisler
Ukraine           CM Ukraine
United Kingdom                            CM UK                                                                      CM Services




                                                                                                           2006 Annual Report //   141
                                       Marketing                Service             Real estate          Service and                   Other
                                      companies              companies              companies             real estate
                                                                                                          companies

      SOUTH AMERICA
      France                    Vacation Resort                                                                                CM Amérique
                                                                                                                                    du Sud
      Argentina                   CM Argentina
      Brazil               CM do Brasil Turismo                                     Itaparica                                      CM Brasil
                            CM Brasil Boutiques                               Taipe Trancoso
                                                                             Empredimentos

      NORTH AMERICA
      France                                                                                                                   CM Amérique
                                                                                                                                   du Nord
      French West Indies                             Sté Martiniquaise                 SVHC           Sté Hôtelière
                                                          des Villages    SNC Caravelle 2006           du Chablais
                                                          de Vacances
      Bahamas                                                                 Holiday village                                 CM Bahamas
                                                                            (Columbus Island)                           Columbus Isle Casino
                                                                                                                                    Shipping
                                                                                                                             Cruise Services
      Canada               CM Sales Canada Inc.
      Dominican Republic                                                                                     HV of
                                                                                                        Punta Cana
      Grand Cayman                                                                                                                   CM Inc.
      Mexico                                                                        Villa Playa
                                                        Operadora de                    Blanca                            Vacation Properties
                                                   Aldeas Vacacionales                Profotur                                    de Mexico
                                                                                  Cancun SRL
                                                                                   Ixtapa SRL
      Saint Lucia                                                                                     HV Ste Lucie
      Turks & Caicos                                                                              HV Providenciales
      United States                   CM Sales       CM Management          Sandpiper Resort        Holiday Village
                                                            services               Properties        of Sandpiper
                                                           Vacation             Sun Property
                                                                                 Corporation
                                                                            Sun Cancun I et II
                                                        Wholesaler Inc       Sun Ixtapa I et II

      ASIA
      Luxembourg                                                                                                                    CM Asie
      Australia                    CM Australie     CM Managementa                                  Holiday Village
                                                           Australia                                      Australia
                                                         Beach Club
      Hong Kong                 CM Hong Kong            Maldivian HV
                                                     CM Management
                                                                Asia
      Indonesia                                                                                          PT Bali HV
      Japan                             CM KK            SCM Leisure
                                                     Development Co

      Malaysia               Vacances (Malaysia)                                                       HV Malaysia              Recreational
                                                                                                                                    Villages
                                                                                                                                   Sdn Bhd
      Polynesia
      & New Caledonia                                                                                         SPVV
      Singapore         CM Services (Singapore)                                                                         Vacances (Singapore)
      South Korea           CM Vacances Korea




142
                                                                    Consolidated Financial
                                                                               Statements

                            Marketing              Service   Real estate       Service and                     Other
                           companies            companies    companies          real estate
                                                                                companies
Taiwan           CM Vacances (Taiwan)
Thailand           Vacances Siam CM                                          HV (Thailand)

TOUR OPERATING
France                                                                                                  Jet tours SA
                                                                                                            Jet Eldo
                                                                                                          Jet Loisirs
                                                                                                        Jet Marques
                                                                                                            Jet Stim
Morocco                                 Four Season Travel                 Jet Eldo Maroc
Tunisia                                                                                             Jet Eldo Tunisie

CLUB MED WORLD
France                                   CM World France                                         CM World Holding
Canada                                  CM World Montréal                                       CM World Montréal
                                                                                                          Holding

CLUB MED GYM
France                                                                                           Club Med Gym SA
                                                                                                            Edifit
                                                                                                CM Gym Corporate




                                                                                              2006 Annual Report //   143
144
General information
146 // GENERAL INFORMATION
       ABOUT CLUB MÉDITERRANÉE

149 // GENERAL INFORMATION
       ABOUT THE COMPANY’S CAPITAL

153 // THE MARKET FOR CLUB MÉDITERRANÉE SECURITIES

154 // DIVIDENDS

155 // CORPORATE GOVERNANCE




                                        2006 Annual Report //   145
      General information
      about Club Méditerranée
      COMPANY NAME                                                         – directly or indirectly through a licensee or other partner –
                                                                           of any and all products and services that can be distributed
      Club Méditerranée.
                                                                           under the brands, logos or emblems owned by the Company,
                                                                           or under any new brand, logo or emblem owned or registered
      REGISTERED OFFICE
                                                                           by the Company in the future.
      AND HEAD OFFICE
      11, rue de Cambrai, 75957 Paris Cedex 19, France.                    The Company may assist its subsidiaries by any method,
                                                                           including by extending loans, advances and credits, subject
      LEGAL FORM AND GOVERNING LAW                                         to compliance with applicable laws and regulations.

      Club Méditerranée (the Company) is a French société                  More generally, the Company may conduct all industrial,
      anonyme (public limited company) governed by the laws                commercial or financial operations, involving both movable
      of France, including Articles L. 225-57 to L. 225-93 of the          property and real estate, including the acquisition, holding
      Commercial Code.                                                     and management of interests in any industrial or commercial
                                                                           venture, directly or indirectly related to the corporate purpose
      TERM                                                                 of the Company as described above and any other similar or
      The Company will be dissolved on 31 October 2095 unless it           related purposes.
      is wound up in advance or its term is extended by decision of
      an Extraordinary Shareholders’ Meeting.                              INCORPORATION DETAILS
                                                                           572 185 684 RCS Paris - APE Code 552 E
      CORPORATE PURPOSE
      (ARTICLE 2 OF THE BYLAWS)                                            CONSULTATION OF CORPORATE
      Club Méditerranée was established to develop and manage              DOCUMENTS
      hotels or holiday centers and/or leisure facilities and/or enter-    The by-laws, minutes of Shareholders’ Meetings, financial
      tainment facilities and any and all activities relating thereto,     statements and auditors’ reports are available for consultation
      whether directly or indirectly, in France or abroad, including       at the Company’s head office.
      the prospecting, purchase and/or sale and leasing, on any
      basis, of land, movable property and real estate; the creation       FISCAL YEAR
      and operation of design offices; the construction, fitting out,
                                                                           The Company’s fiscal year begins on 1 November and ends
      management and maintenance of hotels, restaurants and
                                                                           on 31 October.
      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
                                                                           APPROPRIATION OF INCOME
      and transport for participants; the organization of tours            Article 36 of the by-laws states that at least five percent of
      and excursions; the organization and execution of sporting,          net income for the year, less any prior year losses, is appro-
      educational, tourist, cultural or artistic activities; the organi-   priated to the legal reserve. This appropriation ceases to be
      zation or events and shows, the performance thereof and              compulsory once the legal reserve represents one-tenth of the
      the provision of any related consulting services; the creation       Company’s capital. However, if for any reason, the legal reserve
      or acquisition and development of any and all equipment,             falls to below one-tenth of the capital, it must be restored to
      organizations and facilities for sporting, educational, tourist,     the required level by the same method. The income remain-
      cultural or artistic purposes; the drafting and signature of         ing, less any prior year losses and any other amounts to be
      any and all contracts for the same purposes; the creation or         credited to reserves pursuant to the law or the Company’s
      acquisition and operation of any and all businesses or facilities    bylaws, plus any unappropriated retained earnings brought
      conducting the same activities; participation by any method          forward from prior years, is then appropriated as follows:
      and in any form in any and all existing or future ventures or
      companies; the design, creation, production and marketing



146
                                                                                         General information

• To any extraordinary reserves or to revenue reserves, by deci-    2 - All shareholders may vote by mail, using the postal voting
 sion of the Annual Shareholders’ Meeting.                          form issued by the Company. Details of how to obtain postal
• To the payment of a dividend provided that, except in the         voting forms are provided in the notice of meeting.
 case of a capital reduction, no distributions may be made
                                                                    3 - Shareholders may give proxy only to their spouse or another
 to shareholders if shareholders’ equity represents – or would
                                                                    shareholder.
 represent if the distribution were to be made – less than the
 sum of capital and non-distributable reserves.                     4 - In order to be entitled to participate in Shareholders’
                                                                    Meetings or to vote by mail, holders of registered shares are
The Annual Shareholders’ Meeting may also decide to pay all
                                                                    required to have their shareholdings recorded in the share
or part of the dividend out of revenue reserves or to effect
                                                                    register kept by the Company or the registrar at least five days
an exceptional distribution of revenue reserves. In this case,
                                                                    prior to the date of the Shareholders’ Meeting. Holders of
the reserves against which the dividend is to be charged must
                                                                    bearer shares wishing to attend the Shareholders’ Meeting
be designated in the related resolution. However, no distri-
                                                                    are required to lodge at the Company’s head office or at any
butions of reserves may be decided if distributable earnings
                                                                    other address specified in the notice of meeting, at least five
for the year have not been fully distributed.
                                                                    days prior to the date of the meeting, a certificate issued by
Any losses recorded in the financial statements approved by         their stockbroker, bank or other intermediary attesting to the
the Annual Meeting are recorded in a special reserve account        holder’s ownership of the shares and certifying that they are
and set off against income earned in subsequent years until         being held in a blocked account until after the date of the
they have been absorbed in full.                                    Shareholders’ Meeting.

The Annual Meeting may offer shareholders the option to             5 - Holders of registered shares will be admitted to the meeting
reinvest all or part of the interim or final dividend in new        on presentation of evidence of their identity. Holders of bearer
shares. The method of payment of cash dividends is decided          shares will be admitted on presentation of the certificate
by the Annual Meeting or, failing that, by the Board of             referred to above.
Directors. In all cases, dividends must be paid within nine
                                                                    The Board of Directors may decide to issue individual admis-
months of the year-end, unless the court grants an extension.
                                                                    sion cards to shareholders, in which case only the named
If the audited annual or interim financial statements show that     shareholder or proxy may use the card.
the Company has generated a profit for the period – after
deducting depreciation, amortization and provision expense          DOUBLE VOTING RIGHTS
as well as any prior year losses and any amounts to be appro-
                                                                    Article 8 of the by-laws stipulates that all fully paid shares
priated to reserves pursuant to the law or the by-laws, and
                                                                    registered in the name of the same holder for at least two
taking into account any unappropriated retained earnings –
                                                                    years carry double voting rights. Evidence of eligibility for
an interim dividend may be paid prior to the approval of the
                                                                    double voting rights must be provided at least five days prior
financial statements for the year. Under no circumstances may
                                                                    to the date of the Shareholders’ Meeting. In the event such
interim dividends exceed the profit available for distribution
                                                                    shares are transferred or converted to bearer form, they
thus defined.
                                                                    are stripped of their double voting rights. However, double
                                                                    voting rights are not lost and the two-year qualifying
ATTENDANCE AND REPRESENTATION                                       period continues to run if the shares are transferred in the
AT SHAREHOLDERS’ MEETINGS                                           estate of a deceased shareholder, or in connection with the
1 - All shareholders have the right to attend Shareholders’         settlement of the marital estate, or a donation inter vivos
Meetings and take part in the vote, in person or by proxy,          to a spouse or relative in the direct line of succession.
whatever the number of shares held, upon presentation of
evidence of their identity, provided that they have settled all
capital calls within thirty days of receiving notification of the
amount called and that their shares are recorded in an account
opened in their name at least five days prior to the date of
the meeting.




                                                                                                             2006 Annual Report //   147
      DISCLOSURE THRESHOLDS                                               In the case of failure to comply with these requirements, duly
                                                                          noted in the minutes of the Shareholders’ Meeting, the shares
      Article 7 of the by-laws stipulates that any natural person or
                                                                          in excess of the relevant threshold will be stripped of voting
      legal entity acting alone or in concert with others that acquires
                                                                          rights at all Shareholders’ Meetings for the period provided
      0.5% of the Company’s capital or any multiple thereof is
                                                                          for by law at the request of one or several shareholders together
      required to disclose to the Company the total number of
                                                                          holding at least 5% of the Company’s capital or voting rights.
      shares and voting rights held. Disclosure must be made by
      registered letter with return receipt requested, within five
                                                                          IDENTIFIABLE BEARER SECURITIES
      trading days of the date on which the disclosure threshold is
      crossed. For the purpose of determining whether a disclosure        The by-laws authorize the Company to apply at any time
      threshold has been crossed, account is taken of any securities      to the French securities clearing agency for details of the
      that are convertible, exchangeable, redeemable or other-            identity of holders of voting shares and any securities convert-
      wise exercisable for shares of the Company. These disclosure        ible, exchangeable, redeemable, or otherwise exercisable for
      thresholds apply in addition to the one-twentieth, one-tenth,       voting shares, and of the number of securities held by each
      three-twentieths, one-fifth, one-quarter, one-third, one-half,      such holder, pursuant to Article L.228-2 of the Commercial
      two-thirds, eighteen-twentieths and nineteenth-twentieths           Code. The Company makes such applications each year.
      thresholds provided for in Article L 233-7 of the Commercial
      Code. The same disclosure rules apply if a shareholder’s inter-     SERVICES PROVIDED BY THE COMPANY
      est is reduced to below any of the above thresholds.                TO SUBSIDIARIES
      For the purpose of applying these rules, the terms “shares”         Services provided by Club Méditerranée SA in its capacity as
      and “voting rights” have the same meaning as in Articles            parent company to its subsidiaries include the usual senior
      L.233-3, L.233-9 and L.233-10 of the Commercial Code.               management and support services, including administrative,
                                                                          financial, legal, communication, marketing, human resources,
                                                                          training, IT and sales services. They are billed at cost.




148
                                                                                                General information

General information
about the Company’s capital
SHARE CAPITAL                                                                 19,358,005 shares outstanding at 31 October 2006:
At 31 October 2006, the Company’s share capital amounted                    + 2,193,731 convertible bonds (OCEANEs) due
to €77,432,020, divided into 19,358,005 common shares with                               1 November 2008
a par value of €4.00, all fully paid-up. These figures were                 + 3,092,783 convertible bonds (OCEANEs) due
unchanged from 31 October 2005. Shares registered in the                                 1 November 2010
name of the same holder for at least two years carry double                 + 1,437,420 stock options outstanding at 31 October 2006
voting rights (193,985 at 31 October 2006).                                 = 26,081,939 potential shares at 31 October 2006


POTENTIAL CAPITAL                                                           AUTHORIZED, UNISSUED CAPITAL
The exercise of all outstanding equity warrants and stock                   The Extraordinary Shareholders’ Meeting of 16 March 2005
options would result in the capital being increased to                      approved several resolutions authorizing the Board of
€104,327,756 consisting of 26,081,939 shares of common stock,               Directors to increase the Company’s capital. The Board of
or a potential dilution of 34.7%. These figures take into account           Directors may delegate the right to use these authorizations
all the securities outstanding at 31 October 2006 that are                  in accordance with the Company’s by-laws and Articles
convertible, redeemable, exchangeable or otherwise exercis-                 L.225-127 et seq of the Commercial Code.
able for common shares at a future date.                                    The purpose of these authorizations is to enable the Company
                                                                            to issue shares and share equivalents in order to raise any
                                                                            necessary financial resources required in a swift and flexible
                                                                            manner. They expire in May 2007, and the shareholders will be
                                                                            invited to grant new and similar authorizations at the next
                                                                            Annual Meeting.


FINANCIAL AUTHORIZATIONS AT 31 OCTOBER 2006
 Authorization                                            Maximum             Duration      Expiry date      Used in fiscal     Total used
                                                           amount                                              2005/2006
 Issue of shares and share                    Equity: €20 million(1)        26 months     15 May 2007          Not used
 equivalents with pre-emptive                  Debt: €300 million
 subscription rights
 Issue of shares and share                    Equity: €20 million(1)        26 months     15 May 2007          Not used
 equivalents without pre-emptive               Debt: €300 million
 subscription rights
 Issue of shares and share                          10% of capital          26 months     15 May 2007          Not used
 equivalents with no set issue price                     per year
 Capital increase to be paid                              Equity:           26 months     15 May 2007          Not used
 up by capitalizing retained earnings,             €226.5 million(1)
 additional paid-in capital or profit
 Issue of shares and share equivalents        Equity: €20 million(2)        26 months     15 May 2007          Not used
 in connection with a public
 exchange offer
 Issue of shares and share equivalents              10% of capital          26 months     15 May 2007          Not used
 in payment for contributed assets
 Increase in the number of securities            15% of the initial         26 months     15 May 2007          Not used
 to be issued in the event of the                 issue, based on
 issue of shares and share equivalents             the same price
 either with or without pre-emptive
 subscription rights (greenshoe option)
 Employee share issue                                 €3.5 million(1) (2)   26 months     15 May 2007          Not used
 Stock options for corporate                                         (3)
                                                                            26 months     15 May 2007           250,000          250,000
 officers and employees                                                                                         options          options
 Shares awarded free of consideration                                (1)
                                                                            14 months     15 May 2007          Not used

(1) Amount included in the overall authorized ceiling: €270 million (40th resolution of the Shareholders’ Meeting of 16 March 2005).
(2) Amount included in the €20 million ceiling relating to the issue of shares and share equivalents without pre-emptive subscription rights.
(3) The number of outstanding options may not exceed one-third of the Company’s common stock (Article L.225-182 of the Commercial Code
and Article D.174-17 of the Decree of 23 March 1967).



                                                                                                                     2006 Annual Report //   149
      CHANGES IN CAPITAL SINCE 31 OCTOBER 2001
                                   Share capital           Additional paid-in     Number of shares                   Type of transaction
                                                                      capital
                                         €’000s                      €’000s
       At 31 October 2001               77,432                                -       19,358,005
                                                                              -                                 Conversion of capital
                                                                              -                                 Employee share issue
                                                                                                                 Exercise of warrants
       At 31 October 2002               77,432                                -       19,358,005
                                                                              -                                 Conversion of capital
                                                                              -                                 Employee share issue
                                                                                                                 Exercise of warrants
       At 31 October 2003               77,432                                -       19,358,005
                                                                              -                                 Conversion of capital
                                                                              -                                 Employee share issue
                                                                                                                 Exercise of warrants
       At 31 October 2004               77,432                                -       19,358,005
                                                                              -                                 Conversion of capital
                                                                              -                                 Employee share issue
                                                                                                                 Exercise of warrants
       At 31 October 2005               77,432                                -       19,358,005
                                                                              -                                 Conversion of capital
                                                                              -                                 Employee share issue
                                                                                                                 Exercise of warrants
       At 31 October 2006               77,432                                -       19,358,005



      ANALYSIS OF OWNERSHIP STRUCTURE
                                                            Number of shares                                   Voting rights
                                                      31 Oct. 2006                      %            31 Oct. 2006                           %
       Fipar Holding (CDG Maroc)                         1,935,801                    10.0             1,935,801                       9.9
       Accor                                             2,212,349                    11.4             2,212,349                      11.3
       Rolaco                                              909,577                     4.7               909,577                       4.7
       Nippon life                                         769,731                     4.0               769,731                       3.9
       Total Board of Directors                         5,827,458                    30.1             5,827,458                       29.8
       Treasury stock                                      277,305                     1.4               277,305                           1.4
       Employees                                            31,241                     0.2                58,591                           0.3
       Richelieu mutual fund                             5,107,492                    26.4             2,187,946                      11.2
       Air France                                          387,160                     2.0               387,160                           2.0
       French institutions                               2,692,116                    13.9             2,749,939                      14.1
       Foreign institutions                              2,259,401                    11.7             2,269,421                      11.6
       Public and other                                  2,775,832                    14.3             2,969,817                      15.2
       Total                                           19,358,005                   100.0            19,551,990                      100.0


       Single voting rights                                  19,164,020
       Double voting rights                                     387,970
       Total voting rights                                  19,551,990*

      * Taking into account 3,196,851 shares without voting rights (277,305
      held in treasury and 2,919,546 held by the Richelieu mutual fund
      stripped of voting rights in accordance with a decision issued by the
      French securities regulator (AMF) on 18 March 2005).




150
                                                                                        General information

CHANGES IN OWNERSHIP STRUCTURE                                     On 7 August 2006, Richelieu Finance increased its holdings
                                                                   in the Company to 5,107,492 shares, representing 26.38% of
OVER THE LAST THREE YEARS
                                                                   the capital.
Changes in ownership structure over the last three years have
                                                                   • 2007: On 23 January 2007, Accor divested part of its interest
been as follows:
                                                                    in Club Méditerranée in the open market, reducing its stake
• 2004: On 22 October 2004, Accor acquired a 28.9% interest         in the Company to below the 10% capital and voting rights
 in the Company by purchasing the shares held by its two            threshold. Following this divestment Accor disclosed that it
 historic shareholders, the Agnelli Group (through its Exor and     held 1,912,349 shares of Club Méditerranée common stock,
 IFIL subsidiaries) and Caisse des Dépôts et Consignations.         representing 9.88% of the capital and 9.78% of the voting
 On 19 October 2004 Richelieu Finance disclosed to                  rights.
 the Autorité des Marchés Financiers that the number of
 Club Méditerranée shares held in its managed funds and
                                                                   AUTHORIZATION TO TRADE
 portfolios had exceeded the 10% threshold, at 10.22% of
                                                                   IN THE COMPANY’S SHARES
 the capital.                                                      The authorization given to the Board of Directors to trade in
                                                                   the Company’s shares on the stock market, in accordance with
• 2005: On 25 January 2005, Richelieu Finance informed the
                                                                   Articles L.225-209 et seq. of the French Commercial Code and
 Company that it held 3,668,857 shares of Club Méditerranée
                                                                   European Commission Regulation 2273/2003 , was renewed
 common stock, representing 18.95% of the capital.
                                                                   at the Annual Shareholders’ Meeting of 14 March 2006
 On 9 February 2005, Richelieu Finance disclosed to the            (seventh resolution) for a further period of eighteen months,
 Autorité des Marchés Financiers that its holdings had             expiring on 13 September 2007.
 exceeded the 20% threshold, at 20.13% of the capital.
                                                                   Under the terms of this authorization, the number of shares
 Having reduced its holdings in the Company to below the
                                                                   purchased may not exceed 10% of the capital.
 20% threshold at 18.06%, representing 3,495,635 shares,
 on 9 June 2005, Richelieu Finance disclosed to the Autorité       The authorization may be used, in the following order of
 des Marchés Financiers that it had once again exceeded the        priority:
 20% threshold through the ownership of 3,871,780 shares.          • To maintain a liquid market in the Company’s shares under
                                                                    a liquidity agreement that complies with the Code of Ethics
 Richelieu Finance subsequently continued to raise its
                                                                    of the French Association of Investment Firms (AFEI).
 shareholdings and at 31 October 2005 held 4,564,212
                                                                   • To purchase shares for allocation on exercise of stock options
 shares, representing 23.57% of the Company’s capital.
                                                                    granted to employees.
• 2006: On 21 November 2005, Richelieu Finance informed the        • To purchase shares to be exchanged for stock in other com-
 Company that it held 4,784,817 shares of Club Méditerranée         panies or to be used as consideration in connection with
 common stock, representing 24.71% of the capital.                  acquisitions.
 On 18 April 2006, Richelieu Finance informed the Company          • To purchase shares for subsequent cancellation.
 that it had raised its interest to 4,895,369 shares, represent-   For transactions to stabilize the share price, the maximum
 ing 25.28% of the capital.                                        purchase price per share under this authorization is €70 and
As part of its strategy to refocus operations on its Hotels and    the minimum sale price is €30. This minimum sale price applies
Services businesses, on 9 June 2006 Accor announced that it        to the resale of shares acquired under this share buyback
had decided to sell the bulk of its stake in Club Méditerranée,    program and/or any programs authorized by previous share-
representing 22.9% of the capital out of its total holding of      holders’ meetings.
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.




                                                                                                            2006 Annual Report //   151
      Club Méditerranée entered into an AFEI liquidity agreement          SHAREHOLDERS’ PACTS
      with CA Cheuvreux as part of the share buyback program
                                                                          In connection with the reorganization of Club Méditerranée’s
      authorized by the Annual Shareholders’ Meeting of 16 March
                                                                          ownership structure, a shareholders’ pact relating to 22% of
      2005. This agreement came into effect on 15 November 2005
                                                                          the Company’s shares was signed on 9 June 2006 between
      for an automatically renewable one-year term. The Company
                                                                          Accor (which has retained a 6% stake in the Company), Caisse
      originally allocated €2 million in liquidity under the agreement,
                                                                          de Dépôt et de Gestion du Maroc (through its subsidiary Fipar
      followed by a further €2 million on 14 March 2006, bringing
                                                                          Holding which has acquired a 10% interest), Air France Finance
      the total available amount to €4 million.
                                                                          (holder of a 2% interest) and Icade (whose interest amounts
      At 31 October 2006, the Company had used the 16 March               to 4%).
      2006 authorization to purchase 156,709 shares at an average
                                                                          By signing this pact, these shareholders have illustrated their
      price of €41.53 per share and sell 136,569 shares at an average
                                                                          long-term commitment to holding a stake in Club Méditerranée
      price of €43.42.
                                                                          with a view to enabling the Company to continue to imple-
      At 31 October 2006, a total of 277,305 shares were held in          ment its strategy via the backing of a solid ownership struc-
      treasury.                                                           ture. The pact includes a two-year lock-up and standstill clause.
      At the Annual Meeting on 8 March 2007, shareholders will be         Icade’s signature of the pact was subject to a condition prece-
      asked to approve a new share buyback authorization.                 dent of entering into a real estate partnership agreement with
                                                                          Club Méditerranée by 30 September 2006. The planned trans-
                                                                          action – which concerned refinancing three Club Med Villages
                                                                          – could not be completed by that date as the related economic
                                                                          and financial conditions were not suitably advantageous for
                                                                          Club Méditerranée. As a result Icade has withdrawn from the
                                                                          shareholders’ pact.

                                                                          To the best of the Company’s knowledge, no other share-
                                                                          holders’ pacts exist.




152
                                                                                              General information

The market for Club Méditerranée
securities
Club Méditerranée shares were originally floated on the Paris             To inform shareholders, financial analysts, brokers, portfolio
stock exchange in 1966 and are currently traded on the first              managers and private investors of developments affecting
market of Euronext. Club Méditerranée is one of the 120 stocks            the Group, press releases are distributed to the main press
included in the SBF 120 index. At 31 December 2006, its index             agencies and published in a number of newspapers, as well
weighting was 0.05%. Club Méditerranée shares are eligible                as on the Company’s website.
for Euronext’s deferred settlement service.
                                                                          Prices and trading volumes for Club Méditerranée common
Common shares are traded under ISIN code FR 0000 121568.                  stock and OCEANE convertible/exchangeable bonds are
Between the beginning of each fiscal year and the ex-dividend             presented below.
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.

TRADING PERFORMANCE OF CLUB MÉDITERRANÉE SA SECURITIES
 Common stock                                           Monthly share price                                     Monthly average daily
 (ISIN: FR 0000 121568)                                             (euros)                                             trading volume
                                                                                                          (number of shares traded and
                                                                                                                   thousands of euros)

                                                    High               Low      Average (1)        No. of shares               Capital


 July 2005                                         39.60             37.11           39.38               32,070                  1,238
 August 2005                                       40.36             38.70           38.85               22,805                    907
 September 2005                                    40.30             38.50           39.10               19,233                    755
 October 2005                                      39.15             36.20           36.45               25,770                    973
 November 2005                                     39.43             36.30           37.79               25,360                    964
 December 2005                                     39.40             37.20           39.32               27,259                  1,037
 January 2006                                      42.45             39.00           41.51               36,359                  1,504
 February 2006                                     42.96             40.80           42.17               13,670                    574
 March 2006                                        48.91             41.46           45.79               48,335                  2,208
 April 2006                                        47.60             43.28           47.05               49,600                  2,259
 May 2006                                          48.59             44.45           47.40               17,151                    803
 June 2006                                         48.00             38.50           39.80               25,438                  1,054
 July 2006                                         39.89             35.25           37.00               18,033                    674
 August 2006                                       41.99             36.25           41.60               10,774                    415
 September 2006                                    44.70             40.56           42.00               15,920                    675
 October 2006                                      43.00             41.37           42.21               10,902                    462
 November 2006                                     43.50             40.40           42.80               25,738                  1,086
 December 2006                                     42.96             40.31           40.80               18,636                    772

Source: Fininfo
(1) Average calculated based on daily closing prices.




                                                                                                                   2006 Annual Report //   153
       3% OCEANE convertible/exchangeable bonds                         Monthly price                      Monthly average daily trading volume
       (face value €58)                                                       (euros)                             (number of bonds traded and
       (ISIN: FR 0000 180184)                                                                                               thousands of euros)

                                                          High                     Low    Average (1)        No. of bonds                     Capital


       July 2005                                         65.50                    64.20        65.18                     873                       57
       August 2005                                       65.95                    64.50        65.44                    2,888                    190
       September 2005                                    66.50                    65.50        65.91                    2,634                    174
       October 2005                                      66.50                    65.83        66.12                     200                       13
       November 2005                                     66.00                    63.50        65.03                     380                       25
       December 2005                                     69.00                    64.35        64.93                     741                       49
       January 2006                                      66.35                    64.80        65.77                     333                       22
       February 2006                                     66.45                    64.80        65.80                    1,842                    121
       March 2006                                        66.70                    65.40        65.89                    4,780                    315
       April 2006                                        66.40                    65.60        65.98                     206                       14
       May 2006                                          66.80                    65.70        66.31                     389                       26
       June 2006                                         66.80                    65.70        66.13                     335                       22
       July 2006                                         66.90                    65.15        65.89                     147                       10
       August 2006                                       66.40                    65.25        66.00                      96                        6
       September 2006                                    67.10                    65.25        65.81                     298                       20
       October 2006                                      67.15                    65.00        66.17                     251                       17
       November 2006                                     66.00                    65.00        65.35                     305                       20
       December 2006                                     66.00                    65.00        65.24                     212                       14


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

                                                          High                     Low    Average (1)        No. of bonds                     Capital


       November 2005                                      50.2                    46.50        49.30                     189                        9
       December 2005                                      51.6                    44.40        50.00                     545                       27
       January 2006                                       52.0                    50.05        51.00                    4,348                    219
       February 2006                                      54.9                    51.05        51.05                     631                       33
       March 2006                                         55.3                    49.00        54.00                    3,088                    166
       April 2006                                         54.9                    50.00        54.00                    4,175                    225
       May 2006                                           55.2                    53.00        54.80                     289                       16
       June 2006                                          54.8                    49.50        51.80                     144                        7
       July 2006                                          53.0                    49.00        53.00                     246                       13
       August 2006                                        52.7                    49.13        49.21                      63                        3
       September 2006                                     52.7                    49.20        50.35                    2,002                    102
       October 2006                                       51.4                    50.00        50.00                     351                       18
       November 2006                                      49.4                    48.25        48.60                     851                       41
       December 2006                                      50.0                    48.65        49.00                     753                       37

      (1) Average calculated based on daily closing prices - Source: Fininfo




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

                                                  Net      Tax credit            Total     High         Low 31 Oct.


       2004                   19,358,005             -              -                -    40.00     29.20       35.30
       2005                   19,358,005             -              -                -    42.28     34.00       36.45
       2006                   19,358,005             -              -                -    48.39     35.90       42.21




154
                                                                                                               General information

Corporate governance
The Company complies with the principles of corporate                              COMPENSATION AND BENEFITS PAID
governance applicable in France.
                                                                                   TO DIRECTORS AND OFFICERS
At the Annual Shareholders’ Meeting of 16 March 2005,
the shareholders approved an amendment to the Company’s                            Compensation
corporate governance involving a switch from the two-tier                          The compensation paid to executive officers is made up of a
system of an Executive Board and Supervisory Board to that                         fixed and variable portion. The rules used to calculate the
of a Board of Directors.                                                           variable portion are set by the Board of Directors each year
                                                                                   on the basis of recommendations issued by the Nominations
                                                                                   and Compensation Committee.
Gross compensation in euros

                                                 Fiscal 2005 annual compensation                              Fiscal 2006 annual compensation
                                             Fixed             Variable(1)       Benefits                  Fixed          Variable(2)         Benefits
                                                           Target          Paid   in-kind                             Target          Paid     in-kind

 Henri Giscard d’Estaing              648,653*           435,000       261,000            17,388         640,020         450,000       288,000          24,184
 François Salamon                     320,000            160,000        64,000             7,083         320,000         160,000       104,300           4,865
 Michel Wolfovski                     302,500            137,500        82,500            16,800         332,300         155,200       121,600          19,131

(1) Paid in January 2005 for fiscal 2004.
(2) Paid in January 2006 for fiscal 2005.
(*) This figure includes the balance paid in relation to amounts due when the Company’s corporate governance structure was changed. Henri Giscard
d’Estaing’s annual basic compensation in his capacity as Chairman and Chief Executive Officer was €640,020 for the period under review.


Henri Giscard d’Estaing’s variable compensation paid in                            Benefits in-kind correspond to a company car and fringe
January 2006 for fiscal 2005 in his capacity as Chairman and                       benefits associated with stays at Club Méditerranée Villages.
Chief Executive Officer was linked to the Company’s earnings.
                                                                                   No exceptional payments were made in fiscal 2006.
He received 64% of the target amount set for that year.
                                                                                   No loans or guarantees have been granted by the Company
The variable portion of the compensation of François Salamon
                                                                                   to its executive officers.
and Michel Wolfovski – who are Executive Vice-Presidents
(non-directors) – is based partly on the Company’s earnings
                                                                                   Other benefits and commitments
and partly on the attainment of individual objectives. These
                                                                                   Stock options were granted to executive officers during fiscal
factors respectively represent 60% and 40% of the Executive
                                                                                   2006 under Plan K.
Vice-Presidents’ target bonus.
                                                                                   At 31 October 2006, the Company’s executive officers held
                                                                                   the following stock options:


Outstanding stock options granted in prior years
                                  Plan F            Plan F2        Plan G     Plan G3        Plan G5           Plan H           Plan I       Plan J          Plan K
 Exercise dates                   50 % at             50% at    7 Feb. 2005 6 Feb. 2005    5 Feb. 2006    1 March 2006     15 Jan. 2007 11 Jan. 2008   14 March 2009
                             18 Aug. 2002      24 March 2003
                              + balance at       + balance at
                             18 Aug. 2003      24 March 2004
 Exercise price
 (in euros)                       68.80               70.81       111.11        92.78          44.74           35.00           31.03         35.00           42.67
 Henri Giscard
 d’Estaing                       51,099                           25,000                                    130,000           33,000       40,000           30,000
 François Salamon                                                                            10,000           25,000          15,000       15,000           10,000
 Michel Wolfovski                                   10,000         5,000        5,000                         30,000          10,000       25,000           20,000




                                                                                                                                          2006 Annual Report //    155
      On 6 April 2006, Michel Wolfovski set up hedges in relation to      Total compensation and benefits paid to each of the members
      15,000 options and filed a notice of the transaction with the       of the Board of Directors in fiscal 2006 was as follows (infor-
      Autorité des Marchés Financiers.                                    mation disclosed in accordance with Article L.225-102-1 of the
      No stock options were exercised during the period under             Commercial Code):
      review.
                                                                          In euros
      The Company’s executive officers are covered by supplemen-
                                                                           Members of the Board of Directors
      tary defined-contribution pension plans. The contributions
                                                                           Ph. Adam                                                    -
      paid under these plans represent 8% of the officers’ gross
                                                                           M. Bakkoury                                                 -
      compensation.
                                                                           S. Al Sulaiman                                     18,007.95
      Henri Giscard d’Estaing, François Salamon and Michel                 E. Bertier                                          5,500.00
      Wolfovski are entitled to a contractual lump-sum severance           Y. Caillère                                                 -
      payment in the event that their employment contracts are             D. Dautresme                                       33,730.45
      terminated, other than for gross or willful misconduct. The          T. Delaunoy de La Tour d’Artaise                   21,412.11
      amount payable corresponds to two years’ gross remunera-             R. Espirito Santo Silva Salgado                         0.00
      tion, including variable compensation. For Henri Giscard
                                                                           J-M. Espalioux                                     27,020.45
      d’Estaing and Michel Wolfovski, this severance pay will be
                                                                           H. Giscard d’Estaing                               22,835.45
      increased to three years’ gross compensation (including vari-
                                                                           P. Jeanbart                                        25,602.83
      able compensation) if the termination occurs within six months
                                                                           A. Langlois-Meurinne                                        -
      of a third party acquiring a controlling interest in the Company.
                                                                           P. Lebard                                          23,497.95
                                                                           T. Miyagawa                                                 -
      Compensation paid to members                                         V. Morali                                          28,850.45
      of the Executive Committee                                           G. Pélisson                                                 -
      Total gross compensation paid to the members of the                  S. Ragozin                                         27,020.45
      Executive Committee (including executive officers) in fiscal         J. Stern                                           28,850.45
      2006 amounted to €3,928,000 (€3,624,000 in fiscal 2005).             P. Todorov                                         34,137.11
      The members of the Executive Committee (excluding                    K. Ujihara                                              0.00
      executive officers) are covered by supplementary defined-            A-C. Taittinger                                             -
      contribution pension plans. The contributions paid under
      these plans represent 6.29% of their gross compensation.            David Dautresme received additional compensation of €30,625
                                                                          for specific advisory work carried out in fiscal 2005 for the
      Attendance fees                                                     Chairman and Chief Executive Officer.
      The Annual Shareholders’ Meeting of 16 March 2005 set the
                                                                          No loans or guarantees have been granted by the Company
      aggregate amount of attendance fees payable to members
                                                                          to any member of the Board of Directors.
      of the Supervisory Board and subsequently the Board of
      Directors (including the non-voting director) at €305,000 for
                                                                          Stock options
      fiscal 2005, unchanged from the previous fiscal year.
                                                                          Stock options grants are discretionary. They are primarily
      Based on the recommendations of the Nominations and                 awarded based on the level of responsibility and potential of
      Compensation Committee, on 12 December 2005 the Board               the beneficiaries.
      of Directors decided to allocate these fees based on members’
      actual attendance at meetings held by the Board of Directors                                                                Plan K
      and Board Committees during fiscal 2005.                             Number of potential new shares to be issued          250,000

      The total amount of €305,000, which was paid in January 2006,        Exercise price                                        €42.67

      was allocated as follows: €244,000 for Board of Directors’           Expiry date of exercise period                13 March 2014
      meetings and €61,000 for meetings of the Board Committees.




156
                                                                                                                         General information

Details of the stock option plans in place at 31 October 2006 for corporate officers and full-time GOs are presented below.

                              1997           1998                  1999                 2000                   2001              2002         2003        2004        2005      2006
                             Plan F   Plan F2 Plan F3       Plan F4 Plan F5        Plan G Plan G2       Plan G3 Plan G4       Plan G5       Plan H*       Plan I     Plan J    Plan K
 Date of Shareholders’
 Meeting                   23.04.97   23.04.97   23.04.97   23.04.97   23.04.97   23.04.97   23.04.97   23.04.97   23.04.97   23.04.97    29.03.02     17.03.03    17.03.03   16.03.05
 Date of Executive         18.08.97   24.03.98   24.08.98   17.02.99   29.07.99   07.02.00   26.07.00   06.02.01   24.07.01   05.02.02    28.02.03     15.01.04    11.01.05   14.03.06
 Board/Board of
 Directors’ Meeting
 Number of options
 granted                    663,370    73,500      9,000     21,000     46,000    258,400     21,815    212,530     37,400    127,000      283,000      272,000    300,000    250,000
 o/w number of new
 or existing shares to
 be purchased by
 members of the
 Executive Committee
 (based on composition
 at 31 October 2006)         63,159    10,000           -     1,000           -    34,800           -    18,900           -    13,800      229,000       95,000    111,000    103,000
 Number of executives
 concerned                       3          1           -         1           -         5           -         4           -         3            7            9          8          9
 Start date of exercise
 period                      50% at    50% at    50% at    50% at    50% at       07.02.05   26.07.04   06.02.05   24.07.05   05.02.06    01.03.06      15.01.07 11.01.08 14.03.09
                           18.08.02 24.03.03 24.08.03 17.02.04 23.07.04                                                                   + sale of    + sale of + sale of + sale of
                          + balance + balance + balance + balance + balance                                                                  shares       shares    shares     shares
                           18.08.03 24.03.04 24.08.04 17.02.05 23.07.05                                                                  prohibited   prohibited prohibited prohibited
                                                                                                                                            before       before     before     before
                                                                                                                                           28.02.07     14.01.08 10.01.09 13.03.10
 Expiry date               17.08.07   23.03.08   23.08.08   16.02.09   22.07.09   06.02.10   25.07.10   05.02.11   23.07.11   04.02.12    27.02.13     14.02.14    10.01.13   13.03.14
 Exercise price
 (in euros)                    68.8     70.81      79.12      81.13      92.79     111.11     136.13      92.78      63.99      44.74           35        31.03         35      42.67
 Number of options
 outstanding at
 31 October 2006            119,063    13,500      3,000     10,000      3,000     89,542      6,200    105,315     13,900     86,500      245,000      226,800    268,600    247,000

* The options granted under Plan H entitle beneficiaries to purchase shares of common stock which have already been issued and are held
  in treasury. Their exercise will not therefore have the effect of increasing the Company’s capital.



THE BOARD OF DIRECTORS                                                                       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
1. GENERAL INFORMATION
                                                                                             Board as Chief Executive Officer.
In accordance with Article L.225-35 of the Commercial Code,
the Board of Directors determines the Company’s strategy and                                 At its first meeting held on 16 March 2005, Club Méditerranée’s
oversees its implementation. Except for the powers directly                                  Board of Directors resolved to combine these two functions
vested in shareholders and within the scope of the corporate                                 and appointed Henri Giscard d’Estaing as Chairman and Chief
purpose, the Board considers all matters related to the efficient                            Executive Officer.
management of the Company and makes all related decisions.                                   David Dautresme was appointed Vice-Chairman of the Board,
The Board of Directors comprises a minimum of three and a                                    François Salamon was named Executive Vice-President,
maximum of eighteen members, elected by shareholders in                                      Europe and North America, and Michel Wolfovski became
an Ordinary Meeting. At the filing date of this report the Board                             Executive Vice-President, Chief Financial Officer.
comprised eleven voting directors and two non-voting direc-
                                                                                             The Board met four times in fiscal 2006, with an average atten-
tors. No directors are elected by the Company’s employees.
                                                                                             dance rate of 85%. Eleven out of twelve members attended
In application of Article 14 of the Company’s by-laws, each                                  the 12 December 2005 meeting, ten out of twelve members
member of the Board must own at least 50 Club Méditerranée                                   were present at both the 14 March 2006 and 8 June 2006
shares.                                                                                      meetings, and nine out of eleven members attended the
                                                                                             28 September 2006 meeting.




                                                                                                                                                        2006 Annual Report //       157
      The structure and operations of the Board of Directors are           3. CHANGES SINCE THE ANNUAL
      governed by internal rules which establish the terms of refer-       SHAREHOLDERS’ MEETING
      ence and powers of the Board, define the operating rules
                                                                           OF 14 MARCH 2006
      for the Board Committees and set out the confidentiality
                                                                           At its 14 March 2006 meeting the Board of Directors noted the
      principle applicable to information obtained by members in
                                                                           resignations of Jacques Stern, Serge Ragozin and Kiyoshi
      their capacity as directors, as well as the duty of directors to
                                                                           Ujihara and appointed Philippe Adam, Yann Caillère and Anne-
      comply with the fundamental principles of independence,
                                                                           Claire Taittinger to replace them. Acting on the recommen-
      ethical conduct and integrity. The internal rules require each
                                                                           dation of the Chairman and Chief Executive Officer, and in
      director to disclose to the Board any actual or potential conflict
                                                                           accordance with Article 23 of the by-laws, the Board also
      of interest in which he or she may be directly or indirectly
                                                                           appointed Tetsuya Miyagawa as a non-voting director.
      involved, and in such a case to abstain from taking part in
      any discussion and/or vote on the matters in question. They          At its 28 September 2006 meeting the Board of Directors
      also set out the regulations applicable to trading in the            noted the resignations of Yann Caillère, Gilles Pélisson and
      Company’s securities, in compliance with Article L.621-18-2 of       Pierre Todorov and appointed Mustapha Bakkoury and Aimery
      the French Monetary and Financial Code and Articles 222-14           Langlois-Meurinne as their replacements.
      and 222-15 of the AMF’s General Regulations.
                                                                           4. MEMBERS OF THE BOARD OF DIRECTORS
      2. INDEPENDENT DIRECTORS (AS DEFINED                                 The Board of Directors comprises eleven directors - eight of
      IN THE AFEP/MEDEF REPORT ISSUED                                      whom are independent - and two non-voting directors. It is made
      IN OCTOBER 2003 ON PROMOTING                                         up of individuals with complementary skills and backgrounds.
      CORPORATE GOVERNANCE IN FRENCH
                                                                           MEMBERS OF THE BOARD OF DIRECTORS AND POSITIONS
      LISTED COMPANIES)
                                                                           HELD IN OTHER COMPANIES
      At its meeting on 28 September 2006, the Board of Directors
      reviewed the assessment of the independence of Board                   HENRI GISCARD D’ESTAING
      members, based on the criteria set out in the AFEP/MEDEF               Chairman and Chief Executive Officer
      report on corporate governance. According to these criteria,
                                                                             Born on 17 October 1956
      directors in the following situations are not independent:
                                                                             French
      directors who represent a shareholder that owns more than
                                                                             Appointed on 16 March 2005
      10% of the Company’s capital, directors with close family ties
                                                                             Term expires at the Annual Shareholders’ Meeting to
      with a corporate officer of the Company, directors with an
                                                                             be called to approve the accounts for the year ending
      employment contract, directors with a seat on the Board of
                                                                             31 October 2007
      another company of which the Company is also a director,
                                                                             First term of office within the Company began
      directors who have been director of the Company for more
                                                                             on 17 July 1997
      than a certain period of time, directors who have been an
                                                                             Non-independent director
      auditor of the Company in any of the five preceding years, and
                                                                             Number of shares held: 50
      directors who have material business interests with the
      Company.
                                                                           Biography: Henri Giscard d’Estaing graduated from Institut
      Based on these criteria, eight of the eleven current Board           d’Etudes Politiques de Paris and has a masters degree in eco-
      members can be deemed independent, corresponding to                  nomics. He began his career with Cofremca where he served
      more than the 50% minimum recommended in the AFEP/                   as an Associate Director between 1982 and 1987, specializing
      MEDEF report. The detailed information below concerning              in researching changes in food consumption patterns and their
      each director indicates whether or not he or she is classified       marketing and strategic impacts. In 1987 he entered the
      as independent.                                                      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.


158
                                                                                   General information

OTHER POSITIONS WITHIN THE GROUP
                                                                DAVID DAUTRESME
Chairman of the Board of Directors of:
                                                                Vice-Chairman of the Board of Directors
Club Med World Holding
Jet tours SA                                                    Born on 5 January 1934
                                                                French
Chairman and Founding Director of:
                                                                Appointed on 16 March 2005
Fondation d’entreprise Club Méditerranée
                                                                Term expires at the Annual Shareholders’ Meeting to
Senior Executive of:                                            be called to approve the accounts for the year ending
Club Med Management Asia Ltd. (Hong Kong)                       31 October 2007
Chairman of the Board of:                                       First term of office within the Company began
Club Med Services Singapore Pte Ltd (Singapore)                 on 23 April 1997
                                                                Number of shares held: 1,591
Director of:
                                                                Independent director
Holiday Hôtels AG (Switzerland)
Carthago (Tunisia)
                                                              Biography: A graduate of ENA, David Dautresme held the
                                                              post of Officer in charge of Algerian Affairs for the French gov-
OTHER POSITIONS OUTSIDE THE GROUP
                                                              ernment between 1958 and 1960. He was subsequently an
Director of:
                                                              auditor at and then honorary advisor to the Cour des Comptes
Casino, Guichard-Perrachon
                                                              (French National Audit Office), following which he served as
Member of the Supervisory Board of:                           a Policy Officer at the French Ministry of the Economy and
Vedior (Netherlands)                                          Finance. In 1966 he was appointed Comptroller at Caisse des
                                                              Dépôts et Consignations before joining Crédit Lyonnais in
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS               1968 as Deputy Director, where he subsequently became Chief
Chairman of the Executive Board of:                           Operating Officer. He served as Chairman and Chief Executive
Club Méditerranée                                             Officer of Crédit du Nord between 1982 and 1986 before
Chairman of:                                                  entering Banque Lazard Frères et Cie where he was Managing
Grand Hôtel Parisien                                          Partner until 2000 and appointed Senior Advisor in 2001. Since
Hôteltour                                                     2006 he has also been a Senior Advisor to Barclays Capital
Club Med Marine                                               France.
Centrovacanze Kamarina (Italy)
CM U.K Ltd (United Kingdom)                                   Main position outside the Group: Senior Advisor
Gregolimano Etabe (Greece)                                    to Lazard Frères

Vice-Chairman of:                                             OTHER POSITIONS OUTSIDE THE GROUP
Nouvelle Société Victoria (Switzerland)                       Member of the Supervisory Board of:
                                                              AXA (France)
Legal Manager of:
Loin                                                          Sole Legal Manager of:
                                                              DD Finance (France)
Permanent Representative of:
Club Méditerranée SA on the Board of Directors of STCL 2      Director of:
                                                              Fimalac (France)
Hôteltour on the Board of Directors of CM Middle East BV
(Netherlands)                                                 Non-voting director of:
                                                              Eurazeo (France)
Loin on the Boards of Directors of Flèche Bleue Voyages and
SECAG Caraïbes
                                                              OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Chairman of:                                                  Executive Deputy Chairman of:
Club Méditerranée Trustee Ltd (United Kingdom)                Crédit Agricole - Lazard Financial Products Bank

                                                              Vice-Chairman and director of:
                                                              Fonds - Partenaires Gestion (F.P.G.)




                                                                                                        2006 Annual Report //   159
      Non-voting director of:                                        OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
      Eurazeo                                                        Managing Director of:
      Groupe Go Sport                                                Carlson Wagon Lit Travel
      Lazard Frères Banque
                                                                     *Appointment subject to ratification by the shareholders at the Annual
                                                                     Meeting of 8 March 2007.
      Chairman of:
      Parande Développement SAS
                                                                       SAUD AL SULAIMAN
      Member of the Supervisory Board of:                              Director
      Club Méditerranée
                                                                       Born on 8 December 1961
      Casino
                                                                       Saudi-Arabian
      Managing Partner of:                                             Appointed on 16 March 2005
      Lazard Frères                                                    Term expires at the Annual Shareholders’ Meeting to
      Maison Lazard                                                    be called to approve the accounts for the year ending
      Partena                                                          31 October 2007
      Director of:                                                     First term of office within the Company began
      Société Immobilière Marseillaise                                 on 12 December 2003
      Axa Investment Managers                                          Number of shares held: 50
      Lazard Frères Banque                                             Independent director
      Crédit Agricole Lazard Financial Products Ltd
      Rue Impériale                                                  Biography: Saud Al Sulaiman graduated in Finance from the
                                                                     University of New York in the United States. Since he began
      Permanent representative of:
                                                                     his career he has held several management positions within
      Lazard SA
                                                                     the Rolaco Trading & Contracting group, which is partly owned
      Compagnie de Crédit (director)
                                                                     by the Al Sulaiman family. He has contributed to driving the
                                                                     group’s expansion in a number of areas including manufactur-
        PHILIPPE ADAM*
                                                                     ing, finance, real estate development and tourism.
        Director
                                                                     Main position outside the Group: Partner and Managing
        Born on 1 May 1957
                                                                     Director of Rolaco Trading and its subsidiaries (Jeddah,
        French
                                                                     Saudi Arabia)
        Appointed on 16 March 2005
        Term expires at the Annual Shareholders’ Meeting to          OTHER POSITIONS OUTSIDE THE GROUP
        be called to approve the accounts for the year ending        Member of the Board of Directors of:
        31 October 2007                                              Arabian Cement Company (Saudi Arabia)
        Number of shares held: 50                                    Saudi Arabian Refineries Company (Saudi Arabia)
        Non-independent director                                     Saudi Industrial Development Company (Saudi Arabia)
                                                                     Capital Finance Company SAL. (Lebanon)
      Biography: Philippe Adam is a graduate of Institut d’Etudes    Rolaco Holding SA (Luxembourg)
      Politiques de Strasbourg and also holds an MBA degree.         Hadhan Holding SA (Luxembourg)
      He began his career in 1984 as a financial analyst before      Oryx Finance Ltd. (Grand Cayman)
      joining Accor in 1986. In 1993 he entered the Compass Group,   Semiramis Intercontinental Hotel (Egypt)
      the worldwide leader in contract catering. Philippe Adam is    Sharjah National Lube Oil Company (United Arab Emirates)
      currently Executive Vice-President, Strategy and Hotel         This Works (United Kingdom)
      Development with the Accor Group.                              Muzun International Aviation Fund (Bahamas)


      Main position outside the Group: Executive Vice-President,     OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

      Strategy and Hotel Development - Accor                         Member of the Supervisory Board of:
                                                                     Club Méditerranée (France)
      OTHER POSITIONS OUTSIDE THE GROUP
      Chairman and Chief Executive Officer of:
      Devimco

      Permanent representative of:
      SAMINVEST, on the Board of Directors of GO Voyages




160
                                                                                     General information

                                                              Compagnie d’Assurance Atlanta
  MUSTAPHA BAKKOURY*
                                                              Crédit Eqdom
  Director
                                                              Médi 1 Sat (Morocco)
  Born on 20 December 1964
  Moroccan                                                    OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
  First appointed on 28 September 2006                        Chairman of the Board of Directors of:
  Term expires at the Annual Shareholders’ Meeting to         Banque Nationale de Développement Economique (Morocco)
  be called to approve the accounts for the year ending       Compagnie Générale Immobilière (Morocco)
  31 October 2007                                             Cellulose du Maroc
  Number of shares held: 250                                  Papelera de Tétouan (Morocco)
  Non-independent director                                    SOGATOUR (Société d’Aménagement Touristique) (Morocco)
                                                              Loterie Nationale (Morocco)
Biography: Mustapha Bakkoury graduated from Ecole Nationale   Maroc Leasing
des Ponts et Chaussées de Paris and also holds a degree in    Caisse Marocaine des Marchés (Morocco)
Banking and Finance. He spent some ten years working in the
                                                              Director of:
banking industry, including with BNP Paribas in France and
                                                              CNIA Assurances (Morocco)
BMCI in Morocco, and in August 2001 was appointed Chief
                                                              Régie des Tabacs (Morocco)
Executive Officer of Caisse de Dépôt et de Gestion du Maroc
in Morocco. Mustapha Bakkoury is also Vice-Chancellor of      Chairman of the Management Board of:
Al Akhawayn University, a member of the Mohammed VI           TMSA (Agence spéciale Tanger Med)
Foundation (which promotes the teaching profession and        *Appointment subject to ratification by the shareholders at the Annual
                                                              Meeting of 8 March 2007.
performs charity work), a member of the Employers’ Fede-
ration (Conseil du Patronat) and Co-Chairman of Groupe
                                                                THIERRY DELAUNOY DE LA TOUR D’ARTAISE
d’Impulsion Economique France Maroc, aimed at furthering
                                                                Director
economic relations between France and Morocco.
                                                                Born on 27 October 1954
Main position outside the Group: Chief Executive Officer        French
of Caisse de Dépôt et de Gestion du Maroc                       Appointed on 16 March 2005
                                                                Term expires at the Annual Shareholders’ Meeting to be
OTHER POSITIONS OUTSIDE THE GROUP                               called to approve the accounts for the year ending 31
Chairman of the Board of Directors of:                          October 2007
Fipar Holding (Morocco)                                         Number of shares held: 100
Société Générale de Réassurance (Morocco)                       Independent director
CDG Capital (Morocco)
SOFAC Crédit (Morocco)                                        Biography: A graduate of Ecole Supérieure de Commerce de
Société Immobilière de la Mer (Morocco)                       Paris, Thierry Delaunoy de La Tour d’Artaise served as head
Société d’Aménagement Ryad (Morocco)                          of internal audit with the Chargeurs group from 1983 to 1984,
Massira Capital Management (Morocco)                          before joining Croisères Paquet where he held the post of
                                                              Chief Financial Officer from 1984 to 1986 and subsequently
Chairman of the Supervisory Board of:
                                                              Chief Executive Officer from 1986 to 1993. He then went on to
CDG Développement (Morocco)
                                                              work at Calor SA from 1994 to 1997 as Chief Executive Officer
Crédit Immobilier et Hôtelier (Morocco)
                                                              and subsequently Chairman and Chief Executive Officer. In
Member of the Supervisory Board of:                           1998 he joined Groupe SEB where he was Chairman of the
TMSA (Tanger Med Special Agency)                              Home Appliances Division and Senior Vice-President, Chief
Banque Marocaine pour le Commerce et l’Industrie (Morocco)    Executive Officer, before being appointed Chairman and Chief
Director of:                                                  Executive Officer in 2000.
Banque Centrale Populaire (Morocco)
Méditélécom (Morocco)
Ciments du Maroc
Lafarge Maroc
Air Liquide (Morocco)
Carnaud Metalbox (Morocco)
Fonds d’Equipement Communal (Morocco)
Poste Maroc

                                                                                                           2006 Annual Report //   161
      Main position outside the Group: Chairman of the board
                                                                 PAUL JEANBART
      and Chief Executive Officer of Groupe SEB
                                                                 Director
      OTHER POSITIONS OUTSIDE THE GROUP                          Born on 23 August 1939
      Chairman of:                                               Canadian
      SEB Internationale (France)                                Appointed on 16 March 2005
                                                                 Term expires at the Annual Shareholders’ Meeting to
      Member of the Supervisory Board of:
                                                                 be called to approve the accounts for the year ending
      Rowenta Invest BV (Netherlands)
                                                                 31 October 2007.
      Permanent representative of:                               First term of office within the Company began
      Sofinaction, director of Lyonnaise de Banque (France).     on 23 April 1997
      Director of:                                               Number of shares held: 50
      Tefal UK (United Kingdom)                                  Independent director
      Groupe Seb Japan (Japan)
      Groupe Seb Mexicana (Mexico)                             Biography: After graduating in civil engineering from the
      Siparex Associés (France)                                University of Alep in Syria, Paul Jeanbart co-founded the
      Plastic Omnium (France)                                  Rolaco Trading & Contracting Group, which started out as a
      Legrand                                                  construction firm and also specialized in trading construction
                                                               materials, vehicles and road and maritime freight equipment.
      OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS          He worked at Rolaco Trading & Contracting from 1964 until
      Chairman of:                                             1982 when he moved to Geneva to manage the investments
      Groupe SEB Moulinex (France)                             of the Luxembourg-based company Rolaco Holding SA Group
                                                               in various sectors, including tourism, hotel services, finance,
      Chairman of the Supervisory Board of:
                                                               insurance and the maritime industry (covering both ship owners
      Rowenta Werke (Germany)
                                                               and operators).
      Member of the Supervisory Board of:
      Groupe SEB Deutschland (Germany)                         Main position outside the Group: Managing Director of
      Permanent representative of:                             Rolaco Holding SA (Luxembourg)
      SEB Internationale for Groupe SEB UK (United Kingdom)
                                                               OTHER POSITIONS OUTSIDE THE GROUP
      SEB Internationale for Groupe SEB Iberica (Spain)
                                                               Chairman and Chief Executive Officer of:
      SEB Internationale for Rowenta France
                                                               Oryx Finance Limited, Grand Cayman
      SEB Internationale for Calor (France)
                                                               Hôtels Intercontinental Genève SA
      SEB Internationale for Tefal (France)
                                                               Managing Director of:
      Director of:
                                                               All of the subsidiaries of Rolaco Holding S.A, Luxembourg
      T-Fal Corp (United States)
      T-Fal de Mexico (Mexico)                                 Director of:
      Rowenta Inc (United States)                              Sodexho Alliance SA
      Groupe Seb Colombia (Colombia)                           Luxury Brand Development SA
      SEB SA (France)                                          Semiramis Hôtel Co, Egypt
      Tefal UK (United Kingdom)                                Nasco Insurance Group, Bermuda
      Seb Benrubi (Greece)
      Groupe Seb South Africa (South Africa)                   OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
                                                               Director of:
      Legal Manager of:
                                                               Orfèverie Christofle SA
      Rowenta Deustchland GmbH (Germany)
                                                               XL Capital Limited, Bermuda
      Krups GmbH (Germany)
                                                               Delta Bank Intenational, Egypt

                                                               Member of the Supervisory Board of:
                                                               Club Méditerranée




162
                                                                                              General information

  AIMERY LANGLOIS-MEURINNE*                                                PASCAL LEBARD
  Director                                                                 Director

  Born on 27 May 1943                                                      Born on 15 May 1962
  French                                                                   French
  First appointed on 28 September 2006                                     Appointed on 16 March 2005
  Term expires at the Annual Shareholders’ Meeting to                      Term expires at the Annual Shareholders’ Meeting to
  be called to approve the accounts for the year ending                    be called to approve the accounts for the year ending
  31 October 2007.                                                         31 October 2007.
  Number of shares held: 1,000                                             First term of office within the Company began
  Independent director                                                     on 23 April 1997
                                                                           Number of shares held: 54
Biography: Aimery Langlois-Meurinne graduated from                         Independent director
Sciences Po in Paris in 1965, earned a doctorate in law in 1966
and graduated from France’s Ecole Nationale d’Administration             Biography: After graduating from EDHEC, Pascal Lebard
in 1970. He joined the Paribas group in 1971 where he worked             became a Chargé d’Affaires at Crédit Commercial de France
for 12 years before being appointed Managing Director of                 in 1986. He held the post of Associate Director at 3I SA from
G. Becker Paribas (New York) and subsequently Merrill Lynch              1989 until 1991, before becoming a Director at Ifint, the
Capital Markets (New York). Between 1987 and 1998, he served             predecessor of the Exor Group. In 2003 he joined Worms
as Chief Executive Officer and then Senior Vice-President,               & Cie (which was renamed Sequana Capital in 2005) as a
Chief Executive Officer of Parfinance Paris. In 1998, he was             member of the Supervisory Board (2003-2004), a member of
appointed Chairman of the Supervisory Board of Imerys and                the Management Board (2004-2005) and Deputy Managing
has been the Chairman of that company’s Board of Directors               Director (since 2005).
since 2005. He has also been Managing Director of Pargesa
Holding in Geneva since 1990.                                            Main position outside the Group: Deputy Managing Director
                                                                         of Sequana Capital
Main position outside the Group: Chief Executive Officer
and Member of the board of Pargesa Holding SA (Geneva)                   OTHER POSITIONS OUTSIDE THE GROUP
                                                                         Chairman of:
OTHER POSITIONS OUTSIDE THE GROUP                                        Safic Alcan
Director of:
                                                                         Chairman of the Supervisory Board of:
Groupe Bruxelles Lambert SA (Belgium)
                                                                         Permal Group SAS
Eiffage (France)
PAI Management (France)                                                  Member of the Supervisory Board of:
Pascal Investment Advisers SA (Switzerland)                              ArjoWiggins SAS
                                                                         Antalis SAS
Director and Chairman of:
Pargesa Luxembourg SA (Luxembourg)                                       Director of:
Pargesa Netherlands BV (Netherlands)                                     LISI (Paris)
Imerys (France)                                                          SGS (Geneva)
                                                                         Financière Worms SA (Geneva)
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS                          Greysac (formerly Domaines Codem)
Director of:
Power Financial Corporation (Canada)                                     OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

Axis Capital Management (United Kingdom)                                 Chairman of the Supervisory Board of
Club Français du Livre (France)                                          MICEL (Saint-Chamond)
                                                                         Club Méditerranée
*Appointment subject to ratification by the shareholders at the Annual
Meeting of 8 March 2007.                                                 Chief Executive Officer of:
                                                                         Exor SA (Paris)

                                                                         Chairman and Chief Executive Officer of:
                                                                         Domaines Codem (Begadan)




                                                                                                                 2006 Annual Report //   163
      Director of:                                                     Permanent representative of:
      Domaines Codem (Begadan)                                         Fimalac on the Board of Directors of Facom
      Européenne de Financement (Paris)                                Fimalac, Inc. on the Board of Directors of Fitch France SA
      Soficol (Paris)                                                  Fimalac Investissements on the Board of Directors of Clestra
      Exint. (Paris)                                                   Minerais et Engrais on the Board of Directors of Monde Presse

      Member of the Executive Board of:                                Member of the Supervisory Board of:
      Worms & Cie (Paris)                                              Club Méditerranée

                                                                       Director of:
        VÉRONIQUE MORALI                                               Minerais et Engrais
        Director
                                                                       Legal Manager of:
        Born on 12 September 1958                                      Pandour
        French                                                         Silmer
        Appointed on 16 March 2005
                                                                       Member of:
        Term expires at the Annual Shareholders’ Meeting to
                                                                       Conseil des Marchés Financiers
        be called to approve the accounts for the year ending
        31 October 2007.                                               Chairman of:
        First term of office within the Company began                  Strafor Facom, Inc. (United States)
        on 22 October 2004
                                                                       Member of the Board of:
        Number of shares held: 50
                                                                       Core Ratings Ltd (United Kingdom)
        Independent director

                                                                         ANNE-CLAIRE TAITTINGER*
      Biography: Having graduated from Institut d’Etudes Politiques
                                                                         Director
      and Ecole Supérieure de Commerce de Paris, Véronique
      Morali entered Ecole Nationale d’Administration in 1984. She       Born on 3 November 1959
      became part of the Inspectorate General team at the French         French
      Finance Ministry in 1986 before joining Fimalac in 1990.           Appointed on 14 March 2006
      Véronique Morali is President of the Force Femmes Association      Term expires at the Annual Shareholders’ Meeting to
      and Chairman of the Economic Dialog Committee for MEDEF,           be called to approve the accounts for the year ending
      the French employers’ organization. In 1999 and 2004 respec-       31 October 2007
      tively she received the prestigious titles for services to the     First term of office within the Company began
      French state - Chevalier dans l’Ordre National du Mérite and       on 12 June 2003
      Chevalier de la Légion d’Honneur.                                  Number of shares held: 400
                                                                         Independent director
      Main position outside the Group: Director and Chief
      Operating Officer of Fimalac                                     Biography: Anne-Claire Taittinger is a graduate of Institut
                                                                       d’Études Politiques de Paris. She also holds ordinary and
      OTHER POSITIONS OUTSIDE THE GROUP                                advanced degrees in urban planning as well as a diploma
      Director of:                                                     awarded by a specialized executive training institution (Centre
      Eiffage                                                          de perfectionnement aux affaires). She spent four years at
      Valeo                                                            Caisse des Dépôts et Consignations (1976-1979), before hold-
      Sole director of:                                                ing various managerial positions within Groupe du Louvre and
      FCBS GIE                                                         subsequently Groupe Taittinger, as follows:
                                                                       - Head of the Manufacturing Division (1979-1995) of Groupe
      Director :
                                                                        du Louvre. In her capacity as Chairman and CEO of Groupe
      Fimalac, Inc. (United States)
                                                                        du Louvre she oversaw the gradual sale of this division
      Fitch Group Inc. (United States)
                                                                        between 1994 and 2000.
      Fitch Ratings (United States)
                                                                       - Chairman and CEO of Annick Goutal Fragrances (1986-1992)
                                                                        where she was responsible for the launch of the company
      OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
                                                                        and subsequent operations.
      Chairman and Chief Executive Officer of:
                                                                       - CEO and then Chairman and CEO of Baccarat (1993-1994
      Fimalac Communication
                                                                        and 1994-2002 respectively), and subsequently Chairman
      Fimalac Investissements
                                                                        of Baccarat’s Board of Directors from 2002.
      Revue des Deux Mondes


164
                                                                                      General information

- Executive director of Groupe Taittinger and Société du       Chairman and Director of:
 Louvre holding companies (between 2002 and 2005), as well     Baccarat Inc. (USA)
 as executive director of Groupe du Louvre from 1997 to        Baccarat Pacific KK (Japan)
 2006).
                                                               Director of:
- Corporate Secretary, CEO and subsequently Chairman of
                                                               Baccarat Pacific Ltd. (USA)
 the Management Board of Groupe du Louvre (1985-2006) –
 positions she held in parallel with those of Corporate        *Appointment subject to ratification by the shareholders at the Annual
                                                               Meeting of 8 March 2007.
 Secretary and subsequently Chairman of the Management
 Board of Groupe Taittinger. These positions involved over-
 seeing the various strategic and financial developments of      ÉTIENNE BERTIER
 Groupe Taittinger-Louvre, optimizing returns on the group’s     Non-voting director
 prestigious property portfolio, and ensuring the smooth         Born on 25 February 1960
 implementation of changes in the group’s ownership struc-       French
 ture - including the recent sale of Groupe Taittinger to an     Appointed on 9 June 2005
 investment fund.

                                                               Biography: Etienne Bertier graduated from Institut d’Etudes
Main position outside the Group: Corporate Secretary –         Politiques de Paris, Essec and the Human Sciences Faculty of
Groupe Taittinger                                              Paris X Nanterre University. He began his career as a journal-
                                                               ist for the Expansion newspaper (1984-1987), Libération (1987-
OTHER POSITIONS OUTSIDE THE GROUP
                                                               1990) and Le Point (1990-1993). He was appointed Technical
Director of:
                                                               Advisor to the French Ministry of the Economy in 1993 before
Dexia
                                                               becoming a Policy Officer. In 1995 he joined EDF as Corporate
Baccarat
                                                               Secretary until his appointment in 1998 as Deputy Director of
Member of the Supervisory Board of:                            the International Division, a position he held until 2003. In
Carrefour                                                      January of that year he was appointed as advisor to the Chief
Senior Advisor to:                                             Executive Officer of Caisse des Dépôts and has been
Wefcoms-Women’s Forum                                          Chairman and Chief Executive Officer of Icade since October
                                                               2003.
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Chairman of:                                                   Main position outside the Group: Chairman of the board
Louvre Hôtels SAS                                              and Chief Executive Officer of Icade SA
A. Hôtels SAS                                                  OTHER POSITIONS OUTSIDE THE GROUP
L. Hôtels SAS                                                  Director of:
S. Hôtels SAS                                                  Icade de Foncière des Pimonts SA
Groupe Envergure SAS                                           MAP Holding SA (formerly Financière Lille SA)
Permanent representative of Groupe Taittinger on the           Fineco Vita SA
Boards of:                                                     Member of the Supervisory Board of:
Société Hôtelière Lutétia Concorde                             CNP Assurances SA
Taittinger CCVC
                                                               Non-voting director of:
Legal Manager of:                                              Club Méditerranée SA
SAS du Riffray
                                                               Permanent representative of:
Chairman of the Management Board of:                           Icade, as director of Icade Patrimoine SA
Groupe Taittinger                                              Icade, as director of Icade EMGP SA
                                                               Icade, as Legal Manager of SCI Patrimoniales, comprising:
CEO of:
                                                               SCI Construction du Bassin Parisien, Fontaine au Roi, Rhône,
Société du Louvre
                                                               Résidence de Sarcelles, Résidence d’Epinay/Seine, St Etienne
Groupe du Louvre
                                                               du Rouvray, Seloge, Vénissieux Grandes Terres des Vignes




                                                                                                            2006 Annual Report //   165
      Permanent representative of Icade as co-legal manager of:     Henri Giscard d’Estaing is assisted by two Executive
      SNC Capri Danton                                              Vice-Presidents:

      OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
                                                                      FRANÇOIS SALAMON
      Permanent representative of Icade, as director of:
                                                                      Executive Vice-President, Europe and North America -
      SCIC Habitat SA
                                                                      Non-director
      SCIC Habitat Ile de France SA
      SCET SA                                                         Born on 23 July 1953
      CAPRI SA                                                        French
      CIRP SA
                                                                    OTHER POSITIONS WITHIN THE GROUP
      Member of the Supervisory Board of:                           Legal Manager of:
      Club Méditerranée SA                                          Club Med Viagens Lda (Portugal)
      CNCE SA
                                                                    Director of:
      Crédit Foncier de France SA
                                                                    Club Méditerranée Israel Ltd (Israel)
      Director of:                                                  Vacances (Proprietary) Ltd (South Africa)
      C3D SA
                                                                    Director of:
      Representative of SCI Domaine IDF on the Management           Sociedade Hoteleira Da Balaia (Portugal)
      Board of:                                                     HOCASA (Spain)
      GIE Icade Patrimoine                                          SACM (Spain)
      Chairman of the Supervisory Board of:                         TEK AE (Greece)
      Budapest EROMU SA                                             Carthago (Tunisia)

                                                                    Director and founder of:
        TETSUYA MIYAGAWA                                            Fondation d’Entreprise Club Méditerranée
        Non-voting director
                                                                    OTHER POSITIONS OUTSIDE THE GROUP
        Born on 6 April 1955
                                                                    N/A
        Japanese
        Appointed on 14 March 2006
                                                                    OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS

      Biography: After graduating from the University of Tokyo in   Member of the Executive Board of:
      Japan, Tetsuya Miyagawa joined Nippon Life Insurance          Club Méditerranée SA
      Company in 1978. He was appointed General Manager in
      charge of the International Investment Department in 2001       MICHEL WOLFOVSKI
      and has been Nippon Life’s chief representative in London       Executive Vice-President, Chief Financial Officer
      since 2005.                                                     Non-director

                                                                      Born on 3 April 1957
      Main position outside the Group: Chief Representative of
                                                                      French
      Nippon Life Insurance Company at its London office

      OTHER POSITIONS OUTSIDE THE GROUP                             OTHER POSITIONS WITHIN THE GROUP
      Director of:                                                  Permanent representative of:
      Nippon Life Insurance International PLC                       Club Méditerranée SA for Club Med World Holding (Paris)
      Nippon Life Insurance Investments Europe Ltd.                 Director of:
                                                                    Jet tours SA (Ivry)
      OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
      N/A                                                           OTHER POSITIONS OUTSIDE THE GROUP
                                                                    N/A




166
                                                                                          General information

OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS                      Meurinne, Pascal Lebard and Tetsuya Miyagawa (non-voting
Member of the Executive Board of:                                    director). Five of the Committee’s members are independent.
Club Méditerranée SA (Paris)
                                                                     The roles and responsibilities of the Strategy Committee are
Director of:                                                         described in the Report of the Chairman of the Board of
Club Med Gym (Paris)                                                 Directors on Preparing and Organizing Board Meetings and
                                                                     on the Company’s Internal Control Procedures (see page 82).
Chairman of:
Club Med Amérique du Nord (Paris)                                    The Strategy Committee met once in fiscal 2006.
Club Med Amérique du Sud (Paris)
Club Med Asie (Luxembourg)                                           The Audit Committee
As far as the Company is aware, none of its corporate officers       The Audit Committee is chaired by David Dautresme and
have any convictions in relation to fraudulent offences in the       has three other members: Véronique Morali, Philippe Adam
past five years and none have been involved in any bankrupt-         and Pascal Lebard. Three of the Committee’s members are
cies, receiverships or liquidations in the past five years.          independent.
In addition no official public incriminations and/or sanctions       The Audit Committee is one of the key components of the
have been pronounced against any of the Company’s offi-              corporate governance structure set up by the Company. It is
cers by any statutory or regulatory authorities and they have        responsible for assisting the Board with reviewing and approv-
never been disqualified by a court from acting as a member           ing the financial statements, analyzing risks and ensuring that
of the administrative, management or supervisory bodies of           the Group’s internal control system operates efficiently.
an issuer or from acting in the management or conduct of
the affairs of any issuer. Finally, to the best of the Company’s     The roles and responsibilities of the Audit Committee are

knowledge, there are no potential conflicts of interests             described in the Report of the Chairman of the Board of

between the duties of the corporate officers to the Company          Directors on Preparing and Organizing Board Meetings and

and their private interests.                                         on the Company’s Internal Control Procedures (see page 81).

                                                                     The Audit Committee met twice in fiscal 2006, prior to the
5. BOARD COMMITTEES                                                  presentation of the financial statements. The Statutory
At its meeting of 16 March 2005, the Board of Directors set up       Auditors attended both of these meetings.
three specialized committees:
• A Strategy Committee.                                              Nominations and Compensation
• An Audit Committee.                                                Committee
• A Nominations and Compensation Committee
                                                                     The Nominations and Compensation Committee has three
The members of the Board Committees are appointed by the             members, all of whom are independent: Anne-Claire Taittinger,
Board of Directors.                                                  Thierry de La Tour d’Artaise and Saud Al Sulaiman. It is chaired

The responsibilities of the Committees, whose role is exclu-         by Thierry de La Tour d’Artaise.

sively advisory, are set by the Board of Directors.                  The roles and responsibilities of the Nominations and

The Committees report on their work to the Board of Directors.       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
The Strategy Committee
                                                                     Control Procedures (see page 81).
The Strategy Committee is chaired by Henri Giscard d’Estaing
and has seven other members: Véronique Morali, Philippe              The Nominations and Compensation Committee met twice
Adam, Mustapha Bakkoury, Paul Jeanbart, Aimery Langlois-             in fiscal 2006.



Summary of transactions carried out during fiscal 2006 concerning the Company’s securities (disclosed in
accordance with Article L.621-18-2 of the French Monetary and Financial Code)
 Transaction           Officer                          Financial instrument            Type of transaction          Number of
 date                                                                                                                securities
 6 April 2006          Michel Wolfovski                 Derivative instrument           Sale of call                 15,000
                                                        relating to ordinary shares     option – Purchase
                                                                                        of put option
 16 October 2006       Aimery Langlois-Meurinne         Shares                          Purchase                     1,000




                                                                                                              2006 Annual Report //   167
168
Additional
information
170 // RESOLUTIONS




                     2006 Annual Report //   169
      Resolutions
      A - ORDINARY RESOLUTIONS                                            FOURTH RESOLUTION - APPROVAL OF RELATED PARTY
                                                                          AGREEMENTS
      FIRST RESOLUTION - APPROVAL OF THE FINANCIAL
                                                                          The Ordinary General Meeting, having considered the report
      STATEMENTS OF THE COMPANY FOR THE YEAR ENDED
                                                                          of the Auditors on related party agreements governed by
      31 OCTOBER 2006
                                                                          Articles L.225-38 et seq. of the French Commercial Code and
      The Ordinary General Meeting, having considered the
                                                                          – for agreements entered into prior to the change in manage-
      report of the Board of Directors, the Chairman’s report on the
                                                                          ment system – Articles L.225-86 et seq, approves the related
      practices and procedures of the Board of Directors and the
                                                                          party transactions and agreements that were entered into or
      Company’s internal control procedures, the Auditors’ report,
                                                                          remained in force during the year.
      and the financial statements of the Company for the year
      ended 31 October 2006 presented by the Board of Directors,          FIFTH RESOLUTION - APPROVAL OF DIRECTORS’ FEES
      approves the financial statements as presented, which show          The Ordinary General Meeting, having considered the
      a net loss of €14,480,839, as well as the transactions reflected    report of the Board of Directors, sets the total amount of
      in these financial statements and described in these reports.       directors’ fees payable for the period from 1 November 2006
      As a result, the Ordinary General Meeting gives discharge to        to 31 October 2007 at €305,000.
      the Board of Directors for the fulfillment of its duties for the    SIXTH RESOLUTION - RATIFICATION OF THE APPOINTMENT
      year ended 31 October 2006.                                         OF YANN CAILLÈRE AS DIRECTOR

      SECOND RESOLUTION - APPROVAL OF THE                                 The Ordinary General Meeting ratifies the appointment of
      CONSOLIDATED FINANCIAL STATEMENTS FOR                               Yann Caillère as director to replace Jacques Stern for the
      THE YEAR ENDED 31 OCTOBER 2006                                      remainder of the latter’s term expiring at the Annual
      The Ordinary General Meeting, having considered the                 Shareholders’ Meeting to be called to approve the fiscal 2007
      report of the Board of Directors, the Chairman’s report on          financial statements, as decided at the Board meeting of
      the practices and procedures of the Board of Directors and          14 March 2006.
      the Company’s internal control procedures, the Auditors’            SEVENTH RESOLUTION - RATIFICATION OF THE
      report, and the consolidated financial statements for the year      APPOINTMENT OF PHILIPPE ADAM AS DIRECTOR
      ended 31 October 2006 presented by the Board of Directors,
                                                                          The Ordinary General Meeting ratifies the appointment of
      approves the consolidated financial statements as presented,
                                                                          Philippe Adam as director to replace Serge Ragozin for the
      which show net income of €4.58 million, as well as the trans-
                                                                          remainder of the latter’s term expiring at the Annual
      actions reflected in these consolidated financial statements
                                                                          Shareholders’ Meeting to be called to approve the fiscal 2007
      and described in these reports.
                                                                          financial statements, as decided at the Board meeting of
      THIRD RESOLUTION - APPROPRIATION OF PROFIT                          14 March 2006.
      The Ordinary General Meeting, considering the deficit carried       EIGHTH RESOLUTION - RATIFICATION OF THE
      forward from the previous year and the recommendation of            APPOINTMENT OF ANNE-CLAIRE TAITTINGER
      the Board of Directors, resolves to appropriate the Company’s       AS DIRECTOR
      net loss for the year, in the amount of €14,480,839, to the         The Ordinary General Meeting ratifies the appointment of
      deficit. Including this loss and the €12,893,044 effect of a        Anne-Claire Taittinger as director to replace Kiyoshi Ujihara
      change in accounting method concerning the measurement              for the remainder of the latter’s term expiring at the Annual
      of assets, the deficit will amount to €258,485,594.                 Shareholders’ Meeting to be called to approve the fiscal 2007

      As required by law, the Ordinary General Meeting notes that         financial statements, as decided at the Board meeting of

      dividends for the last three fiscal years were as follows:          14 March 2006.

                                                                          NINTH RESOLUTION - RATIFICATION OF THE
                             Fiscal 2003   Fiscal 2004      Fiscal 2005
                                                                          APPOINTMENT OF MUSTAPHA BAKKOURY AS DIRECTOR
       Number of shares
       carrying dividend                                                  The Ordinary General Meeting ratifies the appointment of
       rights               19,358,005     19,358,005    19,358,005       Mustapha Bakkoury as director to replace Yann Caillère for
       Net dividend
       per share                       -             -                -   the remainder of the latter’s term expiring at the Annual
       Tax credit                      -             -                -   Shareholders’ Meeting to be called to approve the fiscal 2007
                                                                          financial statements, as decided at the Board meeting of
                                                                          28 September 2006.

170
                                                                                                             Additional
                                                                                                           information
TENTH RESOLUTION - RATIFICATION OF THE                            Directors to buy back shares of the Company in accordance
APPOINTMENT OF AIMERY LANGLOIS-MEURINNE                           with Articles L.225-209 et seq. of the French Commercial Code,
AS DIRECTOR
                                                                  European Commission Regulation 2273/2003 of 22 December
The Ordinary General Meeting ratifies the appointment of          2003 implementing Directive 2003/6/EC of 28 January 2003,
Aimery Langlois-Meurinne as director to replace Pierre Todorov    and Articles 241-1 to 241-6 of the Autorité des Marchés
for the remainder of the latter’s term expiring at the Annual     Financiers’ general regulations or any regulations that may be
Shareholders’ Meeting to be called to approve the fiscal 2007     substituted therefor. The number of Club Méditerranée SA
financial statements, as decided at the Board meeting of          shares held under this authorization at any given time shall not
28 September 2006.                                                represent more than 10% of the Company’s capital, currently
ELEVENTH RESOLUTION - RENEWAL OF THE                              19,358,005 shares. Authority to act on this resolution may be
APPOINTMENT OF DELOITTE & ASSOCIÉS AS STATUTORY                   delegated by the Board, subject to compliance with the appli-
AUDITOR                                                           cable laws and regulations.
The Ordinary General Meeting, considering that the term of        The Ordinary General Meeting authorizes the Board of
Deloitte & Associés as Statutory Auditor expires at this Annual   Directors (or any person duly authorized by the Board) to buy
General Meeting, renews the appointment as Statutory              back shares for the following purposes:
Auditor of Deloitte & Associés (185, avenue Charles de Gaulle,    • To permit transactions under a liquidity contract complying
92524 Neuilly-sur-Seine Cedex), for the statutory period of        with a code of ethics approved by the Autorité des Marchés
six years expiring at the Annual Shareholders’ Meeting to be       Financiers, entered into with an investment service provider
called to approve the fiscal 2012 financial statements.            acting on an independent basis without any influence from
TWELFTH RESOLUTION - RENEWAL OF THE APPOINTMENT                    the Company.
OF ERNST & YOUNG AUDIT AS STATUTORY AUDITOR                       • For allocation to directors and/or employees of the Company
The Ordinary General Meeting, considering that the term of         and/or the Group, upon exercise of stock options or under
Ernst & Young Audit as Statutory Auditor expires at this Annual    an employee stock ownership plan or stock grant plan.
General Meeting, renews the appointment as Statutory              • For allocation upon the issue or exercise of rights attached
Auditor of Ernst & Young Audit (Faubourg de l’Arche 92037          to shares or share equivalents.
Paris-La Défense Cedex), for the statutory period of six years    • To constitute a stock of shares to be used (i) to pay for future
expiring at the Annual Shareholders’ Meeting to be called to       business acquisitions or (ii) for future mergers, demergers or
approve the fiscal 2012 financial statements.                      acquisitions of assets in exchange for shares. The number of
                                                                   shares used for this latter purpose shall not exceed 5% of
THIRTEENTH RESOLUTION - RENEWAL OF THE                             the Company’s capital as of the transaction date, currently
APPOINTMENT OF BEAS AS SUBSTITUTE AUDITOR
                                                                   19,358,005 shares.
The Ordinary General Meeting, considering that the term of        • For cancellation of the acquired shares, including any shares
Beas as Substitute Auditor expires at this Annual General          bought back pursuant to earlier authorizations (provided
Meeting, renews the appointment as Substitute Auditor of           that 28th resolution authorizing the Board to reduce the
Beas (185, avenue Charles de Gaulle, 92524 Neuilly-sur-Seine       Company’s capital is voted).
Cedex), for the statutory period of six years expiring at the     • For any other purpose that is currently authorized by law or
Annual Shareholders’ Meeting to be called to approve the           may be authorized in the future, provided that the Company
fiscal 2012 financial statements.                                  informs shareholders of said new purpose or purposes by
FOURTEENTH RESOLUTION - RENEWAL OF THE                             press release or by any other legally authorized means.
APPOINTMENT OF FRANÇOIS CARREGA AS SUBSTITUTE                     The shares may be purchased, sold or otherwise transferred
AUDITOR
                                                                  by any appropriate method, on the market or over the count-
The Ordinary General Meeting, considering that the term of        er, through a public cash or exchange offer, or through the use
François Carrega as Substitute Auditor expires at this Annual     of options or derivatives, in compliance with the applicable
General Meeting, renews the appointment as Substitute             regulations. The shares acquired, including those bought back
Auditor of François Carrega (13, boulevard des Invalides, 75007   under earlier authorizations, may be cancelled, provided that
Paris), for the statutory period of six years expiring at the     28th resolution authorizing the Board to reduce the Company’s
Annual Shareholders’ Meeting to be called to approve the          capital is voted.
fiscal 2012 financial statements.
                                                                  The maximum buyback price is set at €70 per €4 par value
FIFTEENTH RESOLUTION - AUTHORIZATION TO TRADE                     share and the minimum resale price at €30. Considering the
IN THE COMPANY’S SHARES
                                                                  number of shares making up the Company’s capital as of the
The Ordinary General Meeting, having considered the report        date of this General Meeting, and any adjustments that may
of the Board of Directors, resolves to authorize the Board of     result from corporate actions, the amount invested in the
                                                                  buybacks shall not exceed €135,506,035.

                                                                                                            2006 Annual Report //   171
      The Board of Directors shall have full powers to adjust the          2) To give the Board of Directors a 26-month authorization
      prices or the number of shares specified above to take into          to increase the Company’s share capital on one or more
      account the effects of any corporate actions. In the case of any     occasions, by the amounts and at the times that it considers
      such corporate actions, particularly a stock split or reverse        appropriate, by issuing, in France and abroad, shares and
      stock split, an issue of bonus shares or an increase in the par      securities exchangeable, convertible, redeemable or otherwise
      value of existing shares paid up by capitalizing reserves or         exercisable for shares or debt securities – including stand-
      earnings, the adjustment will be determined by multiplying           alone warrants issued with or without consideration and rights
      the price by the ratio between the number of shares outstand-        – to be paid up in cash or by capitalizing debt. Securities
      ing before and after the transaction.                                other than shares may be denominated in euros, in foreign
                                                                           currency or in any monetary unit determined by reference to
      The buybacks, sales and transfers may be carried out and
                                                                           a basket of currencies. Existing shareholders shall have a
      settled by any means, including through the use of derivatives
                                                                           pre-emptive right to subscribe for the shares and securities
      and notes and the purchase of call options, in compliance with
                                                                           issued pursuant to this resolution. In accordance with Article
      the Autorité des Marchés Financiers’ general regulations. The
                                                                           L.228-93 of the French Commercial Code, this resolution may
      entire program may be carried out through a single block
                                                                           be used to carry out one or several issues.
      purchase.
                                                                           However, it may not be used to issue preferred shares or
      The Company may use this authorization to continue imple-
                                                                           securities exchangeable, convertible, redeemable or other-
      menting its share buyback program and to take any and all
                                                                           wise exercisable for preferred shares.
      measures related to the program, including in connection with
      a takeover bid for the Company or a public exchange offer            3) That the aggregate par value of shares issued pursuant to
      initiated by the Company in compliance with the applicable           this resolution, either directly or on exchange, conversion,
      regulations.                                                         redemption or exercise of share equivalents, shall not exceed
                                                                           €20 million, provided that this ceiling shall not include the
      The Ordinary General Meeting gives full powers to the Board
                                                                           effect of any adjustments to be made to protect the rights of
      of Directors to use this authorization, to set the terms and
                                                                           holders of share equivalents pursuant to the law. Share issues
      conditions of the program, where necessary, to carry out any
                                                                           carried out pursuant to this resolution will be deducted from
      and all necessary formalities and generally to do everything
                                                                           the blanket ceiling of €75 million set in the 27th resolution.
      necessary to implement this authorization. Authority to act
      on this resolution may be delegated by the Board, subject to         4) That the Board of Directors may give existing shareholders
      compliance with the applicable laws and regulations.                 a pre-emptive right to subscribe for any shares or share
                                                                           equivalents not taken up by other shareholders pursuant to
      This authorization will expire at the end of a period of eighteen
                                                                           their pre-emptive rights. If the issue is oversubscribed,
      months from the date of this Meeting. It supersedes the
                                                                           participating shareholders will be allocated a number of
      existing authorization given in the 7th resolution of the Ordinary
                                                                           additional shares or share equivalents determined pro rata
      General Meeting of 14 March 2006.
                                                                           to their existing interests. If the issue is not taken up in full by
      SIXTEENTH RESOLUTION - POWERS                                        shareholders, the Board may take one or more of the following
      The Ordinary General Meeting, having considered the report           courses of action, in the order that it considers appropriate:
      of the Board of Directors, gives full powers to the bearer of a      • Limit the issue to the amount of the subscriptions received,
      copy or extract of the minutes of this Meeting to carry out all       provided that at least three-quarters of the original issue has
      legal filing and other formalities.                                   been taken up, in accordance with the law.
                                                                           • Freely allocate all or some of the unsubscribed shares or
      B - EXTRAORDINARY RESOLUTIONS                                         share equivalents.
                                                                           • Offer all or some of the unsubscribed shares or share equiv-
      SEVENTEENTH RESOLUTION - AUTHORIZATION TO ISSUE
                                                                            alents to the public.
      SHARES AND SHARE EQUIVALENTS WITH PRE-EMPTIVE
      SUBSCRIPTION RIGHTS FOR EXISTING SHAREHOLDERS                        5) That this resolution shall automatically entail the waiver of
      The Extraordinary General Meeting, having considered the             shareholders’ pre-emptive rights to subscribe for the shares
      reports of the Board of Directors and the Auditors, resolves,        to be issued on exchange, conversion, redemption or exer-
      in accordance with Articles L.225-127, L.225-129, L.225-129-2,       cise of share equivalents.
      L.225-132 and L.228-92 et seq. of the French Commercial              6) That the price of each share issued directly or indirectly
      Code:                                                                pursuant to this resolution, after taking into account the issue
      1) To terminate, with immediate effect, the powers granted           price of any stand-alone warrants or rights, shall not be less
      in the 31st resolution of the Extraordinary General Meeting          than the minimum price stipulated in the laws and regulations
      of 16 March 2005.                                                    applicable on the issue date, whether or not the new shares
                                                                           rank pari passu with existing shares.

172
                                                                                                               Additional
                                                                                                             information
This resolution may be used to issue bonds or notes with an          The Board of Directors shall have full powers, including the
equity component, or securities exchangeable, convertible,           power of delegation as permitted by the applicable laws
redeemable or otherwise exercisable for bonds or notes with          and regulations, to:
an equity component, including dated or perpetual senior             • Determine, pursuant to the law, the method to be used to
or junior bonds or notes, denominated in euros, in foreign            adjust the exchange, conversion, redemption or exercise
currency or in any monetary unit determined by reference to           price of share equivalents, including warrants.
a basket of currencies, provided that the life of dated bonds        • Determine the method of dealing with fractions of shares
or notes issued pursuant to this resolution shall not exceed          created on exchange, conversion, redemption or exercise
twenty years. The aggregate nominal amount of debt securi-            of share equivalents, particularly warrants.
ties issued pursuant to this resolution shall not exceed €300        • Determine any and all special provisions to be included in
million or the equivalent in foreign currency or monetary units       the issue agreement.
on the date when the issue is decided. Said aggregate                • Provide for the temporary suspension of the rights attached
nominal amount shall be deducted from the blanket ceiling             to the share equivalents for a period not exceeding the
on debt issues authorized by this Meeting.                            maximum period specified in the applicable laws and
                                                                      regulations.
The debt securities may consist of fixed or floating rate or zero
                                                                     • Set the terms and conditions of any allotment of stand-alone
coupon bonds or notes and may be issued with or without a
                                                                      warrants issued without consideration and the procedures
redemption premium. They may be repayable in installments
                                                                      for the buyback or exchange of shares and share equivalents,
or in full at maturity. The securities may be bought back on the
                                                                      including warrants, or the allotment of shares in repayment
market or through a public offer initiated by the Company.
                                                                      of share equivalents.
If this resolution is used to issue debt securities, the Board of    • Set the terms and conditions of purchase or exchange, at
Directors shall have full powers to decide whether such debt          any time or during fixed periods, of shares and share equiv-
securities will be subordinated or not and to set the interest        alents issued or to be issued pursuant to this resolution.
rate, the life of the securities, the fixed or variable redemption   • Charge any and all transaction or other costs against the
price – which may or may not include a premium –, the terms           related premiums.
and conditions of their repayment and the manner in which            • Protect the rights of holders of securities exchangeable,
the securities will be exchangeable, convertible, redeemable          convertible, redeemable or otherwise exercisable for shares,
or otherwise exercisable for shares. Authority to act on this         in accordance with applicable laws and regulations.
resolution may be delegated by the Board, subject to com-
                                                                     EIGHTEENTH RESOLUTION - AUTHORIZATION
pliance with the applicable laws and regulations.
                                                                     TO ISSUE SHARES AND SHARE EQUIVALENTS WITHOUT
The Board of Directors shall have full powers to use this author-    PRE-EMPTIVE SUBSCRIPTION RIGHTS FOR EXISTING
ization, including the power of delegation provided for by law       SHAREHOLDERS
and by the Company’s bylaws. In particular, the Board shall          The Extraordinary General Meeting, having considered the
have full discretionary powers to set the terms and condi-           reports of the Board of Directors and the Auditors, resolves,
tions of the issue(s), place on record the capital increase(s)       in accordance with Articles L.225-127, L.225-129, L.225-129-2,
resulting from the use of this authorization, amend the bylaws       L.225-135, L.225-136 and L.228-92 et seq. of the French
to reflect the new capital, set the subscription date or period      Commercial Code:
and the terms and conditions of subscription, decide the char-
                                                                     1) To terminate, with immediate effect, the powers granted
acteristics of the securities to be issued, enter into any and
                                                                     in the 32nd resolution of the Extraordinary General Meeting of
all underwriting or other agreements and generally carry out
                                                                     16 March 2005.
any and all formalities required to place the issues, have the
securities listed and make interest and principal payments.          2) To give the Board of Directors a 26-month authorization to
The Board shall decide the amount of each issue, the issue           increase the Company’s share capital on one or more occasions,
price of the shares or share equivalents and the subscription        by the amounts and at the times that it considers appropri-
price of the shares issued directly or indirectly on conversion,     ate, by issuing, in France and abroad, shares and securities
redemption or exercise of share equivalents – in both cases          exchangeable, convertible, redeemable or otherwise exercis-
with or without a premium –, the cum-dividend or cum-inter-          able for shares or debt securities – including stand-alone
est date, which may or may not be retroactive, the terms and         warrants issued with or without consideration and rights – to
conditions of payment of the subscription price and, where           be paid up in cash or by capitalizing debt. Securities other
appropriate, the life and exercise price of warrants or the terms    than shares may be denominated in euros, in foreign currency
and conditions of exchange, conversion, redemption or exer-          or in any monetary unit determined by reference to a basket
cise of share equivalents.                                           of currencies. In accordance with Article L.228-93 of the French
                                                                     Commercial Code, this resolution may be used to carry out
                                                                     one or several issues.

                                                                                                              2006 Annual Report //   173
      3) That shareholders shall not have a pre-emptive right to         foreign currency or in any monetary unit determined by
      subscribe for the shares or share equivalents issued pursuant      reference to a basket of currencies, provided that the life of
      to this resolution.                                                dated bonds or notes issued pursuant to this resolution shall
                                                                         not exceed twenty years. The aggregate nominal amount of
      This resolution may not be used to issue preferred shares
                                                                         debt securities issued pursuant to this resolution shall not
      or securities exchangeable, convertible, redeemable or
                                                                         exceed €300 million or the equivalent in foreign currency or
      otherwise exercisable for preferred shares.
                                                                         monetary units on the date when the issue is decided. Said
      4) That the aggregate par value of shares issued pursuant to       aggregate nominal amount shall be deducted from the
      this resolution, either directly or on exchange, conversion,       blanket ceiling on debt issues authorized by this Meeting.
      redemption or exercise of share equivalents, shall not exceed
                                                                         If this resolution is used to issue debt securities, the Board of
      €20 million, less the amount of any issues carried out pursuant
                                                                         Directors shall have full powers to decide whether such debt
                 st
      to the 21 resolution. However, this ceiling shall not include
                                                                         securities will be subordinated or not and to set the interest
      the effect of any adjustments to be made to protect the
                                                                         rate, the life of the securities, the fixed or variable redemption
      rights of holders of share equivalents pursuant to the law.
                                                                         price – which may or may not include a premium –, the terms
      Share issues carried out pursuant to this resolution will be
                                                                         and conditions of their repayment and the manner in which
      deducted from the blanket ceiling of €75 million set in the
                                                                         the securities will be exchangeable, convertible, redeemable
      27th resolution.
                                                                         or otherwise exercisable for shares. Authority to act on this
      5) To give the Board of Directors discretionary powers, in         resolution may be delegated by the Board, subject to com-
      accordance with the law, to determine whether to offer exist-      pliance with the applicable laws and regulations.
      ing shareholders a priority right to subscribe for the issue –
                                                                         The Board of Directors shall have full powers to use this author-
      which may or may not include a priority right to subscribe for
                                                                         ization, including the power of delegation provided for by law
      any securities not taken up by other shareholders – for a peri-
                                                                         and by the Company’s bylaws. In particular, the Board shall
      od at least equal to the minimum period specified by decree,
                                                                         have full discretionary powers to set the terms and condi-
      and to set the terms and conditions of exercise of this right in
                                                                         tions of the issue(s), place on record the capital increase(s)
      accordance with Article L.225-135 of the French Commercial
                                                                         resulting from the use of this authorization, amend the bylaws
      Code.
                                                                         to reflect the new capital, set the subscription date or period
      If the issue is not taken up in full by shareholders, the Board    and the terms and conditions of subscription, decide the
      may take one or more of the following courses of action, in        characteristics of the securities to be issued, enter into any
      the order that it considers appropriate:                           and all underwriting or other agreements and generally carry
      • Limit the issue to the amount of the subscriptions received,     out any and all formalities required to place the issues, have
       provided that at least three-quarters of the original issue       the securities listed and make interest and principal payments.
       has been taken up, in accordance with the law.                    The Board shall decide the amount of each issue, the issue
      • Freely allocate all or some of the unsubscribed shares or        price of the shares or share equivalents – which may or may
       share equivalents.                                                not include a premium –, the cum-dividend or cum-interest
      • Offer all or some of the securities for subscription by the      date, which may or may not be retroactive, the terms and
       public.                                                           conditions of payment of the subscription price and, where
      6) That this resolution shall automatically entail the waiver of   appropriate, the life and exercise price of warrants or the terms
      shareholders’ pre-emptive rights to subscribe for the shares       and conditions of exchange, conversion, redemption or
      to be issued on exchange, conversion, redemption or exer-          exercise of share equivalents.
      cise of share equivalents.                                         The Board of Directors shall have full powers, including the
      7) That the price of each share issued directly or indirectly      power of delegation as permitted by the applicable laws and
      pursuant to this resolution, after taking into account the issue   regulations, to:
      price of any stand-alone warrants or rights, shall not be less     • Determine, pursuant to the law, the method to be used to
      than the minimum price stipulated in the laws and regulations       adjust the exchange, conversion, redemption or exercise
      applicable on the issue date, whether or not the new shares         price of share equivalents, including warrants.
      rank pari passu with existing shares.                              • Determine any and all special provisions to be included in
                                                                          the issue agreement.
      This resolution may be used to issue bonds or notes with an
                                                                         • Provide for the temporary suspension of the rights attached
      equity component, or securities exchangeable, convertible,
                                                                          to the share equivalents for a period not exceeding the
      redeemable or otherwise exercisable for bonds or notes
                                                                          maximum period specified in the applicable laws and
      with an equity component, including dated or perpetual
                                                                          regulations.
      senior or junior bonds or notes, denominated in euros, in



174
                                                                                                              Additional
                                                                                                            information
• Set the terms and conditions of purchase or exchange,             3) That any rights to fractions of shares shall not be tradable
 at any time or during fixed periods, of shares and share           or transferable, and that the corresponding shares will be sold,
 equivalents issued or to be issued pursuant to this reso-          with the proceeds from the sale allocated among the holders
 lution.                                                            of rights to fractions of shares within the period specified in a
• Charge any and all transaction or other costs against the         decree of the French Council of State.
 related premiums.
                                                                    4) That the aggregate amount by which the capital may be
• Protect the rights of holders of securities exchangeable,
                                                                    increased pursuant to this resolution shall not exceed €32 mil-
 convertible, redeemable or otherwise exercisable for shares,
                                                                    lion, to be deducted from the blanket ceiling of €75 million
 in accordance with applicable laws and regulations.
                                                                    set in the 27th resolution.
NINETEENTH RESOLUTION - AUTHORIZATION
                                                                    5) To give the Board of Directors full powers to use this author-
TO ISSUE SHARES AND SHARE EQUIVALENTS
                                                                    ization and to do everything necessary to permit the issue of
AND FREELY SET THE ISSUE PRICE
                                                                    bonus shares or an increase in the par value of existing
The Extraordinary General Meeting, having considered the
                                                                    shares in accordance with the law and the Company’s bylaws.
reports of the Board of Directors and the Auditors, resolves,
                                                                    Authority to act on this resolution may be delegated by the
in accordance with Article L.225-136-1, of the French Commercial
                                                                    Board, subject to compliance with the applicable laws and
Code and within the limit of 10% of the Company’s capital in
                                                                    regulations and the Company’s bylaws.
any given year:
                                                                    TWENTY-FIRST RESOLUTION - AUTHORIZATION TO ISSUE
1) To terminate, with immediate effect, the powers granted
                                                                    SHARES OR SHARE EQUIVALENTS IN CONNECTION WITH
in the 33rd resolution of the Extraordinary General Meeting of      A TAKEOVER BID INITIATED BY THE COMPANY
16 March 2005.
                                                                    The Extraordinary General Meeting, having considered the
2) To give the Board of Directors a 26-month authorization          reports of the Board of Directors and the Auditors, resolves,
to issue shares or securities exchangeable, convertible,            in accordance with Articles L.225-148 and L.225-129 to
redeemable or otherwise exercisable for shares or debt secu-        L.225-129-6 of the French Commercial Code:
rities based on market opportunities and to determine the
                                                                    1) To terminate, with immediate effect, the powers granted
issue price in the case of a public placement without pre-emp-
                                                                    in the 35th resolution of the Extraordinary General Meeting of
tive subscription rights provided that the amount received
                                                                    16 March 2005.
by the Company for each share issued directly or on exchange,
conversion, redemption or exercise of share equivalents shall       2) To give the Board of Directors a 26-month authorization
be at least equal to its par value. As required by law, if this     to issue shares, other equity securities, debt securities
resolution is used, the Board shall issue a report – certified by   exchangeable, convertible, redeemable or otherwise exercis-
the Auditors – describing the terms and conditions of the issue     able for shares or debt securities and stand-alone warrants in
and its impact on the situation of existing shareholders.           payment for shares of another company listed on a regulated
                                                                    market – as defined in Article L.225-148 of the French
TWENTIETH RESOLUTION - AUTHORIZATION TO INCREASE
                                                                    Commercial Code – that are tendered to a public exchange
THE COMPANY’S CAPITAL BY CAPITALIZING RESERVES,
                                                                    or cash-and-exchange offer initiated by the Company, and to
PROFIT OR PREMIUMS
                                                                    cancel, if necessary, existing shareholders’ pre-emptive rights
The Extraordinary General Meeting, having considered the
                                                                    to subscribe to the issue.
report of the Board of Directors, resolves, in accordance with
Articles L.225-129, L.225-129-2 and L.225-130 of the French         3) That this resolution shall automatically entail the waiver of
Commercial Code:                                                    shareholders’ pre-emptive rights to subscribe for shares to be
                                                                    issued on exchange, conversion, redemption or exercise of
1) To terminate, with immediate effect, the powers granted
                                                                    share equivalents.
in the 34th resolution of the Extraordinary General Meeting of
16 March 2005.                                                      4) That the aggregate par value of shares issued pursuant to
                                                                    this resolution, either directly or on exchange, conversion,
2) To give the Board of Directors a 26-month authorization
                                                                    redemption or exercise of share equivalents, shall not exceed
to increase the Company’s capital on one or more occasions,
                                                                    €20 million, less the par value of any shares issued pursuant
in the amounts and at the times that it considers appropri-
                                                                    to the 18th resolution. However, this ceiling shall not include
ate, by issuing bonus shares or by increasing the par value of
                                                                    the effect of any adjustments to be made to protect the
existing shares, to be paid up by capitalizing reserves, profit
                                                                    rights of holders of share equivalents pursuant to the law.
or premiums.
                                                                    Share issues carried out pursuant to this resolution will be
                                                                    deducted from the blanket ceiling of €75 million set in the
                                                                    27th resolution.



                                                                                                              2006 Annual Report //   175
      5) That the price of each share issued directly or indirectly pur-    against the issue premium, increase the capital, amend the
      suant to this resolution, after taking into account the issue price   bylaws to reflect the new capital, and generally take any and
      of any stand-alone warrants or rights, shall not be less than the     all measures, enter into any and all agreements and carry out
      minimum price stipulated in the laws and regulations applica-         any and all formalities required to permit the exchange. The
      ble on the issue date, whether or not the new shares rank             balance of the issue premium, after deducting any and all costs
      pari passu with existing shares.                                      and expenses, shall be allocated by decision of the Board or
                                                                            of the shareholders in General Meeting.
      The Extraordinary General Meeting gives full powers to the
      Board of Directors to carry out the public offers referred to         TWENTY-THIRD RESOLUTION - AUTHORIZATION
      above and to issue shares or share equivalents in payment for         TO GRANT STOCK OPTIONS TO EXECUTIVE DIRECTORS
      the shares or other securities tendered to the offer, to set the      AND/OR EMPLOYEES OF GROUP COMPANIES

      exchange ratio and to place on record the number of securi-           The Extraordinary General Meeting, having considered the
      ties tendered to the offer. Authority to act on this resolution       reports of the Board of Directors and the Auditors, resolves,
      may be delegated by the Board, subject to compliance with             in accordance with Articles L.225-177 et seq. of the French
      the applicable laws and regulations and the Company’s bylaws.         Commercial Code, to give the Board of Directors a 26-month
                                                                            authorization to grant stock options, on one or several occa-
      TWENTY-SECOND RESOLUTION - AUTHORIZATION
      TO ISSUE SHARES AND SHARE EQUIVALENTS IN PAYMENT                      sions, to all or some of the employees and executive directors
      FOR THE SECURITIES OF ANOTHER COMPANY                                 of the Company and related companies and intercompany
                                                                            partnerships as defined in Article L.225-180 of the French
      The Extraordinary General Meeting, having considered the
      reports of the Board of Directors and the Auditors, resolves,         Commercial Code, subject to the limits specified in the appli-

      in accordance with Article L.225-147, paragraph 6, of the             cable legislation. This resolution may be used to grant:

      French Commercial Code:                                               • Options to subscribe for new shares to be issued by the

      1) To terminate, with immediate effect, the powers granted             Company, and/or;

      in the 36th resolution of the Extraordinary General Meeting of        • Options to purchase existing shares bought back by the

      16 March 2005.                                                         Company in accordance with the law.

      2) To give the Board of Directors a 26-month authorization to         The total number of options outstanding at any given time

      issue shares, other equity securities, securities exchangeable,       shall not be exercisable for a number of shares in excess of

      convertible, redeemable or otherwise exercisable for shares           the legal limit or the blanket ceiling set in the 27th resolution.

      or other securities in payment for the shares or share equiva-        This resolution automatically entails the waiver, by existing
      lents of another company in a transaction not governed by             shareholders, of their pre-emptive right to subscribe for the
      Article L.225-148 of the French Commercial Code, provided             shares to be issued upon exercise of the options.
      that the aggregate par value of shares issued directly or indi-
                                                                            The option exercise price shall be set by the Board of Directors
      rectly pursuant to this authorization shall not exceed 10% of
                                                                            at the time of grant, within the limits and in the manner pre-
      the Company’s capital at the issue date. In accordance with
                                                                            scribed by law.
      the law, the aggregate value of shares or other securities
      issued pursuant to this resolution shall be based on the values       The options shall have a ten-year life.
      reflected in the report of the Merger Auditor(s) provided for         The shares issued upon exercise of the options shall carry
      in Article L.225-147 of the Code.                                     dividend and voting rights from the date of issue.
      3) That shareholders shall not have a pre-emptive right to            The Extraordinary General Meeting gives the Board of
      subscribe for the shares or share equivalents issued pursuant         Directors full powers to use this resolution within the above
      to this resolution, or the shares to be issued on conversion,         limits and the limits specified in the Company’s bylaws.
      redemption or exercise of said share equivalents.                     Authority to act on this resolution may be delegated by the
      The price of each share issued directly or indirectly pursuant        Board, subject to compliance with the applicable laws and
      to this resolution shall not be less than the minimum price           regulations and the Company’s bylaws. In particular, the Board
      stipulated in the laws and regulations applicable on the issue        of Directors shall have full powers to:
      date, whether or not the new shares rank pari passu with              • Set the option grant dates.
      existing shares.                                                      • Set the terms and conditions of the options – which may
                                                                             include a lock-up clause preventing the sale of all or some
      The Board of Directors shall have full powers to approve the
                                                                             of the shares acquired upon exercise of the options within
      value attributed to the shares or other securities to be
                                                                             a specified period –, the option exercise price, the list of
      acquired, set the exchange ratio and any cash payment, place
                                                                             grantees and the number of shares that may be acquired by
      on record the exchange, charge any costs and expenses
                                                                             each grantee.


176
                                                                                                                Additional
                                                                                                              information
• Set the terms and conditions of exercise of the options,          • To authorize the Board of Directors to grant new or existing
 including the exercise period, and decide to allow for the          shares of the Company, on one or several occasions, to
 temporary suspension of the right to exercise the options           selected qualifying employees and/or executive directors of
 in accordance with the applicable laws and regulations.             the Company and/or related companies and intercompany
• Decide the basis for adjusting the price and the number of         partnerships as defined in Article L.225-197-2 of the French
 shares to be acquired upon exercise of the options in the           Commercial Code.
 cases provided for by law.                                         • To give the Board of Directors full discretionary powers to
• Determine the deadline for exercising the options, which           draw up the list of grantees, determine the number of grants
 may not be more than ten years after the grant date, and            to be made to each grantee, set the terms and conditions
 the exercise period.                                                of grant and any related criteria, and make the grants
• Carry out any and all formalities to effect the capital            subject to vesting conditions based on the performance of
 increase(s) that may result from the exercise of options            the Group or the grantee.
 granted pursuant to this resolution.                               • That the total number of stock grants made pursuant to this
• Amend the Company’s bylaws to reflect the new capital and          resolution shall not exceed 1% of the Company’s capital
 generally do everything necessary.                                  as of the date of this Meeting, not including any additional
                                                                     shares to be issued or allotted to protect the rights of
The Board of Directors shall report to each Annual General
                                                                     grantees in the case of any corporate actions carried out
Meeting on the transactions carried out pursuant to this
                                                                     during the vesting period. The aggregate par value of shares
authorization.
                                                                     issued pursuant to this resolution will be deducted from
This authorization supersedes, with immediate effect, the            the blanket ceiling set in the 27th resolution.
                              th
authorization given in the 37 resolution of the Extraordinary       • That the stock grants shall be subject to a vesting period of
General Meeting of 16 March 2005.                                    between two and four years, and that the vested shares shall
TWENTY-FOURTH RESOLUTION - AUTHORIZATION TO                          be subject to a lock-up period of between two and four
INCREASE ISSUES OF SHARES AND SHARE EQUIVALENTS                      years.
WITH OR WITHOUT PRE-EMPTIVE SUBSCRIPTION RIGHTS                     • To authorize the Board of Directors to adjust the number of
The Extraordinary General Meeting, having considered the             stock grants in the case of any corporate actions carried
reports of the Board of Directors and the Auditors, resolves,        out during the vesting period in order to protect the rights
in accordance with Article L.225-135-1 of the French Commercial      of grantees.
Code:                                                               • That, if new shares are issued in respect of stock grants, said
                                                                     shares shall be paid up by capitalizing reserves, profits or
1) To terminate, with immediate effect, the powers granted
                                                                     premiums and existing shareholders shall automatically
in the 38th resolution of the Extraordinary General Meeting of
                                                                     waive their right to said reserves, profits or premiums; and
16 March 2005.
                                                                     that the Board of Directors shall be authorized to carry out
2) To give the Board of Directors a 26-month authorization to        said share issues.
increase the number of shares or share equivalents offered in
                                                                    This authorization is given for a period of 26 months and
the event that an issue of shares or share equivalents with or
                                                                    supersedes, with immediate effect, the authorization given in
without pre-emptive subscription rights is oversubscribed,
                                                                    the 10th resolution of the Extraordinary General Meeting of
provided that the additional issue is decided within the peri-
                                                                    14 March 2006.
od and for no more than the maximum amount prescribed by
the laws and regulations in force on the issue date (currently      The Board of Directors shall have full powers to use this author-
thirty days from the close of the initial subscription period and   ization, including the power of delegation provided for by law.
15% of the original issue) and the additional shares or share       In particular, the Board of Directors shall have full discretionary
equivalents are offered at the same price as the original issue.    powers to decide the timing and the terms and conditions of
                                                                    the grants, and – if new shares are issued in respect of stock
3) That the aggregate par value of shares issued directly or
                                                                    grants – the amount and origin of the reserves, profits and/or
indirectly pursuant to this resolution will be deducted from the
                                                                    premiums to be capitalized, to increase the capital, to enter
blanket ceiling of €75 million set in the 27th resolution.
                                                                    into any and all agreements and to carry out any and all for-
TWENTY-FIFTH RESOLUTION - AUTHORIZATION TO MAKE                     malities to permit the grants, to place on record any capital
STOCK GRANTS                                                        increases(s) resulting from the use of this resolution and to
The Extraordinary General Meeting, having considered the            amend the Company’s bylaws to reflect the new capital.
reports of the Board of Directors and the Auditors, resolves,
in accordance with Articles L.225-197-1 et seq. of the French
Commercial Code:



                                                                                                               2006 Annual Report //   177
      TWENTY-SIXTH RESOLUTION - AUTHORIZATION                             • Decide to issue shares or share equivalents either directly
      TO CARRY OUT AN EMPLOYEE SHARE ISSUE                                 to employees or through a corporate mutual fund.
      The Extraordinary General Meeting, having considered                • Determine the characteristics, amounts, terms and conditions
      the reports of the Board of Directors and the Auditors,              of the issues, including the cum-interest or cum-dividend
      resolves, in accordance with Articles L.443-1 et seq. of the         date and the terms and conditions of payment of subscrip-
      French Labor Code and Articles L.225-138 et seq., L.225-129-2        tion monies.
      and L.225-129-6 of the French Commercial Code:                      • Set the subscription price of the new shares in accordance
                                                                           with the provisions of the law.
      1) To terminate, with immediate effect, the powers granted
                                                                          • Set the opening and closing dates of the subscription period.
      in the 39th resolution of the Extraordinary General Meeting of
                                                                          • Set the period allowed for the payment of subscription
      16 March 2005.
                                                                           monies, which shall not exceed the maximum period spec-
      2) To give the Board of Directors a 26-month authorization to        ified in the applicable laws and regulations, and the mini-
      (i) issue shares or share equivalents to employees of                mum service period, if any, qualifying employees to subscribe
      the Company and related companies as defined in Article              for the shares or share equivalents and to receive a match-
      L.225-180 of the French Commercial Code who are members              ing payment from the Company.
      of an employee stock ownership plan, for subscription either        • Amend the Company’s bylaws to reflect the new capital and
      directly by the employees concerned or through a corporate           generally do everything necessary; charge the share issue
      mutual fund, and (ii) grant shares or share equivalents to said      costs against the related premium and deduct from the pre-
      employees without consideration, within the limits specified         mium the amount necessary to increase the legal reserve
      in Articles L.443-5 et seq. of the French Labor Code, entail-        to 10% of the new capital after each issue.
      ing the waiver by existing shareholders of all rights to said
                                                                          TWENTY-SEVENTH RESOLUTION - BLANKET CEILING
      shares and share equivalents.
                                                                          ON SHARE ISSUES
      3) That the aggregate par value of shares issued pursuant to        The Extraordinary General Meeting, having considered the
      this resolution, either directly or on exchange, conversion,        reports of the Board of Directors and the Auditors, resolves,
      redemption or exercise of share equivalents, shall not exceed       in accordance with Article L.225-129-2 of the French Commercial
      €3 million. However, this ceiling shall not include the effect of   Code, to set a blanket ceiling of €75 million on the aggregate
      any adjustments to be made to protect the rights of holders         par value of share issues carried out directly or indirectly under
      of share equivalents pursuant to the law. Share issues carried      the authorizations given to the Board of Directors in the 17th,
      out pursuant to this resolution will be deducted from the blan-     18th, 19th, 20th, 21st, 23rd, 24th, 25th and 26th resolutions, before
      ket ceiling of €75 million set in the 27th resolution.              taking into account any shares to be issued in accordance with
      4) That the issue price of shares issued pursuant to this           the applicable laws and regulations to protect the rights of
      resolution will be determined in accordance with Article            holders of share equivalents. Within this blanket ceiling:
      L.443-5 of the French Labor Code.                                   a) Issues with pre-emptive subscription rights pursuant to the
      5) That this resolution entails the waiver by existing share-       17th resolution, plus any additional shares and share equiva-
      holders of their pre-emptive right to subscribe for shares          lents issued pursuant to the 24th resolution, shall not have the
      issued pursuant to this resolution and Article L.444-3 of the       effect of increasing the capital by more than €20 million.
      French Labor Code to employees of the Company and                   b) Issues without pre-emptive subscription rights pursuant to
      related companies as defined in Article L.225-180 of the French     the 18th, 19th and 21st resolutions, plus any additional shares
      Commercial Code who are members of an employee stock                and share equivalents issued pursuant to the 24th resolution,
      ownership plan.                                                     shall not have the effect of increasing the capital by more than
      The Ordinary General Meeting gives full powers to the               €20 million.
      Board of Directors to use this authorization on one or several      c) Share issues (or increases in the par value of the shares) paid
      occasions, subject to the above conditions and limits, and to       up by capitalizing reserves, profits or premiums pursuant to
      set the terms and conditions of the issues. Authority to act        the 20th resolution shall not have the effect of increasing the
      on this resolution may be delegated by the Board, subject to        capital by more than €32 million.
      compliance with the applicable laws and regulations and the
      Company’s bylaws. In particular, the Board of Directors shall       d) Share issues in payment of the securities of another com-
      be authorized to:                                                   pany pursuant to the 22nd resolution shall not have the effect
                                                                          of increasing the capital by more than the maximum amount
                                                                          prescribed by law.




178
                                                                     Additional
                                                                   information
e) Share issues upon exercise of stock options pursuant to
the 23rd resolution shall not have the effect of increasing the
capital by more than the maximum amount prescribed by law,
determined separately from the ceiling specified in b) above.

f) Stock grants made pursuant to the 25th resolution shall not
have the effect of increasing the capital by more than the
maximum amount prescribed by law.

g) Employee share issues pursuant to the 26th resolution shall
not have the effect of increasing the capital by more than
€3 million.

The above limits within the blanket ceiling do not take into
account the effect of any adjustments to be made to protect
the rights of holders of share equivalents pursuant to the law.

TWENTY-EIGHTH RESOLUTION - AUTHORIZATION
TO CANCEL SHARES
The Extraordinary General Meeting, having considered the
reports of the Board of Directors and the Auditors, resolves,
in accordance with Articles L.225-209 et seq. of the French
Commercial Code, to authorize the Board of Directors to
reduce the capital on one or several occasions by canceling
all or some of the shares held or bought back by the Company.
The Board of Directors shall have full discretionary powers to
decide the amount(s) and timing of such cancellations, with-
in the legal limit (currently 10% of the Company’s capital per
24-month period). The share capital used to calculate this 10%
limit shall be adjusted for the effects of any corporate actions
carried out after this Meeting.

This authorization will expire at the end of a period of eight-
een months from the date of this Meeting.

The Extraordinary General Meeting gives full powers to the
Board of Directors – including the power of delegation – to:
• Cancel shares and reduce the capital accordingly.
• Determine the method and the final amount of the capital
 reduction and place the capital reduction on record.
• Charge the difference between the carrying amount of the
 canceled shares and their par value to any reserve account
 or to additional paid-in capital.
• Amend the bylaws to reflect the new capital and generally
 do everything necessary in accordance with the provisions
 of the law applicable when this resolution is used.

TWENTY-NINTH RESOLUTION - POWERS
The Extraordinary 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 registration, filing, announcement and other
formalities.




                                                                   2006 Annual Report //   179
      INFORMATION INCORPORATED BY REFERENCE                            SUBSTITUTE AUDITORS
      The following information is incorporated by reference in the    • François Carrega, 13, boulevard des Invalides 75007 Paris.
      registration document:                                           François Carrega was appointed for the first time at the Annual
      • The business report, the consolidated financial statements     General Meeting of 13 March 2001 for a period of six years
       of Club Méditerranée and the Auditors’ report on the con-       expiring at the Annual General Meeting to be called to
       solidated financial statements for fiscal 2004, as presented    approve the fiscal 2006 financial statements. Renewal of his
       on pages 15 to 27, 43 to 81 and 78 of the registration          appointment will be proposed at the Annual General Meeting
       document filed with the Autorité des Marchés Financiers on      of 8 March 2007.
                                                                       • Beas, 185, avenue Charles de Gaulle 92524 Neuilly-sur-Seine
        21 February 2005 under no. D.05-133.
                                                                       Cedex. The firm was appointed for the first time at the Annual
      • The business report, the consolidated financial statements
                                                                       General Meeting of 17 March 2003 for the remainder of its
        of Club Méditerranée and the Auditors’ report on the con-
                                                                       predecessor’s term expiring at the Annual General Meeting
        solidated financial statements for fiscal 2005, as presented
                                                                       to be called to approve the fiscal 2006 financial statements.
        on pages 60 to 78, 91 to 126 and 123 of the registration
                                                                       Renewal of its appointment will be proposed at the Annual
        document filed with the Autorité des Marchés Financiers on
                                                                       General Meeting of 8 March 2007.
        23 February 2006.

      The information in these two registration documents not incor-   PERSON RESPONSIBLE FOR INFORMATION
      porated by reference in this registration document has been
                                                                       • Michel Wolfovski,
      replaced and/or updated by the information in this registra-     Executive Vice President and Chief Financial Officer,
      tion document where appropriate.                                 11, rue de Cambrai - 75019 Paris.
      The two reference documents referred to above can be             Phone: + 33 (1) 53 35 34 00
      downloaded from the Club Méditerranée website                    VICE PRESIDENT, INVESTOR RELATIONS
      (www.clubmed.com) and the Autorité des Marchés Financiers        AND FINANCIAL COMMUNICATION
      website (www.amf-france.org).                                    • Caroline Bruel
                                                                       11, rue de Cambrai - 75019 Paris.
      STATUTORY AUDITORS
                                                                       Phone: + 33 (1) 53 35 30 75 - Fax: + 33 (1) 53 35 32 73
      • Ernst & Young Audit SAS, Faubourg de l’Arche 92037 Paris-
                                                                       E-mail: investor.relations@clubmed.com
      La Défense Cedex, represented by Pascal Macioce. Ernst &
      Young Audit’s appointment was renewed at the Annual              PERSON RESPONSIBLE FOR THE REGISTRATION
      General Meeting of 13 March 2001 for a period of six years       DOCUMENT
      expiring at the Annual General Meeting to be called to           “To the best of our knowledge, having taken all reasonable
      approve the fiscal 2006 financial statements. The firm was       care to ensure that such is the case, the information contained
      appointed for the first time at the Annual General Meeting       in this registration document is in accordance with the facts
      of 30 April 1981. Renewal of its current appointment will be     and includes all the information needed by investors to assess
      proposed at the Annual General Meeting of 8 March 2007.          the Group’s assets and liabilities, business, financial position,
      • Deloitte & Associés, 185, avenue Charles de Gaulle 92524       results and outlook. No information has been omitted that
      Neuilly-sur-Seine Cedex, represented by Alain Pons and           would be likely to affect its import. We obtained a statement
      Dominique Jumaucourt. The firm was appointed for the first       from the Statutory Auditors at the end of their engagement
      time at the Annual General Meeting of 17 March 2003, for the     affirming that they had examined, in accordance with the pro-
      remainder of its predecessor’s term expiring at the Annual       fessional standards and guidelines applicable in France, the
      General Meeting to be called to approve the fiscal 2006 finan-   information about the financial position and the accounts con-
      cial statements. Renewal of the firm’s appointment will be       tained in this reference document and had read the entire
      proposed at the Annual General Meeting of 8 March 2007.          reference document.”

                                                                                          The Chairman and Chief Executive Officer
                                                                                                          Henri Giscard d’Estaing




       This registration document was filed with the Autorité des Marchés Financiers (AMF) on 14 February 2007 in accordance
       with Article 212-13 of the AMF’s general regulations. It may be used in connection with a financial transaction provided
       that it is accompanied by an information memorandum approved by the AMF.



180

				
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